Appeals Court Approves LegalZoom Class Action Settlement

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On Wednesday, a California appeals court upheld a class action settlement over claims LegalZoom misrepresented its legal document review services, finding that the deal was reasonable and fair.

LegalZoom is an online company that sells self-help legal documents to consumers for common legal matters such as name changes, trademark registrations, wills, trusts, and divorce. Customers could select the documents they wanted and submit the required information to LegalZoom. A LegalZoom employee would review the document for spelling, consistency and completeness, and would send the software-generated documents to the customer. Depending on the type of document, LegalZoom charged between $35 and $299 for the service.

The LegalZoom class action settlement will resolve two class action lawsuits filed against the company. The first was initially filed by plaintiff Charles Drozdyk in 2009, and the second was filed by plaintiff Katherine Webster in May 2010. Drozdyk allegedly experienced problems with the legal documents obtained from the website, and claimed LegalZoom violated California’s Legal Document Assistant Act. Webster’s class action lawsuit alleged LegalZoom misrepresented its services by leading consumers to believe they could create reliable legal documents through the website without the need to hire an attorney.

Webster later amended her LegalZoom class action lawsuit to include Legal Document Assistant Act claims, and the two actions were handled together. Plaintiff Randall Whiting later replaced Drozdyk as the lead plaintiff in the first class action lawsuit.

The parties began mediating the LegalZoom class action lawsuit, and Webster agreed to a class action settlement in 2011. LegalZoom sought to have the class action settlement resolve all of the allegations in both of the class action lawsuits, but Whiting did not agree to the deal. The trial judge found Whiting had adequate notice and opportunity to join the mediation process and approved the LegalZoom class action lawsuit. Whiting subsequently appealed, along with three objectors, arguing the LegalZoom settlement was unfair.

On appeal, the panel of judges agreed with the trial court and ruled that the LegalZoom class action settlement was fair. “First, the settlement was reached through arm’s-length bargaining,” the opinion states. “Webster and LegalZoom fought bitterly until a retired judge mediated the conflict.”

The appeals court noted that Whiting had many opportunities to offer input about the LegalZoom class action settlement, and that the trial court had examined his objections. Whiting’s main contention was that the LegalZoom settlement provided too little recovery for Class Members. However, the trial court concluded there were numerous obstacles to victory for the Class, and that the deal was fair and reasonable.

“The trial judge investigated and rejected the possibility Webster surrendered her legal claim for less than it was worth,” the appeals court concluded. “The trial court did not abuse its discretion.”

Webster and the Class Members are represented by Robert S. Arns, Jonathan E. Davis and Steven R. Weinmann of the Arns Law Firm and Kathryn Ann Stebner and Sarah Colby of Stebner & Associates.

The LegalZoom Class Action Lawsuit is Katherine Webster v. LegalZoom Inc., Case No. BC438637 in the Superior Court of the State of California, County of Los Angeles.