It has been a longstanding tradition for lawyers to engage other lawyers and nonlawyers as independent contractors to provide various legal and nonlegal support services. For years, this caused little concern for the ethical practice of law since it was mostly restricted to licensed US practitioners and registered local litigation support shops that were easy to monitor. However, the trend towards globalization and the establishment of legal outsourcing companies around the world has, like everything else, complicated the idea of “outsourcing”.
After years of discussing what was ethical, proper and would allow a lawyer to be in compliance with the Model Rules of Professional Conduct, the ABA Committee on Ethics and Professional Responsibility issued Formal Opinion 08-451 on August 5, 2008. Why is this news again?? Primarily because the pressures to reduce costs of litigation have grown ever stronger over the last two years; including wider regulatory obligations such as Sarbanes-Oxley disclosure requirements and the explosive growth of electronic discovery in corporate litigation, increasing the need to reduce labor costs while maintaining high quality service. Many law firms are encountering the issue of LPO for the first time. It is important that lawyers and eDiscovery professionals understand the current parameters of the outsourcing environment.
Anyone considering outsourcing should examine Formal Opinion 08-451 in detail and in conjunction with the Model Rules of Professional Conduct, with a special emphasis on Rules 1, 5, 7 and 8.4, which deal the legal obligations of outsourcing. In summary, the key language from the formal opinion includes the following:
“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. In complying with her Rule 1.1 obligations, a lawyer who engages lawyers or nonlawyers to provide outsourced legal or nonlegal services is required to comply with Rules 5.1 and 5.3. She should make reasonable efforts to ensure that the conduct of the lawyers or nonlawyers to whom tasks are outsourced is compatible with her own professional obligations as a lawyer with “direct supervisory authority” over them. In addition, appropriate disclosures should be made to the client regarding the use of lawyers or nonlawyers outside of the lawyer’s firm, and client consent should be obtained if those lawyers or nonlawyers will be receiving information protected by Rule 1.6. The fees charged must be reasonable and otherwise in compliance with Rule 1.5, and the outsourcing lawyer must avoid assisting the unauthorized practice of law under Rule 5.5.1”
Law firms need to consider embracing Legal Process Outsourcing (LPO) as part of their answer to provide quality legal services efficiently. If done correctly, it can be a strong marketing tool in obtaining and retaining clients, and if implemented thoughtfully, risk exposure can be minimized. Showing your clients that you have their best interests at heart (quality service at reasonable prices) is paramount in the current business climate. Controlling the risks by managing a long term LPO relationships and understanding your legal obligations to clients are fundamental steps in successfully implementing an LPO option at your firm.
Some typical scenarios to be aware of while instituting an LPO program at your firm include:
1. Outsourcing for the right reasons.
Before the first contact is made with an LPO partner, a law firm should perform an internal analysis; understanding what the current model for the firm consists of, including a clear understanding of the costs to deliver both core services and specialty services. It is key to understand the true cost structure of the services so that proper consideration can be given to potential outsourcing solutions. Additionally, the firm must undertake an analysis of their existing client base to determine which of them are most likely to embrace and appreciate the firms entry into the LPO service areas.
2. Structuring the LPO to meet your firm’s standards of conduct.
Selecting an LPO partner should be a long term commitment. It is important that you find an institutional match that assures that the provider can work as an extension of the firm, under the same core principles. Items that will help define this match include: the creation of documented information flow that outlines engagement procedures and expectations; clarifying responsibilities for the provider, law firm and client. The creation of a quality assurance review process that is implemented both during and after each engagement will help asure that any problems are identified and eliminated from future engagements.
3. Focus on the whole service contract, not just price.
While price is one of the most important factors driving the market to the LPO process, it is not the sole factor in making a decision to select a particular provider. Of equal importance are issues such as experience, staffing options and turnover, ability to meet deadlines and manage conflicts, confidentiality and perhaps most importantly, a providers ability to provide substantial reporting on procedures so that you can provide defensible positions to the court on your methodology.
4. Choosing the best LPO service provider.
Nothing will negatively impact a firm’s entry into the LPO market and sour a clients experience than choosing a poor partner. You are forming a series of partnerships that will impact the success of your firm’s business, so the selection process should focus on more than just price. Steps to help select the correct service provider include substantial due diligence, including on-site visits and customer reference checks. There must be a commitment to the same business principles to help assure success. Consider conducting small pilot projects with one or more providers before committing to a full partnership. This helps define the terms of relationship for both parties and gives you a chance to “kick the tires” before a full commitment.
5. Total firm “buy in” of LPO procedures.
The only way to effectively marry an LPO services option to an existing firm culture is to have full buy in by key partners and compliance by all members of the firm. They must understand how this arrangement will strengthen the firm in the long run, making it more competitive and therefore improving client relationships. Key partners have t be part of the process and lead by example to change member behavior.
This type of shift in policy and firm structure is important for law firm mangers to consider as they plan for the future. Clients are challenging firms to improve the quality, cost and effectiveness of legal representation in unprecedented ways. Considering the long term benefits of the LPO model and implementing a carefully designed plan with the propoer oversight, will go a long way towards meeting the clients interests under an acceptable level of risk.
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