Breaking news: UpCounsel, a web-based marketplace for legal services, which is understood to have raised $12 million in 2018, is to shut down its site.
Artificial Lawyer received a verifiable copy of the message below, which explains that the US company will shutter its site on 4 March:
‘We want to thank you for your continued support since we first started UpCounsel in 2012. It has been a delight to work with each of you along the way, building innovative products to make the legal experience better. Pursuing our mission of creating a remarkable legal experience was made possible because of you. As founders we are humbled and honored that you came on this journey with us.
Pursuant to a decision approved by our board of directors and shareholders, the UpCounsel website will be shut down permanently on March 4, 2020. At that time you will no longer be able to login to your account. In connection with the site shutdown we will be deleting all account information and any data associated with your usage of UpCounsel in accordance with best data practices. If you wish to retrieve a copy of your data, please contact email@example.com.
We recommend and encourage you to continue working with your lawyers. This does not disrupt your attorney relationships or interfere with the progress of any legal project. Please reach out to your lawyer to discuss steps on managing this transition and feel free to contact us with questions as well.
It is with a heavy heart that we deliver this news and understand that this abrupt announcement will come as a shock to some of you that have come to rely on UpCounsel. Our team will be available as usual to answer any questions you may have leading up to the site’s shutdown on March 4th. We will share further details with you as they become available.
Mason Blake & Matthew Faustman
It looks as though UpCounsel is joining the growing ranks of legal sector startups that have hit serious turbulence over the last 12 months.
Artificial Lawyer has asked UpCounsel for further comment.
Update: Were Regulatory Issues A Contributing Factor?
Without official confirmation it’s hard to point a finger at one cause, however, market insiders are suggesting regulatory issues may have been a contributing factor.
Back in 2016, the State Bar of California sent out a notification to the effect that:
‘Rule 1-320 of the California Rules of Professional Conduct prohibits, with certain limited exceptions, the sharing of legal fees between a member of the State Bar of California and a non-attorney. The rule also prohibits a member from compensating a person or entity for the purpose of recommending or securing employment of the member by a client, or as a reward for having made a recommendation resulting in employment of the member.
While at this time there does not appear to be the level of conduct that would likely lead to the imposition of discipline in the State Bar Court, we are concerned that a percentage-based processing fee to be paid to UpCounsel, Inc., would constitute an improper sharing of legal fees.’
However, the company went on to thrive and raised money, so we have to see this in context and clearly some kind of ongoing working solution would appear to have been found – at least until the present day.
But, then later in 2018 UpCounsel faced a law suit filed also in California claiming it was operating unfairly. This was filed by LegalForce RAPC Worldwide. It is not known how this case ended, or if it had any direct connection to UpCounsel’s sudden decision to close the site. A case reference from 2019 appears to suggest that things were going partly in favour of UpCounsel – at least in terms of part of the matter – but not completely.
On September 11, 2018, plaintiffs filed their FAC, asserting therein three claims for relief: (1) “False Advertising and Unfair Competition [under] the Lanham Act, 15 U.S.C. § 1125(a)”; (2) “California False & Misleading Advertising [under] Cal. Bus. & Prof. Code § 17500 et seq. [(‘FAL’)]”; and (3) “California Unfair Competition in Violation of Cal. Bus. & Prof. Code § 17200 et seq. [‘UCL’].”
For the foregoing reasons, UpCounsel’s motion to dismiss is GRANTED IN PART AND DENIED IN PART as follows:
• The motion to dismiss LegalForce RAPC’s Lanham Act claim is GRANTED WITHOUT LEAVE TO AMEND to the extent the claim is based on the statement that “UpCounsel is the world’s largest law firm.” To the extent the Lanham Act claim is based on any other statement asserted in the FAC, the motion is DENIED.
• The motion to dismiss LegalForce RAPC’s FAL claim based on lack of standing is DENIED. The motion is otherwise GRANTED IN PART AND DENIED IN PART in accordance with the Court’s rulings herein regarding LegalForce RAPC’s Lanham Act claim.
• The motion to dismiss plaintiffs’ UCL claim is GRANTED to the extent the claim is based on a violation of Rules of Professional Conduct 1-320 and 1-400. To the extent it is based on other predicates, it is DENIED.
• The motion to dismiss plaintiffs’ claim under the UCL’s unlawful prong is DENIED.
This Order terminates Docket Number 49.
IT IS SO ORDERED. Dated: January 10, 2019