See August 23, 2011, update at end of post for links to reports of proposed settlement in this case
The District Court has issued an order in the Missouri LegalZoom Case.
Bottom line: The District Court rejects LegalZoom’s Motion for Summary Judgement, ruling that the software and associated services could be found by a reasonable juror to be the practice of law under Missouri law. The Court regards the software as more like a legal service than a pure scrivener or the sale of a forms book.
In the description of what the software does, the Court describes the discretionary role (beyond the writing of the software) as highly limited. In fact the court basically says that two users who answer the forms the same way would get the same document. It did not help LegalZoom that their promotion says that after you use the software “Legal Zoom takes over.”
The court points out that the software design was not done by a Missouri lawyer.
Two points: One. There is little if anything here to worry legal aid and court-based services, since they are overseen by state-licensed lawyers.
Two: The real issue is the writing of the software. That is where the debate about whether it is the practice of law should be. Some say that writing software is more like writing a book or a paper form, but I am not yet sure where I stand on that. That certainly is where the issues of quality and the need for consumer protection most arise.
The ultimate conclusion may well be that current regulatory definitions just do not work, and that we need a new form of regulation of the the drafting of interactive court assistance software, one that protects the consumer against fraud in marketing and incompetence in execution. Given the interstate nature of the services, Federal consumer protection regulation might be the answer.
Update — August 23, 20110 — AP and the Wall Street Journal report a proposed settlement in this case. We’ll comment in more detail if and when enough more is known.
Richard Zorza's Access to Justice Blog 
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Richard, thanks for your insight into this decision. On your first point, I agree that legal aid and court-based self-help assistance services have nothing to worry about, as they are engaging in the *authorized* practice of law. On your second point, I believe (and, as an organization, Responsive Law believes) that the software at issue here is behaving very much like a self-help book that includes forms. Branching decision-tree software merely automates what would be a lengthy series of written steps for an individual to follow without computer assistance. Theoretically, an individual using the software could complete forms by following each of the steps in the computer program without the assistance of software. It would be unfortunate if the definition of practice of law were to be predicated upon whether the self-help process is accelerated–without otherwise being changed–through computer automation.
One other point that I found troubling in the court’s decision was its reliance on the human element in LegalZoom’s services as part of its analysis of whether LegalZoom engaged in UPL. Specifically, the court calls out human-delivered services such as “review[ing] the data file for for completeness, spelling and grammatical errors” and “correcting word processing ‘widows,’ ‘orphans,’ page breaks, and the like.” Does this mean that a non-lawyer composing pleadings on her own may not send those pleadings to a proofreader without the proofreader engaging in UPL?
Of course, the most troubling aspect of this whole case is that, as the court acknowledges, the plaintiffs have never asserted that they believed LegalZoom was acting as a lawyer, nor that the forms they received were deficient in any way. If UPL restrictions exist to protect consumers, and not to protect the bar from competition, then consumer harm should be a necessary element of any UPL complaints.