This is a follow-up to our post yesterday about the release by the ABA of an ethics opinion on legal outsourcing.
The American Bar Association ethics opinion, Formal Opinion 08-451 - Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services (PDF), dated 5 August 2008 and publicly announced 25 August 2008 does not tell us anything substantively new, only that the ABA agrees with clients and professionals alike that legal outsourcing is ethical so long as lawyers comply with the Model Rules and engage suitable providers.
It is thus a welcome addition to the growing body of persuasive opinion about the ethics of legal process outsourcing. It aligns offshore with onshore outsourcing; usefully consolidates a range of ethical issues into one Opinion; recognizes the global nature of legal services; and acknowledges the professional and economic benefits of outsourcing.
Purchasers of outsourced legal services, law firms and corporations alike, however, have long conducted their own ethics assessments and concluded that ethical rules have never precluded outsourcing so long as certain conditions were met. Even without this opinion, there has been no reasonable doubt about the valid ethical nature of such activities by well managed and reputable providers.
Sweeping as the Opinion is, it is not carte blanche to outsource nor is it an endorsement of every outsourcing provider. The purchaser of outsourced services must adhere to relevant professional obligations and the provider should conform to the staffing, training, physical and network security and expertise requirements set forth in the Opinion. Professional and reputable outsourcing providers welcome these due diligence requirements.
The salient and self explanatory points from the Opinion are below. I have added headers in bold below that are not in the opinion but otherwise quote relevant sections, though with liberal use of ellipses. Readers seeking legal guidance should be sure to read the opinion in its entirety.
- Outsourcing and Offshoring is Ethical: “There is nothing unethical about a lawyer outsourcing legal and nonlegal services, provided the outsourcing lawyer renders legal services to the client with the ‘legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation,’ as required by Rule 1.1.”
- Direct Control Not Required: “[A lawyer] may decide to outsource tasks to independent service providers that are not within their direct control. Rule 1.1..…requires only that the lawyer who is responsible to the client satisfies her obligation to render legal services competently.”
- Adequate Supervision is Essential: “Rules 5.1 and 5.3 impose additional obligations on lawyers who have ‘direct supervisory authority” over other lawyers and nonlawyers…. The challenge for an outsourcing lawyer is, therefore, to ensure that tasks are delegated to individuals who are competent to perform them, and then to oversee the execution of the project adequately and appropriately.”
- Lawyers Should Assess Provider Suitability: “At a minimum, a lawyer outsourcing services for ultimate provision to a client should consider conducting reference checks and investigating the background of the lawyer or nonlawyer providing the services…. The lawyer also might consider interviewing the principal lawyers…involved in the project…. When dealing with an intermediary, the lawyer may wish to inquire into its hiring practices to evaluate the quality and character of the employees likely to have access to client information…. [T]he lawyer should consider investigating the security of the provider’s premises, computer network…”
- Considerations in Working with Overseas Providers: “When engaging lawyers trained in a foreign country….the professional regulatory system should be evaluated to determine whether members of the nation’s legal profession have been inculcated with core ethical principles similar to those in the United States, and whether the nation’s disciplinary enforcement system is effective….”
- Disclosure to Client: “[A]t the outset, it may be necessary for the lawyer to provide information concerning the outsourcing relationship to the client, and perhaps to obtain the client’s informed consent to the engagement of lawyers or nonlawyers who are not directly associated with the lawyer or law firm that the client retained…. Thus, where the relationship between the firm and the individuals performing the services is attenuated, as in a typical outsourcing relationship, no information protected by Rule 1.6 may be revealed without the client’s informed consent. The implied authorization of Rule 1.6(a)…to share confidential information within a firm does not extend to outside entities or to individuals over whom the firm lacks effective supervision and control.
- Take Steps to Ensure Confidentiality and Avoid Conflicts: “Written confidentiality agreements are.. strongly advisable in outsourcing relationships. … [T]he outsourcing lawyer should verify that the outside service provider does not also do work for adversaries of their clients on the same or substantially related matters…
- Fee Levels: [T]he fees charged by the outsourcing lawyer must be reasonable and otherwise comply with the requirements of Rule 1.5…. [T]he lawyer is not obligated to inform the client how much the firm is paying a contract lawyer; the restraint is the overarching requirement that the fee charged for the services not be unreasonable. If the firm decides to pass those costs through to the client as a disbursement, however, no markup is permitted…. [I]f and to the extent that the outsourced work is performed off-site without the need for infrastructural support… the outsourced services should be billed at cost, plus a reasonable allocation of the cost of supervising those services if not otherwise covered by the fees being charged for legal services.”
- Unauthorized Practice of Law: “[T]he outsourcing lawyer must be mindful of the admonition of Rule 5.5(a) to avoid assisting others to ‘practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction….’ … Ordinarily, an individual who is not admitted to practice law in a particular jurisdiction may work for a lawyer who is so admitted, provided that the lawyer remains responsible for the work being performed and that the individual is not held out as being a duly admitted lawyer.”
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