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ABA BLESSES LEGAL PROCESS OUTSOURCING IN 2008 AUGUST ETHICS OPINION

The American Bar Association (ABA) recently issued an ethics opinion blessing and endorsing the outsourcing of legal services. The opinion was issued in August 2008 by the Ethics Committee of the ABA and has already had a ripple effect across the legal process outsourcing industry and the legal industry in general.

Since the opinion was made public in late August, it has been featured in numerous media publications and blogs including the New York Law Journal and Law.com. The full opinion is available on the ABA website.

Below we have provided two related summaries that will give you additional information regarding what the opinion says and how it affects the legal process outsourcing industry.

What it Says and How it Works

Operative Effect

The bar is a self-regulated industry and rules of ethics and professional responsibility are traditionally delegated by the courts to the state bar associations. The ethical rules promulgated by each state bar are enforceable by the state court in the applicable state. In the absence of applicable statutory or case law, the courts will look to various bar associations, including local, state and national bar associations, for guidance in interpreting issues or questions of first impression. As a result, the ABA Ethics Committee opinion, while not officially binding, will serve as an important guide if and when courts are asked to address issues relating to the ethics of legal process outsourcing. The same is true of the opinions issued by the bar associations of Florida, Los Angeles County, New York City and San Diego County, all of which are large and important jurisdictions, and all of which permit legal process outsourcing and set forth rules on how to outsource and offshore legal services.

The Details

To begin with, the ABA opinion opens by explicitly stating that “[a] lawyer may outsource legal or nonlegal support services provided the lawyer remains ultimately responsible for rendering competent legal services to the client under Model Rule 1.1.” Noting that lawyers engage various parties (including both non-lawyers and lawyers) to provide a host of services, directly or indirectly, the ABA opinion thereafter sets forth a series of suggested and required steps for a lawyer outsourcing legal work, including the following:
 

  1. Diligence: Lawyers outsourcing legal work must make reasonable efforts to ensure that the conduct of the party to whom the work is outsourced is compatible with the professional obligations of the lawyer herself (Model Rule 5.3(b)). The ABA opinion notes that this obligation is especially true, and requires extra care, when outsourcing to a distant offshore location. Consider reference checks/background investigations of lawyer or non-lawyer providers/intermediaries.

    Additional optional diligence:
    • interview main project lawyers
    • assess educational background
    • evaluate the quality and character of employees
    • review security systems
    • visit offshore facilities
  2. Offshore Regulatory Systems: Determine if the offshore legal education system is comparable to that of the U.S., and whether professional regulatory systems incorporate equivalent core ethics principles and effective disciplinary enforcement systems. In addition, lawyers should determine whether the legal system protects client confidentiality and provides effective remedies to the lawyer’s client in case disputes arise.
     
  3. Client Consent: Depending on the level of supervision contemplated by the outsourcing lawyer, obtaining informed client consent before engaging outside (offshore or onshore) assistance may be necessary. Written confidentiality agreements are strongly advisable.
     
  4. Fees: It is permissible to pass along to the client the costs of using a service provider, including reasonable allocation of associated overhead expenses, but no markup is permitted. Reasonableness of the fee is key.
     
  5. Practice of Law: The ABA Ethics Committee noted that its lacks authority to express an opinion about whether any particular service provider is engaging in unauthorized practice of law. However, all of the local and state bar association opinions related to outsourcing address this issue, and concludes that the outsourcing of legal services, either offshore or onshore, does not constitute the unauthorized practice of law.

The ABA guidelines correspond with the measures we counsel our clients to undertake when evaluating legal process outsourcing in general and our services in particular. As a result, we welcome the ABA Ethics Opinion as a codification and affirmation of current industry practice.

How it Affects the legal process outsourcing Industry

The ABA Ethics Opinion is expected to have a dramatic effect on the legal process outsourcing industry, both because the opinion sets forth guidelines for how to outsource and offshore legal work and, more importantly, because the opinion explicitly endorses the use of legal process outsourcing providers as a method to extend in-house capacity and to reduce law-firm costs.
 

  1. Endorsement: The opinion describes outsourcing as a “salutary trend in a global economy.” In other words, the ABA, as the single most important national bar association, representing millions of US lawyers, believes that outsourcing legal services is a benefit to the health of the profession itself.
     
  2. Onshore/Offshore Treated Equally: Moreover, the ABA Opinion draws no distinction between onshore outsourcing and offshore outsourcing, with the exception of the level of diligence performed and background checking. As a result, the comfort level that US lawyers have over many decades gained with outsourcing services to paralegals, legal assistants, secretaries, court reporters, printers and countless other service providers will, as a result of the ABA Opinion, quickly begin to encompass the offshoring of legal work to foreign lawyers and non-lawyers.
     
  3. Air Cover, Risk Elimination and Change Agent: Law is by its nature a conservative profession. Lawyers are charged with protecting our clients, and are often the last voice of caution in a business transaction or dispute. As a result, the legal industry is extremely slow to change, relative to other major US industries. In addition, lawyers are often constitutionally or professionally adverse to risk.
    The ABA Opinion, by endorsing legal process outsourcing and by setting forth clear and concise guidelines for implementing onshore and offshore legal process outsourcing, has dramatically reduced the risk for lawyers wishing to offshore legal work, provided air cover for those lawyers seeking to outsource and offshore legal work, and acted as a catalyst to move the industry in a decidedly pro-outsourcing direction.
     
  4. Validation: Perhaps most importantly, the ABA Opinion confirms that the use of offshore legal process outsourcing providers is indeed ethical and a huge economic benefit to companies and law firms alike.
     

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