Monday, May 14, 2012

LegalZoom to go public; plans include creating a network of lawyers to dispense legal advice

Let's go for the Bill Henderson trifecta of ominous news (here and here) regarding the structural changes taking place in the legal services industry. He's got another important post over at the Legal Whiteboard concerning LegalZoom's plan for an IPO.  LegalZoom, as just about everyone knows, sells boilerplate legal forms but has been very careful to avoid the appearance of offering legal advice (though that hasn't stopped a few local bar associations from litigating the issue - here and here). In that sense, LegalZoom hasn't yet been a direct threat to lawyers, typically small firms and solos, who make part of their living advising clients on routine legal matters like simple wills and helping them to incorporate. Although according to the IPO materials, last year LegalZoom was responsible for more than 20% of the limited liability companies formed in California. Yikes.

But going forward, LegalZoom does indeed plan to offer legal advice through a network of affiliated lawyers it will create.  No doubt lawyers in the network will have to work for cut-rate prices and those who don't join will be under tremendous pressure to match LegalZoom's prices. None of this will have an impact on clients with complex legal problems that require a more sophisticated approach, representation in criminal matters and other trial work.  But if your current practice depends at least in part on helping clients with any of the routine legal matters where LegalZoom plans to compete, LegalZoom is going to eat your lunch. Like it or not, "the Wal-Mart effect" is coming to the legal services industry.

From Professor Henderson:

What is LegalZoom's long term play?  Based on the S-1 [a document filed in connection with the IPO], it is to use its trusted brand to build a network of "legal subscribers" who obtain legal advice from licensed attorneys.  As LegalZoom says,

We are not a law firm, and we do not provide legal advice. We provide self-help legal documents at our customers' specific direction and teneral information on legal issues generally encountered. Independent, licensed attorneys participate in our attorney network to provide services to our customers through our legal plans.

LegalZoom is seeking $120M for general corporate purposes.  Sheppard Mullin and Latham & Watkins are listed on the S-1 registration statement.  Think LegalZoom is no big deal?  If so, I would encourage you to read my previous post.

Rocket Lawyer, an online legal service provider that Google has heavily invested in, also plans to offer legal advice via the internet through a network of licensed attorneys who undoubtedly will be working for cut-rate prices


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See: Rozman Law Group sues LegalZoom for ethical infractions at: blog

Posted by: Richard Granat | Jun 2, 2012 6:50:12 AM

Professor Henderson –

I don’t believe that there is much doubt that, classic market a disrupter, is a direct and potent provider of legal services and at least one court as found that is engaged in the active practice of law. It will continue to compete directly with traditional law firms with incredible price advantages, wall to wall advertising and an astounding capital base.
I’ve written in more detail on this subject at

Jerry Kowalski

Posted by: Jerome Kowalski | May 18, 2012 7:06:19 AM

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