After being sued for an alleged contract breach, Toronto-based legaltech startup Alexi has fired back with counterclaims against Fastcase and its parent company Clio. Alexi calls the original suit “sham litigation” and says it’s an attempt to bring down a competitor.
Fastcase, a subsidiary of Burnaby, BC-based legaltech firm Clio, filed suit against Alexi on Nov. 26. It accused Alexi of allegedly violating a data-licensing agreement and misusing Fastcase’s data to build a competing legal platform.
Mark Doble, Alexi
“This is a sham litigation that Clio is using to either bully us or try to get out of this license agreement.”
Alexi has now countersued Fastcase, as well as vLex and Clio, for alleged anticompetitive behaviour. In a counterclaim filed on Friday in Washington, DC, Alexi argued that Fastcase’s accusations of contract breach were “manufactured” and that Clio is attempting to stifle competition in the AI-enabled legaltech space. Alexi also claimed that the ongoing litigation has forced it to make significant layoffs and ruined acquisition talks for the startup. None of the allegations from either lawsuit have been proven in court.
“This is a sham litigation that Clio is using to either bully us or try to get out of this license agreement,” Alexi CEO Mark Doble said in an interview with BetaKit on Monday.
“Fastcase categorically denies Alexi Technologies’ baseless allegations,” a spokesperson for Clio wrote in an email to BetaKit on Monday. The spokesperson said that Alexi’s claims add “noise” to a dispute about a licensing agreement that “explicitly prohibits use of the data for commercial or competitive purposes.”
Clio, one of Canada’s largest legaltech companies, bought Fastcase’s parent company vLex—and access to its proprietary research database—in November for $1 billion USD ($1.4 billion CAD) in cash and stock. Clio CFO Curt Sigfstead said at the time that the Fastcase database is “arguably the best legal database and data assets in the world,” rivaled only by those owned by legal industry giants LexisNexis and Thomson Reuters.
RELATED: Clio takes Alexi to court over database at the centre of billion-dollar vLex deal
Clio, which is valued at $5 billion USD, sells law firm management software and has been increasingly leveraging AI on its platform to help customers complete tasks like document preparation and legal research. In November, the firm said it had reached $400 million USD in annual recurring revenue and caters to more than 400,000 legal professionals.
For its part, Alexi sells AI-powered legal software designed to help lawyers and legal teams produce research memos, identify relevant legal issues and arguments, and automate routine tasks. Doble told BetaKit in October that Alexi saw a 3,000-percent boost in users year-over-year and serves more than 600 mid-market to enterprise legal firms.
Alleged breach of contract
Fastcase’s original lawsuit alleges Alexi breached the terms of a data-licensing agreement established in 2021 by using the database to build a competing legal platform. But Alexi says it also has certain rights to this data, according to the licensing agreement, and denies ever breaching it.
In its countersuit, Alexi claimed that Fastcase’s allegations are based on a “tortured reading” of the agreement and that its use of Fastcase’s database falls within the agreement. The data licensing agreement has not been made public and neither party has agreed to share it with BetaKit (in December, Doble cited confidentiality clauses).
Fastcase’s original lawsuit alleges Alexi breached the terms of a data-licensing agreement established in 2021 by using the database to build a competing legal platform.
Alexi’s countersuit claims that a clause in the data licensing agreement would allow a potential acquirer of Alexi to “purchase the Fastcase backfile,” which it called a “unique legal asset.” It claims that Clio learned about this clause during due diligence for its acquisition of vLex, and that Clio’s VP of legal innovation of strategy (and Fastcase founder) Ed Walters contacted Doble in October to ask him to scrap the purchase right. Alexi claims that Walters said “there would be trouble” if Alexi did not follow through with this demand.
Discussions with potential acquirers had valued Alexi at more than $100 million, the lawsuit claimed.
Alexi is now claiming that damages incurred by Fastcase’s lawsuit are threatening to destroy its business. According to the lawsuit, customers have cancelled subscriptions, interested parties have stopped discussions about a potential acquisition, and “Alexi’s growth trajectory, revenue, fundraising prospects, and valuation all have been materially impaired.”
According to the suit, Clio was itself a potential acquirer. Alexi alleged that 19 days before the vLex acquisition closed, Alexi and Clio’s VP of corporate development met to discuss a potential acquisition, and the VP asked to be included.
Alexi also said it was forced to lay off two-thirds of its staff because of the damage caused by Fastcase’s breach claim and lawsuit. Doble confirmed the layoffs, which could amount to more than 30 employees.
Doble said he would love to bring these employees back if they can reach a quick resolution. “We have to make sure to do what’s right for the company so we can continue to fight,” Doble said.
He said that Clio’s team is potentially seeing some of the information for the first time in his countersuit, and that “Clio will be able to make a more reasoned assessment of their prospects and who’s really in the right here.”
When reached for comment, Clio referred BetaKit back to its statement responding to the counterclaim.
Feature image courtesy Clio and Alexi.