First Kill the Lawyers... ... on the price for basic legal paperwork. That's the strategy of a rapidly growing national chain.
(FORTUNE Small Business) – The U.S. has more lawyers per capita than any country on earth, but it's no secret that tens of millions of Americans can't afford them. While the typical American earns $630 a week, a partner in a law firm charges $261 an hour on average, according to a 2003 survey. More and more Americans are representing them-selves in court--as many as 90% in some family courts.
For those who can't afford expensive lawyers, a Santa Barbara-based company called We the People has a few welcome signs: Bankruptcy $199. Divorce $399. Living trust $399. The company runs a chain of 114 stores (95 of them franchises) in 30 states, which prepare legal documents for civil procedures that aren't under dispute. If you're arrested for drunk driving, you need an attorney. But if you want to incorporate a new small business, We the People might be a smart option. It processed 6,300 incorporations last year, along with 35,000 divorces and 16,000 bankruptcies. All, the company claims, without offering legal advice.
The concept has proved controversial among--guess who?--lawyers, who have filed complaints against We the People in 13 states. So far the company has settled most of those actions and remains in every state in which it has set up shop. Now it's launching an ambitious expansion, aiming to double its stores to 200 by the end of the year. It also plans to double its sales, which piled up to $28 million in 2003. The company recently added some high-profile support: former New York City mayor Rudolph W. Giuliani, whose consulting group, Giuliani Partners, is helping We the People expand nationally.
CEO Ira Distenfield says he's not scared by the lawsuits. He says he's creating an industry that could change the structure of the legal profession. "Lawyers," he says, "don't have a monopoly on the law."
Walk into a We the People office, and you'll be greeted with a scripted explanation of what the company does. The salespeople are careful to add, "We are not lawyers." You have to state exactly what type of form you want (divorce, incorporation), because if a salesperson suggests a form, that can be considered legal advice. For each form, We the People's corporate attorneys have put together simple worksheets to fill out. (A will in New York State, for example, requires a two-page questionnaire.)
Terry Hartzfeld of Parker, Colo., is We the People's kind of client. An ex-truck driver, Hartzfeld wanted to incorporate several businesses--everything from graphic arts to hot sauce--under a single LLC. No law firm he called could help him for less than $800 and a wait of three to eight weeks. We the People in Denver got Hartzfeld his LLC in 24 hours for $499.
CEO Distenfield and his wife, president Linda Distenfield, don't have legal backgrounds. Ira, 58, worked in finance for 25 years and served as president of the Los Angeles Port Authority. Linda was a deputy for the mayor of Los Angeles. We the People was founded in 1985 by an entrepreneur named Carol Bradley, who ran it as a document-preparation service. After reading about her, the Distenfields met her in 1993 and bought the company name for $100,000.
Ira Distenfield sees his business as democratizing the justice system. He says 70% of his customers are the "underserved" who can't afford a lawyer, and the other 30% are those who could afford help but object to paying a lot for simple, cookie-cutter legal documents. "Our service is valuable for a great number of people who are not in a complex matter that would need specialized help," he says. "When you do need that, for God's sake, go to a lawyer."
Several We the People franchisees are lawyers themselves. Richard Danzig, 53, is a litigator with Kurzman Eisenberg Corbin Lever & Goodman in White Plains, N.Y., where he charges $425 an hour. He opened the chain's first New York City store in April 2003. Danzig had connections to Rudy Giuliani, and it was through him that Giuliani Partners took on We the People as a client. In addition to its current expansion, the company is looking to rent space within a bigger retail chain. Distenfield says he's in talks with several retailers and expects a deal before 2005. "Aligning ourselves with a large retail distribution system would enable us to be in every market in the U.S., virtually overnight," he says.
Many lawyers argue that We the People doesn't provide a legitimate service. It faces lawsuits for unauthorized practice of law in Illinois, North Carolina, and Texas, despite having defeated such claims in Nebraska (and settling a similar case in Connecticut). The state bar associations that bring the suits say that they're acting to protect consumers. Bankruptcy lawyers have been particularly vocal, and complaints in seven states focus specifically on We the People's bankruptcy services.
Franchisee Charles Anderson has become a lightning rod for such attacks in North Carolina. Anderson, 57, was a Naval officer for 33 years before he launched a We the People franchise in Raleigh. Shortly after he opened in March 2002, local lawyers began to call, posing as customers with legal questions. "They would actually call from their offices," he says. "The law firm names would come up on caller ID." A Raleigh bankruptcy lawyer paid a woman $400 to bring a concealed tape recorder into Anderson's office. The state attorney general pursued three legal actions against him, and a year ago he was forced to cut his prices on bankruptcy forms from $199 to $80 (a judge ruled that he couldn't charge more than a typist). "I was careful to draw the line so far away from what is truly practice of law," Anderson says. "I was running scared, but now I'm running mad."
David Skeel, a professor at the University of Pennsylvania School of Law with expertise in bankruptcy, says, "The reality is that most bankruptcies are cookie-cutter and don't require a lawyer. But if anything out of the ordinary crops up, a debtor who only has a petition preparer is in trouble."
We the People has had some legal victories, though. In California and Arizona, the company lobbied for new laws establishing legal-document preparation as a legitimate profession. State bars, Ira Distenfield says, will eventually lose the battle. "They're trade associations," he says. "Their job is to protect the interest of their dues-paying members. When a new industry is born, that's going to take some business away from their protected turf."