Online Legal Service LegalZoom Files Antitrust Suit vs. North Carolina Bar for $10.5 Million

LBN’s Bob Donley notes that everyone loves a bargain. But it may not be a bargain if a dollar spent today ends up costing you hundreds later. That possibility—savings now might mean big expenses later—is at the heart of a struggle involving LegalZoom and the North Carolina Bar Association.

LegalZoom was formed over a decade ago by Robert Shapiro, who became famous as a member of the legal team that defended O.J. Simpson. Shapiro formed LegalZoom in 2001, and the company has grown steadily since. It has served over 2 million customers in the last ten years. A visit to the company’s website reveals that the company offers downloadable forms for a variety of basic legal needs: wills, business incorporation, real estate transactions, and many other services.

Those who criticize document services like this point out that a downloaded document cannot stand up for someone’s rights in a court of law. That’s the issue about which the North Carolina Bar Association has been fighting with LegalZoom for about a decade. The state bar has refused to recognize LegalZoom as a prepaid legal services provider, though the company is already licensed in 42 states.

The other states agree with North Carolina, that the service does not really meet the legal needs of consumers because it provides fill-in-the-blank forms and not actual, one on one legal representation. The bar’s position is that, in the end, consumers who use LegalZoom and have difficulties will end up paying more to solve a problem than if they had used a lawyer in the first place.

But LegalZoom has gotten some help from the U.S. Supreme Court. In North Carolina State Board of Dental Examiners v. FTC, the Court held that the dental board, composed of dentists and not overseen by any elected officials, could not stop non-dentists from getting into the teeth whitening business in North Carolina. Armed with the decision that the antitrust law was there to use, LegalZoom sued the North Carolina Bar Association for $10.5 million.

It is not clear, Donley notes, how the legal action will play out. But the action will happen “in courtrooms, and the players will be attorneys.”

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