(Oct. 31, 2019) On October 8, 2019, the Higher Regional Court of Cologne held that the services provided by a legal contract generator platform violated the German Legal Services Act. It instructed the owner of the contract platform to cease its operations and stop advertising it.
Applicable Law
The Legal Services Act defines a legal service as “any activity related to the concrete affairs of others as soon as it requires a legal assessment of the individual case.” (Legal Services Act § 2, para. 1.) The objective of the Act is to “protect the consumers of legal services, legal relations, and the legal system from unqualified legal services.” (§ 1.) Any provision of legal services must be authorized by the Legal Services Act or other laws. (§ 3.)
Facts of the Case
The plaintiff is the local bar association in Hamburg. The defendant is a company headquartered in Cologne that provides information services in the areas of law, economics, and tax. It is not admitted to the bar or otherwise allowed to provide legal services. One of the products the defendant markets is an electronic generator of legal documents for various areas of law, which it advertises as “a digital legal department for your company.” It allows companies and individual consumers to purchase legal contracts for various areas of law either by buying a subscription or by buying a single document. The customer provides input to a set of questions and answers, which “recreates the attorney-client consultation,” according to the defendant. On the basis of the customer’s answers, an individualized document is generated. (Regional Court of Cologne paras. 3–4.)
The defendant advertised its contract generator platform with slogans such as “cheaper and faster than an attorney,” “legal documents of the same quality as an attorneys’,” and “more individualized and secure than any template and cheaper than an attorney,” among others. The legal notice on the website stated that the company was not allowed to provide legal services and that their legal contract generator did not provide legal services, but provided exclusively contractual services regarding legal topics. (Paras. 4–11.)
Considering the contract generator platform to be a violation of the Legal Services Act and the platform’s advertisements to be misleading, the plaintiff sent a cease-and-desist letter to the defendant. The defendant subsequently stopped using only one of the advertisements, but refused to comply with the rest of the cease-and-desist request. (Para. 12.)
Decision
The Regional Court of Cologne recalled that there have been a limited number of decisions regarding legal tech and its requirements and that opinions on whether legal tech falls under the scope of the Legal Services Act are divided. (Paras. 36–38.) However, it held that, in the case at issue, the Legal Services Act was applicable and legal services were provided. It stated that it is irrelevant that the legal services are software-based and that there is no human interaction. It pointed to the explanatory memorandum for the Legal Services Act, which stated that it is generally irrelevant which technical tools are used to provide legal services. The content of the legal services is the relevant factor. (Para. 41.)
The Court added that the legal service provided by the contract generator platform relate to a specific and concrete case and not a hypothetical situation. According to the Court, the product the customer receives is more individualized than a contract template found in a form book with general notes. Those who use a form book themselves choose the product that corresponds to their needs, whereas in the case at issue, the contract generator platform chooses for the consumer. (Para. 42.)
The Court opined that the objective of the Legal Services Act to “protect consumers from unqualified legal services” can be achieved only when the term “legal services” is broadly interpreted. The fact that modern technology has made human input—for example, by way of phone consultation—dispensable cannot be an argument for denying that there is a “concrete affair” as required by section 2 of the Legal Services Act. (Para. 43.)
Furthermore, the Court held that the contract generator platform performs a legal assessment of the facts. It is irrelevant whether it is an easy or complex legal question. The set of questions posed to the consumer is similar to the questions an attorney would ask to assess the legal situation. The way the platform is set up makes average consumers expect a legal assessment of their case and not just general assistance in preparing a document. The Court stated that the advertisements for the platform reinforce that view. (Paras. 45–47.)
With regard to the advertisements, the Court held that they are misleading and must be taken down. (Para. 52; Act Against Unfair Competition § 3; § 5, para. 1, sentence 2, no. 3; § 8, para. 1; § 8, para. 3, no. 2.) It stated that there was no need to decide whether the advertisements suggested that the services provided by the contract platform are equivalent to the services provided by an attorney. According to the Court, the consumer is already misled by the fact that the defendant promotes a service that the Legal Services Act prohibits the defendant from performing. The disclaimer on the defendant’s website that no legal services are provided is insufficient and contradicts the facts. (Regional Court of Cologne para. 54.)
Related Developments
A similar case regarding legal tech is pending at the Federal Court of Justice, Germany’s highest civil court. Oral arguments took place on October 16, 2019. In that case, the company Mietright GmbH operates the website “wenigermiete.de,” where tenants may check for free whether the rent they pay is too high and violates rent control laws. The online calculator tool compares the tenant’s rent with the local reference rent. If the tool finds that the tenant has any claims, it can assign the claims to Mietright GmbH, which will enforce them against the landlord. Mietright GmbH is registered as a legal services provider for collection services. The lower courts held that the focus of the company was not the provision of collection services but the general provision of legal services via their online tool and therefore found a violation of the Legal Services Act. The decision of the Federal Court of Justice will be announced on November 27, 2019.