Legal Process Outsourcing: Ethical, Practical & Legislative Considerations

This session on Legal Process Outsourcing (LPO) was presented by Mark Ross, VP Legal Solutions at Integreon and David Stanton, a litigation partner in Pillsbury’s Los Angeles office. Mark is an experienced UK litigation solicitor and former partner at the UK law firm Underwoods Solicitors. Underwoods was the first UK law firm to outsource legal work to a lower cost common law jurisdiction. David has a large outsourcing practice. Pillsbury has experience managing a global team of eDiscovery providers while meeting US legal and ethical obligations.

[These are my notes from LegalTech NY 2011.  Since I’m publishing them as soon as possible after the end of a session, they may contain the occasional typographical or grammatical error.  Please excuse those. To the extent I’ve made any editorial comments, I’ve shown those in brackets.]

NOTES:

• Outsourcing is nothing new — it basically is delegation. While lawyers have outsourced and delegated tasks for years, the difference today is that we are delegating these tasks to people who work in another country. This raises new issues.
• Ethical Obligations Differ Depending on What is Outsourced. Are you outsourcing administrative support or “substantive legal support services”?
• Client Confidentiality in the Cloud is a Big Issue — however, these go beyond legal process outsourcing. That said, firms considering LPOs are often most worried about preserving the confidentiality and security of client information.
• ABA Formal Opinion 08-451 key points — US lawyers may outsource, but they remain responsible for rendering competent legal services; US lawyers need to ensure that the conduct of personnel performing outsourced tasks complies with the US lawyer’s professional obligations; US lawyers must retain direct supervisory authority of outsourced personnel and work; US lawyers must make appropriate disclosures to clients; the fees charged must be reasonable; US lawyers much avoid the unauthorized practice of law by the personnel performing the outsourced tasks.
• Avoiding Aiding the Unauthorized Practice of Law — the mere fact that an LPO provider hires US-qualified lawyers to carry out the work doesn’t relieve law firms of their ethical obligation to prevent the unauthorized practice of law. While outsourcing to US-qualified lawyers may improve the quality of work product, it doesn’t answer the law firm’s ethical obligations. The law firm must closely supervise the work in order to ensure they aren’t aiding the unauthorized practice of law. You need to be sure that non-lawyers are not doing a lawyer’s work. The responsible law firm needs to have a transparent system in place to measure and report on quality/success and to ensure that tasks are carried out by appropriate personnel. What is the response mechanism for addressing inadequate performance and improving performance? How do you document to show that tasks are appropriately assigned and performed adequately? What happens when the client has “preferred vendors” who carry out the work, regardless of the identity of outside counsel — what does that outside counsel need to do to meet their ethical obligations.
• Review Your Firm’s Malpractice Insurance Poliy — be sure it allows for the hiring of outside providers. If there is any ambiguity at all, be sure to discuss it and resolve it with your insurance carrier.
• San Diego County Bar Association Ethics Opinion 2007-1 (January 2007) — this is an important opinion and should be read by every firm considering outsourcing. It discusses a hypothetical in which a firm fails to meet its ethical obligation to prevent the unauthorized practice of law because they lacked the necessary substantive legal knowledge required to assess accurately the quality of the work performed by the LPO provider.
• Disclosure is Key — you need to disclose the LPO arrangement to your client if any confidential information is involved, if the LPO arrangement constitutes a significant development in a matter, if a client has a reasonable expectation of disclosure.
• Conflicts of Interest — since LPO providers are not bound by the ethical obligations imposed on US lawyers. Nonetheless, US lawyers should be sure to ask their LPO providers to undertake conflicts checks to ensure that they are not doing anything that makes it difficult for the US lawyers to meet their own ethical obligations to avoid conflicts of interest.
• Confidentiality and Data Security — Ross and Stanton belive this is almost a moot point since most LPO providers have put in place confidentiality and data security measures that are more stringent and effective than that of most law firms.