| The benefits of outsourcing for businesses in today's global market-place can be huge and the legal industry is no exception. The prime motivation for outsourcing legal work is to reduce costs, thereby increasing profits. Making the decision to outsource legal work does not however come easily for attorneys in the United States. There is a certain reluctance to using legal outsourcing services, often for ethical and moral reasons. Some believe that outsourcing ultimately has a negative impact on the U.S. economy and is morally wrong. Others feel that legal outsourcing is burdensome and complicated and calls into question issues of confidentiality, competency, and deliverables. Are any of these concerns justified or are they simply popular alarmist myths? This opinion considers these issues and concludes that the benefits of legal outsourcing clearly outweigh any possible drawbacks. | |
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| Several of these concerns and issues have been raised in a number of different states and jurisdictions. The key question is how U.S. attorneys will deal with this increasingly popular business trend. This opinion gives a brief overview of Opinion No. 518 of the Los Angeles County Bar Association (“LA Bar”) given in November 2006 (“LA Opinion”) and the Formal Opinion 2006-3 of the Committee on Professional And Judicial Ethics of the Association of the Bar of the City of New York1 (“NY State Bar”) given in August 2006 (“NY Opinion”). In essence, the issues and concerns addressed in both the opinions are identical. Interestingly, the NY State Bar has permitted outsourcing legal work subject to certain considerations. LawScribe, Inc. (“LawScribe”) is effectively dealing with the issues and concerns addressed in these opinions to the satisfaction of its clients. | |
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| Fundamental Issues & Concerns | |
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| Though business relationships are economic in nature, their moral and ethical dimensions have an important impact on the profitability of business ventures. When it comes to the ethics of outsourcing, matters become more complicated, as parties involved are situated across continents. | |
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| The two fundamental issues addressed in LA Opinion are whether: | |
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| a) | In a civil case, it is ethically permissible for a California attorney to hire an out-of-state legal research and brief writing company (“Company”); and |
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| b) | If such an arrangement is permissible, whether it is the duty of the attorney to adequately comply with the ethical issues. |
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| Some of the ethical issues that need to be dealt conscientiously by attorneys are: | |
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Financial arrangements with the Company |
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Aiding and abetting in the unlawful practice of law |
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Duty to inform client about outsourcing |
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Duty of competence & duty to exercise independent judgment |
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Duty to the court |
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Charging the cost to the client |
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Confidentiality issues |
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Conflict of interest issues |
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Client's consent |
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| Key Factor: Attorney's Duty & Role | |
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| The respective state’s codes of professional conduct set out the attorney guidelines for outsourcing.2 | |
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| Outsourcing in California | |
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| The California Rule of Professional Conduct3 (“CRPC”) bars lawyers from sharing their legal fees with a non-lawyer and forming a partnership with a non-lawyer. An attorney should respect the following guidelines when outsourcing legal work: | |
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A fee for legal service offered is not to be divided unless the client has consented in writing after full disclosure.4 In case of outsourced legal work, the attorney may or may not pass the financial burden of the fees paid by him to the outsourcing vendor to his client. Under California and other state laws, the attorney has to disclose how the expenses which have been incurred for prosecution or settlement of the dispute will affect the contingency fees and the client's recovery; |
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Understand that he has the ultimate responsibility for the final work and product. An attorney has a legal and ethical responsibility for all his submissions to the court on behalf of his client;5 |
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To keep the client duly informed of the status of his representation;6 |
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To keep the client informed of the specifics of the agreement between the attorney and Company;7 |
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Review the brief provided by Company as to its accuracy and relevance, which involves supervision of the work assigned to the Company; |
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Not to charge unconscionable fees to the client. The fees charged to the client should justify the value of services performed and the Client should be informed of the basis of billing for the work done for him; |
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The laws pertaining to the disclosure of outsourcing expenses to clients are very stringent, and come under the definition of “significant development”. The attorney must disclose the costs which are passed by him to the client. If the attorney passes the incidence of the costs of outsourcing to a client, then the client must be duly informed of the same. Further, if the attorney marks up the cost of services, then the client needs to be advised of such mark-up as well; |
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Attorney to ensure and protect the confidential information of the client subsequent to the attorney's contract relationship with the Company;8 and |
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Attorney to ensure that no conflict exists that would preclude him from the client's representation.9 |
Committee on Professional and Judicial Ethics, Formal Opinion 2006-3, http://www.nycbar.org/Ethics/eth2006.htm.
2 See Lawyers Code of Professional Responsibility of the New York State Bar Association and California Rule of Professional Conduct.
3 See Rule 1-310 of CRPC.
4 See Rule 2-200 of CRPC.
5 See § 6125 of the Business and Professions Code, which is also a part of the State Bar Acts.
6 See Rule 3-500 of CRPC and § 6068 of the Business and Professions Code.
7 See Rule 3-500 of CRPC.
8 See Rule 3-310 of CRPC.
9 See Rule 3-310 of CRPC.
