STATE OF NORTH CAROLINA WAKE COUNTY IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION ll-cvs- LEGALZOOM.COM, INC., v. Plaintiff/Petitioner, THE NORTH CAROLINA STATE BAR, Defendant/Respondent. ) ~) ) ) ) ) ) ) ) ) ) ) COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF Plaintiff/Petitioner LegaIZoom.com, Inc. ("LegaIZoom"), by and through its attorneys, files this Complaint. Plaintiff, complaining of Defendant, alleges and says: INTRODUCTORY STATEMENT 1. This action is brought pursuant to Article I, Sections 19 and 34 of the North Carolina Constitution, the Declaratory Judgment Act, N.C. Gen. Stat. 1-253 et seq. and common law, and stems from Defendant's unlawful refusal to register Plaintiffs compliant prepaid legal services plans under N.C. GEN. STAT. 84-23.1; from Defendant's ultra vires actions and assertions that Plaintiff is prohibited from offering its services to consumers in North Carolina; from the anti-competitive, false and disparaging conduct of Defendant the North Carolina State Bar; and from Defendant's unlawful attempt to deprive Plaintiff of its right to offer its services to consumers in North Carolina.
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS Wake County Complaint Page 2 of25 PARTIES, JURISDICTION AND VENUE 2. Plaintiff LegalZoom is a Delaware corporation with its principal place of business in Glendale, California. Plaintiff's business includes providing legal document services and prepaid legal services plans under the name LegalZoom. 3. Defendant North Carolina State Bar ("NCSB") is an instrumentality and agency of the State of North Carolina. The NCSB was created pursuant to N.C. GEN. STAT. 84-15: "There is hereby created as an agency of the State of North Carolina, for the purposes and with the powers hereinafter set forth, the North Carolina State Bar." 4. The NCSB is a state agency, and as such is subject to state laws applicable to all instrumentalities of the state. Thus the NCSB is subject to, and must comply with, North Carolina's Constitution, Administrative Procedure Act (N.C. GEN. STAT. 150B-l to -52), State Government Ethics Act (N.C. GEN. STAT. 138A-l to -45) and N.C. GEN. STAT. Chapter 84 ("Attorneys-at-Law"). 5. All of the NCSB's administrative proceedings are subject to judicial review by the State's Superior Courts. N.C. GEN. STAT. 150B-43 to -52. Any action by the NCSB to enjoin the unauthorized practice of law must be brought in North Carolina Superior Court. N.C. GEN. STAT. 84-37(c). N.C. GEN. STAT. 84-7 authorizes criminal prosecution by North Carolina district attorneys based on information provided by members of the North Carolina bar alleging the unauthorized practice oflaw, and N.C. GEN. STAT. 84-8 provides that unauthorized practice of law violations are misdemeanors. In addition, NCSB actions are subject to challenge in the General Court ofjustice of North Carolina. N.C. GEN. STAT. 7A-3.
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 3 of25 6. The NCSB's enforcement of N.C. GEN. STAT. 84-15 to -38 is subject to North Carolina's constitutional prohibition against monopolies l and the North Carolina Constitution's Law of the Land Clause. 2 7. Jurisdiction and venue in this Court are proper. Specifically, this case includes claims that involve a material issue relating to the following: (1) the determination that commercial activity is or is not subject to occupational licensing laws; (2) the determination that commercial activity is required to be registered; (3) anti-monopoly, anti-competition, and antitrust law claims that are not based solely on N.C. GEN. STAT. 75-1.1; (4) unfair competition law claims that are not based solely on N.C. GEN. STAT. 75-1.1; and (5) the Internet and electronic commerce. FACTS 8. This is an exceptional and complex case of first impression on the facts and the law. 9. Plaintiff principally provides two services: (1) a self-help legal document service and (2) prepaid legal services plans, both of which are available on the Internet at www.legaizoom.com. Plaintiff's self-help legal document services are available online nationally and are available to consumers in North Carolina. Plaintiff's prepaid legal services plans are available in most of the United States, but are not currently offered in North Carolina pending their registration status. I "Monopolies are contrary to the genius of a free state and shall not be tolerated." N.C. CONST., art. 1, 34. 2 "No person shall be taken, imprisoned, or disseized of his freehold, liberties, or privileges, or outlawed, or exiled, or in any manner deprived of his life, liberty, or property, but by the law of the land. No person shall be denied the equal protection of the laws; nor shall any person be subjected to discrimination by the State because ofrace, color, religion, or national origin." N.C. CONST., art. 1, 19.
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 4 of25 lo. Plaintiffs self-help legal document service does not select legal forms for its customers - customers make their own decisions as to which forms they believe they need. Documents are created in an automated process similar to off-the-shelf legal software available throughout the state. Customers go to the LegalZoom website, decide what form they want to purchase, fill in the intormation in the selected form, and a document is generated from standardized language based on the information and decisions made by the customer. 11. Plaintiff s prepaid legal services plans provide an efficient mechanism for delivering legal services to people in need of legal help. A consumer pays a fixed amount each month in exchange for certain service benefits to be used as and if needed. Like most legal service plans in operation today, Plaintiff's plan relies on a panel oflawyers in private practice to provide covered services. 3 The basic service provided under each plan varies, but the services provided under the plans generally consist oflegal advice and consultation by telephone and may also include brief office consultations, review of simple legal documents, and short letters written or phone calls made by a lawyer to an adverse party. 12. Plaintiff, through its officers and employees, IS a member of the American Prepaid Legal Services Institute, an entity affiliated with the American Bar Association whose purpose is to act as a clearinghouse and technical assistance source for the prepaid legal services industry. 13. LegalZoom's self-help legal document service provides the standardized language that is used in the automated document-creation process; such forms are typically obtained trom state agencies or approved by licensed North Carolina attorneys. This selection takes places 3 The American Bar Association describes common features of such plans on its website. See h!1p.l{ww.:'y.:i!j.d.9i!~.<.mqi!lqig!gt:mm.~~mjll.~r.~r!}id)egal seryj~~'tjltlul (last visited Sep. 29, 2011).
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS Wake County Complaint Page 5 of25 prior to, and independent of, any customer seeking to generate a legal document. It is no different than the selection of one form from among many potential forms that is made by the author of any legal textbook, legal form book, or do-it-yourselflegal document kit. 14. Both LegalZoom's self-help legal document service and prepaid legal services plans otter alternative low-cost personal resources to the consuming public of North Carolina in general, and to consumers oflow and moderate means in particular. 15. N.C. GEN. STAT. 84-2.1 states that the practice oflaw is defined as "performing any legal service for any other person, firm or corporation, with or without compensation..." (emphasis added). Accordingly, although providing legal assistance to another person can constitute the practice of law, self-help conduct undertaken by an individual on his or her own is not the practice of law. Long-standing case law has upheld the principle that the sale of legal forms and instructions and do-it-yourself legal document kits is not the unauthorized practice of law, and has held that the sale of such products and services is protected by the First Amendment. E.g., New York County Lawyers' Ass 'n v. Dacey, 21 N.Y.2d 694, 287 N.Y.S.2d 422,234 N.E.2d 459 (1967); Oregon State Bar v. Gilchrist, 272 Ore. 552, 538 P.2d 913 (1975); State Bar v. Cramer, 399 Mich. 116,249 N.W.2d 1 (1976). 16. LegalZoom' s self-help legal document service does not determine which form is appropriate for individual customers, because the process is fixed and automated. LegalZoom does not exercise legal judgment based on the facts or circumstances of any given customer's needs, nor does it provide legal assistance to individual customers. If two North Carolina customers selected the same product and answered the questions identically, they would receive identical documents. There is no discretion or independent judgment by LegalZoom.
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 6 of25 17. LegalZoom's self-help legal document service does not (and does not claim to) have attorneys who review the customer's documents after they are generated to determine if the forms meet the individual customer's needs. The generated documents are checked for completeness, spelling and grammar errors, and correct addresses and the like - not for legal sufficiency. This is clearly stated in numerous disclaimers throughout the website. 18. Plaintiff provides dependable and legally compliant legal document services and its document templates are prepared by attorneys. 19. Prior to Defendant's actions complained of herein, Plaintiff had made its self-help legal document services available to North Carolina customers. Subsequent to Defendant's actions complained of herein, Plaintiff has continued to make its services available in North Carolina on the advice of counsel. 20. In March 2003, Defendant's Authorized Practice of Law Committee (the "APL Committee") opened an inquiry into Plaintiff's online self-help legal document services, and sent a letter to Plaintiff notifying the company of its inquiry. See Letter from NCSB dated March 13,2003, true and correct copy attached hereto as Exhibit 1. 21. On April 10, 2003, Plaintiff responded with a letter (true and correct copy attached hereto as Exhibit 2), and described how its self.-help legal document service did not constitute the unauthorized practice oflaw, explaining that: a. The purpose of LegalZoom is to be a general legal portal and to give customers a general understanding of the law, as well as to provide automated software solutions to allow individuals to prepare legal documents. b. The website contains numerous disclaimers that LegalZoom is not a law firm and does not give legal advice. The website also encourages visitors to seek
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS Wake County Complaint Page 7 of25 an attorney for more information, for example stating "This website should not be used as a substitute for the advice of an attorney," and that visitors to the website should "consult with professional legal counsel in his or her state regarding the applicability of any points of law discussed at this Site to any specific problem." 22. Plaintiff in its April 10, 2003 letter also provided detailed information on the se1fhelp legal document service it provides, including a detailed description of its incorporation and LLC formation services. 23. On August 26, 2003, the APL Committee issued a letter stating that it had "carefully considered" the information received by it and provided by Plaintiff, and "[b ]ased on all of the information available, the APL Committee voted to dismiss this complaint because the evidence was insufficient to support a finding of probable cause that [Plaintiff was] engaged in the unauthorized practice oflaw." See 2003 NCSB Letter, true and correct copy attached hereto as Exhibit 3. 24. In January 2007, the APL Committee opened a second inquiry raising a concern about Plaintiff being named as the incorporator of corporations formed by its customers in North Carolina. See January 30, 2007 NCSB Letter, true and correct copy attached hereto as Exhibit 4. 25. In a letter to NCSB dated February 13, 2007 (true and correct copy attached hereto as Exhibit 5), Plaintiff provided a response to the APL Committee detailing how Plaintiffs self-help legal document service business model, including its incorporation service, had not materially changed since 2003 when the NCSB closed its inquiry into LegalZoom.
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 8 of25 26. Despite the fact that Plaintiffs business practices had not changed since the NCSB Commission's 2003 inquiry, Defendant on May 5, 2008 sent a "Letter of Caution[;] Cease & Desist" letter 4 to Plaintiff stating that Plaintiff was engaged in the unauthorized practice of law. See Cease & Desist Letter from NCSB to Plaintiff dated May 5, 2008 ("Cease & Desist Letter"), true and correct copy attached hereto as Exhibit 6. Defendant indicated in the Cease & Desist Letter its belief that "[t]he North Carolina General Statutes prohibit individuals or other entities other than North Carolina licensed attorneys at law from providing or offering to provide legal services" such as the self-help legal document service described above. See Ex. 6, Cease & Desist Letter. 27. The NCSB's Cease & Desist Letter contained a number of inaccuracies in its description of the self-help legal document services provided by Plaintiff. On June 13, 2008, Plaintiff sent a letter responding to Defendant's Cease and Desist Letter, explaining that the APL Committee's 2003 conclusion was correct, and that its 2008 conclusion was based on mistaken assumptions about Plaintiffs business practices and the applicable law. A true and correct copy of Plaintiffs June 13, 2008 letter is attached hereto as Exhibit 7. Desist Letter: 28. Plaintiffs letter of June 13,2008 noted the following inaccuracies in the Cease & a. The Cease & Desist Letter states that "[a]mong the documents LegalZoom prepares or offers to prepare are articles of incorporation, wills, trusts, [uncontested] divorce pleadings, and deeds." Ex. 6, Cease & Desist Letter. These legal documents "are prepared through LegalZoom's website where, once the 4 Although the letter is styled as a "LETTER OF CAUTION", the style subheading also states "Cease and Desist" and the letter has been nominally referred to by NCSB representatives as a "cease and desist letter."
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 9 of25 customer purchases the service, the customer is presented a questionnaire that the customer completes online. LegalZoom transcribes the responses onto a form template that Legalzoom [sic] has determined is appropriate for the customer's legal document and in a form or manner determined by LegalZoom or through software developed by or on behalf of LegaIZoom." Ex. 6, Cease & Desist Letter. However, as noted in Plaintiffs response on June 13, 2008, LegalZoom's selfhelp legal document service does not "transcribe" or "determine[] [what form] is appropriate for the customer's legal document." Rather, "the process is fixed and automated, just as in any form book with instructions or a do-it-yourself kit." Ex. 7 at 2. LegalZoom's "customers make their own decisions as to which forms they believe they need." Id. b. The Cease & Desist Letter also stated: "In the case of the articles of incorporation, [Plaintiff] files the document with the North Carolina Secretary of State without any prior delivery of the document to the customer. The template used for North Carolina corporations is the template offered by the Secretary of State." Ex. 6, Cease & Desist Letter. Plaintiff "select[ s] or prepare[ s] the template for each type of document selected by its customers."!d. As noted above, Plaintiffs response on June 13, 2008 clarified to the NCSB that its self-help legal document service process is "fixed and automated", and that "LegalZoom does not exercise legal judgment based on the facts or circumstances of any given customer's needs." Ex. 7 at 2. This is true for form articles of incorporation that are offered as part of LegalZoom's self-help legal document service.
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 10 of25 29. Additionally, as is clear from reviewing Plaintiff's website, Defendant's assertion in the Cease & Desist Letter that LegalZoom "offers to prepare legal documents to the public through a web-based system" is inaccurate and misleading. LegalZoom merely offers its self-help legal document service online so that its customers can create the documents themselves using LegalZoom's website. 30. In Plaintiff's letter of June 13, 2008, Plaintiff's North Carolina counsel also provided a legal opinion explaining that, under North Carolina law, the automated document preparation and filing service provided by Plaintiff does not constitute the "organizing" of a corporation, and therefore is not the unauthorized practice oflaw in violation of N.C. GEN. STAT. 84-4. A true and correct copy of that legal opinion is attached hereto as Exhibit 8. 31. Defendant did not ever respond to Plaintiff's letter of June 13, 2008, other than to acknowledge its receipt in a letter to Plaintiff's counsel dated June 17, 2008 (true and correct copy attached hereto as Exhibit 9). 32. Additionally, Defendant, as threatened in the Cease and Desist Letter, has not sought an injunction pursuant to N.C. GEN. STAT. 84-37, nor an injunction and/or criminal action pursuant N.C. GEN. STAT. 84-7 and 84-8, nor any other relief for that matter, to establish as a matter of law that Plaintiff's self-help legal document service constitutes the unauthorized practice of law in North Carolina. 33. The Cease & Desist Letter falsely accuses Plaintiff of engagmg m the unauthorized practice of law in North Carolina, accuses Plaintiff of engaging in criminal conduct, and was derogatory to Plaintiff's business in general. 34. For over three years and almost five months, since May 5, 2008, the NCSB has wrongfully failed to either: withdraw its Cease & Desist Letter; or pursue its right to have the
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 11 of25 matter determined judicially per N.C. GEN. STAT. 84-37(c) or N.C. GEN. STAT. 84-7 and 84-8, as it threatened to do in its Cease & Desist Letter. 35. The Cease & Desist Letter was published and made available by Defendant on the internet, including on NCSB's website, and thus was widely disseminated to other state regulatory bars, and the legal services provider, legal services consumer, and legal document services consumer communities. 36. Upon information and belief, Defendant's Deputy Counsel, David R. Johnson, has made statements to other individuals incorrectly stating that the Cease & Desist Letter has the force of law and that Plaintiff is "prohibited" from doing business in North Carolina. 37. Upon information and belief, Mr. Johnson stated to third parties that LegalZoom was prohibited from doing business in North Carolina. 38. Plaintiff never received a response from the APL Committee to its June 13, 2008 letter. Since June 13, 2008, Plaintiff has continued to lawfully make available its self-help legal document products and services in North Carolina. 39. Pursuant to that goal, Plaintiff on July 14,2010 sent a letter to the NCSB (true and correct copy attached hereto as Exhibit 10) seeking to register one of its prepaid legal services plans, its Legal Advantage Plus Plan, in accordance with N.C. GEN. STAT. 84-23.1. Subsection (bl) of N.C. GEN. STAT. 84-23.1 provides that "all organizations offering prepaid legal services plans shall register those plans with the North Carolina State Bar Council on forms provided by the Council." 40. On September 30, 2010, the NCSB sent a letter in response that listed requirements for the registration of Plaintiff's plan. That letter also described the NCSB APL Committee's 2008 Cease & Desist Letter regarding Plaintiff's activities, and noted that "[i]t
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 12 of25 appears... that LegalZoom continues to conduct business in a way that the Authorized Practice Committee prohibited in its May 5, 2008 cease and desist letter," and asking that Plaintiff respond to this concern. See September 30, 2010 NCSB Letter, true and correct copy attached hereto as Exhibit 11 (emphasis added). 41. On October 14, 2010, Plaintiff responded with a letter from Kenneth Friedman, Plaintiff's Senior Counsel, noting (1) the conflicting conclusions ofncsb's 2003 and 2008 inquiries, (2) that in June 2008 Plaintiff responded to the NCSB's Cease & Desist Letter stating that its 2008 conclusion was based on mistaken assumptions about Plaintiff's business practices and the applicable law, and (3) that the NCSB had not responded to Plaintiff's June 2008 letter. A true and correct copy of this letter is attached hereto as Exhibit 12. Plaintiff also provided a separate letter from James Peters, a Vice President with Plaintiff's Attorney Services Division, also dated October 14, 2010, again requesting registration of Plaintiff's legal services plans and clarifying that LegalZoom sought registration of both its Business Advantage Pro Plan and its Legal Advantage Plus Plan, and also providing information regarding a North Carolina-licensed attorney intended to be registered under the plans. A true and correct copy of this letter is attached hereto as Exhibit 13. 42. In its October 14, 2010 response (Exhibit 12), Plaintiff also noted that, while the NCSB's APL Committee was certainly within its statutory authority to make a finding of no probable cause or probable cause of unauthorized practice, and to "demand" action consistent with its probable cause finding, the Cease & Desist Letter did not "prohibit" any activity by its terms or by operation oflaw, as stated in NCSB's September 30,2010 Letter. (Exhibit 11)
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 13 of25 43. The NeSB cannot by law enforce its "order" to "prohibit" any activity without first seeking a court order, according to the statutes governing the NCSB's enforcement authority. See N.C. GEN. STAT. 84-15 to -38. 44. In its October 14, 2010 response (Exhibit 12), Plaintiff further noted that the NCSB's Cease & Desist Letter should have no effect on Plaintiffs pending application for registration of Plaintiffs pre-paid legal services plan. 45. Defendant responded with a letter dated November 18, 2010 (true and correct copy attached hereto as Exhibit 14) stating that the NCSB's APL Committee met on October 27 and that it declined to register the Legal Advantage Plus Plan, and requested responses regarding some "concerns" the APL Committee had about the plan regarding whether the plan satisfied North Carolina's definition of a prepaid legal service plan, whether the plan violates unauthorized practice of law statutes, whether LegalZoom wanted to register an additional plan, the Business Advantage Pro Plan, and also requested further information about registered attorneys under the plans and their attorney certification forms. 46. Plaintiff responded with a letter dated December 29, 2010 (true and correct copy attached hereto as Exhibit 15) and stated how LegalZoom's prepaid legal services plan would be offered to North Carolina consumers in such a way as to fully comply with North Carolina unauthorized practice of law statutes, confirmed that Plaintiff sought to register more than one plan, and provided the contact information of an additional attorney along with both attorneys' attorney certification forms. 47. Defendant did not respond until March 24,2011, at which point Defendant sent a letter (true and correct copy attached hereto as Exhibit 16) requesting that the two prepaid legal services plans be registered separately. Defendant wrote an additional letter dated April 28, 2011
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 14 of25 (true and correct copy attached hereto as Exhibit 17) stating that the NCSB APL Committee had concerns about whether North Carolina residents would have access to LegalZoom's self-help legal document service from the prepaid service plan web pages, and that the APL Committee had "voted to continue consideration" of the two plans until LegalZoom responded. 48. Plaintiff responded by a letter dated July 8, 2011 (true and correct copy attached hereto as Exhibit 18), and stated that its self-help legal document service would be available on its website to North Carolina residents in addition to its prepaid legal services plan. Plaintiff stated that there is no legal basis to deny registration of LegalZoom's prepaid legal services plans based on the NCSB's previously expressed concerns regarding LegalZoom's separate self-help legal document service. Plaintiff also stated that LegalZoom continued to otter its self-help legal document service in North Carolina when the NCSB did not respond to LegalZoom's June 13, 2008 letter that raised the numerous mistaken factual and legal assumptions in the NCSB's Cease & Desist Letter, and that under North Carolina law the Cease & Desist Letter did not prohibit any activity but was merely advisory. 49. To date there has been no response by Defendant to Plaintiff's July 8,2011 letter. 50. On or about August 12, 2011, Counsel for Plaintiff telephonically contacted NC State Bar President Anthony di Santi and requested a meeting between Plaintiffs CEO and Counsel with the officers of the State Bar to discuss the C&D Letter (noting that it had been outstanding for over three years) and the Plaintiffs prepaid legal application for registration (noting that it had been outstanding for more than a year). President di Santi indicated to Counsel that he would consult with his fellow officers on August 15, 2011 regarding the request. When no response was received from President di Santi by August 18, 2011, Counsel inquired through voice mail of President di Santi as to the status of the request, which had included four specific
LegaIZoom.com. Inc. v. The North Carolina State Bar. 11 CVS Wake County Complaint Page 15 of25 dates on which Plaintiffs CEO and Counsel would be available. President di Santi responded by email to Counsel on August 18, 2011, indicating that the State Bar officers did not believe that the requested meeting "would be productive at this time", and that counsel would be receiving "a detailed written response soon". (See Exhibit 19). To date (September 30, 2011), no further response of any kind has been received from Mr. di Santi or from the State Bar. 51. Despite Plaintiffs continuing efforts over a period of more than twelve months to register its prepaid legal services plans, the NCSB has unjustifiably and in contravention of N.C. GEN. STAT. 84-23.1 refused and failed to register LegalZoom's compliant prepaid legal services plans, including Plaintiffs Legal Advantage Plus Plan and its Business Advantage Pro Plan. Additionally, Section.0301 of the North Carolina Regulations for Organizations Practicing Law provides that "The North Carolina State Bar shall not approve or disapprove any prepaid legal services plan or render any legal opinion regarding any plan. The registration of any plan under these rules shall not be construed to indicate approval or disapproval of the plan." 52. Once the statutory requirements of N.C. GEN. STAT. 84-23.l have been met, the act of registering prepaid legal services plans by the NCSB constitutes a ministerial act. 53. The NCSB's conduct undertaken on four different occasions under color of law to refuse to register LegalZoom's compliant prepaid legal services plans by tying such services to LegalZoom's separate self-help legal document service is ultra vires and without any authority under North Carolina law and is in contravention of Sections 19 and 34 of the North Carolina Constitution. 54. The NCSB's conduct of publishing and asserting that its Cease & Desist letter "prohibits" any activities by Plaintiff is ultra vires and without any authority under North Carolina law.
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 16 of25 55. The publication and promotion of the Cease & Desist Letter by Defendant has resulted in harm to Plaintiff s pecuniary interest, providing support to supporting private class action lawsuits in other states and also has invited additional regulatory scrutiny from other states: a. The Pennsylvania State Bar issued Formal Opinion 2010-01 regarding Legal Document Preparation By Online And In-Person Services, concluding that "the offering or providing [in Pennsylvania] of legal document preparation services as described herein... either online or at a site in Pennsylvania is the unauthorized practice of law and thus prohibited." While not concluding that LegalZoom itself was engaged in the unauthorized practice of law, the opinion described the activities of online "legal document preparation services" based on mistaken factual and legal assumptions taken in large part from the NCSB's findings. 5 The opinion specifically cites its review of the NCSB' s Cease & Desist Letter as providing authority for its decision, and quotes at length from the Cease & Desist Letter. b. A Missouri class action complaint filed in November 2009 against Plaintiff also explicitly cites and quotes from the NCSB's Cease & Desist Letter. A true and correct copy of this class action complaint is attached hereto as Exhibit 20. c. North Carolina attorneys, given the impression fostered by the NCSB's Cease & Desist Letter, have openly and publicly discussed the possibility that a 5 The Pennsylvania Bar Association rendered this opinion without any consultation with LegalZoom. LegalZoom objected to the opinion in writing and has not been the target of an inquiry to date.
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS Wake County Complaint Page 17 of25 recent legislative enactment in North Carolina creating a private cause of action for violations of unauthorized practice of law statutes could be used against LegalZoom. See NC Lawyer's Weekly Article dated June 24, 2011, true and correct copy attached hereto as Exhibit 21 (quoting North Carolina attorney Holden Reaves: "Companies like LegalZoom who, in my opinion, are engaged in the unauthorized practice of law by preparing wills and setting up corporations for citizens in this state, may be subject to actions based on this new law."). d. National media coverage of LegalZoom's activities also has taken note of Defendant's Cease & Desist Letter. See, e.g., Associated Press Article re Missouri Class Action, true and correct copy attached hereto as Exhibit 22 ("The business practices of LegalZoom have been challenged elsewhere, including in... North Carolina."). 56. In many of these instances, such private actions and regulatory activity have been based at least in part on the erroneous impression, actively fostered and encouraged by Defendant, that the Cease & Desist Letter has a legal effect and/or is a legal finding that LegalZoom engages in the unauthorized practice of law. 57. Plaintiff has a right to do business in North Carolina III accordance with applicable law. 58. Defendant's actions are an attempt to deprive Plaintiff of its right to offer its services to residents of North Carolina in violation of the Law of the Land Clause, Article I, Section 19 of the North Carolina Constitution. 59. Defendant has intentionally engaged in conduct in contravention to and ultra vires from activities contrary to N.C. GEN. STAT. Chapter 84, and knowingly caused harm to
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 18 of25 Plaintiffs pecuniary interest; or, either recognized or should have recognized that publication of the Cease & Desist Letter and its ultra vires actions were likely to do so. 60. Defendant has intentionally and knowingly engaged in monopolistic and anticompetitive conduct in violation of Article I, Section 34 of the North Carolina Constitution and in contravention to and ultra vires from activities contrary to N.C. GEN. STAT. Chapter 84 by seeking to prevent Plaintiff from doing business in North Carolina. 61. Defendant has intentionally and knowingly engaged in monopolistic and anticompetitive conduct in violation of Article I, Section 34 of the North Carolina Constitution and in contravention to and ultra vires from activities contrary to N.C. GEN. STAT. Chapter 84 by refusing to register Plaintiffs prepaid legal services plans according to N.C. GEN. STAT. 84-23.1. 62. Defendant has knowingly and intentionally engaged in and continues to engage in, in contravention to and ultra vires from activities contrary to N.C. GEN. STAT. Chapter 84, a national campaign of intentionally publishing and uttering wrongful and incorrect statements about the status of Plaintiffs bona fide and legally compliant business operations in North Carolina. FIRST CAUSE OF ACTION Violation of Monopoly Clause 63. Paragraphs 1-61 are incorporated herein by reference. 64. Plaintiff files this cause of action under the Monopoly Clause, Article I, Section 34, of the North Carolina Constitution. 65. Defendant's conduct violates the Monopoly Clause by engaging in monopolistic and anti-competitive conduct excluding Plaintiff and wrongfully utilizing its regulatory authority
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 19 of 25 in attempting to prevent Plaintiff from providing its products and services to North Carolina consumers. 66. By its actions as described above, Defendant has caused and continues to cause irreparable and incalculable injury, including but not limited to Plaintiff's constitutional right to freely do business in North Carolina pursuant to the monopoly clause. As a result of being so excluded Plaintiff also is suffering from incalculable economic injury in the form of irretrievably lost opportunities to reach and provide its business to potential customers in North Carolina and to acquire the economic benefits thereof. SECOND CAUSE OF ACTION Denial of Equal Protection of the Laws 67. Paragraphs 1-65 are incorporated herein by reference. 68. Petitioner files this cause of action under the Equal Protection of the Laws Clause, also known as the Law of the Land Clause, Article I, Section 19, of the North Carolina Constitution. 69. Defendant's conduct violates the Equal Protection of the Laws Clause of the North Carolina Constitution in singling out and excluding Plaintiff from the opportunity to provide its products and services in North Carolina by not allowing Plaintiff to register its legally compliant prepaid legal services plans. 70. By its actions as described above, Defendant has caused and continues to cause irreparable and incalculable injury, including but not limited to Plaintiff's constitutional right to equal protection under the Law of the Land clause. This deprivation has harmed Plaintiff in the form oflost business opportunities from potential customers.
Lega/Zoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 20 of25 THIRD CAUSE OF ACTION Commercial Disparagement 71. Paragraphs 1-69 are incorporated herein by reference. 72. Defendant's statements that Plaintiff has engaged in the unauthorized practice of law are false and untrue, and disparaged Plaintiff's product, LegalZoom. 73. By making the statements available on the NCSB website and online, Defendant published the disparaging statements to one or more people. law. 74. Defendant's conduct is ultra vires and without any authority under North Carolina 75. Defendant knowingly published wrongful ultra vires statements concernmg LegalZoom, causing the consuming public and others to regard Plaintiff's product as legally unauthorized, and imputing illegal conduct to Plaintiff. 76. By knowingly publishing the wrongful, ultra vires statements on the NCSB website and online, Defendant published the disparaging statements to a wide range of persons in the public. 77. Defendant knowingly published the wrongful, ultra vires statements about Plaintiff, causing Plaintiff to suffer the monetary loss of certain important and valuable customers and injury to the reputation of Plaintiff. 78. Defendant knowingly published the wrongful, ultra vires statements with the knowledge that the statements were incorrect, or with open and knowing disregard as to the
Lega/Zoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 21 of25 falsity of the statements. This conduct was ultra vires and Defendant was without legal authority to do so. 79. Plaintiff is informed and believes that Defendant will continue to harm Plaintiff until Defendant is enjoined and constrained from doing so by order of this Court. FOURTH CAUSE OF ACTION Petition for Declaratory Judgment 80. Paragraphs 1-78 are incorporated herein by reference. 81. Plaintiff files this Petition for Declaratory Judgment under Chapter 1, Article 26 of the North Carolina General Statutes, and this Court has jurisdiction of this matter under such statutes. 82. Plaintiff is entitled to a declaration that Defendant has disparaged Plaintiff's products and services, and has acted ultra vires to its authority in doing so. 83. Plaintiff has an actual controversy with Defendant resulting from Defendant's ultra vires and intentional publication of false and disparaging statements regarding Plaintiff. 84. Wherefore, Plaintiff's further seek a judicial declaration pursuant to N.C. GEN STAT. 1-253 et. seq. that Plaintiffs are not engaged in the unauthorized practice of law by providing a "self help legal document service" through the internet. RELIEF REQUESTED WHEREFORE, Plaintiff requests that this Court: I. Enter a mandatory injunction, without bond, ordering Defendant to register Plaintiff's prepaid legal services plans in accordance with N.C. GEN. STAT. 84-23.1, including Plaintiff's Legal Advantage Plus Plan and its Business Advantage Pro Plan; II. Declare that NCSB's publication of its Cease & Desist Letter was ultra vires and
LegaIZoom.com, Inc. v. The North Carolina State Bar, 11 CVS, Wake County Complaint Page 22 of25 unlawfully disparaged Plaintiff's products and services. III. Declare that Plaintiff is not prohibited from or unlawfully operating a "self help legal document service" through the internet. IV. Enter a mandatory injunction, without bond, ordering Defendant to publicly withdraw the Cease & Desist Letter and prominently publish notice of the same on the NCSB website; V. Enter a mandatory injunction, without bond, ordering Defendant to withdraw and/or remove all published NCSB reports of Plaintiff's operations in North Carolina; VI. Award Plaintiff its attorney's fees, costs, and expenses; and VII. Grant such further relief as this Court deems just and proper.
LegalZoom.com, Inc. v. The North Carolina State Bar, 11 CVS Wake County Complaint Page 23 of24 Respectfully submitted, this the 30th day of September, 2011. COUNSEL: p, Carlton, Jr. NC State Bar No. 6544 ALLEN, PINNIX & NICHOLS, P.A. Attorney for Plaintiff Post Office Drawer 1270 Raleigh, North Carolina 27602 Telephone: 919-755-0505 Facsimile: 919-829-8098 Email: ACarlton@allen-pinnix.com CO-COUNSEL: NC State Bar No. 12329 NEXSEN PRUET, PLLC Attorney for Plaintiff Post Office Drawer 30188 Raleigh, North Carolina 27622 Telephone: 919-755-1800 Facsimile: 919-653-0435 Email: DBoyce@nexsenpruet.com Gene Boyce NC State Bar No. 0435 NEXSEN PRUET, PLLC Attorney for Plaintiff Post Office Drawer 30188 Raleigh, North Carolina 27622 Telephone: 919-755-1800 Facsimile: 919-653-0435 Email: GBoyce@nexsenpruet.com
Lega/Zoom, com, Inc, v, The North Carolina State Bar, 11 CVS, Wake County Complaint Page 24 0[24 CERTIFICATE OF SERVICE I, the undersigned do hereby certify that I have this day served the foregoing COMPLAINT by depositing a copy of the same in the United States mail, First Class, Certified Mail, Return Receipt Requested, postage prepaid, addressed as follows: L. Thomas Lunsford, II Executive Director The North Carolina State Bar 208 Fayetteville Street Mall Raleigh, NC 2760 This the -- September, 2011.
The North Carolina State Bar AUTHORIZED PRACTICE COMMITTEE David R. Johnson UPL Counsel MAR.1 :z 200J LETTER OF NOTICE I,,~~ IZoofl"','001, [n.: SHY N. Lan:nmont Ave., 2nd Hour Lo." :\ngeles, C A 90004 Re: Authorized Practlce- Our File Number: 03APOOi5 Dear Sir or Madam: fhis is to advise you that information that you may have been engaged in conduct constituting the unauthorized practice of law has been received by this office, The North Carolina State Oar, through its Authorized Practice Committee, is conducting an inquiry into your conduct pursuant to the statutory authority granted by North Carolina General Statute SectIOn 84-3'1 and Chapter One, SUbchapter D, Section.0205 of the Rules and Regulations of the North Carolina State Oar. You are requested to respond to this Letter of Notice within fifteen (15) days of its receipt. If you fail to respond within fifteen (15) days after receipt, the Chailman of the Committee may instruct the Counsel of the North Carolina State Bar to proceed with action in accordance with Section,0207 of the Rules, mcluding the seeking of injunctive relief. To assist you in preparing a response to this letter, I am enclosing a form entitled "Substance of the Authorized Practice Complaint" The substance is a summary of the information received but is not intended as a pleading of any kind. The Committee has not made any assumptions as to the validity of these allegations against you, fn those cases where a violation of the unauthorized practice statutes is found to be inadvertent, or without knowledge of the statutes, the Committee generally closes its file upon assurance that the prohibited act will not be repeated. I also am cnclosing copies of pcrtincnt statutes rcgarding the unauthorized practice of law. It may be practice of In' v is a misdemeanor cnme. If you have any questions, you may Gall or write to me at the North Carolina State Bar, PO Box 25908, Raleigh, NC 27flll, telephone number (919) 828-4620 ext. 262. Sincerely yours. DRJ/paa Enclosure ~',(K9~ David R. Johnson UPL Counsel ~ ~ CERTIFIED MAIL-RETURN RECEIPT REQUESTED ~ ~ EXHIBIT 1 208 Fayetteville Street Mall Post Office Box 25908 Raleigh, NC 27611 (919) 828-4620 Fax (919) 834-8156
~.I Ie / (, Ocro~,2003 David R. Johnson, Esquire The North Carolina State Bar 208 Fayetteville Street Mall Raleigh, NC 27611 Dear Mr. Johnson: This letter is written in response to your correspondence dated March 13,2003 regarding the North Carolina State Bar's Unauthorized Practice of Law Committee and its examination of the information and services contained on our Internet site, LegalZoom.com ("LegaIZoom"). In this letter, we would like to better clarify the contents on the Internet site and our business practices. BACKGROUND The purpose of LegalZoom is to be a general legal portal and to give visitors a general understanding of the law, as well as to provide automated software solutions to allow individuals to prepare legal documents. To that extent, the site publishes general infonnation on legal issues commonly encountered. Neither LegalZoom nor its employees provide legal advice or guidance. We do not apply the law to the facts of a visitor's particular situation and we do not provide legal representation. The website contains numerous disclaimers to inform our visitors that LegalZoom is not a law firm and docs not give legal advice. (See Exhibit A for examples.) Throughout the site, we clearly and repeatedly encourage our visitors to seek an attorney for more information. For example, we state that "This web site should not be used as a substitute for the advice of an attorney," and we urge our visitors to "consult professional legal counsel in his or her state regarding the applicability of any points of law discussed at this Site to any specific problem." For visitors seeking legal advice and guidance, our website provides three options. First, our co-branding and marketing arrangement with Respond.com allows our customers to submit an online request for legal services in specific legal categories. The attorney referral network is managed and maintained by Martindale-Hubbell's Lawyers.com. Customers describe the facts of their particular situation and provide an estimated budget. Thereafter, attorneys licensed to practice in the customer's state may choose to respond to the request by contacting the customer directly via e-mail. EXHIBIT 2
Respond.com has informed us that 32 attorneys licensed to practice law in North Carolina subscribe to their service. We actively promote our attorney request service on the home page of LegalZoom, as well as through embedded links on the site. Second, we offer an attorney directory through a distribution agreement with Findlaw.com (a division of The West Group). This service allows our visitors to browse through a comprehensive listing of attorneys by practice area, city and state. Hundreds of North Carolina attorneys are listed in this directory. The attorney directory is also promoted on our home page. Third, we refer visitors to Te1e-Lawyer, where visitors can speak with a licensed attorney on the phone for $3.00 per minute. Unfo11unately, Tele-Lawyer has informed us that this service is currently not available to residents of North Carolina. Due to the fact that we are an online resource, we do not receive many phone calls. Personal contact with any customer is extremely rare. On the rare occasion that we receive a phone call or e-mail requesting legal advice or guidance, wc refer these individuals to Te1e-Lawyer, our attorney-by-request service or the attorney directory. fn other unique situations, where Te1e-Lawyer is not available and a customer needs legal consultation, we refer them to www.legalopinion.com (where a customer can obtain a written legal opinion for a fixed fee) or www.lawexpress.com (a telephone legal advice service affiliated with the ARAG Group). In terms of legal document preparation services, LegalZoom has developed a proprietary document assembly software based on branching technologies called "LegaIZip." Users may read tlu'ough our reference area, called the "law library," at their leisure. They can even link directly to governmental agencies' websites to gather the intormation that will assist them in making their decisions. Users' answers are migrated to LegalZoom's internal infrastmcture through a highly secure n-tiered system. Like other commonly available legal document assembly software, including Quicken Lawyer and Kiplinger's WILLPower, LegalZoom's web-based software prompts individuals to complete a questionnaire which is customized based on answers previously given. For example, a person who does not have children will not be asked for the names of the children. The information is then auto-populated into fill-in-the hlank forms and reviewed by staff for completeness, spelling and grammar. We print the documents on high-quality bond paper and send the documents to our customers by mail. For incorporation and LLC formation services, after the answers are auto-filled into government-approved forms (such as Form B-O I, Articles ofincorporation for Business Corporation, published by the NOl1h Carolina Secretary of State), we deliver the completed form to the Secretary of State for filing. Thereafter, we package the filed Articles of Incorporation with.a corporate kit, which is supplied by a third-party vendor. 2
The corporate kit includes a corporate seal, customized stock certificates and fill-in-theblank forms for resolutions and corporate minutes. As described on the LegalZoom website, our review of the answers provided by the customers relates only to checking for completeness (ie, making sure that all required fields are answered), spelling errors, grammatical errors, mailing addresses and name spellings. LegalZoom docs not review user information for legal sufficiency or any other legal matter. Programs such as Microsoft's spell check and grammar check components are employed to ensure that basic rules of the English language have been followed. Zip codes are matched to other location data to ensure that the user has not made a typographical error which could result in a frustrating delay. Information from each questionnaire across the enterprise is pooled and sorted, bringing together information from each functional group into a central whole to create the final automated forms. Again, LegalZoom does not provide legal advice or direction to any particular person, but allows a general use format for the public at large. The amount charged for LegalZoom' services range between $35 to $55 for our most popular legal forms, such as Powers of Attorney and Last Wills. These prices are comparable to the retail price of most off-the-shelf legal software. COMPARABLE SERVICES As previously noted, LegalZoom's document assembly software is similar to Quicken Lawyer, Kiplinger's WILLPower and Broderbund's Family Lawyer, all of which are widely available in retail stores throughout North Carolina. LegalZoom is among many law-related companies presently operating on the internet. The American Bar Association's "elawyering website" (www.e1awyering.org/what/practice.shtml) lists the following law-related organizations as illustrative of the types of services currently available on the internet: American Law Online -- "State-specific explanations of law in every-day language, access to state-specific legal resources, tools to conduct on-line legal research services, on-line legal education workshops, legal checklists, legal forms and document assembly services on-line, child support and other interactive calculators, and detailed state-specific procedural information -- all designed for pro se litigants." Covers Maryland and Pennsylvania now; more states on the way. Cybersettle.com -- Computer-mediated dispute resolution. 3