Outsourcing Ain't Easy for Lawyers

Seems like every couple of weeks attorneys get emails from offshore companies interested in taking on US legal work and research at low cost to the US attorney. Tempting on costs, but confusing on ethics.

Now the ABA Standing Committee on Ethics and Professional Responsibility has given some guidance by releasing Formal Opinion 08-451, Lawyer's Obligations When Outsourcing Legal and Nonlegal Support Services.

Nothing is inherently illegal or unethical about outsourcing but an attorney has an obligation to provide competent legal services for their client under Rule 1.1 of the ABA Model Rules and an obligation to properly supervise lawyers and nonlawyers under Rule 5.1.

In considering the outsourcing issue, the ABA decision notes that the client's attorney is obligated to make resonable efforts to ensure that the outsource lawyer conforms to the Rules of Professional Conduct and that the outsource lawyer's conduct conforms with the lawyer's professional obligations to his client and, notably, that these provisions apply even when the outsource person, lawyer or not, is directly affiliated with the hiring lawyer's firm.

To deal with the issue, the ABA Standing Committee made some outsourcing conduct recommendations:

1. conduct background checks of the outsource entity and its lawyer and nonlawyer staff
2. interview the lawyers involved to determine their educational background
3. when working with an intermediary, check on its hiring practices to determine the character of the employees who might have access to client data
4. investigate the security measures at the provider's premises, including computer network and disposal systems
5. it may even be prudent to conduct a site visit to get an impression of the professionalism of the lawyers and nonlawyers involved
6. if the outsource lawyer is in a foreign country, the local attorney should ascertain if the legal training in that country is comparable to US training, if ethical principles differ, and if the foreign country has an effective professional discipline system

The ABA Committee noted that if these steps aren't taken the attorney can still outsource the work but there will be a "heightened duty to scrutinize the work produced" for the client.

Other things need to be thought about too, though, including the possibility that confidential client information may be disclosed or seized in locally foreign court proceedings in the outsourced country.

So, it's obviously a little harder and riskier to use outsourced legal services, especially from a foreign source, but not impossible if done right. But, what about the client? Does the attorney have an obligation to tell the client?

In a previous decision back in 1988, the ABA had said that the working relationship with temporary or contract lawyers who were closely supervised by the firm did not have to be disclosed to the client. Now, however, the ABA Committee says that of the outsourcing's typically "tenous" relationship between the local lawyer and the outsourced lawyer, most of the time the client will have to be informed. Just as important, under Rule 1.6 confidential information still can not be disclosed to the outsourced lawyer without client consent.

Here's some outsourcing tips and suggestions for the US attorney to keep in mind:

1. don't outsource legal work without a confidentiality agreement in place to prevent wrongful disclosure of confidential client information
2. check with the outsourced lawyer for any conflict of interest
3. get client consent to outsource the work
4. either don't mark up the cost of the outsource work or get client consent to a reasonable markup that is related to overhead or other tangibly related firm costs
5. have a written agreement with the client on what outsource costs will be passed on to the client and at what rates
6. don't try to make a profit on the outsourced work cost being passed on to the client

Even with all of that, you still have to be careful of Rule 5.5's admonition not to assist in the unauthorized practice of law.

This whole outsourcing thing is fraught with danger so be cautious first and be careful later and be concerned at all times.

Ron Burdge

Helping attorneys help clients and win cases since 1978.