Publishing the most detailed guidance on legal process outsourcing (LPO) since 2008, the American Bar Association (ABA) Commission on Ethics 20/20 last November released proposed ethical amendments to its Model Rules. The proposed draft amendments come after a series of meetings and various working group initiatives dating back to 2009. The amendments provide guidance for commentary on Model Rules 1.1, 5.3 and 5.5, which deal with the competence of services provided to a client and the responsibilities of managing both lawyer and non-lawyer assistants. Amendments are closely aligned to the reports originally published on the LPO Ethics Resource Center last October. Many industry participants welcomed the announcement of targeted guidance on areas such as supervision, client disclosure and collaboration with attorneys based in outside jurisdictions as opposed to a blunt referendum on the practice of LPO.
A key initiative set forth in the ABA’s recommendations is that when outsourcing legal and legal support services, the outsourcing law firm must ensure that “the other lawyers’ services will contribute to the competent and ethical representation of the client.” While far from ratification, the release provides welcome direction for legal professionals seeking to prepare for upcoming regulatory obligations. While the full implications of the proposed changes is far from clear, the general essence of the guidance appears to avoid sweeping regulatory shifts regarding the practice of LPO. The Commission is now actively seeking feedback from all interested stakeholders on proposed amendments before further review in this year. The Commission pushed back earlier plans to submit its recommendations to the ABA House of Delegates from February 2011 to the current deadline in August 2011.
There are five major ethical/professional conduct issues raised by LPO: (1) unauthorized practice of law by non-lawyers; (2) conflicts of interest; (3) client confidentiality; (4) client disclosure and consent; and (5) billing issues related to outsourcing.
Some LPO providers seem dismissive of such concerns as raised by U.S. firms about confidentiality and data security, apparently unaware that these concerns are motivated by something deeper than a simple desire to protect trade secrets. For example, Anupam Ahuja, Vice President-Marketing for BPO company, Office Tiger, says that client concerns over risk will simply resolve themselves. According to Ms. Ahuja: “Typically, clients do their due diligence in a detailed manner. They will come here, go through your security audits, check how mature and capable you are, and then the question of risk is out of the picture.” As for the higher risk involved, “There is risk involved in any service that goes offshore, why single out the legal market?” she asks.
By downplaying these concerns, LPO providers betray a fundamental misunderstanding of the roles that ethics and professional responsibility play in the U.S. legal profession. An attorney considering LPO should not be comforted and reassured by the knowledge that other outsourced businesses care about security too. The legal profession may have become progressively more corporate and automated, but an attorney still has a fiduciary relationship with her client that goes beyond the mere “business” of practicing law. Indian companies may feel comfortable with their levels of security and their employee’s discretion, but law firms still need to be more conscious of the ethical ramifications of outsourcing than regular companies.
The growth of a healthy U.S.-based LPO clientele depends, in large part, on the ability of Indian companies to sensitize their workers to the added layer of responsibility underlying what may otherwise seem to be a paranoid abundance of caution.
LPO does raise some interesting issues that place the business of practicing law in tension with a lawyer’s ethical responsibilities as the member of a noble profession. An Evalueserve report acknowledges these concerns, emphasizing that confidentiality and conflicts of interest are major issues for U.S. firms, and that successful Indian start-ups must put processes in place to resolve these issues.
As LPO becomes more widespread, more formal guidance will be necessary to help firms and LPO companies prevent problems before they arise. Although the ABA has not yet issued a Formal Opinion addressing LPO, offshore outsourcing is, in many ways, analogous to the use of contract lawyers, and has been treated as such in the limited literature discussing LPO.
In 1988, the American Bar Association issued Formal Opinion 88-356 on contract lawyers. The analogy is imperfect as applied to LPO, especially considering that Indian “contract workers” are unlikely to be licensed to practice in the United States. However, it does provide a useful starting point to help frame the ethical issues involved.
In August 2006, LPO was directly addressed for the first time in a Formal Opinion issued by the Committee on Professional and Judicial Ethics of the New York City Bar Association (“NYC Bar”). The NYC Bar’s treatment was relatively comprehensive, and provides a valuable blueprint for other states to look to in considering how to best approach LPO.
The major ethical considerations applicable to LPO raised by the Model Rules of Professional Conduct follow: Attorney supervision of LPO work is perhaps the most important factor in the ethics of legal offshoring. In addition to being a prophylactic measure for maintaining client confidentiality and guarding against conflicts of interest, it carries independent significance, as the Model Rules prohibit unsupervised paralegals from engaging in the practice of law.
Firms that fail to monitor the work done by their LPO companies risk potential liability for ethics sanctions. As such, it is imperative that licensed U.S. attorneys closely monitor the workflow for outsourced projects. Model Rule 5.3 addresses a lawyer’s responsibilities to supervise non-lawyer assistants.121 Under Rule 5.3, partners and lawyers with comparable managerial authority are required put adequate processes in place to give “reasonable assurance that the person’s conduct is compatible with the professional obligations of the lawyer.” Furthermore, individual lawyers with direct supervisory authority over non-lawyers are required to make reasonable efforts to verify that their assistants are conducting themselves in accordance with the “professional obligations of the lawyer.” Ultimately, however, the supervising lawyer is responsible for the final work product of the non-lawyer assistant. The Comment to Rule 5.3 indicates that non-lawyer assistants should be given sufficient instruction about the ethical requirements imposed on attorneys, and they should also be taught to distinguish between acceptable and unacceptable behaviors. The Comment further states that the “measures employed in supervising non-lawyers should take into account of the fact that they do not have legal training and are not subject to professional discipline.”
These considerations are particularly applicable to LPO because, in addition to being unlicensed to practice law in the United States, they are not even physically located in this country. The culture in a country such as India may not impart the same default values to an LPO worker that a U.S. attorney could expect from domestic support staff. The LPO service provider could easily conduct trainings to educate workers and closely supervise the assignment and completion of projects. It is in the best interests of companies courting confidence of U.S. law firms to ensure their workers comply with the Model Rules, and that the final work product adequately meets the needs of the outsourcing firm. Close supervision by the LPO company would arguably prevent the most egregious errors. Still, the outsourcing attorney must remain sensitized to the fact that neither the individual worker nor the LPO service company will be held accountable for inadequate supervision or other ethics violations.
While contract remedies may be negotiated for breaching these duties, the ultimate responsibility to supervise LPO work still rests with the outsourcing lawyer. The NYC Bar similarly emphasizes attorney supervision in LPO to prevent the unauthorized practice of law. The NYC Bar previously assented to the use of domestic legal research firms staffed by non-lawyers, on the condition that the outsourcing lawyer supervises the work. If LPO work is adequately supervised, no unique ethical considerations are raised simply because it is performed outside of the United States. In addition to monitoring the progress of outsourced projects, the attorney should independently verify that the final work product is reliable. Formal Opinion 2006-3 notes with approval the standard for domestic outsourcing set out by the Los Angeles County Bar Association, requiring the supervising attorney to “review the brief or other work provided by [the non-lawyer] and independently verify that it is accurate, relevant, and complete . . . .”
In short, the NYC Bar has determined that the duty of supervision is actually two separate duties: first, to adequately outline the assignment and monitor the non-lawyer’s progress; and second, to review the final work product and amend or revise it as necessary. Formal Opinion 2006-3 recognizes that, in practice, the actual development of an LPO relationship is a complicated process.
While it does not establish a protocol for demonstrating adequate attorney supervision, the Opinion does make several recommendations.
• First, conducting preliminary due diligence on the LPO service provider would help determine whether the LPO company was reliable, and would also provide a means to identify whether processes are in place to assure compliance with the Model Rules.
• Second, the attorney should conduct reference checks on both the LPO company as well as the individual nonlawyer assistant(s).
• Third, the attorney should consider interviewing the non-lawyers in order to make sure their skills and abilities are adequate to complete the project.
• Finally, continued communication during the life of the assignment is crucial. Close communication ensures that the non-lawyer assistant understands what is expected, and that they are executing the assignment at each stage of the process in accordance with those expectations. Put another way, communication serves the same function in LPO as it does within the law firm: if the LPO worker takes the wrong direction early in the project, an attentive supervising attorney can redirect them without losing as much productive time than if the attorney had waited to receive a final product wholly unsuited to their needs.
Model Rule 1.7 outlines the basic rule regarding conflicts of interest, namely that “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.” “Concurrent conflicts of interest” involve situations where representation of one client would negatively impact simultaneous NYC Formal Op. 2006-3, supra note 120, at 5 (“[A]mong the salutary steps in discharging the duty to supervise that the New York lawyer should consider are to . . . communicate with the non-lawyer during the assignment to ensure that the non-lawyer understands the assignment and that the non-lawyer is discharging the assignment according to the lawyer’s expectations.”). 138 MODEL RULES OF PROF’L CONDUCT R. 1.7(a) (2003) representation of another client. Model Rule 1.7 is complemented by Model Rule 1.8, which addresses specific limitations on the scope of an attorney’s dealings with her client, and Model Rule 1.9, which focuses on an attorney’s continuing obligations to former clients. Since a single LPO company could conceivably be retained to work on both sides of the same issue, the use of LPO raises potential conflict of interest scenarios for U.S. law firms who utilize their services. Moreover, these conflicts are particularly difficult to control for because client confidentiality may hinder LPO companies from disclosing matters for which they have previously been retained.
In 1988, the ABA Committee on Ethics and Professional Responsibility issued Formal Opinion 88-356, which addressed conflicts of interest for contract lawyers. The ABA concluded that a temporary lawyer retained to work on a particular client matter is deemed to “represent” that client for the purposes of Rules 1.7 and 1.9. As a result, a temporary lawyer could not work for two opposing firms on the same matter without violating Model Rule 1.7, and could not thereafter work on a substantially related issue materially adverse to the temporary lawyer’s former “client” without committing a violation of the Model Rules. Formal Opinion 88-356 concludes that potential conflicts of interest are minimized when firms retain control over access to sensitive information.
As such, temporary lawyers can only access information relevant to the specific matter for which they were retained, and should be screened from all other matters. Firms can minimize the risk of conflict by maintaining accurate records of clients for which each temporary lawyer works, as well as the particular matters to which they were assigned. Similarly, each temporary lawyer should maintain records of clients and matters they have worked on, and should avoid assignments that are materially adverse to matters on which they previously worked.
The analogy between temporary attorneys and LPO workers is fundamentally problematic, however, as both Indian paralegals and attorneys are non-lawyers for purposes of the Model Rules. Even so, the importance of restricting access to information is relevant in both situations and, in addition to limiting potential conflicts of interest, is also useful for protecting client confidentiality.
NYC Bar Opinion 2006-3 applies an analysis similar to that of Formal Opinion 88-356, but limits its discussion of access to information to the issue of client confidentiality. With regard to conflicts of interest, Formal Opinion 2006-3 also emphasizes record-keeping and accountability, advising firms to inquire into conflict-checking procedures and mechanisms for tracking workflow. Firms are also advised to refrain from assigning work to individuals previously involved in matters materially adverse to one of their clients.
Accurate record-keeping is particularly important for LPO assignments. By some accounts, worker attrition in LPO is relatively high, meaning workers may move from company to company in the same city. It is unclear how LPO service providers can create record-keeping systems sophisticated enough to control for conflicts of the company as well for particular workers. Even assuming such a system is feasible, full disclosure by LPO workers may not be forthcoming, and disclosures of one company’s assignments to another company may raise independent conflict of interest issues. As workers migrate between LPO companies, adequate disclosure for conflict of interest purposes implicates the importance of maintaining client confidentiality. This is less likely to be an issue for captive work centers than for third-party service providers, but it represents a vulnerability that must be addressed if U.S. law firms are going to feel comfortable utilizing LPO services. Confidentiality of client information is governed by Model Rule 1.6, which states that “[a] lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent [or] the disclosure is impliedly authorized in order to carry out the representation . . . .”
Rule 1.6 lists several exceptions to this general principle, such as prevention of crime, fraud, or financial injury, all of which are largely inapplicable to either hiring contract lawyers or offshoring legal work. Protecting client confidentiality entails more than just safeguarding proprietary information. In addition to run-of-the-mill corporate confidentiality, an attorney is obligated to protect client confidences (information given to the lawyer pursuant to a privilege) and secrets (information gained about the client that is embarrassing or undesirable.) An attorney who reveals confidential information to third parties without a client’s informed consent may be subject to discipline. Furthermore, Model Rule 5.1(b) charges a supervising lawyer with the additional responsibility of ensuring subordinate lawyers conform to the Rules of Professional Conduct. Under Rule 5.1(c), a lawyer is responsible for another lawyer’s violation of the Rules if they order or ratify the conduct of the other lawyer, or if they know of the conduct “at a time when its consequences can be avoided or mitigated but fail to take reasonable remedial action.” Formal Opinion 88-356 extends Rule 1.6 to every lawyer in a law firm, regardless of whether they have contact with a particular client. Likewise, a temporary lawyer may not disclose confidential information learned as a result of working at a firm, whether or not she actually worked on the client matter. The Opinion confirms that supervising lawyers have a heightened responsibility to make sure subordinate lawyers comply with Rule 1.6, and extends this obligation to the supervision of temporary lawyers as well. However, it should also be noted that, under Rule 5.2, subordinate lawyers are independently responsible for ethical violations, even if the transgressions were committed at the direction of a supervising attorney. Issues of client confidentiality are uniquely implicated when legal work is sent offshore.
Since Indian attorneys and paralegals are not licensed to practice law in the United States, they are not bound by the Rules of Professional Conduct, and may not be sensitized to the differences between acceptable and unacceptable disclosures. Analogizing overseas support staff to domestic support staff, Formal Opinion 2006-3 states, “the transient nature of lay personnel is cause for heightened attention to the maintenance of confidentiality . . . . Lawyers should be attentive to these issues and should sensitize their non-lawyer staff to the pitfalls, developing mechanisms for prompt detection of . . . breach of confidentiality problems.” As was the case with conflicts of interest (discussed above), Formal Opinion 2006-3 recommends restricting access to information to what is necessary for completing an assignment. Restricting the flow of potentially sensitive information will help limit potential disclosure, intentional or accidental, to unauthorized third parties. Furthermore, firms should require service providers to maintain complete and accurate records of the information particular workers have had access to, which may later prove useful for damage control in the event of a breach. Formal Opinion 2006-3 further recommends that firms considering LPO make sure foreign, non-licensed workers understand the heightened duties imposed on attorneys in the U.S.
Since LPO workers are not bound by the Rules of Professional Conduct, and may not even be familiar with them at all, firms should be explicit with their expectations, and remedies for breaching those expectations should be stipulated by contract. Finally, the commitment to client confidentiality, as memorialized in the contract, should be reaffirmed periodically. Firms may wish to occasionally re-evaluate the processes implemented by the service provider to ensure they still provide adequate protection. According to Model Rule 7.5(d), which deals with firm names and letterheads, “[l]awyers may state or imply that they practice in a partnership or other organization only when that is the fact.” Both the Comment to Rule 7.5164 and the ABA Canon of Professional Ethics165 interpret this statement as a prohibition on the use of certain names in certain contexts for law firms. Rule 7.5 is permissive, not mandatory; as such, the focus is on names that firms may NOT use. There are no references requiring attorneys to disclose when non-firm lawyers (or India-based paralegals, for that matter) are employed on a project. As is demonstrated below, the ABA Ethics Committee took significant liberties when it interpreted Rule 7.5(d) in Formal Opinion 88-356. The Committee arrived at a conclusion that, while equitable, is unsupported by the text of the Rule.166 Rule 1.6 (discussed above under client confidentiality) authorizes attorneys to disclose client information to other attorneys within their firm without obtaining prior client consent. Subsection (a) allows attorneys to reveal information relating to a client matter if “the disclosure is impliedly authorized.” The Comment to Rule 1.6 provides that “[l]awyers in a firm may, in the course of the firm’s practice, disclose to each other information relating to a client of the firm, unless the client has instructed that particular information be confined to specified lawyers.”
In other words, client consent is implied by the act of retaining the firm, and a firm attorney may consult another firm attorney without seeking additional permission. Rules 1.2 and 1.4 are also relevant to the inquiry of client disclosure. Rule 1.2(a) sets the allocation of authority between an attorney and a client. Basically, the client controls the ends to be pursued, and the lawyer has control over the means. By retaining an attorney or firm, the client gives implied consent for the attorney to pursue the goals of representation as the attorney sees fit.
However, the attorney’s authority is limited by Rule 1.4, which requires client consultation “as to the means by which [the client’s goals] are pursued.” Rule 1.4(a)(2) states that a lawyer must “reasonably consult with the client about the means by which the client’s objectives are to be accomplished.”
The Comment to Rule 1.4 indicates that the “means” contemplated by Rule 1.4(a)(2) relate to substantive actions taken on the client’s matter. The Comment makes no reference to the particular administrative or clerical choices an attorney makes to accomplish the client’s objectives, nor does it address the decision to employ outside assistance. However, a strict interpretation of both Rule 1.2(a) and Rule 1.4(a)(2) supports (or could support) the conclusion that consent to employ non-firm attorneys is not implied by retaining a particular attorney or firm and that, therefore, consultation would be required. Formal Opinion 88-356 interprets Rule 7.5 expansively, stating the Rule “articulates the underlying policy that a client is entitled to know who or what entity is representing the client.”
When clients retains an attorney, they give implied consent for the attorney to take action on their behalf under Rule 1.2(a),176 and it is reasonable to expect that others in the attorney’s law firm may also work on the case. However, client consent cannot reasonably be assumed when it comes to associating non-firm attorneys. For contract attorneys, Rule 7.5 would appear to require consultation whenever they perform work on a client matter. The ABA Ethics Committee rejected this interpretation, concluding instead that client consultation is unnecessary where a firm attorney supervises the temporary lawyer. Opinion 88-356 indicates it is reasonable to expect “legal services [to] be rendered by lawyers and other personnel closely supervised by the firm.” As such, if a temporary lawyer works on a client matter under the direct supervision of a lawyer from the firm, consultation would not be required. However, if the temporary attorney were to work independently on the project, without supervision, then prior client consultation and consent would need to occur.
As a client, it seems reasonable to expect to be informed before your matter is referred to outside counsel. In Formal Opinion 88- 356, the ABA Ethics Committee acknowledges EC 2-22 of the New York Code of Professional Responsibility, which states “[w]ithout the consent of the client, a lawyer should not associate in a particular matter another lawyer outside the lawyer’s firm.” However, the Committee still found that “where a temporary lawyer is working under . . . close firm supervision, such employment does not involve ‘association with a lawyer outside the firm.’” The “attorney supervision” exception advanced by Formal Opinion 88-356 requires that the temporary attorney be paid as an independent contractor to the firm. The contract attorney cannot directly share fees charged for the particular client matter. Provided the temporary attorney is paid directly by the law firm and is supervised, “the firm has no obligation to reveal to the client the compensation arrangement with the temporary lawyer,” and client consultation is not required.
Unlike the ABA, the NYC Bar has taken a strict position on client disclosure with regard to temporary lawyers, charging law firms with “an ethical obligation in all cases (i) to make full disclosure in advance to the client of the temporary lawyer’s participation in the law firm’s rendering of services to the client, and (ii) to obtain the client’s consent to that participation.” This position is more restrictive than that taken by the New York State Bar, which has concluded disclosure of temporary lawyers is required in only three situations: when client confidences and secrets will be divulged to the temporary lawyer, when the lawyer is highly involved in the client’s case, or when the lawyer performs work of high significance to the client’s matter.
Work performed by a temporary attorney that does not trigger these issues would not require client consent. Surprisingly, the NYC Bar does not extend this strict standard for client disclosure to LPO, and does not require client disclosure and consent to use LPO services for client matters. The distinction apparently turns on the presumption that LPO assignments do not require independent decision-making.
The NYC Bar distinguishes contract lawyers from LPO workers on the grounds that non-lawyers are generally not assigned work in which they play significant decision-making functions. Temporary lawyers, as compared to non-lawyers, are more likely to be placed in situations where access to client secrets and confidences are necessary to complete the project. Moreover, temporary lawyers are also more likely to be required to exercise independent judgment on the client’s behalf. Under this reasoning, a strict rule requiring client disclosure to non-lawyers would fail to serve the same purposes as the rule for temporary lawyers.
Still, Formal Opinion 2006-3 is not an unqualified mandate to use LPO without informing clients. Client consent is still required where confidences and secrets must be divulged to complete the assignment, or where the non-lawyers will be extensively involved in the matter (such as an LPO team hired to conduct a large-scale document review). In situations where it is reasonable for a client to expect an issue to be handled only by firm attorneys and personnel, client consent must still be obtained before any work sent out.
Billing Issues—Surcharges on Expenses and Disbursements
Technically, the means by which the fees for contract employees are passed on to clients are closely related to the client disclosure issues discussed in the previous section. However, the issue is significant enough to deserve independent consideration, as is demonstrated by the extensive treatment the ABA has given the subject in their Formal Opinions.
The issue of reasonable and ethical billing is not unique to LPO. Attorneys are under constant pressure to bill hours and generate additional revenue, which creates potential for abuse, such as over-billing, billing two clients for the same work, and/or surcharging services performed by outside vendors. Rule 1.5(a) provides a reasonableness standard for fees and costs, stating simply that an attorney “shall not make an agreement for, charge, or collect an unreasonable fee for an unreasonable amount for expenses.” Rule 1.5(b) requires an attorney, at the beginning of the attorney-client relationship, to disclose the basis upon which fees and expenses are to be calculated.
These two provisions are augmented by Rule 7.1, which prohibits a lawyer from making false or misleading statements about the lawyer or the lawyer’s services. “False or misleading” is defined as “material misrepresentation[s] of fact or law, or [omission of] a fact necessary to make the statement as a whole not materially misleading.” Failure to include information relevant to billing rates and ancillary charges would violate Rule 7.1.
Other than the references discussed above, the Model Rules provide no further guidance as to how much a firm can acceptably charge for costs incurred independently of an attorney’s hourly fee. Formal Opinion 93-379 acknowledges this deficiency, and clarifies the issue by extending the “reasonableness standard” in Rule 1.5(a) to costs other than attorney fees. As such, charges to a client for expenses incurred above and beyond the attorney’s fee must be reasonable for the services rendered. Inherent in the reasonableness standard is a requirement that the client be charged only for the actual costs incurred. It would be acceptable to charge a premium over the actual costs when the surcharge was disclosed in advance.
The reasonableness standard applies to all costs: from depositions, to copies and faxes, and finally, to services contracted to third parties, overseas or otherwise. Presumably, this means that firms utilizing LPO services would be unable to benefit from arbitrage (i.e., charging the client more than the cost of the outsourced services and retaining the difference as profit). Although the reasonableness standard clearly resolved any ambiguities, Formal Opinion 00-420 was published seven years later to address the issue of surcharging fees for temporary lawyers. The Opinion distinguished between legal services and expenses, concluding that, subject to the reasonableness requirement of Rule 1.5(a), a firm may charge a premium for work done by a temporary lawyer, provided they are billed as legal services. If the contract lawyer were billed as a cost, however, no premium could be charged without client consent. Although Formal Opinion 00-420 does not overrule Formal Opinion 99-379, the distinction seems arbitrary when applied to LPO. After all, copy costs and mileage are easily categorized as expenses, and attorney fees are clearly legal services.
But what about offshore paralegals? Are they expenses or are they fees? LPO falls somewhere between these two extremes. Formal Opinion 2006-3 devotes very little space to the issue of billing for LPO work. However, its treatment is definitive: By definition, the non-lawyer performing legal support services overseas is not performing legal services.
It is thus inappropriate for the New York lawyer to include the cost of outsourcing in his or her legal fees. Absent a specific agreement with the client to the contrary, the lawyer should charge the client no more than the direct cost associated with outsourcing, plus a reasonable allocation of overhead expenses directly associated with providing that service. ABA Formal Opinion 93-379 (1993).
Under Formal Opinion 2006-3, the amount billed to the client for legal support staff may include both the employee’s wage as well as a reasonable amount for overhead. Although the “reasonability” standard allows firms substantial discretion to determine the final amount charged to a client, the rule is, at least facially, relatively clear.
The bottom line is that a client may be billed for more than the cost of the fees charged to the firm by an LPO company, but the premium may reflect only reasonable expenses associated with providing the service. In the case of work performed outside of the law firm, these additional costs will presumably be low, as only a very minor percentage of administrative expenses could reasonably be attributed to providing the LPO service.
Still, there is potential for abuse in the form of overbilling for LPO services that should be addressed.
In conclusion, experts are now somewhat less indignant about outsourcing legal work to other countries than they were when they first learned of the concept. After all, the practice of law has become as cost-conscious as any other profession. The days of delivering a bill containing only an amount due with a description of “for services rendered” are long gone.
Lawyers used to be able to collect exorbitant fees from clients without question. As clients, especially corporate clients, have become more streamlined and efficient, they have come to expect the same behavior from their law firms. To a certain extent, clients have removed lawyers from the “professional” pedestal on which they once comfortably sat, too civilized to quibble over costs. Lawyers today have become just another third-party service provider, and are expected to provide the same low, low prices companies get from their other suppliers. To remain competitive, therefore, it seems logical for firms to imitate the same cost-cutting measures embraced by their corporate clients.
There are multiple ethical issues fairly raised by sending confidential legal work overseas, and very little guidance for law firms currently considering LPO. However, the limited authority currently available appears to conclude that the ethical implications of LPO are adequately addressed by attorney supervision of the final work product and, where applicable, client disclosure and consent.
Although the Model Rules provide a means to identify the ethical concerns raised by LPO, they are currently ill-suited to accommodate the unique issues inherent to foreign outsourcing. The ABA is undoubtedly aware that LPO is happening, but has not yet issued an opinion providing formal instruction.
Luckily, the NYC Bar opinion has filled the vacuum and provided the first extensive treatment of LPO, allowing firms to anticipate to a certain degree how the ABA and/or their own state and local bars will eventually treat the subject in the future. If the NYC Bar Opinion is right, LPO is not much cause for concern, at least on the level of professional conduct.
Ultimately, LPO workers are not very different from temporary attorneys or other third party contract workers, and the solutions are the same as with temporary lawyers: client disclosure and attorney supervision.
Still, law firms were troubled when they realized they were no longer morally outraged at the concept of LPO. Rationalizations and reasons aside, LPO still instinctively felt wrong, as if it somehow cheapened and commodified the practice of law. Lawyers’ brains had convinced them LPO was innocuous, but their guts kept insisting LPO was a bad idea. They resolve to follow their instincts. As Stephen Colbert told President George W. Bush at a White House Correspondents Dinner, sometimes our guts are more reliable than our heads, because our guts are not distracted by things like facts and logic.
Lawyers have realized their uneasiness was not simply reactionary economic protectionism. On the contrary, their concerns rested upon a solid foundation, and were shared by others. The major critique was that adequate attorney supervision in the context of LPO is, at best, wishful thinking. At worst, it was outright deception.
The point of LPO is to farm out work that attorneys were too busy to do in the first place. LPO companies have been ramping up their rhetoric for the past year about adding value to their services, about becoming an integral part of a law firm’s operations. Essentially, they propose to evolve to the point where they are doing the same work U.S. attorneys do, but for a fraction of the price. Moreover, LPO companies clearly have the capacity to do so, considering a substantial part of the LPO work force has graduated from an Indian law school and is capable of working at the level of a new U.S. associate.
In short, LPO companies may not be overtly aspiring to engage in the unauthorized practice of law, but they clearly intend to push the envelope. Although such behavior arguably violates the Model Rules of Professional Conduct, and is therefore at odds with the rules of many state and local bar associations, the aspiration to provide a sophisticated service menu to U.S. firms is understandable, from both an economic as well as a law-culture perspective. From an economic perspective, the more comprehensive an LPO company’s skill set is, the more business they can attract from law firms. From a law-culture perspective, the desire to please the assigning partner is a concept that most U.S associates are intimately acquainted with.
One of the hallmarks of mid-size and large firm culture is that the associate’s job is to make the partner’s life easier. Since the partner is dealing with other sources of pressure, associates should do whatever can be done to lessen the partner’s workload and anticipate their needs. Since LPO companies seem to be intently striving to provide services that could be construed as the unauthorized practice of law, the onus of responsibility ultimately rests exactly where it should: with the supervising U.S. attorney. Since the U.S.-based attorney is the only party involved that is bound by a code of professional conduct, it is her responsibility to supervise all LPO work and make sure the final product is accurate. By taking responsibility for the work as her own, the U.S. attorney thereby “sanitizes” the outsourced work of any potential ethical issues.
The irony involved here should be apparent. The proffered solutions to the ethical dilemmas created by LPO are that the work can be sanitized by supervision and review of the final product. However, the work was offshored in the first place because U.S. attorneys were either too busy or too expensive to attend to it. It is unrealistic to assert that attorneys will be able to continue to “adequately” supervise LPO work for professional conduct purposes under these conditions, especially if more and more work starts going overseas. The projects outsourced to LPO companies are likely to involve discrete tasks on larger issues, such as document review, coding discovery for complex litigation, or perhaps patent research and application drafting. In many cases, attorney supervision and review will likely be adequate to avoid malpractice, but supervision for the purposes of avoiding tort liability or a bar disciplinary action is not the same thing as actually adequately supervising and reviewing LPO work.
Although having an attorney stand behind the final work product as her own is comforting for liability purposes, in reality it seems naïve to believe that an attorney busy enough to send the work to India in the first place is going to be able to adequately supervise and review of the final product. Where thousands, hundreds of thousands, or even millions of pages of data were processed to arrive at the final product, it is more likely that attorneys will be forced by necessity to cross their fingers and play the odds, hoping the work product they have endorsed never ends up giving rise to a cause of action.
The threshold of “adequate” attorney supervision for LPO projects highlights the tension between law as a business and law as a profession. When considered from the perspective of the “profession of law,” a “noble calling” involving fiduciary responsibilities, the issues raised are almost enough to justify rejecting LPO altogether. However, the “noble calling” paradigm has, in many law firms, given way to the “law as product” paradigm, less concerned with fiduciary duties than with maximizing profits and competitive advantages. From the “business of law” perspective, the ethical issues raised by LPO are risks, and nothing more. As with any other business risk, the relative burdens can be allocated by contract.
Given the increasing corporatization of law firm management, the ethical “risks” of LPO will undoubtedly be able to be “managed” to the satisfaction of the market. As the hype surrounding LPO dissipates over time, the practice may even become commonplace. LPO companies will continue to develop their processes and services, and as more cautious firms witness the more adventurous ones utilizing LPO without getting into trouble, they will become less apprehensive about doing so as well.
So what should be done about LPO? Is there anything that can be done? After all, LPO is a global phenomenon, and to some extent whether it thrives or perishes is not the United States’ decision to make. While the U.S. is the largest target market for offshore legal services providers, LPO is, fundamentally, beyond U.S. control. The U.S. does not—nor should it—have the power to prevent an industry halfway around the world from continuing to evolve and grow, not even if every firm in this country miraculously decided to reject it. Even if the U.S. opted out altogether, other countries, such as Canada, the U.K, and Australia, would still provide large potential markets for these services. LPO is inevitable, and it is a question of when—not a question of whether—it will become widespread enough to attract broad acceptance.
Although the U.S. cannot unilaterally decide whether LPO lives or dies, lawyers in this country are definitely in a position to help define how the industry develops. After all, the U.S. is the biggest potential LPO market. We are the most sought-after customers, and LPO companies are eager to please us because they want our business. Since LPO is in the early stages of development, U.S. firms have a collective opportunity to help guide the growth of a phenomenon that could very well revolutionize the practice of law.
Given the inevitability of LPO, as well as the limitations provided by busy attorneys expected to oversee major projects from halfway across the globe, it is imperative the ABA and other bar associations revisit outdated precedents and guidelines, and recognize that LPO gives rise to unique ethical considerations.
In 1988, when the use of contract attorneys was a new thing, the ABA addressed it head-on, and it put out some very useful guidance.
Now more than 30 years have passed, and LPO is a force to be dealt with. The world has changed a lot over the past years, and the 1988 analysis only takes us so far by analogy. We have reached that point. Now is the time for the ABA to address LPO directly and on its own terms. Given the magnitude of the situation, relying by analogy on opinions issued when email didn’t even exist seems lazy, and fails to satisfy the needs of a profession standing at a major crossroads.