Prepaid legal services company sues N.C. Bar | News
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Tuesday, June 9, 2015

Prepaid legal services company sues N.C. Bar

Posted by on Tue, Jun 9, 2015 at 3:24 PM

The North Carolina State Bar is being sued. 

The plaintiff is LegalZoom.com, Inc., a Delaware corporation with offices out of California and Texas, which sells wills and other legal documents online. Clients of the service can order legal documents and consult with company-contracted attorneys by phone for a discounted price.

In the federal lawsuit, LegalZoom complains that the State Bar is “illegally and unreasonably restraining trade in the market for legal services” by “excluding LegalZoom from offering its prepaid legal services plans” in North Carolina.

That is, the Bar has refused to register LegalZoom’s two prepaid legal services plans; LegalZoom operates currently in 42 other states. The complaint cites a federal antitrust law—the Sherman Act— to challenge and redress “anticompetitive, exclusionary and monopolistic conduct” by the State Bar.

According to N.C. General Statutes, no prepaid legal services plan may operate in North Carolina unless it is registered with the State Bar. Currently there are around seventy prepaid legal services plans registered with the State Bar operating in the state.

“The State Bar, pursuant to its statutory obligations to protect the public and in accordance with rules approved by the North Carolina Supreme Court, determined that LegalZoom’s two proposed prepaid legal services plans did not qualify for registration due to a number of deficiencies,” wrote N.C. State Bar President Ronald L. Gibson in a press release.

“In short, the applications were denied registration because they did not satisfy the registration requirements approved by the North Carolina Supreme Court, not because the State Bar has any desire to prohibit prepaid legal services plans from operating in this state.”

LegalZoom’s lawsuit cites a February U.S. Supreme Court affirmation of a Fourth Circuit Court of Appeals decision that held that state-agencies must be supervised by “a politically accountable state official” in order to be immune to federal antitrust laws to support its argument.

The case, North Carolina State Board of Dental Examiners v. Federal Trade Commission, was prompted by a lawsuit from businesses that provide teeth-whitening services at shopping malls against the state Dentistry Board which, they claimed, were trying to prevent them from providing competing services at a cheaper rate. The North Carolina State Bar, a state agency composed of licensed professionals which it regulates, like the Dentists’ board, filed an amicus brief with the Supreme Court supporting the Dentists' board in that case.

LegalZoom and the State Bar have been embroiled for years, the lawsuit notes, and the state bar has sent the company “cease and desist” notices, which LegalZoom considers an intimidation tactic.

“The Defendants’ anticompetitive activity is not, and has not been, in pursuit of a clearly articulated state policy,” the lawsuit states. “The Defendant’s anticompetitive conduct is, and has been, wholly unsupervised by the State of North Carolina. The State Bar’s anticompetitive conduct exceeds its statutory authority. Therefore, the Defendants’ conduct is not entitled to immunity from the federal antitrust laws.”

“The State Bar does intend to vigorously defend against this lawsuit and other lawsuits that threaten its ability to protect the public of North Carolina by fulfilling its statutory obligations,” Gibson said.

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