Contemplations on ‘An Act to Further Define … ‘Practice [of] Law’,’ ‘Requirements for Web Site Providers’ and Chapter 84 of the North Carolina General Statutes

Osborne,GrantBy Grant B. Osborne

Ulysses Everett McGill (previously imprisoned for practicing law without a license and about to be hanged):  “It ain’t the law!”

Sheriff Cooley:  “The law? The law is a human institution.”

— “Oh Brother, Where Art Thou?” (Joel and Ethan Coen, 2001)

How much time have you spent reading Chapter 84 of the North Carolina General Statutes on “Attorneys-at-Law”? Probably not much, which is a little surprising considering that it defines what it means to engage in the “practice [of] law” in North Carolina and regulates what we do for a living. Most attorneys in North Carolina (including your humble author until he wrote this) have probably spent more time monitoring updates on LinkedIn and Facebook than they have engaging in study of the statutes that, until recently, gave us in North Carolina a virtual monopoly over the rendition of legal services. The General Assembly and our Governor, however, have recently amended what it means to engage in the “practice [of] law.” Those amendments warrant attention.

On June 30, 2016, Section 84-2.1 of the General Statutes, entitled “‘Practice Law’ defined,” was substantially amended and, more important, was supplemented by Section 84‑2.2 entitled “Exemption and additional requirements for Web site providers.”

The adoption of Section 84‑2.2 arose from what was commonly known as “House Bill 436” (“H.B. 436”), which resulted from an antitrust lawsuit filed in 2015 by LegalZoom.Com, Inc. (“LegalZoom”) against the N.C. State Bar in the U.S. District Court for the Middle District of North Carolina. In Oct. of 2015, the State Bar and LegalZoom reached a compromise that ended the suit by way of a consent judgment providing, in effect, that the company may register with the State Bar and lawfully engage in specified legal services if it complies with various consumer protection requirements. The State Bar and LegalZoom also agreed to work cooperatively to seek adoption of H.B. 436 by the N.C. General Assembly; that bill has now become law in the form of revisions of Sections 84-2.1 and adoption of Section 84-2.2 (collectively, the “Amended Law Practice Statutes”).

Before the adoption of H.B 436, “[t]he phrase ‘practice law'” was “defined to be performing any legal service for any other person, firm or corporation,” and, not surprisingly, included engaging in traditional legal practice such as “assisting by advice, counsel or otherwise in any legal work”; and advising or giving opinion “upon the legal rights of any person, firm or corporation.” N.C.G.S. § 84‑2.1 (a) (emphasis supplied). That definition, which remains in effect, has long been very expansive:  the “particular acts [that] … are specifically included within the definition of … ‘practice law'” have never been intended to “be construed to limit the … general definition.” Id.

The General Assembly, despite the established and far-reaching meaning of “practice law” in North Carolina, ratified and the Governor approved Section 84‑2.2, which dramatically narrows the scope of the “practice [of] law” with respect to “the operation of a Web‑site by a provider.” This section, which is explicitly intended to create an “exemption” and provide “additional requirements for Web‑site providers,” provides that “[t]he practice of law, including the giving of legal advice, as defined by G.S. 84‑2.1[,] does not include the operation of a Web site by a provider that offers consumers access to interactive software that generates a legal document based on the consumer’s answers to questions presented by the software, provided that all” specified conditions “are satisfied.” N.C.G.S. §84‑2.2 (a) (emphasis supplied).

The Amended Law Practice Statutes, notably, don’t define a “provider” of a “Web site,” but they prescribe seven mandatory conditions as follows:

  • The consumer is provided a means to see the blank template or the final, completed document before finalizing a purchase of that document.
  • An attorney licensed to practice law in the State of North Carolina has reviewed each blank template offered to North Carolina consumers, including each and every potential part thereof that may appear in the completed document. The name and address of each reviewing attorney must be kept on file by the provider and provided to the consumer upon written request.
  • The provider must communicate to the consumer that the forms or templates are not a substitute for the advice or services of an attorney.
  • The provider discloses its legal name and physical location and address to the consumer.
  • The provider does not disclaim any warranties or liability and does not limit the recovery of damages or other remedies by the consumer.
  • The provider does not require the consumer to agree to jurisdiction or venue in any state other than North Carolina for the resolution of disputes between the provider and the consumer.
  • The provider must have a consumer satisfaction process. All consumer concerns involving the unauthorized practice of law made to the provider shall be referred to the North Carolina State Bar. The consumer satisfaction process must be conspicuously displayed on the provider’s Web site.

Id. (emphasis supplied).

Before the adoption of H.B. 436, it was (and had long been) “unlawful for any person or association of persons, except active members of the Bar of the State … admitted and licensed to practice as attorneys-at-law … to hold out himself, or themselves, as competent or qualified to give legal advice or counsel, or to prepare legal documents… .”  N.C.G.S. §84‑4. That restriction, as a result of the Amended Law Practice Statutes, is no longer the case as far as  creation of “a legal document” by “interactive software” that is provided by a “provider” of “a Web site” is concerned.

Whether the Amended Law Practice Statutes wisely advance the public’s legitimate interest in affordable legal services is beyond the scope of this article, but the statutes, regardless, raise thorny questions. First, they fail to define key terms, such as “provider” and “interactive software,” which is critical because only a “provider” that offers consumers access to “interactive software” may invoke the new exemption. Second, the statutes don’t describe the parameters of an acceptable “consumer satisfaction process,” which is a required element of the exemption. Third, they fail to indicate expressly whether a licensed attorney may be a “provider” and thus, in that capacity, avoid regulation by the State Bar (and the accompanying burden of having to comply with the Revised Rules of Professional Conduct) if he or she otherwise complies with Section 84-2.2.

Fourth, and perhaps more important, the Amended Law Practice Statutes require that an “attorney” who has been “licensed to practice law in the State of North Carolina” must have “reviewed each blank template … including each and every part thereof that may appear in the completed document,” and have his or her name and address “provided to the consumer upon written request.” The statutes, notably, don’t require the licensed attorney to have drafted, approved of, endorsed or even critiqued the “blank template” or “each and every potential part thereof”: the lawyer need only have “reviewed” it. The new statutes say nothing about what if any obligation(s) the attorney will have assumed to the “consumer” or, for that matter, to the Web-based “provider” as a result of such “review” or about what such “review” entails. The reviewing lawyer is left to guess about that.

These issues are not of hypothetical interest. Chapter 84 has teeth. Section 84‑4 still makes it “unlawful for any person or association of persons, except active members of the Bar of the State … to hold out himself, or themselves, as competent or qualified to give legal advice or counsel, or to prepare legal documents“; Section 84‑5 still makes it “unlawful for any corporation to practice law” or “hold itself out to the public or advertise as being entitled to practice law” or “give legal advice”; and Section 84‑10.1 (as amended by H.B. 436) (still menacingly entitled “Private cause of action for the unauthorized practice of law”) still provides that, “[i]f any person knowingly violates any of the” statutes pertaining to the unauthorized practice of law “or knowingly aids and abets another person to commit the unauthorized practice of law,” then “any person … damaged by the unlawful acts … shall be entitled to maintain a private cause of action to recover damages and reasonable attorneys’ fees and other injunctive relief” and that “[n]o order or judgment under this section shall have any effect upon the ability of the … State Bar to take any action authorized by this Chapter.” N.C.G.S. §§84-4, 84-5 and 84‑10.1 (all emphases supplied).

Why does this matter? It matters because a North Carolina attorney who “has reviewed each blank template offered to … consumers” and “reviewed … every potential part thereof” in accordance with Section 84-2.2(a) could easily be accused of and possibly sued for having knowingly aided and abetted “another person to commit the unauthorized practice of law” if the Web site operator has failed to comply with all of the conditions expressly prescribed by Section 84‑2.2(a) (e.g., failure to provide the consumer with “a means to see the … final completed document before finalizing a purchase,” failure to “have a consumer satisfaction process” that is adequate under the Amended Law Practice Statutes, or failure to display that “process” on the website with sufficient conspicuousness).

And that’s not all. Chapter 84 permits district attorneys, upon the application of any member of the Bar, to bring a civil action in the name of the State to enjoin persons from engaging in the unlawful practice of law, “and it shall be the duty of the district attorneys… to indict any person, corporation or association of persons upon the receipt of information of the violation of the provisions” of the statutes pertaining to the unauthorized practice of law. N.C.G.S. §84‑7 (emphasis supplied). Such indictment can result in conviction of a “Class 1 misdemeanor.” Id. §84‑8(a). As if that were not enough, one wonders whether an attorney can be persuasively accused of having engaged in a “fraudulent practice” by having “reviewed” documents provided by a Web site provider that has failed to comply scrupulously with the conditions of the Amended Law Practice Statutes, because, “[i]f any attorney commits any fraudulent practice, [then] he [or she] shall be liable … to the party injured, and on the verdict… judgment shall be given for the plaintiff to recover double damages.” Id. §84‑13. Providing attorney “review” of documents provided by operators of websites in accordance with Chapter 84 may look like easy money and/or an easy way to enhance one’s professional credibility, but that opportunity may come with serious risks (which professional liability insurance policies may or may not cover).

The Amended Law Practice Statutes are the product of a thoughtful compromise designed to end difficult and risky litigation. They were obviously intended to address risks posed to the public (and possibly lawyers) by web-based providers of legal documents. But they are a “work in process” that may not be set in stone. They provide explicitly that the “General Assembly,” by June 30, 2018, “shall review the implementation of” Section 84‑2.2 “and consider whether [it] … should be modified or discontinued.” Given the vexing issues set forth above, perhaps such “review” should take place well before then.

Grant Osborne is Immediate Past-Chair, Labor & Employment Law Section of the NCBA.