LegalZoom or LegalDoom?

It’s true. We are competing with LegalZoom. Seems almost outlandish that a law firm, with actual licensed, practicing attorneys possessing over 20+ years of experience each, would be competing with non-lawyers, but here we are.

It’s a mixed blessing for this firm, however. A sizable portion of this firm’s revenue comes from small business owners or leaders who are under some form of duress wrought by poor service, poor drafting, or some other form of tragic mistake that you would not otherwise expect to see, but for the fact that non-lawyers are trying to do the job of attorneys. Don’t take my word for it. Read for yourself in “Legalzoom messed up my LLC filing“, one of many such articles you will find, if you search google for LegalZoom screwed up.

LegalZoom, as an e-commerce company, is doing many things right. We estimate it’s advertising budget is north of $500,000 per month (revised in Oct-2018, up from $200,000 per month estimated in 2015). It’s website is very professional, friendly and easy to navigate. They do a great job of “funneling” customers to their service areas, and their marketing messages make them seem quite impressive. For example, in 2015 they were saying:

• “We’ve filed more U.S. trademark applications in 2013 than the top 40 law firms combined.”
• “Legal Help is Here.”
• “100% satisfaction guarantee.”
• “$50,000 Peace of Mind Guarantee.” (link).
• “Quality You Can Trust.”
• “… our company was created by experienced attorneys …” (link)

The problem with the statements above, is they are very misleading. Let me explain:

• More trademark applications in 2013 than the top 40 law firms combined? More doesn’t necessary mean better. As far as we can tell, LegalZoom only incorporates one class code into its offering, when most trademark holders will be better served with more than one. The filing fee for a trademark can vary, depending on how you file (i.e. TEAS versus TEAS Plus). TEAS Plus is $50 cheaper, and LegalZoom will keep that $50, if it can file a TEAS Plus application (it’s not necessarily more work, as LegalZoom maintains in a footnote on its website). Finally, LegalZoom cannot assist businesses with picking the right class-code, nor can it offer legal advice on the “Likelihood of Confusion” test that governs potentially infringing marks.
• Legal Help is Here? This really sounds like they are attorneys, offering legal help and legal advice, doesn’t it? The problem is, they are not a law firm nor are they attorneys. No lawyer or attorney will review your matter, unless you opt for a monthly recurring fee, then they will refer you to an attorney. Read this press release, where LegalZoom representatives actually boast about their business model, which appears to be nothing more “allowing access to online legal documents.” This does seem a bit self-serving for them: When they are battling it out in court, trying to defend themselves on a “unlicensed practice of law” lawsuit, they say they are “just providing access to legal forms,” but when they market themselves on the Internet, they say “legal help is here?”
• 100% satisfaction guarantee? Read the fine print. You may get a portion of your money back, provided you make a claim with 60-days of the service. The problem is, we’re talking about important legal documents. A business or trademark, for example, can represent someone’s most important and valuable asset they own. LegalZoom doesn’t help you choose the best options for your specific situation. If you find out a year later that your decisions exposed you to ordinary taxes versus capital gains taxes (i.e. 40% taxes versus 15% taxes), LegalZoom’s guarantee is worthless. By the way, did you know that it takes 3-5 months for the USPTO to respond to your trademark filing — and that over 80% of trademark applications that are filed by people who aren’t represented by an attorney will see their trademark applications refused? The 60-days on their 100% satisfaction guarantee seems a bit disingenuous, doesn’t it?
• $50,000 Peace of Mind Guarantee? Again, read the fine print. As an attorney, I find the document well-crafted to minimize the payouts — and I would actually be surprised if they’ve ever given out more than a couple of these awards. They guarantee that “your LLC or corporation will be valid and effective at the time the formation documents are filed and accepted by the Secretary of State (or other government authority).” This is an empty guarantee, since “state acceptance” literally means the “forms are valid and effective at the time the formation documents are filed and accepted.” The Secretary of State (or other government authority) “accepts” the paperwork, they create either a “Certificate of Organization” (for a LLC) or a “Certificate of Incorporation” (for a Corporation), which represents a de facto statement by that organization that the paperwork is valid and effective. This guarantee is a truly meaningless. Surprisingly, LegalZoom must have found some glitch, because they then further limit their empty guarantee by requiring their customers to “notify them within 30 days after a challenge has been made,” with additional, very specific and broad limitations.
• “… our company was created by experienced attorneys …” So what? Unless those attorneys are actually working on your specific matter, it doesn’t matter to you at all. You’re taking chances, because at the end of the day, you’re making very important decisions without the assistance of a licensed attorney.

Unfortunately for us attorneys, we are at a significant disadvantage when it comes to competing with LegalZoom, RocketLawyer, and similar companies. Attorneys are regulated by the state bars in all 50 states, and those state bars require that all attorneys (to keep their license) abide by the attorney rules of professional conduct. These rules are there for a purpose: To protect clients and the legal jurisprudence system. Unfortunately, the rules haven’t been keeping up with the rapid pace of the Internet and its impact to the practice of law. This makes it difficult for us attorneys to complete head-on with the likes of LegalZoom. For example:

• Law firms cannot be owned by non-lawyers, therefore law firms cannot obtain private equity funding. LegalZoom can, which gives LegalZoom access to a war-chest of cash to out-spend and out market us law firms.
• Attorneys cannot make misleading statements. Period. You would never find an attorney or law firm making the marketing statements above that LegalZoom does. We would find ourselves disbarred quickly.
• Attorneys cannot pay referral fees, which is a standard and powerful form of online marketing. LegalZoom pays a “15% commission for every referral” (link), which is something you will NEVER find an attorney or law firm providing. This means an entire online distribution channel is closed off to us attorneys.

For these reasons and more, the large “non-licensed legal help” companies such as LegalZoom is top in Google, and siphoning off clients who really need the help of an attorney. Thus, should they be called LegalZoom or LegalDoom?