Upright Law Acknowledges ‘Mistakes,’ Hopes to ‘Turn the Page’

Upright Law LLP, holding itself out to be a technology-based consumer bankruptcy firm, says it’s poised to move forward after sanctions and other questions over its business practices prompted it to change its management structure and appoint an ethics monitor.

“We acknowledge we’ve made serious mistakes in the past,” Craig Sonnenschein, Upright’s general counsel and chair of the firm’s new management committee, told Bloomberg Law in an Aug. 9 interview on the changes.

“We’ve made a lot of progress. Our hope is we’ve turned the page,” he said.

Chicago-based Upright claims to have partners in every state. Clients engage the firm through a website, and their cases are sent to “partner attorneys” or “local partners” who are licensed in the jurisdiction where the client lives.

The model has run into problems. Some bankruptcy courts have sanctioned the firm and its local partners for providing negligent or “subpar” work, for providing legal advice without a license, and for other mistakes. One court referred to Upright as an “internet cartel” and a “bankruptcy mill.”

Car Problems

Although Sonnenschein declined to expound on what “serious mistakes” Upright has committed, he did acknowledge that one of them was previously participating in something called the “New Car Custody Program.”

When a debtor was prepared to surrender a car because she couldn’t afford payments, a company known as Sperro would tow it to one of three states that grant a lien for towing or storage senior to other liens. Sperro would be paid its towing and storage fees either by the secured lender or would auction the car. From the proceeds it would pay the debtor’s legal and filing fees to Upright.

A Virginia bankruptcy court sanctioned the firm for its participation in this “program,” and for other acts which it deemed unethical. For example, the court accused the firm of using “hard sell” tactics to manipulate clients to file bankruptcy cases. It said that Upright’s non-attorney sales force improperly gave legal advice, which was often incorrect.

Ethics Monitor

Also on the call with Bloomberg Law was Nancy Rapoport, a professor of business law and ethics at the William S. Boyd School of Law at the University of Nevada, Las Vegas. Upright has appointed her as its independent monitor.

Rapoport “will evaluate and monitor Upright Law’s system of policies and procedures implemented to encourage ethical behavior and to reasonably prevent, detect, and respond to misconduct by employees or agents of the law firm,” the company said in a July 30 statement.

Rapoport receives a flat fee from Upright as an independent contractor but doesn’t represent the firm or provide legal advice, she said.

“I’m an outsider giving my best review and suggestions,” she said.

Rapoport from time to time serves as an examiner in bankruptcy cases, including as a fee examiner in the Toys “R” Us case pending in Virginia.

Sonnenschein said that for a lot of organizations venturing into a new world of e-commerce, mistakes are made. But he says that Upright has “learned from negative cases where we have made mistakes, and we take corrective measures.”

For example, where once the firm may have advised clients from Illinois whether to file a Chapter 7 or Chapter 13 case, now such advice is left to the local partner, who is also responsible for the proper preparation of the required bankruptcy filings papers, he said.

The few negative court decisions against it shouldn’t “obscure the great things” Upright has done, Sonnenschein said.

Since its inception in 2014, the company has filed more than 26,000 bankruptcy cases, including more than 16,000 since 2017, he said. The outcome of the vast majority of these cases was success for the clients, he said.

“We truly are trying to expand access to legal services in an ethically compliant manner,” he said.

Rapoport noted that several academic studies have shown that there’s a problem with access to the bankruptcy system for many low-income consumers. “I believe Upright intends to reach large numbers of people who don’t have access, and to do it ethically,” she said.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bloomberglaw.com

To contact the editor responsible for this story: Jay Horowitz at jhorowitz@bloomberglaw.com