ETHICAL CONSIDERATIONS IN OUTSOURCING OF LEGAL
SERVICES
An
Ius Juris White Paper
(PUBLISHED MAY, 2007)
1.
Introduction
The
growth of legal outsourcing overseas by US attorneys over the past
two years has naturally prompted examination of appropriate and
applicable ethical considerations. Within the last year, ethical
guidelines for lawyers have been issued by at least three bar associations
– the Los Angeles County Bar Association (June 2006)1,
Bar of the City of New York (August 2006)2 and the San
Diego County Bar Association (January 2007)3. With legal
outsourcing (principally to India) being taken up by more and more
law firms and corporate legal departments throughout USA, it is
only natural that other Bar Associations are quite likely to issue
their own ethical guidelines.
Clearly,
one ought to read the three issued guidelines in full, as well as
the applicable ABA Formal Comments and Rules, together with the
relevant Rules of Professional Conduct of the Bar Associations,
to understand in detail the various rules that apply to this subject.
Broadly, the three guidelines above, which are specifically on this
subject, conclude that US attorneys may ethically outsource legal
support services to lawyers and non-lawyers abroad (both of whom
are effectively “non-lawyers” for the US Bar Associations),
provided certain basic ethical obligations are met. These ethical
obligations would most likely arise even if the legal outsourcing
was to another attorney within USA. The principal ethical obligations,
when outsourcing legal work abroad, are:
1.
The US attorney needs to adequately supervise the non-lawyer;
2. The US attorney needs to act competently and exercise independent
judgment;
3. The client’s confidences and secrets need to be preserved;
4. Avoid conflicts of interest;
5. Bill for the outsourcing work appropriately; and
6. When and where necessary, obtain advance client consent to outsourcing.
Each
of these is discussed below briefly, with a suggested list of “Recommended
Considerations” to help ensure that the ethical obligations
are satisfied.
2.
Duty to Supervise
a. Ethical Obligation
The duty to supervise applies in two ways: one is to avoid aiding
the non-lawyer in the unauthorized practice of the law, and the
other is to ensure that the non-lawyer’s work contributes
to the lawyer’s competent representation of the client. This
duty is non-delegable.
b.
Practice of Law
Clearly, a lawyer cannot aid a non-lawyer in the unauthorized practice
of the law. However, law firms and in-house legal departments rely
heavily on legal assistants and other non-lawyers to help render
legal services more cost-effectively and efficiently. But at the
same time, the lawyer needs to supervise and take complete responsibility
for the work done by these non-lawyers to avoid aiding the unauthorized
practice of law.
The
same principle applies when outsourcing legal work abroad. The lawyer
must apply professional skill and judgment in setting the scope
of the non-lawyer’s work, and vetting that work and ensuring
its quality. The lawyer needs to exercise proper supervision of
the work to ensure that the non-lawyer is not engaging in unauthorized
practice of law.4
c.
Representing Client Competently
Proper supervision is critical in ensuring that a lawyer represents
his/her client competently. The fact that the non-lawyer is based
abroad means that this duty needs to be discharged more vigilantly.
d.
Recommended Considerations
1.
Obtain background information about the Legal Outsourcing Company
providing the outsourced services;
2. Obtain the resume of all the non-lawyers (including the people
who are lawyers in their own jurisdictions) working on your matters;
3. Conduct reference checks;
4. Interview and speak to the non-lawyers in advance over the telephone
or web, in order to ascertain the non-lawyer’s suitability
for the particular assignment;
5. Communicate with the non-lawyer during the assignment and provide
guidance as necessary, in order to ensure that the non-lawyer’s
work is in accordance with the lawyer’s expectations;
6. Ascertain what supervisory checking and quality processes are
in place within the Legal Outsourcing Company to supervise and check
the non-lawyer’s work before it is handed over to the US attorney.
3.
Competence & Exercising Independent Judgment
a.
Ethical Obligation
The
US attorney has a duty to act competently in any representation.
He/she needs to have sufficient learning and skill, either in himself/herself
or by associating with another US attorney. In addition, he/she
must also exercise independent professional judgment on behalf of
the clients at all times.
The
US attorney must remain ultimately responsible for any work product
on behalf of the client. He/she must review the work done by the
Legal Outsourcing Company, and independently verify that it is accurate,
relevant and complete, making revisions where necessary. The US
attorney must be able to determine for himself/herself whether the
work under review is competently done. In order to make such a determination,
the US attorney must know enough about the subject in question to
judge the quality of the work. He/she cannot delegate any authority
over legal strategy, questions of judgment, or the final content
of any work product delivered to the client or filed with the court.
b.
Recommended Considerations
1.
The Recommended Considerations for “Duty to Supervise”
(above) all apply.
2. The US attorney needs to have competence (learning and skill)
in the work given to the Legal Outsourcing Company.
3. The US attorney ought to ascertain if the work will be done by
a “lawyer” or “non-lawyer” within the foreign
jurisdiction. Clearly, if the person is a non-lawyer, a higher level
of supervision, care and instructions will need to be given.
4. The US attorney ought to take adequate steps to review the work
product the Legal Outsourcing Company and its staff do for the US
attorney.
4. Client’s Confidences and Secrets
a.
Ethical Obligation
The
lawyer has a duty to preserve the client’s confidences and
secrets. A “confidence” is generally “information
protected by the attorney-client privilege under applicable law”
5 or “includes any information gained in the engagement
which the client does not want disclosed or disclosure of which
is likely to be embarrassing or detrimental to the client”
6. A “secret” is “other information gained
in the professional relationship that the client has requested be
held inviolate or the disclosure of which would be embarrassing
or would be likely to be detrimental to the client” 7.
A lawyer is required to exercise reasonable care to prevent his/her
employees and anyone else he/she engages from disclosing or using
confidences or secrets of clients.
The
New York guidelines concluded that if the outsourcing assignment
requires the lawyer to disclose client confidences or secrets to
the overseas non-lawyer, then the lawyer should secure the client’s
informed consent in advance.
The
Los Angeles guidelines concluded that confidential information can
be disclosed to the Legal Outsourcing Company as long as the latter
agrees to keep the client confidences and secrets inviolate, both
by the Legal Outsourcing Company and by the non-lawyer with it,
throughout and subsequent to the US attorney’s relationship
with the Legal Outsourcing Company.
Attorney-client
privilege extends to the work product created by the Legal Outsourcing
Company, where the purpose is to aid the US attorney in giving legal
advice to the client.8
b.
Recommended Considerations
1.
Restrict access to confidences and secrets, or, give access to only
those confidences and secrets as are necessary for the non-lawyer
to perform the task given;
2. The US attorney needs to enquire about the security measures
(technological and physical) the Legal Outsourcing Company takes
to protect confidential information;
2. Have contractual provisions addressing confidentiality and remedies
in the event of breach;
3. Give periodic reminders regarding confidentiality;
4. Engage a Legal Outsourcing Company that has a valid, substantive
and registered corporate presence in USA, quite apart from having
its offices and staff in India.
4.
Conflicts Check
a.
Ethical Obligation
A
US law firm is generally required to maintain contemporaneous records
of prior engagements and to have a system for checking proposed
engagements against current and prior engagements. A law firm is
also generally required to add information about the prior engagements
of lawyers who join the firm. This latter requirement does not generally
apply to non-lawyers joining a law firm, although there could be
exceptions to that under special circumstances.
b.
Recommended Considerations
1.
The lawyer ought to ask the Legal Outsourcing Company about its
conflict checking procedures;
2. The lawyer ought to also ask the Legal Outsourcing Company, and
the non-lawyer(s) performing the legal support services, whether
either is performing or has performed, services for any parties
adverse to the lawyer’s client;
3. Restrict access to confidences and secrets, or, give access to
only those confidences and secrets as are necessary for the non-lawyer
to perform the task given;
4. The lawyer should pursue further inquiry as required;
5. The lawyer should from time to time remind the Legal Outsourcing
Company and its relevant staff of the need for them to safeguard
the confidences and secrets of their current and former clients;
6. Engage a Legal Outsourcing Company that has a valid, substantive
and registered corporate presence in USA, quite apart from having
its offices and staff in India.
5.
Billing Appropriately & Financial Arrangements
a.
Ethical Consideration
The
US attorney may elect to pay the Legal Outsourcing Company for the
cost of the work done without passing any of the cost to the client,
or pass the cost directly on to the client, or mark up the cost
and pass the marked up cost to the client, or charge the client
a flat fee.
The US attorney must accurately disclose to the client, in the retainer
agreement, the basis upon which any cost is passed on to the client.
Apart from the three guidelines, there are also the ABA Formal Opinions9
to consider here.
Consequently, if the US attorney bills the client for the cost of
the outsourced legal services as a disbursement, the charge can
only be for the actual cost of the services, with a reasonable overhead
for managing the outsourcing relationship. This overhead can be
the time spent in delegating, supervising and reviewing the work
done by the Legal Outsourcing Company. The basis of such costs needs
to be communicated to the client.
If the US attorney does not bill the client directly for these costs,
but includes them in his/her legal services, he/she could charge
a premium , as long as the US attorney vouches for the work product
as his/her own and the overall fees are reasonable. The US attorney
in this case would be using the Legal Outsourcing Company’s
work product as assisting him/her to give legal advice to his/her
client. He/she reviews such work product to formulate the legal
advice to the client.
b. Recommended Considerations
1. The US attorney must disclose to the client the basis
upon which the client is expected to pay for any legal work outsourced.
This can be in the retainer agreement with the client.
6.
Advance Client Consent to Outsourcing
a.
Ethical Consideration
The
lawyer’s obligations here are akin to where a contract lawyer
is used. The obligation to disclose legal outsourcing of a client’s
matter to the client depends upon whether:
1.
client confidences and secrets will be disclosed to the non-lawyer,
2. the degree of involvement of the non-lawyer in the matter,
3. the significance of the work done by the non-lawyer,
4. whether responsibility for overseeing the client’s matter
is being changed, and
5. whether the client has a reasonable expectation that only personnel
hired by the law firm will handle the matter.
The
Los Angeles Bar Association guidelines couches this obligation in
terms of “significant development”, in that a client
needs to be advised of these, and whether outsourcing of part of
the client’s matter is a “significant development”
would depend on the factors listed above.
Participation
by the non-lawyer, whose work is limited to legal research or tangential
matters, would not need to be disclosed. Similarly, administrative
legal support services (such as transcription of voice files from
dictation, depositions, trials and hearings; paralegal and clerical
support for file management; litigation support graphics; and data
entries for marketing, conflicts and contract management), do not
need to be disclosed.
However,
if the non-lawyer makes strategic decisions or performs other work
that the client would expect of the senior lawyers working on client
matters, then this should be disclosed to the client and the client’s
consent obtained.
b.
Recommended Considerations
1.
To be absolutely safe, the US attorney should obtain a client’s
consent to outsource legal support work abroad.
7.
Conclusions
Legal
Outsourcing produces significant cost and time savings, together
with greater efficiencies and improved client service. These can
far outweigh the obligations that arise as a result of this relationship.
These obligations are, by and large, an extension of the obligations
that already have existed for employing junior attorneys, paralegals
and other staff members in a firm, or engaging a contract lawyer.
A
well-structured relationship with an appropriate Legal Outsourcing
Company will provide significant benefits to the US attorney.
A
US attorney can ethically outsource legal support services as long
as the ethical guidelines outlined above are adhered to.
_________________________
1 http://www.lacba.org/Files/Main%20Folder/Documents/Files/Eth518%20PDF.pdf
2 http://www.nycbar.org/Publications/reports/print_report.php?rid=503&searchterm=2006
3 http://www.sdcba.org/ethics/ethicsopinion07-1.htm
4 Professor Stephen Gillers of NYU School of Law, a legal
ethics expert, has stated that “even though the lawyer [in
the foreign country] is not authorized by an American state to practice
law, the review by American lawyers sanitizes the process”.
Professor Geoffrey Hazard, Jr. of University of Pennsylvania Law
School stated that if foreign attorneys are “acting under
the supervision of US lawyers, I wouldn’t think it would make
much difference where they are.”
5 New York Code of Professional Responsibility: DR 4-101
6 California State Bar Formal Opinion No. 1993-133
7 New York Code of Professional Responsibility: DR 4-101(A)
8 United States v. Kovel, 296 F.2d 918, 922 (2d Cir.
1961)
9 ABA Formal Opinions 88-356, 93-379, and 00-420
|
