Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Operating Leases

We conduct operations from certain leased facilities in various locations. At December 31, 2021, we had various non-cancelable operating leases for office space and equipment, which expire between February 2022 and September 2029. Future minimum payments under operating leases are as follows (in thousands):


	Operating Leases
Years Ending December 31,
2022	$	2,372
2023	1,101
2024	867
2025	550
2026	505
Thereafter	1,033
Total minimum lease payments	$	6,428

In 2021, we signed a lease amendment to extend the term of our corporate offices in Glendale, California for an additional 24 months, which expires in July 2024. We recorded rent expense of $3.5 million for 2021, and $3.1 million for both 2020 and 2019, respectively.

Advertising, Media and Other Commitments

We use a variety of media to advertise our services, including search engine marketing, television and radio. At December 31, 2021, we had non-cancelable minimum advertising and media commitments for future advertising spots of $27.0 million, substantially all of which will be paid over a three year period. We also have non-cancelable agreements with various vendors, which require us to pay $32.4 million over a five year period, of which $26.6 million remains to be paid as of December 31, 2021.

Legal Proceedings

We received a demand letter dated April 20, 2020 from service partner Dun & Bradstreet alleging that Dun & Bradstreet had overpaid us for services. The letter alleges these overpayments occurred between 2015 and 2019, amounted to $5.6 million, and were caused by overreporting by us. The parties have continued to negotiate, and no claim has been filed. We deny and will continue to deny all of the allegations and claims asserted by Dun & Bradstreet, including, but not limited to, any allegation that Dun & Bradstreet has suffered any harm or damages. We believe we have meritorious defenses to the claims and will vigorously defend any action. While there is at least a reasonable possibility that a loss may be incurred, we have not recorded any loss or accrual in the accompanying consolidated financial statements at December 31, 2021 for this matter as a loss is not probable.

We initiated arbitration in California on October 28, 2020 against one of our vendors. The demand for arbitration alleged breach of contract and breach of covenant of good faith and fair dealing, and sought declaratory relief and at least $5.6 million in damages. On December 7, 2020, the vendor filed a counterdemand alleging breach of contract and breach of the covenant of good faith and fair dealing, seeking declaratory relief and at least $6.1 million in damages. We replied to the counterdemand on January 19, 2021. The parties reached the terms of a global settlement on August 21, 2021, with ongoing obligations under that agreement relating to the fulfillment of certain services through December 2022. This settlement was not material to our results of operations, cash flows and financial condition.

We were served on February 9, 2021 with a class action complaint, filed in Los Angeles Superior Court and removed to federal court on March 11, 2021, from a Florida resident who claimed to have visited the www.legalzoom.com website. The plaintiff alleges that the website’s use of session replay software was an unlawful interception of electronic communications under the Florida Security Communications Act. The plaintiff sought damages on behalf of the purported class as well as injunctive and declaratory relief. On May 7, 2021, the plaintiff filed a notice of dismissal without prejudice. We are unable to predict the ultimate outcome of this matter. We have not recorded any loss or accrual in the accompanying consolidated financial statements at December 31, 2021 for this matter as a loss is remote.

In July 2021, Legalinc Corporate Services Inc., LegalZoom’s wholly owned subsidiary, or Legalinc, received a citation from the Wyoming Secretary of State of Wyoming regarding Legalinc’s registered agent services in Wyoming. The citation alleges that Legalinc failed to comply with Wyoming’s Registered Offices and Agents Act when carrying out its registered agent business in the state, and assessed an initial $4.1 million penalty and revoked Legalinc’s status as

a commercial registered agent in Wyoming. Legalinc has requested a hearing to review the matter and is engaging in negotiations with the State. We are unable to predict the ultimate outcome of this matter. While there is at least a reasonable possibility that a loss may be incurred, we have not recorded any loss or accrual in the accompanying consolidated financial statements at December 31, 2021 for this matter as a loss is not probable. If this matter is not resolved in our favor, the losses arising from the result of a final ruling, hearing or settlements may have a material adverse effect on our results of operations, cash flows and financial condition.

We are involved in inactive state administrative inquiries relating to the unauthorized practice of law or insurance. Because these are inquiries and no claims have been alleged or asserted against us, we cannot predict the outcome of these inquiries or whether these matters will result in litigation or any outcome of potential litigation. All of these inquiries have been inactive for years and we consider the matters closed, so will not include them in future legal proceedings disclosures.

From time to time, we may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. Other than those described above, we are not currently a party to any material legal proceedings, nor are we aware of any pending or threatened litigation that could have a material adverse effect on our results of operations, cash flows, and financial condition, should such litigation be resolved unfavorably.

Indemnifications

Indemnification provisions in our third-party service provider agreements provide that we will indemnify, hold harmless, and reimburse the indemnified parties on a case-by-case basis for losses suffered or incurred by the indemnified parties in connection with any claim by any third-party as a result of our website, advertising, marketing, payment processing, collection or customer service activities. The maximum potential amount of future payments we could be required to make under these indemnification provisions is undeterminable.

No amounts are accrued or have been paid during any period presented as we believe the fair value of these indemnification obligations is immaterial.