by Wilton H. Strickland

Many attorneys are unfamiliar with legal outsourcing and wish to learn more about its ethical ramifications, which is why I once prepared a CLE course on the subject. Here is an overview of the most important aspects of legal outsourcing.

In 2008 the American Bar Association’s Standing Committee on Ethics and Professional Responsibility released Formal Opinion 08-451, titled Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services. The Opinion acknowledges the beneficial aspects of legal outsourcing, such as how it reduces costs and empowers smaller law firms to provide “labor-intensive legal services” that otherwise might not be possible.

Moreover, in 2012 the ABA adopted Resolution 105C, which adds new commentary to Model Rules 1.1, 5.3, and 5.5 to clarify how those rules operate within the context of an outsourcing arrangement. The Report following the commentary also makes it clear that legal outsourcing is a beneficial practice.

Below is a summary of the major aspects of the Formal Opinion and the Resolution. Please note that you should also consult your state’s ethics rules to confirm that there are no additional requirements or prohibitions (I have found nothing in Montana’s or Florida’s ethics rules contradicting the ABA Opinion).

Verifying The Competence Of The Outside Personnel

The outsourcing attorney should ascertain whether the outside personnel have sufficient knowledge and experience to perform the work in question. “[R]elevant factors include the relative complexity and specialized nature of the matter, the lawyer’s general experience, the lawyer’s training and experience in the field in question, the preparation and study the lawyer is able to give the matter and whether it is feasible to refer the matter to, or associate or consult with, a lawyer of established competence in the field in question.” Formal Opinion at 2.

If you outsource work to another country (i.e., “offshoring”), you need to take additional precautions to ensure that the foreign legal system is compatible with our own and can protect your client’s rights and confidences. The specific measures are listed on pages 3 and 4 of the Formal Opinion.

I am an open book. I have extensive experience handling a broad variety of legal matters, some of which are discussed in my firm bio. You can always contact me to find out more, and rest assured that I would not accept an assignment I did not feel completely comfortable performing.

Supervising The Outside Work

According to the ABA, a typical outsourcing relationship does not have or require a high degree of supervision. However, if the outsourcing attorney prefers a more “hands-on” approach, it becomes necessary to make sure  that the outside personnel are meeting your ethical and professional standards per Rule 5.3 (for non-attorneys) or Rule 5.5 (for attorneys). Either way, what is most important is that the outsourcing attorney remains responsible for the work and observes the duty of competent representation of his or her client under Model Rule 1.1.  Formal Opinion at 2, 5.

Licensing Of The Outside Personnel

It is not necessary for the outside personnel to be licensed to practice law in the same jurisdiction as you, or at all, “provided that the [outsourcing] lawyer remains responsible for the work being performed and that the individual is not held out as being a duly admitted lawyer.” Opinion at 6.

I am licensed to practice law in both Montana and Florida. I do not hold myself out as being admitted to practice anywhere else, and the attorneys I assist remain responsible for the work product that I deliver to them. As a consequence, it is ethical for any attorney in the country to make use of my services, not just in Montana and Florida.

Whether To Obtain Informed Consent From The Client Before Outsourcing Work

The client’s informed consent becomes necessary if you are not exercising a high level of supervision over the outside work, or if you plan to share confidential information with the outside attorney. Formal Opinion at 4-5. Because a typical outsourcing relationship does not feature a high level of supervision, the ABA has stated that the outsourcing attorney “should ordinarily obtain informed consent from the client.” Resolution 105C, New Commentary to Rule 1.1.

By the same token, the Report following Resolution 105C states that informed consent is not always necessary, particularly when no confidences are being shared and the work consists of a “discrete and limited task.” Resolution 105 C, Report at 5.

Much of the work I perform consists of discrete and limited tasks that do not require sharing client confidences, so client consent is not strictly necessary under these circumstances.

However, if you wish to obtain client consent in all matters, it is easy enough to insert language in your fee agreements stating that you reserve the right to make use of outside assistance when you deem necessary. I can provide you with such language if you wish, along with additional provisions protecting client confidentiality to the extent such information is to be shared. Such confidentiality agreements are “strongly advisable in outsourcing relationships.” Formal Opinion at 5.

Profiting From Work Performed By Outside Personnel

Yes, you may profit from work performed by outside personnel.

Specifically, you may charge your client a legal fee that includes a surcharge above the amount paid to the outside attorney, “provided that the total charge represented a reasonable fee for the services provided to the client.” Formal Opinion at 5. “Likewise, the 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.” Formal Opinion at 6.

Please note there can be no markup if you pass along the cost of the outside attorney as a disbursement, i.e., as a charge that the client becomes directly responsible to pay. If you take this route, the billing may include only actual costs and associated overhead, absent client consent to a different arrangement. Formal Opinion at 6.

Please also note that the markup is allowed only when outsourcing to another attorney. If you outsource to a non-attorney, you must bill this as a disbursement at cost, unless the client consents to a different arrangement. Formal Opinion at 6. The rationale for this approach is given in greater detail in New York City Bar Association Opinion 2006-3, which has been cited by the ABA and numerous other ethics opinions.

The experience and skill that I bring to the table are worth a good deal more than the fee I charge you. My fee is discounted because I have low overhead expenses, which enables you to realize a profit with your own fee while also saving time and effort. Because I am an attorney, you do not need to obtain client consent for a surcharge or disclose the surcharge amount (though once again you should check your local bar rules to find out whether an attorney who is not licensed in your own jurisdiction should be regarded as a “non-attorney,” which is sometimes the case).

Conclusion

It is both ethical and beneficial for attorneys to outsource legal research and writing to independent law firms such as mine. Outsourcing strengthens your ability to handle large and complex workloads; it gives you greater flexibility with your schedule; it relieves you of the burden of hiring additional employees; it allows you to earn money while saving time; and most important of all, it advances the interests of the client. As always, please contact me if you have any questions.