Back In The Race: The FTC And DOJ Endorse Legal DIY Websites
Why pay a lawyer when you can do it yourself?
Why pay a lawyer when you can do it yourself? Legal document preparation websites are generally hated by lawyers because they take away a revenue source and occasionally create unanticipated problems. But it now seems that the federal government endorses these websites from an economic standpoint.
The Federal Trade Commission and the Antitrust Division of the Department of Justice wrote a joint letter to North Carolina Senator Bill Cook sharing their opinion on House Bill 436:
The Bill would exclude from the statutory definition of the practice of law the operation of a website that offers consumers access to interactive software that generates legal documents in response to consumer input.
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I must admit, I still do not really know what it means to practice law. Generally, the practice of law involves representing people in litigation, drafting legal documents, and giving advice on how the law applies to certain facts. But that’s what lawyers commonly do – it’s not an actual definition. I think there should be a definition that stays consistent despite changes in the economy and technological advancement. The letter suggests one:
The Agencies believe that ‘the practice of law’ should mean activities for which specialized legal knowledge and training is demonstrably necessary to protect consumers and an attorney-client relationship is present.
The Agencies believe the definition of the practice of law should be limited to activities where: (1) specialized legal skills are required, such that there is an implicit representation of authority or competence to practice law, and (2) a client relationship of trust or reliance exists.
This definition can apply to just about every service profession. Lawyers, physicians, butchers, bakers and candlestick makers possess specialized skills, place themselves in a position of trust with their client/customer, and are duty-bound to perform their jobs competently so that it does not result in unnecessary harm.
So what is impetus for this bill? Of course – access to justice:
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[T]here remains a well-known crisis in access to legal services to millions of American consumers, especially for low and middle-income people. Surveys have shown that many low and middle-income Americans cannot afford the services of a licensed attorney, despite a generally increasing number of lawyers. This seeming paradox of unmet legal needs and an abundance of lawyers continues to persist.
This paradox exists for several reasons. First, for at least the last two decades, most people went to law school for the wrong reasons, based on ridiculous ideas on how much most lawyers make and the lifestyles they live. Most lawyers moved to major cities because they wanted to cater to the wealthy and that is where most of them grew up. So you get the anomalous situation where most attorneys are clustered in a few areas chasing after a limited number of clients.
Also, the Agencies need to understand that there are two types of people who have trouble accessing an attorney. The first are those who genuinely cannot afford an attorney. These people have serious problems but are generally ignored, even by the “legaltech” or “the future of law” salesmen, because they have no money. The second are those who can afford an attorney but don’t want to pay for one because they would rather use the money for something else – either to fix the broken roof or buy the new pink Rose Gold iPhone.
Ideally, lawyers want the first group of people to have access to more affordable legal services to help them get back on their feet. But we don’t want the second group of people to exploit it at our expense.
The agencies claim that interactive software programs can improve access to justice and even create win-win situations where the lawyers would only spend time on important matters:
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For example, a consumer who may be unable to afford to retain a licensed attorney both to draft and review a legal document may be able to use interactive software to generate a draft document, and pay an attorney only to review the document if desired.
Most people seem to think that if they draft the documents themselves or download it from the internet, they can negotiate down 99% of a lawyer’s fee just for “reviewing” their finished “product.” At this point in my career, drafting the document does not take that much time. Most of my time is spent reviewing the document. Reviewing is not just reading the document itself and then sending an emoji or a thumbs-up. It means talking to the client on multiple occasions to address potential problems, reviewing other documents, and verifying information.
In the end, the agencies encouraged the legislature to consider the competitive benefits and even exclude the use of self-help software from the practice of law (emphasis added):
Interactive websites that generate legal documents in response to consumer input may be more cost-effective for some consumers, may exert downward price pressure on licensed lawyer services, and may promote the more efficient and convenient provision of legal services.
The Agencies also recommend that the General Assembly reconsider broadening the Bill to exclude similar self-help products from the definition of the practice of law. (Footnote 29)
They also made two recommendations to the North Carolina Senator. The first advised against placing restrictions on the software:
The Agencies recommend that the North Carolina General Assembly not adopt restrictions on such software products unless there is credible evidence that they harm consumers, any restriction is narrowly tailored to address that harm, and the benefits of the restriction will outweigh the harm that will likely result to competition.
There is evidence of credible harm. Just run a Google search for your favorite DIY website and the word “complaints,” and you’ll find a treasure trove of disgruntled customers who used interactive websites to create documents. But I doubt most of these complaints are serious enough to warrant legislative restrictions. They’ll just go to an attorney and pay a substantial fee to hopefully fix the problem. It’s not like guns, where putting one into the hands of the wrong person can result in a massive tragedy.
And they recommend placing additional disclosures:
Providers of interactive software programs… should provide truthful, non-deceptive information about their characteristics. For example, a commercial software product for generating legal forms should not falsely represent… that it is a substitute for the specialized legal skills of a licensed attorney, or that it is affiliated or endorsed by a government entity.
Ah, the token disclaimer that 99.9999% of the users will ignore. They only see “SET UP YOUR VERY OWN LIMITED LIABILITY CORPORATION FOR $49.95! DON’T PAY TOO MUCH TO A GREEDY ATTORNEY!” That’s okay. Some prefer DIY and a number of them will turn out just fine. But if he wants to get the best deal for a “limited liability corporation,” then he should at least look it up.
The Agencies’ letter unsurprisingly favors competition in the marketplace. The problem is that new small-firm attorneys already have a competitive disadvantage: already existing competition from other attorneys, salesmen gouging lawyers, and high student loan debt, to name a few. Of course, this is not the clients’ problem, and so the costs should not be passed on to them. But by making it more difficult for attorneys to earn a living, it has the unintended consequence of discouraging good people from entering the profession.
Or maybe, just maybe, the FTC and the Antitrust Division can investigate whether law schools are engaging in anti-competitive behavior and whether this is a significant cause of the problem. But that’s a topic for another column.
Shannon Achimalbe was a former solo practitioner for five years before deciding to sell out and get back on the corporate ladder. Shannon can be reached by email at [email protected] and via Twitter: @ShanonAchimalbe.
