Legalzoom.Com, Inc. v. The North Carolina State Bar
| Decision Date | 24 March 2014 |
| Docket Number | 11 CVS 15111 |
| Citation | 2014 NCBC 9 |
| Court | Superior Court of North Carolina |
| Parties | LEGALZOOM.COM, INC., Plaintiff and Counter-Defendant, v. THE NORTH CAROLINA STATE BAR, Defendant and Counter-Plaintiff. |
Carlton Law PLLC, by Alfred P. Carlton, Jr., and Nexsen Pruet, PLLC, by R. Daniel Boyce, Eugene Boyce, and Thomas J. Ludlam, for Plaintiff LegalZoom.com, Inc.
North Carolina Department of Justice, by I. Faison Hicks, Special Deputy Attorney General, for Defendant The North Carolina State Bar.
{1} THIS MATTER is before the court on LegalZoom.com, Inc.'s Motion for Partial Judgment on the Pleadings ("LegalZoom's Motion") and The North Carolina State Bar's Motion for Judgment on the Pleadings ("State Bar's Motion"). For the reasons stated below, LegalZoom's Motion is DENIED, and the State Bar's Motion is GRANTED in part and DENIED in part.
{2} LegalZoom, Inc. ("LegalZoom") filed its Complaint on September 30, 2011 seeking declaratory and injunctive relief. The matter was designated a complex business case and assigned to the undersigned on November 7, 2011. The North Carolina State Bar ("State Bar") moved to dismiss the Complaint on February 22, 2012. By its August 27, 2012 Order, the court denied the State Bar's Motion to Dismiss in part, but deferred ruling on the issue of whether LegalZoom is engaged in the unauthorized practice of law until the State Bar elected whether to file a counterclaim seeking to enjoin LegalZoom. The State Bar filed its Answer, Counterclaim, and Motion for Preliminary and Permanent Injunction on September 21, 2012, and an Amended Answer and Counterclaim on October 1, 2012, including a request that LegalZoom be enjoined. LegalZoom replied to the counterclaim on October 31, 2012.
{3} LegalZoom filed its Motion for Partial Judgment on the Pleadings on December 20, 2012, which was limited to the issue of whether the State Bar must register LegalZoom's prepaid legal services plans. The State Bar filed its Motion for Judgment on the Pleadings on January 17, 2013. The Motions have been fully briefed, a hearing was held on June 18, 2013, and the Motions are ripe for disposition.
{4} The court does not make findings of fact in ruling upon a Rule 12(c) motion, and in considering the motion, the nonmovant's factual averments are assumed to be true. Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974) (internal citations omitted).
{5} The court is permitted, when assessing a Rule 12(c) motion, to consider exhibits attached to and referenced in the nonmovant's pleadings, and exhibits attached or referred to in the movant's pleadings so long as the nonmovant has made admissions regarding those exhibits. See Reese v. Charlotte-Mecklenburg Bd. of Educ., 196 N.C.App. 539, 545–46, 676 S.E.2d 481, 486 (2009). The court may further consider facts of which it may take judicial notice, so long as any such fact is "not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." N.C. R. Evid. 201(b) ("Rule 201"); see also Hope – A Women's Cancer Ctr., P.A. v. State, 203 N.C.App. 593, 597, 693 S.E.2d 673, 676 (2010).
{6} In its Complaint, LegalZoom pleads that its services are "available on the Internet at www.LegalZoom.com." The court concludes that it may take judicial notice of the information provided on LegalZoom's website pursuant Rule 201. See Blackburn v. Bugg, No. COA11-1349, 2012 N.C.App. LEXIS 485, at * 11–12, 723 S.E.2d 585 (N.C. App. Ct. 2012); Doron Precision Sys., Inc. v. FAAC, Inc., 423 F.Supp.2d 173, 179 n.8 (S.D.N.Y. 2006) () (quoting Fed.R.Evid. 201(b)).
{7} The factual statement provides context for these pending motions in accordance with these standards.
{8} LegalZoom, through its website, www.LegalZoom.com, offers two services: (1) a legal document preparation service; and (2) in those states where permitted, prepaid legal services plans. (Compl. ¶ 9; Am. Answer ¶ 9.) LegalZoom currently offers its document preparation service nationwide, including in North Carolina, and offers its prepaid legal services plans throughout much of the United States. (Compl. ¶ 9.) Its prepaid legal services plans are not presently offered in North Carolina because they have not yet been registered.
{9} In March 2003, the State Bar's Authorized Practice Committee ("APC") opened an inquiry into whether LegalZoom's online legal document preparation service constituted the unauthorized practice of law ("UPL"). (Compl. ¶ 20, Ex. 1; Am. Answer ¶ 20.) On August 26, 2003, the APC advised LegalZoom by letter that it had "voted to dismiss this complaint because the evidence was insufficient to support a finding of probable cause that [LegalZoom was] engaged in the unauthorized practice of law." (Compl. Ex. 3; Am. Answer ¶ 23.)
{10} On January 30, 2007, the APC notified LegalZoom by letter that it had again opened an inquiry into whether LegalZoom's activities constitute UPL. (Compl. Ex. 4; Answer ¶ 24.) A number of letters followed. LegalZoom responded to the APC's letter on February 13, 2007, explaining its contention that LegalZoom did not furnish legal advice or guidance, and did not engage in UPL. (Compl. Ex. 5; Am. Answer ¶ 25.) On May 5, 2008, the APC sent LegalZoom a letter, captioned "LETTER OF CAUTION – Cease and Desist" ("Cease and Desist Letter"), which states that the APC "concluded that there is probable cause to believe that LegalZoom's conduct constituted the unauthorized practice of law . . . [and] voted to issue this Letter of Caution to notify you of its decision and to demand that you stop engaging in your activities now." (Compl. Ex. 6; Am. Answer ¶ 26.) The letter concludes that, "Legalzoom's conduct as described above is illegal in North Carolina and must end immediately, " and requests that LegalZoom "provide a response with evidence that [it has] have complied with the Committee's decision within 15 days of [its] receipt of this letter." (Compl. Ex. 6.)
{11} LegalZoom responded to the Cease and Desist Letter on June 13, 2008 challenging the APC's conclusions, (Compl. Ex. 7; Am. Answer ¶ 27, ) and providing a legal opinion drafted by LegalZoom's North Carolina counsel which concludes that the "document preparation and filing service provided by Plaintiff does not constitute the 'organizing' of a corporation, and therefore is not the unauthorized practice of law . . . ." (Compl. ¶ 30, Ex. 8; Am. Answer ¶ 8.)[1]
{12} By letter dated June 17, 2008, the APC acknowledged receipt of LegalZoom's June 13, 2008 response letter. The State Bar did not thereafter institute any legal proceeding against LegalZoom until filing its Counterclaim in this action. (Compl. Ex. 9; Am. Answer ¶¶ 31–32, 34.)
{13} The State Bar has made copies of its Cease and Desist Letter and LegalZoom's June 13, 2008 response letter publicly available upon request, including to bar officials in other states who referenced the letter in their own investigations, and the APC's meeting minutes reflecting the decision to issue the Cease and Desist Letter were posted on the State Bar website for some period of time. (Compl. ¶ 35; Am. Answer ¶ 35.) LegalZoom avers that the State Bar's Counsel has also made statements to third parties expressing his opinion that LegalZoom's conduct is illegal in North Carolina. (Compl. ¶ 36; Am. Answer ¶ 36.)
{14} LegalZoom has two legal service plans: one for consumers and one for business users. On July 14, 2010, LegalZoom sent a letter to the State Bar seeking to register its consumer "Advantage Plus Plan" as a prepaid legal services plan. (Compl. Ex. 10; Am. Answer. ¶ 45.)
{15} The APC responded on September 30, 2010 by letter, (Compl. Ex. 11; Am. Answer ¶¶ 41–42.), informing LegalZoom that its initial registration statement was deficient in three respects: (1) it did not include the required "list of the names, addresses, and telephone numbers of all North Carolina licensed attorneys who have agreed to participate in the plan"; (2) it did not include the required "notarized certification forms from each attorney who has agreed to participate in the plan"; and (3) it did not include the marketing material the APC needed to review. (Compl. Ex. 11.) The letter raised an additional concern regarding the lack of a membership plan for individuals who plan to purchase the Advantage Plus Plan. (Compl. Ex. 11.) Finally, the APC stated that:
It appears from the material you submitted for LegalZoom [Advantage Plus Plan] that LegalZoom continues to conduct business in a way that the [APC] prohibited in its May 5, 2008 cease and desist letter. You are offering plan members an opportunity to get a 10% discount off the price of legal documents prepared by LegalZoom. This service in your plan violates the very essence of a prepaid legal services plan, which is that a North Carolina licensed attorney must provide the legal services. Please respond to that concern.
(Compl. Ex. 11.)
{16} LegalZoom responded on October 14, 2010 with two letters. The first contends that the Cease and Desist Letter did not and could not prohibit any activity, and, that, in any event, the State Bar does not itself have power to declare LegalZoom's practices to be illegal and must rather seek court action, such that the Cease and Desist Letter or the State Bar's unilateral...
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