Tuesday, January 15, 2019

What's UpCounsel? LegalForce thinks it's false advertising

LegalForce RAPC Worldwide P.C. v. UpCounsel, Inc., 2019 WL 160335, No. 18-cv-02573-YGR (N.D. Cal. Jan. 10, 2019)

LegalForce’s litigation against various competitors in the trademark registration world continues.  UpCounsel “is an online marketplace for legal services that enables users (primarily entrepreneurs and businesses) to find and hire attorneys via its website.” LegalForce sued UpCounsel for false advertising and unfair competition, including acting as an unregistered lawyer referral service.

Here, some of the false advertising claims were dismissed as puffery, while others survived.

Law firm/virtual law firm: Exemplary statements included: “We are the world’s largest virtual law firm for businesses of any size. We allow businesses to get high-quality, cost-effective legal services. While our lawyers serve as outside general counsel to many companies, we also assist with specialized legal work like IP, immigration, commercial contracts, litigation, and much more.” The “world’s largest” part was nonactionable puffery.  The “virtual law firm” part was not actionable because of the context, which also introduced UpCounsel as a “startup” that enabled others to “find” attorneys and thus indicated that UpCounsel was a platform rather than a true firm.  I understand the court to be reasoning that there are “tech platforms that enable individual lawyers to communicate with clients” (Uber, but for lawyers) and there are “law firms,” and because most of the challenged statements gestured at identifying UpCounsel as a “platform,” all the rest of that understanding—including that the lawyers would be individuals operating separately—would naturally follow.  On the one hand, seeking legal counsel does require some care and attention from a reasonable consumer; on the other, (1) the whole point of the service is to target people starting businesses fresh, who may not know the ins and outs of the legal services market; (2) even experienced nonlawyers may reasonably not know very much about the important differences between a “law firm” and other means of getting legal services. Anyway, similar statements were analyzed similarly, where there was mention both of a “virtual law firm” and of independent contractors or a claim of “as good as using a law firm.”

However, claims of the form “Top 5% of { Practice Area}  Lawyers in { City}” were not puffery.  LegalForce alleged that “[b]y indicating ‘5%’, UpCounsel implies that there exists an independent and publicly trusted ranking system in each and every city and the attorneys that UpCounsel lists on its city pages are chosen from the top 5% of such a list. In reality, no such list exists.” It quoted a review by a customer of UpCounsel who said the reason he selected UpCounsel was because he believed it was “a network for only the most top notch legal reps in the area” and “[t]he attorneys offered with them are at the top of their game and you will get what you pay for.” Another customer wrote that he was deceived when he saw an advertisement on a search engine “[o]ffering ‘Business Legal Services On-Demand by Top Attorneys’” and thought that a disruptive startup would be a good, cheaper choice for a disruptive startup to use. He concluded: “I wish I had never used UpCounsel and I’m warning all startups, business and companies out there to never make the same mistake!” [Which goes to show that you maybe shouldn’t hire a lawyer the way you’d summon a Lyft.]

Lanham Act claims based on the claim of “Top 5% of Trademark Attorneys” already survived a motion to dismiss on the basis of puffery. Challenging similar statements pertaining to other types of attorneys, namely patent, intellectual property, copyright, and startup attorneys, didn’t change the analysis. UpCounsel cited Hackett v. Feeney, No. 2:09-cv-02075-RLH-LRL, 2011 WL 4007531 (D. Nev. Sept. 8, 2011) to argue that, in order to be actionable, the statement must answer the “critical question ‘[Top 5%] as determined by whom[?]’ ” But that case involved a “voted #1 best show in Vegas!”; not only is #1  particularly puffy, but voting on a best show is also puffier than specifying a specific category of attorneys. Specifying a specific practice area meant that “[i]t cannot be said that no reasonable consumer would rely on such an assertion.”

UpCounsel argued that Google made the challenged statements, not UpCounsel, but this didn’t work at the motion to dismiss stage.  “Plaintiffs allege that the search results ‘republish’ statements originally made by UpCounsel. The issue of who actually made the statements (i.e., the search results) is a factual issue to be resolved at summary judgment.”

The same result happened with “The 10 Best { Practice Area}  Lawyers in { State}  NEAR ME,” which was allegedly false because “individuals listed in each resulting page are not usually near the customer who did the search, and often not even in the same state.”  “A reasonable consumer reading these statements could conclude that UpCounsel attorneys are objectively and measurably superior to other ‘{ practice area}  lawyers in { state}’ near the consumer.” [And even if not, they could reasonably conclude that those were lawyers “near” them.]

So too with “{ City}  { Practice Area}  Lawyers 5.0 ***** Based on { X number of}  reviews,” e.g., “Cotati Intellectual Property Lawyers 5.0 ***** Based on 5450 reviews.” That was allegedly false because “It is impossible for Cotati Intellectual Property Lawyers to have 5,450 reviews on UpCounsel. Cotati is a small town in Northern California with a population of 7,455. There are only 21 attorneys in the city of Cotati licensed to practice law in California, and none of these 21 attorneys are listed on UpCounsel.” (Among other things, one guy who allegedly never even used the UpCounsel platform appeared as a “Top 5%” franchise lawyer in Santa Rosa, California, “Top 5%” copyright lawyer in Coeur d’Alene, Idaho, and a “Top 5%” intellectual property lawyer in Montgomery, Alabama, among other practice areas and cities.)  Invariably, LegalForce alleged, UpCounsel would display a five-star rating, resulting from deceptively aggregating reviews to make it seem as if the reviews came from actual customers in those cities and states.” UpCounsel allegedly used code to “refresh” its reviews to make them more attractive to Google.

UpCounsel argued that use of SEO techniques “as a means to its advertising ends” didn’t state a claim under the Lanham Act because UpCounsel’s “software code” wasn’t a statement that was seen or relied on by customers, and that statements regarding five-star reviews were non-actionable puffery. The first issue, whether the code is (or made) a statement that consumers saw and relied on was a factual issue for summary judgment. The statements were not puffery. [Among other things, that there were X number of relevant reviews is a verifiable statement, even if the individual statements in the review might be non-factual.]

Similarly, LegalForce alleged that UpCounsel “intentionally and purposefully, and in bad faith, attempts to deceive Google search crawlers and the public that uses Google to search for legal services.” For example, “UpCounsel’s tag for its 5450 fabricated reviews for attorneys in Cotati is based on a fraudulent data field called ‘reviewCount’ which is printed on each page,” and “UpCounsel’s page source for each of its tens of thousands of reviews” includes code whose the sole purpose was to “trick search engines into recognizing UpCounsel’s aggregate ratings as trustworthy.” Using this code allegedly intentionally violated Google’s technical and content guidelines.

UpCounsel argued that its “software code” and HTML “page source” weren’t statements that were seen and relied on by customers. Further, a false advertising claim requires a false statement made by the defendant, so UpCounsel argued that a claim couldn’t be based on search results that LegalForce elicited from a search engine using words that LegalForce chose. The court agreed that, standing on their own, the software code and HMTL page source weren’t actionable statements. But LegalForce’s pleading “tied the software code and HTML page source to specific actionable statements,” such that UpCounsel’s actions caused search results to include false and misleading statements.  The software code and HTML page source were thus allegedly evidence of intent to mislead consumers.

Next, LegalForce alleged that “UpCounsel deceives customers by steering them to attorneys and non-attorneys who are not located anywhere close to their city, or authorized to practice in their respective state” or in any state. Among other things, UpCounsel listed patent agents as lawyers; UpCounsel conceded that three examples cited in the complaint were in fact patent prosecutors (among other things, a patent agent appeared as a “Top 5%” immigration lawyer in Blackfoot Idaho and as an “Oregon Attorney[ ] & Lawyer[ ] for Hire On-Demand” through UpCounsel). But UpCounsel argued that it didn’t steer anyone to unlicensed attorneys and that nothing on its UpCounsel’s website represents that these individuals are attorneys.

Comment: Google search results are answers to questions, which thus could be false as answers—and potentially false advertising under the right circumstances—even if they lack a true/false value standing alone. If UpCounsel programs its site to respond to a search for lawyers with unlabelled nonlawyers or lawyers outside the jurisdiction and use the headline “Top 5% of Patent Lawyers in Oakland, California,” then the response can be as false as if I asked for Diet Coke at a restaurant and was given undisclosed Diet Pepsi in return (and though I am loath to admit it, the results for consumers could be far worse).  There’s nothing inherently false about Diet Pepsi; the falsity is in the use in response to a request for something else. 

However, this formulation seems to foreground a §230 issue that is not discussed in the opinion: does UpCounsel rely on what its (putative) lawyer-contractors tell it?  Or does the problem come from non-§230 protected decisions made by UpCounsel on how to structure or label the website?  This formulation also highlights that labelling may be the key here: there’s nothing wrong with advertising an alternative to what the consumer is searching for, but even in the comparatively more liability-happy area of trademark the courts have understood that labeling is the key.  One question is whether ultimately it should matter that, in the individual description of the lawyer/patent agent on the page of “patent lawyers,” (1) that description is provided by the user, or (2) the description is clear, which in the case of the specific patent agent identified by the complaint it was not—he offered “legal services” and “patent prosecution services” but didn’t disclose that he was a nonlawyer, something another nonlawyer might not notice especially among a page of lawyers offering similar services.  When I search Amazon I often get a set of results that don’t make any sense (something to do with algorithmic manipulation or something even weirder?); is Amazon falsely advertising to me because of those bad results, which come from seller-provided information?  My sense is that the answer is no, but then again the fact that some of the results are bad is much easier to determine when I’m looking for girls’ pants size 10; I also think that it is different for a platform to claim to provide access to legal services in particular, which structures consumer expectations when looking at specific entries.

One problem seems to be that UpCounsel structured its own page/headline creation algorithm to be so overenthusiastic that it recommended lawyers far outside their practice areas or states of licensure.  Unless that came from data entered by individual participants checking boxes for those practice areas/states, I think that §230 would not pose a barrier to liability for such structuring.

Anyway, the court concluded: “Accepting as true plaintiffs’ allegation that the search results ‘republish’ statements originally made by UpCounsel, as the Court must in analyzing UpCounsel’s motion to dismiss, UpCounsel cannot reasonably argue at this stage that it has not made false statements by way of the search results.”

UCL claims:  Allegations of lost business and decrease in business value, and allegations of wrongfully denied business opportunities, sufficed to plead standing under the UCL’s expansive standing doctrine.  But could LegalForce bring claims based on violations of other laws that didn’t themselves provide a private cause of action? Usually, yes; the limit is that plaintiffs may not “plead around an absolute bar to relief” by recasting the cause of action as a claim under the UCL: “[t]o forestall an action under the unfair competition law, another provision must actually ‘bar’ the action....” by explicitly precluding private enforcement or expressly providing immunity for the conduct alleged.

Some of the other rules that LegalForce alleged UpCounsel violated thus allowed a bootstrapping UCL claim, such as the provision of the California Business and Professions Code section that bars unregistered attorney referral services. This was not enforceable by private parties, but its violation could be borrowed to create a remedy under the UCL. However, the California ules of Professional Conduct expressly provide: “These rules are not intended to create new civil causes of action.”  Their violation couldn’t be borrowed for a UCL claim. As for federal USPTO rules of professional conduct, the court found no binding or citable authority that the claims were impliedly preempted.

The UCL unfairness claim also survived. As a competitor, LegalForce had to use the more limited definition of “unfair”: they had to plead “conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” UpCounsel argued that this couldn’t be done without pleading “a reduction of competition in the market in general and not mere injury to their own positions as competitors.” The court didn’t agree that LegalForce had to state an antitrust claim to proceed.  They sufficiently pled that UpCounsel’s actions “otherwise significantly threaten[ ] or harm[ ] competition,” given allegations that UpCounsel gave itself an unfair advantage over legitimate, rule-following competitors.

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