Lawyers vs. software

Cite this Article
Larry Ribstein, Lawyers vs. software, Truth on the Market (July 02, 2011),

Roger Parloff asks, “can software practice law?”

He discusses class litigation over whether the web service is illegally practicing law in Missouri by helping users prepare legal documents by posing questions and then providing a customized document based on the user’s answers.  The class plaintiffs don’t claim any injury other than the price they paid for the service, for which they seek triple recovery under Missouri law for all LegalZoom customers since 2004.  (Although plaintiffs may have sought to avoid a lawyer when they signed up with LegalZoom, they’ve got one now.)

(As discussed in the disclaimer at the end of this post, I have a potential relationship with LegalZoom.)

As Parloff says, the question is whether LZ’s online software is simply providing a legal form, which is perfectly legal, or providing “personal advice as to legal remedies or the consequences of flowing therefrom,” which is not under Missouri law. Parloff notes that the website is rife with disclaimers that it is not a lawyer or giving legal advice.  He cheekily concludes:  “Does that seem like a debate over a distinction without a difference? Judge Laughrey must wish there was a JudicialZoom.”

Parloff notes that the most relevant precedent is one from twelve years ago in Texas, Unauthorized Practice of Law Comm. v. Parsons Tech., Inc., No. CIV. A 3:97-CV-2859-H, 1999 U.S. Dist. LEXIS 813 (N.D. Tex. Jan. 22, 1999).  There the trial court held that Quicken Family Lawyer, a CD which helped consumers prepare wills and other legal documents, constituted unauthorized practice because it went beyond a mere form book and “purports to select” the appropriate legal document, “customizes the documents,” and “creates an air of reliability about the documents.”  The Texas legislature then amended the state’s unauthorized law to exempt “the design, creation, publication, distribution, display, or sale . . . [of] computer software, or similar products if the products clearly and conspicuously state that the products are not a substitute for the advice of an attorney.’”  The Fifth Circuit accordingly vacated the trial court’s decision (179 F.3d 956, 956 (5th Cir. 1999)).

I covered some of the relevant policy issues in Lawyers as Lawmakers:  A Theory of Lawyer Licensing, 69 Mo. L. Rev. 299 (2004) (SSRN version) (footnotes omitted):

The courts have characterized as unauthorized practice providing and filling in legal forms in ways that require discretion and legal knowledge.  Writing self-help books or drafting do-it-yourself legal kits is not unauthorized practice of law if it does not involve individualized assistance, while legal computer software and Internet services may cross the line into unauthorized practice.

The mechanistic definitions of law practice based on complexity or custom let self-interested bar committees foreclose competition by non-lawyers without regard to whether these practitioners can render the same quality service as lawyers, or whether clients or customers can accurately evaluate the service they are getting from the non-lawyer.  * * *

The arguments against state licensing of lawyers based on traditional theories of screening unqualified lawyers are even stronger in the borderline unauthorized practice cases.  Requiring broad-based legal training in three years of law school and an intensive bar exam makes less sense as the practitioner’s activities become narrower and more routine.  Conversely, eliminating state licensing of lawyers as to such matters would facilitate the entry of national firms that routinize low-end practice without sacrificing quality.  To be sure, buyers of these low-end services may need more legal protection from unqualified lawyers than corporate clients with in-house lawyers who deal with the most reputable large law firms.  But this protection is better provided by regulation or licensing for specific kinds of activities, such as real estate conveyances, consumer bankruptcies or no-fault divorces, than by requiring consumers to hire full-fledged lawyers even for marginal legal services.

Moreover, lawyer licensing has a greater effect on availability of legal services for low-income people or those involved in smaller transactions.  Forcing these economically marginal clients to buy Cadillacs when they only need Chevrolets may cause them to rely on self-help, and thereby reduce the quality of services these clients actually receive.  The impact has been ameliorated somewhat by exempting legal assistance for the poor from unauthorized practice laws.  But since these exemptions leave the least sophisticated and therefore most vulnerable clients exposed to supposedly unqualified practitioners, they suggest that lawyer licensing is more concerned with protecting lawyers’ profits than with protecting the public.

In addition to the substantive issues with Missouri’s law, there is the problem of the patchwork of state regulation here where one state’s regulation can inhibit the development of a national web-based business that is perfectly legal in many other states.

More recently, in Law’s Information Revolution, Bruce Kobayashi and I discuss how enabling a market for legal information products by beefing up intellectual property rights in these products could reduce the need for licensing laws by providing a transparent product market to replace or complement the closed one-to-one agency relationship between lawyers and clients.   

And in Practicing Theory I show how the development of these products could open up new, high-end design-type jobs for people with legal skills to replace jobs that could be replaced by machines.  Although I don’t view lawyer protectionism an appropriate regulatory goal, it’s worth noting that this isn’t about whether machines will replace lawyers.  Rather, it’s about whether new technologies will channel legally trained people toward more socially productive activities.

Cases like the one in Missouri represent the last gasp of a dying approach to the transmission of legal information — the exclusive reliance on one-to-one customized personal communication of information in the Internet and computer age.  In the long run markets and superior technology will win this battle — they always do.  In the short run, millions of ordinary consumers are locked out of low-cost ways of contending with an increasingly regulated and legalized society.

Lawyers should have to demonstrate in the marketplace and explain to consumers why they should be consumers only way of getting legal information. This isn’t even about replacing lawyers.  LegalZoom at least gives consumers the views of the lawyers who helped develop the product as to how legal documents should be prepared, which the consumers can then compare with the work of a lawyer they may have gotten from their brother-in-law or the Internet.

Disclaimer: Last week I was asked and agreed to join LegalZoom’s “legal advisory council,” although my membership has not been finalized.  Obviously critics of my position on this issue can point to this affiliation to try to discredit my sincerity.  On the other hand, I can point to my writings over more than a decade as evidence that my joining with LegalZoom reflects a long-held position.  I might also call attention to my other longer-standing affiliations that cut the other way:  my membership since 1972 in the state bar of Illinois, and my employment since 1975 in ABA accredited law schools.