Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App.: Final settlement approval in LegalZoom unfair business practices action affirmed, (Oct 3, 2014)

By Linda O’Brien, J.D., LL.M.

In a class action by a consumer against a provider of online legal documents for allegedly misrepresenting to consumers that anyone using its website could create reliable legal documents, the trial court did not err in granting approval to the final settlement, a California appellate court has ruled. Approval of the class action settlement was affirmed in an unpublished opinion (Webster v. LegalZoom.com, Inc., October 1, 2014, Chaney, V.).

LegalZoom.com, Inc. is a nationwide online company that sells self-help legal documents to the public. Consumer Katherine Webster filed a class actions suit against LegalZoom, alleging that the company engaged in unfair business practices by making customers believe that anyone using the website could create effective and reliable legal documents. Webster asserted violations of California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL), among other claims. A separate class action suit was filed by Randall Whiting who alleged violations of the UCL over issues using LegalZoom divorce documents. Although the cases were assigned to different trial judges, all parties appeared before both judges, who coordinated the proceedings.

After joint mediation, Webster entered into a settlement with LegalZoom, while Whiting did not. Subsequently, the trial court granted approved the Webster settlement. Whiting appealed, as did objectors David Johnson, Trent Manbeck, and Abigail MIngs.

Fairness of settlement. The court found that the trial court did not abuse its discretion by approving the Webster settlement. According to the court, the settlement was reached through arm’s length bargaining, the parties settled after substantial discovery, and that the trial court record was extensively and extensively analyzed. Moreover, Webster’s counsel was experienced with class actions and there were only eight objectors out of a class of over one million people.

Additionally, Whiting and the objectors did not rebut the presumption of fairness. The settlement produced a consent decree that mirrored Webster and Whiting’s theory of the case, the settlement achieved other benefits to the class such as an attorney consultation program, and there was little evidence of consumer injury, the court noted. Furthermore, the plaintiffs did not allege general incompetence or negligence by LegalZoom software or authors of LegalZoom documents, rather the evidence showed entire customer satisfaction from class members with documents from LegalZoom.

Class representative. The trial court did not err in determining that Webster was a proper class representative. Whiting’s argument that the settlement should be disapproved because the lead plaintiff lacked standing to pursue claims against LegalZoom was rejected. The court noted that Webster, who as executor of her uncle’s will and co-trustee of his living trust, had a common purpose and equal interest with her uncle in buying and using LegalZoom products to prepare his final documents. She also had standing as her deceased uncle’s personal representative. Moreover, LegalZoom waived any challenge to Webster’s capacity by responding to her complaint without specifically pleading Webster’s incapacity to sue. Whiting’s argument that Webster suffered consequential damages atypical of the class was also rejected, since differences in an individual class member’s proof of damages did not preclude class certification, the court concluded.

The case is No. B240129.

Attorneys: Robert S. Green and James Robert Noblin (Green & Noblin) for Randall Whiting. Joseph Darrell Palmer (Law Office of Darrell Palmer) for David Johnson and Trent Manbeck. Steven D. Martini (The Martini Law Group) for Abigail Mings. Robert S. Arns (The Arns Law Firm) and Kathryn A. Stebner (Stebner and Associates) for Katherine Webster. Alycia A. Degen (Sidley Austin) for LegalZoom.com, Inc.

Companies: LegalZoom.com, Inc.

Cases: StateUnfairTradePractices CaliforniaNews