Practice of Law legislation update from State Bar Councilor Howard Gum

From 28th JDB State Bar Councilor Howard Gum:

Members of the 28th Judicial District: Many of you have contacted me with respect to recent legislation introduced in the NC General Assembly that would have rather dramatically changed the definition of the practice of law. Several of you have also contacted me with concerns about the response of the State Bar to this proposed legislation. (Click here to view: H663 LegalZoom)

This legislation was introduced as a result of the efforts of lobbyists retained by Legal Zoom (LZ) in order to amend the definition of the practice of law in such a way as to permit it to offer a full range of products in the State of North Carolina. LZ also anticipated that H663, if passed into law, would resolve the litigation brought by LZ against the State Bar in its favor.

As I am sure you know, LZ has sued the State Bar in an effort to prevent the State Bar from continuing its ongoing efforts intended to halt LZ’s efforts to engage in the unauthorized practice of law.

I think it is important to understand that not all of the products currently offered by Legal Zoom violate the existing prohibition against the unauthorized practice of law. Merely producing and selling legal forms does not violate the prohibition against UPL. Consumers have always been able to purchase legal forms from bookstores, office supply stores and other outlets. The fact that LZ, and others, offer consumers the opportunity to purchase such forms over the Internet rather than from a brick and mortar business does not place them in violation of the prohibition against the unauthorized practice of law.

However, LZ’s use of “decision trees” and other such algorithms to create legal documents tailor-made to the individual consumer does present significant concerns and the State Bar has endeavored to prevent LZ from engaging in these activities.

The State Bar was advised late Wednesday afternoon, June 25, 2014 that H663, entitled “Commodities Producer Protection” which had passed the House crossed over to the Senate in May, had been stripped of its agricultural content and amended as reflected here: H663 LegalZoom * The State Bar learned that the sponsors of the bill calendared it for final consideration by the Senate’s Judiciary I Committee the very next day. The State Bar responded immediately by having the Chair of the Authorized Practice Committee, Mike Robinson, a respected attorney from Winston-Salem, attend the committee meeting at 10 o’clock on Thursday, June 26. Mike admirably and ably presented the concerns of the State Bar with respect to the harm that such legislation would cause consumers in North Carolina. Unfortunately, the bill was reported favorably and was expected to be considered by the full Senate on the following Tuesday, July 1.

The State Bar Executive Director, Tom Lunsford, and its President, Ron Baker, notified all of the State Bar Councilors by email on Friday, June 27 of these developments and enlisted the help of the Councilors and all other lawyers in the State to resist the passage of this bill.

The North Carolina Bar Association also mobilized its forces and worked cooperatively with the State Bar to generate broad opposition from the practicing bar to this proposed legislation. The efforts of the NCBA were extraordinary and the State Bar is very gratified by its support.

The response of the practicing bar was magnificent! Lawyers from across the State contacted their legislators encouraging them to oppose the passage of this bill. Lawyers from all practice areas participated. Real estate practitioners were particularly active and effective. The State Bar, the North Carolina Bar Association and the consumers of North Carolina, all owe a great debt of gratitude to the lawyers who resisted the passage of this bill.

As a result of this collective effort H663 has been sent to the Senate Rules Committee where it is expected to die. We do not anticipate any bill redefining the practice of law to be passed during this short session of the General Assembly.

During all this, the State Bar was encouraged by the Senate leadership to try to come up with language that would be satisfactory to the State Bar. Recognizing the obligation to protect the public, and also recognizing that in a protracted fight in the legislature LZ’s financial resources and willingness to use them would far outstrip anything the State Bar could do, efforts to respond were undertaken.

During the early part of July representatives of LZ met with representatives of the State Bar in efforts to (1) negotiate a resolution of the pending litigation between it and the State Bar and (2) draft proposed legislation that would amend the existing statute that defines the practice of law in a manner agreeable to all parties.

Mindful of the risks attendant to litigation and the uncertain waters of the General Assembly – a decidedly unfriendly sea for lawyers at this time—negotiations were commenced. The Office of Counsel of the State Bar drafted proposed legislation that would, in the opinion of Staff Counsel and the Officers and Councilors of the State Bar, strengthen the prohibition against the unauthorized practice of law while at the same time acknowledging that we cannot “roll back the clock” with respect to the lawful production, sale, and distribution of legal forms.

After much discussion LZ and its representatives agreed to support the proposed legislation as drafted by the State Bar and, in addition thereto, agreed to a settlement of its litigation against the State Bar consistent with such proposed legislation. The State Bar’s proposed legislation can be viewed by clicking here: State Bar Proposed Legislation.

Unfortunately, it was not possible to bring this proposed legislation before the General Assembly during this short session. It remains uncertain as to whether or not the litigation with LZ can be resolved without the State Bar draft of the proposed legislation becoming law.

The State Bar’s position at present is as follows: (1) it will continue to defend against the suit brought by LZ  while (2) at the same time remain willing to explore settlement of the pending litigation so long as the members of the public are protected against the unauthorized practice of law.

Please feel free to contact me with any questions or concerns you have about this situation.

Howard L. Gum, State Bar Councilor

*The bill was originally introduced with the agricultural focus by our own Nathan Ramsey. To view the history of the legislation, click here.