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President's Message | December 2017 Newsletter

 

In October 2015 the American Bar Association launched a partnership with Rocket Lawyer, a company backed by Google Ventures, that takes a mass marketing approach to helping consumers consult with lawyers and create legal documents. The ABA President, Paulette Brown, lauded the program as an “exciting opportunity” to provide small businesses with affordable legal services, while offering lawyer members a chance to serve new clients. Customers would pay $4.95 to ask an ABA-member lawyer a question on-line with one follow-up question. The lawyer and client would then negotiate for further services.

The ABA Law Connect was tested in California, Illinois and Pennsylvania. The state bar associations in Illinois and Pennsylvania denounced the program, criticizing it for reflecting “a ‘Blue Plate Special’ mentality”. Interestingly, both Illinois and Pennsylvania State Bars run a similar service where a client is charged approximately $25 – $30 for an initial consultation. California did not object. Regardless, the ABA abandoned the program after only 3 months.

The growth of law-related companies such as Rocket Lawyer and Legal Zoom has unsettled many lawyers and bar groups that see the companies as a threat to small firms and solo practitioners. Others, meanwhile, see these alternative providers as addressing the nationwide need for civil legal services for those who would otherwise be unable to afford a lawyer.

Like it or not, On-line Legal Providers (“OLPs”) are here to stay since their customer base continues to grow while venture capital continues to back their development. Legal Zoom has as a 60% brand awareness while the biggest law firms only have a 2 – 5% brand awareness. Meanwhile, membership in the ABA and other state bar associations continues to shrink.

For the last decade, bar associations around the country have pursued litigation against the OLPs. The suits have alleged the unauthorized practice of law (“ULP”) by Legal Zoom. Most cases were lost or settled favorably to the OLPs lost.

It should be noted that the Federal Trade Commission and the Department of Justice have long been hostile to a broad interpretation of UPL legislation. In a 2016 letter, they jointly recommended that the North Carolina General Assembly revise the definition of UPL to avoid undue burdens on “self-help products that may generate legal forms”. They stated that these self-help products and other interactive software programs for generating legal documents would promote competition by enabling non-lawyers “to provide services that historically were provided exclusively by lawyers”.

The pros and cons of OLPs have been debated by the New York State Bar Association. Although the NYSBA does not have an official position on OLPs, they did issue an advisory opinion finding that Avvo’s Legal Services program violates ethical rules. Consumers using Avvo’s Legal Services purchase specific services, such as an uncontested divorce, for a flat rate. When a client receives services from a lawyer throughAvvo, it collects a marketing fee. In a lengthy opinion, the NYSBA concluded that a lawyer paying Avvo’s current marketing fee for Avvo’s Legal Services is making an improper payment for a recommendation in violation of Rule 7.2 (a).

Recently, the New York County Lawyers’ Association (“NYCLA”) appointed a Task Force on On-Line Legal Providers to, among other things, review issues related to on-line legal documents. At the November meeting, the New York State Bar Association House of Delegates voted overwhelmingly to approve the report and recommendations of the NYCLA Task Force. Instead of attempting to outlaw or legislate out of existence OLPs, the NYCLA adopted a more traditional regulatory approach designed to protect the public by ensuring that it
is adequately informed of the risks attendant with using forms generated by OLPs, particularly in sensitive situations. The Task Force noted that it preferred that the legislature or other appropriate regulators enact appropriate regulatory standards. The Task force also recommended that the OLP industry adopt a voluntary standard as a useful interim measure. To that end, the Task Force offered a statement of Best Practices for Document Providers, which it called on OLPs to voluntarily adopt immediately.

The Task Force’s recommendations are intended to counter the one sided nature of OLP form contracts. Typically, such contracts contain no warranties and, indeed, often disclaim warranties. The contracts also generally contain arbitration clauses which OLP providers contend are favorable to consumers but are likely to require the consumer to bear costs and arbitrate in a distant place. The use of any online service involves disclosure of personal data and potential closure sensitive information about a user’s transactions and circumstances. OLPs can make use of this data for marketing purposes, or may try to sell it outright. Nothing in the current contracts preclude them from doing so.


The NYCLA Task Force sets forth list of general provisions and considerations for the regulation of online providers of legal documents. These recommendations can be broken down into 4 categories.


The Usefulness and Propriety of Forms: the OLP should be required to provide clear plain language as to how to complete forms and the appropriate uses for each form. There should be a warranty that is enforceable in in the relevant state, and if the document is not enforceable in the relevant state, what steps can be taken to make it enforceable including, if necessary, the retention of an attorney. The OLP should not be permitted to limit this warranty, or recovery under this warranty in anyway. Further, the documents should be kept up to date and account for any changes in the law. Finally, if the OLP selects the service agent for a document, the OLP will be legally responsible for the proper filing of the document.


Protection of Customers: the OLP should be required to inform their customers of all the ways (if any) they intend to use and share customers’ personal and legal information with the OLPs’ business associates and ask for
consent to do so. The OLP must protect the customers’ personal and legal information with up to date security practices and be required to inform the customer of any breach.


Recommendation of Attorneys to Assist: the OLPs should be required to inform their customers, in plain language, of the importance of retaining an attorney to assist them with any transactions and should not be permitted to advertise their services in a manner that suggests that their services are a substitute for the advice of a lawyer.


Dispute Resolution: OLPs should be required to submit to the jurisdiction of the courts of the State of New York for the resolution of any dispute with New York customers and should not be permitted to require arbitration of any disputes. OLP should not be permitted to preclude their customers from joining in class actions, or require shifting of legal fees to the consumers.


It remains to be seen whether the House of Delegates approval of the NYCLA report will convince OLPs to voluntarily adopt the recommendation or spur the New York State Legislature to action. It should be remembered that the same House of Delegates voted overwhelmingly to endorse a New York Constitutional Convention. That did not turn out very well at the polls. Although, the NYSBA did hand out some nifty stickers and buttons to support ‘yes’ votes.

 

James E. Hacker, Esq.

ACBA President

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