LegalZoom's War on GPs and Solos
LegalZoom filed for an IPO to raise millions in an effort to crush small law firms. It is capitalizing on consumers' willingness to buy cheap, do-it-yourself forms as opposed to paying a lawyer to do the job right in the first place.
"Solos and small law firms will find that it will be very difficult to compete against LegalZoom with its superior capital resources," warns in his eLawyering Blog. "LegalZoom will, inevitably, put many solos and small law firms out of business as it grows and expands its suite of services."
LegalZoom slams lawyers in small firms on p. 62 of their S-1 filing:
When in need of legal help, small businesses and consumers lack an efficient and reliable way to find high quality, trustworthy attorneys...
Attorneys are frequently unable to predict the time required to address a client's legal matter, sometimes billing thousands of dollars to research a legal issue they have not previously encountered. This can be particularly true of generalist attorneys that offer many disparate legal services to members of their local communities. Unlike attorneys at large global law firms or specialty boutiques who handle high volumes of similar matters and develop expertise in specific domains, generalists can find it difficult to efficiently address a client's particular legal issue due to their lack of specialized expertise.
To me it smells like a play to raise cash from Wall Street to wage war on the little guy.
Richard warns, "LegalZoom is here to stay and will expand its market share as the major provider of the delivery of legal solutions to consumers and small business." He is right. It is time for America's lawyers to take back their profession.
For starters, solos and GPs must learn new online skills, provide legal services more efficiently and start marketing better. You must read Richard's blog post which lists steps that small-firm lawyers can take to be more competitive in this rapidly changing environment.
I recommend you take a look at Richard's DirectLaw web service -- a hosted virtual law firm platform for solos and small law firms that enables them to offer legal services on-line without a large capital investment.
For further reading:
14% of Lawyers Operate a Virtual Law Firm
Elawyering Award Goes to Rosen Divorce Firm
Great piece, Larry and timely in many ways.
The overwhelming number of lawyers in the United States do not compete with the Deweys of this world and the passing of that firm is largely ireelevant to them.
The real competition for most practitioners is coming from Internet providers like LegalZoom.com and the extremely potent force they have is what should keep the average lawyer up late at night, as I wrote almost a year ago at http://kowalskiandassociatesblog.com/2011/08/11/are-law-firms-going-to-be-replaced-by-internet-based-providers-of-legal-services/ .
You are quite wise to sound the clarion call.
I am a bit of a contrarian when it comes to LegalZoom. I reviewed a set of their documents a few years ago for a new client, and I couldn't find any real fault with the documents. Putting self-interest aside, I don't know why the client should pay me twice as much if all they need are a few legal forms.
This was a eureka moment for me, causing me to reposition my practice. It helped me realize that I didn't go to law school for 4 years (JD + LL.M.) to compete with non-attorney form providers. With the knowledge-based economy that has risen on the back of the Internet, the old models that depended solely on restricted access to information (such as forms) are crumbling. Attorneys can either choose to fight (and worry about) these new developments, or simply adapt.
The "bundled" services that attorneys once provided have been segregated. The value chain has been decomposed. Clients can now purchase forms and legal advice from separate vendors. Clients who are savvy enough to know that they only need a simple form should use the low-cost provider. (This is no different from the will forms and other legal document software that has been available in office supply stores for years.) Clients who need advice about the application of the law to their specific circumstances should choose the most qualified attorney they can afford.
Of course, the common counter-argument is that most consumers don't know enough to evaluate whether they need legal advice instead of a simple form. But isn't that the consumer's choice? I'm not one for paternalism driven by self-interest.
Maybe this will prompt attorneys to stop thinking of themselves as form-sellers and focus on the value that they can really add to a client (application of law to a specific situation). Attorneys need to think about their practices differently if they want to survive in the new economy. "Developments" like this are just growing pains.
It is niche driven and driving a different market need. Certain adaptation will be required from practicing attorneys to this changing market topography.
I associated with Legal Zoom for client referrals from September through December last year, but had many complaints. My first complaint was that I was not being compensated for what ended up being 40-80 hours of intakes per month. Later, I found out that I should have been paid $15 per 1/2 call, but my contact withheld that information and income, and instead made repeated vague promises of compensation that never materialized.
My second complaint is that the referrals were not coming directly to me, but were being referred by my contact to me. This led to referrals being delayed though there was a client expectation of a 24-hour call back, which I almost always met. Later, I found out that my LZ contact did not refer me all the calls immediately because he wanted to cherry pick for himself the lucrative wrongful death (etc.) cases.
My third complaint is that there are a lot of unethical practices going on, relative to referral fees that may work in some states, but not in ours.
My fourth complaint arose shortly before I left. LZ wanted control of my scheduling software so they could allow the client to make appointments without talking to me. It was a good idea in concept, but I had my own thriving litigation practice that I could not yield my entire schedule over to unknown clients.
My fifth complaint is that Legal Zoom has very little quality control, and is a lurking malpractice risk.
My sixth complaint is that LZ did not allow for practice-area-focused referrals. You have to be a generalist, which I was, but the expectations of competency across the board were high.
My seventh complaint is that LZ told the clients that they paid for 1/2 an hour of legal services per day, with no requirement that the issue be a separate legal matter. This allowed a few clients to take advantage of me.
My eighth complaint is that I had no access to the client's forms with LZ. The clients would call assuming that I knew about their case/file, but I would not have anything. Further, the forms and services provided by LZ were somehow my problem, though I had nothing to do with their drafting or services.
This list could keep going on, and on. It was not an entirely negative experience, but associating with LZ definitely was not economical for me. I understand other attorneys have made it work for them.
I am not sure this is the right forum, but I think the word should be spread that LZ is not all that it says it is.