Arbitration ordered in LegalZoom class action

The LegalZoom.com customers who joined in a now-defunct class-action lawsuit against the self-help legal website are going to have to arbitrate their remaining unauthorized practice of law claims.

The plaintiffs in Bergenstock v. LegalZoom argued that unauthorized practice claims should not be arbitrated as a matter of public policy, regardless of the existence of a valid arbitration agreement.

They asserted that such claims fall outside the scope of the Federal Arbitration Act as individual states typically regulate the practice of law. LegalZoom contended that federal law trumped.

North Carolina Business Court Chief Judge James Gale wrote in his June 23 order that state law permits a private cause of action for unauthorized practice claims,  “supplementing the regulatory authority of the courts and the State Bar.”

But he determined that the statute “does not, however, evidence an intent that such claims are not subject to arbitration.” Then he concluded that the FAA applied to the plaintiffs’ claims and ordered arbitration.

The plaintiffs had also argued that they never agreed to arbitrate their disputes with LegalZoom because they did not physically sign a contract. But they clicked a box on the company’s website agreeing to the terms of use.

Gale looked to a series of federal decisions in determining that so-called “click-through” agreements were as binding as a signature.

“The unrebutted evidence is that Plaintiffs were required to acknowledge assent to the Terms by clicking a button that indicated assent next to links that would have called up either of the Terms in written form,” he wrote.

He added that the FAA and the Electronic Signatures in Global and National Commerce Act of 2000 do not require actual signatures to enforce an arbitration agreement. The agreement only has to be in writing, he said.

Gale’s order on arbitration follows an earlier ruling in which he dismissed the plaintiffs’ class-action suit against LegalZoom. He found that the suit was precluded by an earlier settlement in another class action in California.

An attorney for the plaintiffs, Nathan Atkinson of Spilman Thomas & Battle in Winston-Salem, did not respond to interview requests. LegalZoom’s attorney, Dan Boyce of Nexsen Pruet in Raleigh, also could not be reached.

Ken Friedman, vice president of legal and government affairs at LegalZoom, wrote in an email that this “case is yet another example of harm caused by state bars controlled by active market participants attacking competition.”

The Bergenstock plaintiffs filed suit after the North Carolina State Bar accused LegalZoom of the unauthorized practice of law, prompting the company to turn around and sue the bar.

LegalZoom has been waiting since November 2011 for Gale to declare that its business model is legal. It also has been working with the bar on legislation that would tweak the statutory definition of the practice of law, though neither side seems to agree on what the change might accomplish.

Follow Phillip Bantz on Twitter @NCLWBantz