Maybe We Are Getting Closer to a Decision in North Carolina on Whether LegalZoom Is Engaged in the Unauthorized Practice of Law

Maybe We Are Getting Closer to a Decision in North Carolina on Whether LegalZoom Is Engaged in the Unauthorized Practice of Law

 Legalzoom may be a step closer to overcoming the NC State Bar's assertion that its online legal document service constitutes the unauthorized practice of law (UPL), following yesterday's ruling in LegalZoom, Inc. v. North Carolina State Bar, 2014 NCBC 9 [an enhanced version of this opinion is available to lexis.com subscribers]. Or it may be only a few questions away from a ruling that would impact its ability to conduct business in North Carolina, depending on how you read the decision.

If you need some background on LegalZoom, you probably don't own a television or you haven't read my two previous posts on this long simmering dispute, from January 2012 and August 2012. The company is constantly advertising its legal document generation service which it says on its website "strive(s) to be the best legal document service on the web." It prepares incorporation papers, wills, trademark applications, and divorce documents and other things for its customers, who want a "do it yourself" approach to law. LegalZoom has been battling with the NC State Bar in the Business Court since 2010 over whether its service constitutes the UPL.

Yesterday, Judge Gale denied the State Bar's motion for judgment on the pleadings, ruling that he needed a "more developed record" to make a decision, in 2014 NCBC 9. Op. ¶50.

Exceptions To The Unauthorized Practice Of Law and Judge Gale's Questions

The definition of the "practice of law" is contained in G.S. § 84-2.1. LegalZoom argues that it falls within recognized exceptions to states' prohibitions on the UPL. One is known as the “self-help” or the “self-representation” exception, which means "that one can legally undertake activities in his own interests that would be UPL if undertaken for another, or to “practice law” to represent oneself." Op. ¶ 58.

The NC Supreme Court weighed in on the "self-help" exception fifty years ago, in State v. Pledger, 257 N.C. 634, 127 S.E.2d 337 (1962) [enhanced version], in which it held that a non-lawyer employee of a company in the business of constructing and selling of homes did not engage in the UPL by preparing deeds of trust for homes that his employer sold. The Court said that:

[a] person, firm or corporation having a primary interest, not merely an incidental interest, in a transaction, may prepare legal documents necessary to the furtherance and completion of the transaction without violating [the law].” Id. at 637, 127 S.E.2d at 339.

Op. ¶61. Since LegalZoom doesn't have a "primary interest" in its customers' business, it wasn't able to successfully avail itself of the "self-help" exception.

 Read the rest of the article at the North Carolina Business Litigation Report, a blog for lawyers focusing on issues of North Carolina business law and the day-to-day practice of business litigation in North Carolina courts.

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