Unauthorized Practice of Law Claims Threaten Access to Justice

In the past few years, I have written about the monopoly and protectionism within the legal field. Like intellectual property, the Unauthorized Practice of Law is not considered a sexy topic for the startup community. However, when a state bar sets its sights on a company, large or small, the results can be devastating. Although most have read about the LegalZoom, Avvo, and Rocket Lawyer battles with state bar associations, many may not be aware that over the past four years, a pair of small companies were driven out of business by state bars claiming that legal tech business models violate the unauthorized practice of law (UPL) rules. In addition, it’s the consumer who also loses when access to legal service is reduced. That said, there may be help from the Department of Justice (DOJ) and antitrust law for companies targeted by state bars.
Late last year, TIKD sued The Florida Bar (Bar) and The Ticket Clinic for colluding to put TIKD out of business. The Bar claims it can violate federal antitrust law with impunity because it is an “arm of the state.”  In its Statement of Interest, the DOJ seems to understand the link to access to affordable legal services:

“To be sure, new and innovative mobile device apps can be disruptive.  Business models entrenched for decades have witnessed new competition from mobile platforms that can profoundly change an industry.  But almost invariably, the winners from the process of innovation and competition are consumers.  …”

I spoke with Tom Spahn, TIKD President and COO and legal counsel, Pete Kennedy of Graves Dougherty Hearon & Moody recently about the case. It was very interesting that the DOJ made its statement of interest without any prompting by TIKD.

Mary: Please describe TIKD and its mission.

Tom: TIKD launched in late 2016.  TIKD provides a convenient, affordable solution for drivers to deal with traffic tickets.  For a one-time charge, TIKD hires an independent attorney to represent the driver, pays any fine or court costs assessed, and provides a full refund if the driver’s license gets any points.  Drivers can pay the charge in installments, are represented by independent counsel, and cap their financial exposure; TIKD bears the cost if tickets are not dismissed.

Mary: What prompted this litigation?

Tom: TIKD sued The Florida Bar and the Ticket Clinic because their actions were discouraging lawyers from working with TIKD and representing TIKD’s customers, even though no court has held that TIKD’s services violate any Florida law."

Mary: How much time is spent on this lawsuit versus running the business?

Tom: More than we’d like.  TIKD made repeated efforts to try to resolve this issue with The Florida Bar without filing suit but was rebuffed.  All TIKD wants is a level playing field to offer Florida consumers options in how to deal with tickets.

Mary: Any comment on the regulation and protectionism?

Pete: The Complaint explains TIKD’s allegations in detail and the problems with the Bar and Ticket Clinic’s actions.  A profession with a legal monopoly on providing services should not also have the power to enforce its monopoly.

Mary: Any comment on the DOJ statement of interest?

Pete: The Government’s filing validates TIKD’s position that, after the Dental Examiners case, most state bar association actions, particularly their enforcement of unauthorized practice laws, are subject to antitrust scrutiny because there is no active supervision of those actions by politically accountable government officials.

Important caution for founders as the time and money for a lawsuit can be crippling to a business. The support from the DOJ, plus Pete’s mention of the Dental Examiners’ case, led me to chat with Legal Zoom’s Ken Friedman, VP and in-house counsel. LegalZoom filed the first antitrust lawsuit against a state bar association after Dental Examiners.

Mary: First to be clear, LegalZoom is not involved in any way with TIKD and has not contributed to its case. But, can you tell us a bit about the history of LegalZoom and this landmark Dental Examiners case?

Ken: Launched in 2000, LegalZoom has been a pioneer in changing the way those with legal needs consume legal services.  The vast majority of lawyers and most state bars are highly supportive of technology companies helping solve the justice gap and increasing access to the law, but the bars are also run by active market participants, often with a self-interest to limit competition.

LegalZoom has an excellent relationship with most state bars today, but that was not always the case. During a dispute with the North Carolina State Bar, LegalZoom filed an amicus brief in the North Carolina Board of Dental Examiners matter and supported the FTC’s efforts.  The US Supreme Court made clear that letting professionals enforce their own monopolies creates a “real danger” that they will act to further their “own interests,” rather than the public interest. These practices increase prices to the detriment of consumers while decreasing consumer options.

Mary: Can you explain why the DOJ might wish to intervene here?

Ken: The Supreme Court requires that when a state agency, such as a state bar, is controlled by active market participants, they must act pursuant to a clearly articulated state policy to displace competition and be actively supervised by politically accountable government officials.  State bars should not be able to argue sovereign immunity to sidestep the Supreme Court’s ruling and I am not at all surprised by FTC or DOJ vigilance where they feel the Dental Examiners decision is not properly followed.

State Supreme Court supervision is not the answer.  State Supreme Court judges remain market participants and should not regulate their own profession. They are all lawyers, and many will return to active practice upon retirement from the court. Their focus must be on the law and resolving cases. It is a judicial, not legislative focus.  Their focus is not on consumers and they do not have time for the active supervision required.  Even were that not the case, an inevitable conflict will arise when a legal tech company gets involved in litigation with a state bar, the state bar represents that it is an arm of its Supreme Court, then the case reaches that same Supreme Court on appeal. It is not a workable solution.

It seems that the bar associations are clinging to their monopoly to the detriment of their citizens who are looking for affordable legal services. Tom Gordon, Executive Director of Responsive Law, provides his views on regulation and protectionism, “Time after time, bar associations have claimed that they have been enforcing regulations against UPL for the benefit of the public. Yet, when bars bring UPL enforcement actions, they inevitably have little to no basis in any demonstrated consumer harm. Instead, bars have used these anticompetitive regulations to protect incumbents in the bar against outsiders—both lawyers and non-lawyers—who are bringing affordable, reliable services to the public through technology and innovative business practices. The paradox of simple legal help being unaffordable for most Americans while many lawyers remain drastically underemployed can largely be explained by the bar’s insistence on prohibiting services that match these two parties.”

In addition, Professor Renee Knake, Professor of Law & Doherty Chair in Legal Ethics, University of Houston Law Center, says, “I am not surprised to see the DOJ taking an official action in this case, and while I cannot predict the future, it seems likely to me that the DOJ will continue to be proactive in this way to the extent other lawyer regulators act in anticompetitive ways that reduce consumer choice.” Professor Knake has much more to say on the legal monopoly topic in her upcoming paper, available here.

In summary, DOJ’s agreement with TIKD that the Florida Bar is immune from antitrust laws only if it is “actively supervised” by the State of Florida, will help TIKD’s case. Plus, if the Bar fails to prove that its anti-competitive actions were approved of, and supervised by, a true State of Florida agency, it is vulnerable to treble damage awards under the Sherman Act.  This outcome would be game-changing for legal technology companies that struggle with similar situations. With no one disputing the difficulty for over 80% of Americans to access affordable legal services, it’s still surprising that the bar associations are trying to shut down innovative companies that are filling the gap left by lawyers’ offerings. #onwards.