How ethics reforms in Arizona led to LegalZoom’s law firm

Episode Notes

Transcript

Announcer:

Welcome to the ABA Journal Legal Rebels Podcast, where we talk to men and women who are remaking the legal profession, changing the way the law is practiced, and setting standards that will guide us into the future.

Victor Li:

When Arizona changed its ethics rules in 2020, opening the door for alternative business structures and non-lawyer ownership for law firms, it sent shockwaves throughout the legal industry. The notion of non-lawyer ownership has long been a third rail, often resulting in bitter conflict between proponents who believed that it could help bridge the access to justice gap in this country and its opponents who believe it could corrupt the practice of law and harm the public. LegalZoom is certainly no stranger to this battle. The DIY pioneers acted quickly, and in 2021, the Arizona Supreme Court approved this application for an alternative business structure in Arizona LZ Legal Services. That means LegalZoom can hire lawyers and provide limited legal services to small businesses and individuals in Arizona. For some, it could be the first step towards making the law more accessible to all, particularly low to moderate income individuals who might not be able to afford a lawyer. For others, it could be the beginning of the end. My name is Victor Li and I’m assistant managing editor for the A B ABA Journal. My guest today is Nicole Miller, chief legal officer of LegalZoom. Nicole is here to talk about LegalZoom’s experience in Arizona so far, as well as general issues relating to regulatory reform and alternative business structures. Welcome to the show, Nicole.

Nicole Miller:

Thanks, Victor. Pleasure to be here.

Victor Li:

So tell me a little bit about yourself. I just gave the one line bio for you. What did you do before LegalZoom and what made you decide to join them?

Nicole Miller:

Sure. So prior to joining LegalZoom, I was at a consumer brands company or consumer packaged goods company called the Honest Company. I was there for six years and in my most recent role was general counsel. Prior to that, I practiced corporate law at both Cooley and Gibson Dunn. And when I was leaving the Honest Company, I was super attracted to the idea of LegalZoom. One, I was interested in disruptive companies, disruptive brands, and here was a company where the product itself was legal in nature. So that was appealing to me, particularly in the general counsel role. I think I didn’t fully understand then what I’ve come to know now, which it’s the greatest legal in-house legal job because it’s so much a blend of product and traditional in-house legal. But I think I understood enough to know that it was going to be very interesting and that I was going to learn a whole new area of the law relative to some of the unauthorized practice of law questions and legal ethical questions that were largely academic up until the moment I joined LegalZoom. So that’s a little bit about my background.

Victor Li:

Well, so yeah, I mean, you talked a little bit about the unauthorized practice of law and whatnot. So obviously LegalZoom engenders very strong opinions from people of all viewpoints.

Nicole Miller:

Yes.

Victor Li:

And you can be honest, how did you feel about them before you joined them? I mean, were you on the scale of, okay, well I think they’re interested in coming, do a lot of interesting things, or did you not know that much about them? Or were you sort of like, okay, well their model can be irresponsible and cause people to of think that they can know lot about the law and not have the actual protection that they need?

Nicole Miller:

So certainly I knew some and I had seen ads and I kind of associated the brand from its early heyday with Robert Shapiro and some of the founders of the company. And so never only thought of it as a somewhat disruptive brand and company, but really hadn’t followed too much. And to be honest, when I joined the company, I thought of LegalZoom as being mostly a consumer focused brand, meaning doing estate plans and wills, which we certainly do, but a larger part of the business is actually dealing with small business owners and micro business owners. And I didn’t really know that at the time, but yeah, I was not fearful of where it sits on the edge. I think that was an appealing, I like the gray, so it was appealing to me.

Victor Li:

So let’s talk generally about alternative business structures. And you had talked a little bit about this earlier. One of the main arguments for using it is that it can help bridge the access to justice gap. It can help people who might not be able to afford lawyers. So how does a company like Legal Zoom fit to that?

Nicole Miller:

Yeah, I mean, for us it certainly has helped support bridging the access to justice Gap primary. Primarily what we do through our Arizona a BS is we provide trademark services and we’re able to offer them in a very tech enabled way on a platform, but more importantly maybe for the client or the consumer is that we’re able to do it at a much more affordable price. I think our prices are 60% less expensive than kind of the average main Street IP lawyer. And so we often believe that not only are we providing services at a more affordable cost, but in many cases we’re actually providing trademark services to the unmet needs. So to those consumers that would’ve never actually sought out a trademark before because it just was too expensive.

Victor Li:

What about the flip side of the argument that, I mean, and maybe that’s not the case in Arizona, but in general, you talk about, people will say that, oh, well, this can harm the public. People should be taking legal advice from actual trained lawyers who are accountable and not just generating forms. What you say to that?

Nicole Miller:

Yeah, so I mean as it relates to the A BS, I mean, what people need to know is these are lawyers. The ultimate ownership of the law firm is non-lawyer ownership. It’s in our case, shareholders, public shareholders, but these are lawyers who every single one of is subject to their ethical responsibilities and their ethical judgment. We also have an entire regulatory regime that’s specific to practicing under an A BS in Arizona. So additional regulation and additional ethical standards. So in many ways, I would say the amount of oversight and the regulatory regime on a lawyer practicing within an A BS is more strict than any other lawyer practicing in any other venue or jurisdiction. So I’m just not compelled by this fear that somehow it’s the wild, wild west because it certainly isn’t.

Victor Li:

What about outside Arizona though? I mean with State Square, those restrictions are still in place. Other states other than Arizona where there’s still that prohibition of non-lawyer ownership or alternative business structures or whatnot, how does the public get protected from DIY companies in general where a lawyer might not necessarily be on retainer to help somebody with their needs?

Nicole Miller:

Well, it’s specific to DIY. I mean, I would say it’s no different than someone, anyone can go to a library and check out a do it for you will book or do it for you legal book. What LegalZoom did so effectively back in the early aughts is put it online. So it’s the same sort of information, and that’s really all DIY is. It’s automating legal information that’s generated by the decisions and wishes of the consumer. So I feel like that area, knock wood is well settled and we don’t frequently, the legal team that came before me did a really excellent job in defending that wave of criticism. And it doesn’t mean that every once in a while things don’t pop up, but that piece is well settled. And now what we’ll have to reckon with is what do you do with the advent of AI and chat GPT and people being able to ask those exact same questions in a very unregulated way into an open model like Chat GPT, and that remains to be seen how those get regulated.

Victor Li:

Gotcha. Yeah. I do have some questions about chat, GPT and generative ai. That will get to a later segment. But before we continue, let’s take a quick break for a word from our sponsor. And we’re back. So let’s talk specifically about Arizona now. Why did Legalism decide to take the plunge and go for an a BS license in that state?

Nicole Miller:

So it was a disruptive new reform Utah, before Arizona had established a similar reform to allow for ABSs. But what Utah had done is it was a sandbox. And so there was a time box to how long that sandbox was going to be around, I think it’s ultimately 10 years. And so at the time, we didn’t want to make the massive investments that it does require to establish an a BS in something that wasn’t fixed or permanent. So when the Arizona reform came out, and it was just after we had just gone public, and I remember sitting there and being like, okay, here we go, the next big push, this was essentially what LegalZoom has been hoping, which is to have reform that’s regulated, but allow the masses to have access to quality legal services at a fraction of the price. And we believed that reform this would allow that to happen because we’d have the expertise, the technological know-how, the marketing acumen of LegalZoom, and then be able to build out a best in class law firm in the state, which is what we’ve done.

Victor Li:

Yeah, I remember when Arizona announced this reform. I remember Utah had made the announcement, I think maybe a few weeks or just right before it, I don’t remember the exact timeline, but it was slightly before Arizona, and we all assumed, we all assumed that Arizona, oh, depa just do a sandbox too, or something very similar. It’s safer that way. And also law is very much kind of like, well, if they do it, then we can do it too, and blah, blah, blah.

Nicole Miller:

Exactly.

Victor Li:

So we were surprised when they took the extra step because I mean, taking that extra step was kind of like, wow, they’re really going to go for it, huh?

Nicole Miller:

That’s right.

Victor Li:

Well, let me ask you then. I mean, I think as journalists or people who have been watching this, I think we all just assumed like, oh, the next day people like LegalZoom, rocket lawyer, the big four accounting firms, whatever, they’re just going to rush in and just start setting up shop immediately. Maybe Amazon too, all of a sudden overnight it’ll be like, all these companies are going to come in and just take over. And that didn’t happen right off the bat. It still hasn’t really, I mean, it’s still just very, very slow and whatnot. I mean, do you think people are just waiting to see how things shake out with maybe you guys and some other companies who were willing to take that plunge? I

Nicole Miller:

Think that’s right. I think some of it is wait and see. And I think the other piece is it’s not easy. And I think anyone that’s established a law firm that’s not an A BS could say the same thing. But in this instance, again, businesses that aren’t in the business of setting up law firms, it’s a challenge. You have to put an infrastructure in place. You’ve got to think about data integrity and privilege and confidentiality. All the same rules apply, and I think it’s a massive investment and a massive undertaking. And so many are in wait and see. And I think for a lot of the more established players, it’s just taken time to decide that they want to actually make that sort of investment. And there’s kind of continual oversight and continual maintenance, so it’s not a free for all.

Victor Li:

Gotcha. And so you talked a little bit about this earlier. So how is LZ Legal Services set up? What does it do? What does it not do?

Nicole Miller:

What we have primarily done is focused on federal IP matters, in this case, trademark. And we’re looking to expand that kind of federal IP practice to patents. So we’re hoping to launch, we’ve done a DIY patent product, and we’re looking to move towards an attorney assisted patent product as well that is fulfilled through our law firm. And so we’re hoping to launch that later this summer. We’ve also used the Arizona A BS to experiment with other matters that we think can be successfully done out of local matters that can be successfully done out of Arizona and where we think they can be done much more. So an example of that is we tried out earlier last year prenuptial agreements. We did those in Arizona, and then we also co-counsel with attorneys in several other states to also fulfill prenuptial agreements. We ultimately sunsetted that product and who knows we might pick matters up again. We learned a lot. We learned a lot about how to co-counsel. We learned a lot about how other kind of consumer matters work, but for now in terms of our scale and our ability to deliver services more cost effectively, it’s really those IP products that we’re focused on.

Victor Li:

And what made you decide to go that route with the IP products? Was there something that you saw on the market that there was a deficiency there that you thought you guys you could fulfill that? Or was it just one of your offerings that you decided that we’ll start with this and then we’ll go with the other ones once we get established there?

Nicole Miller:

Yeah, great question. I think primarily when we think about who many of the LegalZoom customers are, and we think about that small to medium business or that micro business, we thought about what are some of the legal needs that are not yet met for that small business owner. And so that’s why we looked at trademarks because it’s a big piece of starting your brand and starting your business. So it fit within the consumer that we’re really serving within the core legal Zoom product. So that was one. Two is as a federal matter, we could service across the entire country because it’s not a localized practice, it’s a federal practice that allowed us to serve a broader group of clients and customers. And then third, it was an area of the law that we felt that technology could really allow for greater scale and greater efficiency, which is really what allows us to offer our services at a much discounted price relative to the offline attorney.

Victor Li:

Okay. So let ask you just on a related note for that then. So how about for individuals then? What is LZ Legal Services doing to try to help individuals who might have the same inability to access the legal system? Inability to hire lawyers, especially because in Arizona I would figure, and this might be making assumptions with the elderly population, like your bread and butter being estate planning and whatnot, why wouldn’t that have been the more natural fit?

Nicole Miller:

So I’ll answer the estate planning piece in a second, but one thing just to clarify, when we talk about the sorts of businesses that we’re serving in terms of small businesses and micro businesses, these really are just individuals, right? A guy or a woman or a person with an idea, with a dream. And so they are really just individuals. These are not typically businesses that are even operational yet. So from that standpoint, we are actually serving individuals. And when you talk to the lawyers in our firm who’ve developed real relationships with their clients, I mean, they feel like they’re tied into the success of this individual’s livelihood, and they watch kind of from the seedling of an idea to really seeing the business flourish. So we do really serve individuals in terms of estate planning. It’s certainly not out of the realm of possibility, but we do currently serve consumers with legal needs in the estate planning world through legal zoom’s, legal access plans. And so we do have an attorney product that really serves individuals, which doesn’t mean that the law firm can’t also serve them, but we felt this was primarily an unmet need of our customer base.

Victor Li:

So how large is the firm right now?

Nicole Miller:

So we’ve got a little over 30 attorneys and a little over 70 non-attorneys, so kind of a hundred plus in the firm right now.

Victor Li:

Okay. And is there a breakdown of partners, associates, or,

Nicole Miller:

So every attorney in the firm in a sense, is a partner. And the reason we say that is every attorney in the firm gets as part of their kind compensation package equity in the parent company in legal Zoom because a publicly traded company. And we always say that’s kind of something very unique because as you know, partnership and equity ownership is often reserved for a very elite few and a firm. And so this is quite democratized in that way. In terms of career tracking, we have three or four different levels of attorneys within our firm, and so we really allow them to have the opportunity to grow with the firm, but we don’t have a partner concept per se.

Victor Li:

Gotcha. And I know in Utah, they have to check in constantly with this Utah Supreme Court or whatever the entity is out there that’s monitoring the sandbox just to check in, but also show how they are bridging the access to justice gap and things like that. Is there a requirement like that in Arizona? I didn’t think there was, but I wanted to double check that with you.

Nicole Miller:

Yeah, no, great question. So it’s slightly different. We do have to renew our application. It went from annually just this last year to bi-annually, but up until now it was annually. And so we provided every year a bunch of data including access to justice, relevant data, but practice data. We also have, and this is required by the regulations, an ethics officer, an ethics lawyer, and that ethics lawyer meets quarterly or more with the principals of the law firm is accessible to all the attorneys within the law firm, and also has a regular kind of touch base or communication cycle with the court as well.

Victor Li:

And you had mentioned earlier that some of your clients, I mean, one of the reasons for going with trademark is it’s federal nature and it’s more expansive and whatnot. So if you have a client that does end up having a matter in another state, but then need you guys to help with something or whatnot, how does that work then? Because obviously then you went into their regulations in other states. Has that been a problem so far or has it not been an issue?

Nicole Miller:

It really hasn’t been an issue. So as it relates to trademark specifically, if we get to a matter or a topic within the trademark regime that we don’t cover, and I’ll give you an example of that. So we handle full application filing and most of all of the opposition office actions once we get to what’s called TTAB proceedings. So that’s where it’s truly more of a kind of litigious, there’s a tribunal that’s involved. We don’t handle that sort of matter, and that’s where we will, we have an excellent network of law firms and attorneys across the country that do specialize in that work and we’ll refer it out. So that’s generally how we’ve approached that.

Victor Li:

Let’s take a quick break for another word from our sponsor, and we’re back now looking forward. Other states are experimenting with forms of limited legal representation. Some are talking regulatory reforms. Where do you see things headed in the next few years? I mean, is it going to be the status quo you think, or do you think we’ll start to see more changes similar to what happened in Arizona?

Nicole Miller:

I’ll tell you my belief, and then I’ll tell you my hope. My belief is we’re not see a whole lot of change, which is too bad. We know that Washington has approved a pilot sandbox, and so that’s probably the most we’ll see in the next few years. It’s a similar setup as to what Utah has established. Definitely a focus on access to justice, but a 10 year timeframe in that sandbox. And my hope is that other states will look at the success that has come out of Arizona. I mean, you have not seen disciplinary action of any sort of magnitude. You haven’t seen bad actors, you’ve not seen consumers being harmed. You’ve actually seen the opposite. And as you said earlier, it’s not like there’s been this run in from everyone and everywhere to get in. It’s been slow and steady and thoughtful in terms of the companies that have had an interest in trying to develop in the state. So my hope is that other states will see there’s no parade of horribles that has occurred, and that in fact, customers and clients have just been served more fully. But my belief is that this is just so slow moving and that people are fearful. And so unfortunately, I don’t think we’re going to see a whole lot of change.

Victor Li:

Yeah, actually, I’m kind of surprised that we’ve even seen we’re even seeing any kind of movement towards changes. I mean, we talked about the Arizona thing, but then just even with other states just toying with, or even starting to plan pilot programs or whatnot, I’m even surprised to see that, to be honest with you.

Nicole Miller:

Yeah, it’s interesting, right around the time that Arizona was coming online, there were a bunch of, it was like there was this moment of everyone kind of trying to push for some reform. And so you saw sweeping proposals and initiatives that came out of California and Florida and New York all over the country, and then they quickly all got shut down. So maybe we’ll see the same thing. You see a few of these ones twosies trying to jump in, and we’ll get a few more. But it’s funny how powerful the opposition is.

Victor Li:

Yeah. Although, and you might have some insight into this, I always kind of felt like, well, if jurisdictions that large and powerful like New York, California, Florida, really, if they got on this bandwagon and did what Arizona did or even what Utah did, would it be hard for the rest of the country to still just be like, no, we’re not going to do it.

Nicole Miller:

That’s super interesting. I think so. I think once you start getting enough of a momentum from those big states, I do think it becomes more of a challenge to oppose it. It’s almost like you, it becomes an antitrust issue at some point. Right? Yeah.

Victor Li:

Interesting. Yeah, I was just curious about that. But let’s talk about generative AI because you brought this up earlier. Now that you have all these platforms like Chat, GPT, Gemini, and Claude and all these other programs, I guess first of all, what do you think about those platforms and what they do?

Nicole Miller:

Well, I’m certainly not an expert, but generally speaking, I think it’s fantastic. I think that what they do is encouraging more people to seek self-help and be able to answer and augment the work that they’re doing. And as we know, it certainly doesn’t replace, in many instances, doesn’t replace a lawyer, because at the end of the day, we know they hallucinate and we know they’re imperfect. And when it comes to your ultimate legal wellbeing, you ultimately will need an attorney to bless it and validate it and use their head. Maybe that won’t be true in a decade or two, but for now it’s certainly is true. So anyways, I think they’re wonderful tools, but they need to be paired in most cases with an attorney.

Victor Li:

How has generative AI changed the way LegalZoom has done business, or how have they integrated into their offerings?

Nicole Miller:

From a LegalZoom perspective, we think about generative AI as augmenting and enabling our experts. And so when we say experts, we mean our frontline, our customer care and sales reps and our credentialed licensed professionals like our attorneys. So it’s really not a replacement, but an augmentation and an enabler. So as it relates to the law firm, what one of the big investments that we’ve made over the last year, year and a half, is we’ve built our own homegrown platform, our own kind of work management tool that we call our expert platform. And it’s a dual-ended platform that allows our attorneys and our attorney staff to engage directly with our clients on this platform to do work. And it’s this platform where we envision and are starting to build out AI capabilities to augment that communication and collaboration between an attorney and client as well as the work of the attorneys and staff that support our trademark filings. So it’s a tool, and that same philosophy is true at legal LegalZoom more broadly. That’s really where our focus is.

Victor Li:

You talked a little about this earlier, but specifically for LZ Legal Services, what’s the next step? Is it to expand its offerings, is to add more lawyers, is it to expand throughout the state? What is that next step for the firm?

Nicole Miller:

Our next step for the firm is to begin to expand the services that we can fulfill. And so our next matter will be provisional patents, and so we’ll be doing that in-house and launching in the summer.

Victor Li:

Alright. And then to wrap up, if our listeners want to get in touch with LegalZoom or with you to ask about what’s next for them as far as Arizona goes or what’s next for them as far as the rest of the country goes, what’s the best way to do that?

Nicole Miller:

So the best way to get in touch with us is to reach out to the [email protected] email domain. You can also go onto our website and go to contact us, but press may be the more direct way to get in touch and we love hearing from clients and constituents and those that are interested in eager to learn more about what we’re doing in the legal tech space. So always welcome that sort of feedback.

Victor Li:

Excellent. Thank you for joining us today, Nicole. I appreciate it.

Nicole Miller:

Thanks so much for having me, Victor. It’s been a pleasure.

Victor Li:

Yeah, it’s been a pleasure. If you enjoyed this podcast and would like to hear more, please go to your favorite app and check out some other titles from Legal Talk Network. In the meantime, I’m Victor Li and I’ll see you next time on the a b ABA Journal Legal Levels

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