Ethics Opinions Allow Foreign Legal Outsourcing By Steven J. Mintz, Litigation News Associate Editor

Lawyers and clients must weigh cost savings, quality, duty to supervise

Bar committees in New York City, San Diego County, and Los Angeles County have ruled, expressly or implicitly, that lawyers may contract with foreign lawyers not admitted to practice in any jurisdiction in the United States, or with nonlawyers outside the United States, to perform legal work for U.S. clients. These authorities hold that foreign legal outsourcing does not constitute aiding the unauthorized practice of law. NYCBA Formal Op. 2006-3; SDCBA Formal Legal Ethics Op. 2007-1; LACBA Ethics Op. 518.

The New York City bar opinion notes that outsourcing overseas “has begun to command attention in the legal profession, as corporate legal departments and law firms endeavor to reduce costs and manage operations more efficiently.” Some market research firms project that tens of thousands of U.S. legal jobs soon will be outsourced to low-cost countries, with the majority of jobs going to India.

"Outsourcing ‘will expand exponentially because of discovery costs."

The opinions maintain that foreign legal outsourcing should be subject to the same ethical requirements as domestic use of nonlawyer services, in particular targeting the following functions for the U.S. lawyer: Supervise the foreign lawyer’s work, preserve client confidences, avoid conflicts of interest, generally bill only for the direct cost of outsourcing, and obtain advance client consent in certain circumstances.

But the opinions emphasize that a U.S. lawyer who outsources work “must at every step shoulder complete responsibility for the nonlawyer’s work” (NYCBA opinion), and “under no circumstances may the non-California attorney ‘tail’ wag the California attorney ‘dog’” (SDCBA opinion). The NYCBA opinion also states that a “New York lawyer must be both vigilant and creative in discharging the duty to supervise,” which might require background and reference checks into outsourcing companies and interviews of foreign lawyers by telephone or Web cast. The San Diego opinion further requires that “to satisfy the [California] duty of competence, an attorney should have an understanding of the legal training and business practices in the jurisdiction where the work will be performed.”

The rulings “take settled principles and familiar rules and apply them to a slightly different setting,” says Bruce A. Green, New York City, professor at Fordham University School of Law and member of the Section of Litigation’s Council, referring to the New York City bar opinion. “Sending legal work abroad makes the supervision more challenging and raises the liability risks,” he explains, but as long as a U.S. lawyer remains responsible to both the client and the ethics rules, any additional risk “will only give lawyers added incentive” to closely supervise the delegation of work.

Foreign legal outsourcing “will expand exponentially because of discovery costs,” agrees Robert R. Simpson, Hartford, CT, Cochair of the Section’s Corporate Counsel Committee. He cites the new federal civil rules on electronic discovery and “sophisticated clients who see legal outsourcing as one vehicle to consider in keeping costs down” as driving demand for outsourcing. Law simply may be “a step behind the curve” of businesses that have set up call centers and technical support abroad, he notes.

But questioning whether the cost savings of foreign legal outsourcing outweigh the difficulties of supervision and concerns about the quality of work product yields differing opinions among Section leaders. “The problem with having foreign lawyers do U.S. legal work is that most of what you get is not going to fit the assignment,” says Louis F. Burke, New York City, Cochair of the Section’s International Litigation Committee. In Burke’s experience, the areas in which he practices, including securities, options, and futures, are too complex for foreign lawyers to substitute effectively for U.S. lawyers.

Quality may be an issue now, but “as the services offering foreign legal outsourcing become more sophisticated and experienced, people will begin using them for more subjective functions,” predicts Simpson. He agrees, however, that law may be less readily amenable than other businesses to foreign outsourcing because of the “additional level of supervision that is required by lawyers. Lawyers are often poor managers. ‘Out of sight, out of mind’ is the problem. It is hard enough to manage people in your department,” he says.

http://www.abanet.org/litigation/litigationnews/2007/july/0707_article_outsourcing.html