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Legal Forms featured in Lawyers Weekly article

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I’m pleased to announce the Lawyers Weekly has just published an article about our legal forms:

Booming Internet biz threatens small firms

By John Schofield

December 16 2011 issue

He’s best known as a lawyer to the stars — the legal genius who successfully defended O.J. Simpson and represented celebrities like Johnny Carson and the Kardashians.

But about 10 years ago, Robert Shapiro saw a vision of the legal industry’s future and signed on as a co-founder of Los Angeles-based LegalZoom.com Inc., an online provider of legal documents. In July, the company announced it had raised US$66 million from venture capital firms. A month later, Google Ventures and another firm pumped US$18.5 million into LegalZoom’s biggest competitor, San Francisco-based Rocket Lawyer Inc.

The revolution is only getting started, says Jordan Furlong, a frequent speaker on the shifting legal landscape and a columnist for The Lawyers Weekly. “We’ll see more of it,” he predicts. “I absolutely think this is a growth industry for the future of the legal marketplace.”

The ultimate impact on Canadian law firms and lawyers is anyone’s guess. But Furlong offers a word of advice: watch your back. LegalZoom is already operating in Canada in partnership with CorporationCentre.ca, an online legal document service for small businesses, and is reportedly planning an expansion into the United Kingdom. A host of homegrown rivals are growing quickly, including Vancouver-based ContractTailor and Toronto-based Dynamic Legal Forms Ltd. “They are very much targeting the consumer and small business markets,” says the Ottawa-based Furlong, “and if I were a lawyer in that area, I would consider myself the prime target.”

Solo and small-firm lawyers who specialize in routine legal services like real estate, wills or business incorporation face the biggest threat from the Internet, says Warren Smith, a managing director with The Counsel Network, a Canadian legal recruitment firm, and a columnist for The Lawyers Weekly. The numbers are significant. In British Columbia alone, he estimates, about 40 per cent of the province’s 10,000 lawyers derive a sizeable share of their income from routine personal services. Small-town lawyers are insulated to some degree because their businesses are based heavily on personal relationships, he says. But urban and suburban small-practice lawyers are less protected from Internet competitors who trade on price sensitivity. “This is the Wal-Mart of legal services,” says Smith. “Anyone practising in that space better be thinking about this and incorporating it into their practice,” he adds. “Failure to do so is at your peril.”

While some lawyers struggle with a turbulent economy, says Furlong, the tough business climate is creating fertile ground for the growth of Internet legal services. Such firms thrive on the perception that lawyers are expensive and difficult to use. And those perceptions hold some truth. At the Canadian Bar Association’s annual conference in Halifax in August, both Governor General David Johnston and Canada’s Chief Justice, Beverley McLachlin, warned in separate speeches that rising legal fees are putting legal services out of reach for many Canadians. “That’s a vulnerability,” says Furlong. “Companies that offer speed, service, convenience, and especially affordability are going to get a lot of people’s attention in this market.”

Lawyers can no longer take comfort in the old notion that their best defence is quality, and that Internet services are inferior by definition, argues Furlong. In today’s market in particular, he says, many consumers don’t care about quality and simply want something good enough for their needs. At the same time, the technology is improving. “These programs are becoming highly sophisticated, highly complex,” says Furlong. “They are creating systems that in very short order will be creating products that are every bit as good as the average lawyer can produce — and arguably better.”

Not everyone agrees. Daniel Lublin, an employment lawyer with Toronto-based Whitten & Lublin LLP and a columnist with the Metro chain of newspapers, wrote last spring about a business that was stung by an employment contract that the owners downloaded from a website. Because the contract didn’t include a termination clause, they were forced to pay a contractor for one year, even though the work was completed in six months.

When it comes to law, Lublin argues, the “cookie-cutter” approach never works. And even if the online service arranges for a lawyer to review the form at a lower rate, he questions the quality of the advice. “If you pay for cheap advice,” he says, “that’s what you’re going to get.”

Lublin’s verdict on online legal services? “I would characterize it as a scam, plain and simple.”

Ellen Roseman, a consumer affairs and personal finance columnist with the Toronto Star, takes a more moderate approach. Online services may be helpful for general legal advice, she says. But people facing legal problems often need a lot of hand-holding, she adds, and lawyers serve that purpose well.

Over the past year, Dynamic Legal Forms founder Michael Carabash says he has expanded the number of legal documents available on Dynamic Legal Forms from 19 geared to Ontario only to 190 that are usable across Canada. He hopes to offer up to 300 forms by the end of next year. His most popular products, which range in price from $17 to $97, include prenuptial agreements, wills, residential leases, employment contracts, and partnership agreements. Each contract comes with an e-book or an instructional video that guides the user through the process. From time to time, he offers discounts through websites such as Groupon.

Like Rocket Lawyer, Dynamic Lawyer can then refer the customer to a lawyer, who will review the document. This “unbundling” of legal services, says Carabash, saves consumers hundreds, if not thousands of dollars. Even with a lawyer’s review, for example, the cost of a cohabitation agreement might total $1,000, compared with $3,000 to $7,000 if drawn up exclusively by a lawyer. “Most of the comments I get back are, ‘Is this for real? What are the hidden costs?’” says Carabash. “And you don’t just get a product,” he adds. “At the end of the day, you get an experience, you get an education. People are overwhelmed by the amount of information I put on the website.”

A “good chunk” of Dynamic Lawyer’s customers are actually lawyers themselves, says Carabash. They buy a document and then charge their client much more to customize it for them.

Carabash says he saw the writing on the wall in 2008, when he read the 1996 bestseller The End of Lawyers? The book by UK-based lawyer and technology expert Richard Susskind predicts the increasing commoditization of law, and a paradigm shift from one-to-one service to one-to-many. “I said right there the winners will be the ones who take advantage of that paradigm shift,” says Carabash, an MBA grad who is also the co-founder of a Toronto dental law practice, DMC Law. “I knew that I should do something online in a niche format that had something to do with the legal services industry.”

Rather than retreating, says Furlong, lawyers would be wise to seek alliances with Internet legal services by signing on for referral business or by outsourcing to them. “I can see as many opportunities for co-operation between these companies and lawyers as I see for competition,” he says. “Is today the day to panic? No, not at all. But I would keep an eye on these companies.”

The number is growing. AdviceScene, established in 2009 by Victoria-based lawyer Nancy Kinney, provides free legal advice to both Canadian and American users. It also offers a free lawyer referral service, legal forms, and legal news and blogs. LawPivot, a Palo Alto, Calif.-based company, offers the same service for U.S. companies, along with a directory that helps lawyers market themselves. It received $600,000 in seed funding last year from Google Ventures. Two Toronto-based websites, My Legal Briefcase and Mr. Small Claims Court, are designed to help users navigate their complaints through the small claims process. ContractTailor, a partnership between Vancouver law firm LPS and Paradigm Shift Solutions Inc., a Vancouver technology firm, advertises free business contracts or agreements in “three easy steps.” For multiple contracts, it charges $30 a month, and also provides a lawyer referral service. In a completely different departure, lawyers in September witnessed the Canadian launch of Shpoonkle, a Miami, Fla.-based website that bills itself as the “eBay of legal services.” Users can describe a legal problem they’re facing, and lawyers are invited to bid on the case.

Last March, Carabash appeared on the popular CBC television program Dragon’s Den — primarily in an effort to generate publicity, he says. Big law firms and what he calls “established legal services companies” have approached him to discuss potentially investing in Dynamic Legal Forms. But now that the site is largely built, Carabash says, he’s not sure he’s interested in investment partners. Over the past two or three years, he notes, creating content for Dynamic Legal Forms has occupied more time than his actual law practice. For some lawyers, the huge effort involved could be a barrier to establishing their own Internet services. Carabash admits he’s still waiting for the expanded site to generate the kind of traffic he expects. But he’s confident it will pay off. “We’re going to try to dominate the Canadian market,” he says, “and then go into the U.S. That may take a few years, but that’s the idea.”

Carabash says he has little sympathy for lawyers whose practices are hurt by Internet legal services because they’ve failed to adapt to the new competitive environment. He’s more interested in the benefits that websites like his may have for ordinary consumers. “If it enhances access to justice for the masses, but still ensures safeguards for the general public, then that’s the ideal mix,” he says.

Ultimately, though, competition from the Internet could improve the practice of law overall by improving client-lawyer relations, Furlong speculates. “Lawyers have been saying for years that it comes down to relationships,” he says. “The harder you work at creating great relationships, the stronger you’ll be in defending your turf from companies that aren’t able to compete on those terms.”

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