By Joan Rogers, Bloomberg BNA
New North Carolina legislation clarifies that automated legal document preparation isn’t the unauthorized practice of law — if the provider satisfies conditions spelled out in the statute.
The new statute requires companies to register every year and meet seven listed consumer protections if they want to offer their services to customers in the Tarheel State.
The legislation capped a 2015 settlement that ended years of litigation between the North Carolina state bar and LegalZoom over whether the company’s online document services amount to the unauthorized practice of law, or “UPL.”
As part of the settlement LegalZoom and the state bar pledged to support legislation that would exclude websites offering automated document preparation from the definition of “practice law” if they offer certain protections to consumers.
Statutory UPL Exception
The final version of H.B. 436, which is Session Law 2016-60, says that the practice of law doesn’t include the operation of a web site that offers consumers access to interactive software that generates a legal document. That is, so long as these consumer protections are satisfied:
• consumers get to see the blank template or the final document before finalizing the purchase; • a North Carolina lawyer has reviewed all of the templates, and the name and address of each reviewing lawyer are kept on file and provided to the consumer upon written request; • the provider tells the consumer that the forms aren’t a substitute for an attorney; • the company discloses its name, physical location and address; • the provider doesn’t disclaim any warranties or liability, nor does it limit the consumer’s recovery of damages or other remedies; • the company doesn’t require consumers to agree to jurisdiction or venue in any other state; and • the provider has a consumer satisfaction process that’s conspicuously displayed on the provider’s website.
The legislation also requires providers to register annually with the state bar.
David Johnson, who is deputy counsel of the state bar, told Bloomberg BNA that a registration form will be posted on the bar’s website soon.
On July 22 the State Bar Council approved a registration form and set registration fees of $100 for the initial registration and $50 annually after that, as permitted by the new law, Johnson said.
Bar Can’t Turn Down Registrants
The new legislation is mostly similar to what the settlement between LegalZoom and the state bar contemplated. However, the registration mandate and the requirement for a consumer satisfaction process got added during the lawmaking process.
In an interview with Bloomberg BNA, LegalZoom executive Ken Friedman said LegalZoom registered under the new law right away.
“We’re happy to comply and we trust the state bar will make it a simple process,” said Friedman, vice-president of legal and governmental affairs at LegalZoom.
Friedman said that in his view, the general idea of a registration process is questionable. One of the major problems between LegalZoom and the state bar involved the bar’s refusal to register the company’s legal services plans, he said.
Although LegalZoom and the N.C. bar have settled their differences, “I was concerned that smaller players could have a repeat of those issues and may not have the resources to resolve them,” Friedman said.
However, the final N.C. legislation explicitly states that the state bar can’t refuse registration, Friedman pointed out.
This aspect of the new law ensures that companies won’t have to fight the state bar over the right to register, he said.
Friedman told Bloomberg BNA that LegalZoom is no longer involved in any UPL disputes. “We have a clean bill of health now,” he said.
FTC Weighed In
During the legislative process the FTC sent detailed comments on the pending legislation.
The letter urged the legislature to keep in mind the potential benefits of interactive websites for consumers and competition.
“Overbroad scope-of-practice and unauthorized-practice-of-law policies can restrict competition between licensed attorneys and non-attorney providers of legal services, increasing the prices consumers must pay for legal services, and reducing consumers’ choices,” the FTC said.
To contact the reporter on this story: Joan C. Rogers in Washington at jrogers@bna.com
To contact the editor responsible for this story: Ethan Bowers at sbowers@bna.com
Learn more about Bloomberg Law or Log In to keep reading:
See Breaking News in Context
Bloomberg Law provides trusted coverage of current events enhanced with legal analysis.
Already a subscriber?
Log in to keep reading or access research tools and resources.