American Bar Association "Salutes" Outsourcing of Legal Services

No one seriously expected the American Bar Association to come out against the legal services outsourcing to India, or as many call it, "legal process outsourcing" or "LPO."  After all, the ABA historically has been a finger-in-the-wind organization.  Today the wind blows against exorbitant legal fees and law firm inefficiencies that for too long have been a burden on the economies and even ordinary citizens of the West.  It blows in the direction of globalization -- of legal services without borders.  Ethics panels from New York City, Los Angeles County, San Diego, Florida, and North Carolina already have stated what should be obvious, which is that there is nothing necessarily unethical about having legal work done by lawyers or non-lawyers at off-shore providers, so long as the work is carefully supervised and edited by attorneys admitted to the bar in the U.S. jurisdiction where the work is being delivered.

So what is surprising about the recent ABA Formal Ethics Opinion 08-451 is not that the ABA Standing Committee on Ethics and Professional Responsibility fell in line with the other panels.  The surprise is that the ABA Committee came right out and "saluted" the outsourcing of legal services: "The outsourcing trend is a salutary one for our globalized economy."  In the Opinion, the ABA Committee went on to mention that "outsourcing affords lawyers the ability to reduce their costs and often the costs to the client," allowing law firms to better represent clients "effectively and efficiently."  In the words of the Committee, which apply to in-house counsel as well as law firms: "There is nothing unethical about a lawyer outsourcing legal and non-legal services, provided the outsourcing lawyer renders legal services to the client with the 'legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.'"  (Quoting Model Rule 1.1.)  

Regarding the ethical requirements imposed on in-house or outside counsel sending legal work overseas, the ABA Committee offers the following guideline: "At a minimum, a lawyer outsourcing services... should consider conducting reference checks and investigating the background of the lawyer or nonlawyer providing the services, as well as any non-lawyer intermediary involved."  I already can hear the cries of the anti-outsourcing Luddites, who will point out that the ABA is not even requiring background checks -- only that outsourcers "consider" conducting them.  It is true that there are hardly any outright prohibitions or mandatory proscriptions in Opinion 8-451, and certainly no new ones (and the ABA does not have authority to issue binding rules anyway, since that is left to the various state bar panels), but there is plenty of advice.

For example, the ABA Committee suggests that "in some instances, it may be prudent to pay a personal visit to the intermediary's facility, regardless of its location or the difficulty of travel, to get a first-hand sense of its operation...." (emphasis added).  I agree.  By all means come to India, and especially Mysore!  The people and culture are wonderful; the weather and natural beauty are amazing; and there are few things more exciting than taking a front-row seat to watch, or better yet, to participate in, a world in transition.  First-rate legal outsourcing companies can only benefit from on-site visits by prospective clients.  Law firms and corporations interested in legal outsourcing can learn first-hand that the professionalism, enthusiasm, and efficiency of Indian lawyers at such providers compare favorably with any law firm in the West.  Prospective clients also can learn that at the best Indian legal off-shoring companies, the work is carefully supervised by Western-licensed attorneys, who also train the Indian lawyers in the applicable law and practice.

The ABA Committee further recommends that "when engaging lawyers trained in a foreign country, the outsourcing lawyer should first assess whether the system of legal education... is comparable to that of the United States." In a previous article for LexisNexis, I commented on how U.S. law schools, just like Indian ones, do not teach students how to practice law.  I discussed how the legal training provided by at least one Indian legal outsourcing company (mine!) is superior in many ways to the training provided in the West.  But even if the foreign training falls short, the ABA does not prohibit outsourcing.  The Committee states that "the lack of rigorous training or effective lawyer discipline does not mean that individuals from that nation cannot be engaged to work on a particular project.  What it does mean... is that it will be more important than ever for the outsourcing lawyer to scrutinize the work of the foreign lawyers...."

In the Opinion, the panel further states that in some circumstances, it "may" be necessary (a) to advise the client that an outsourcing provider is being employed, and (b) "perhaps to obtain the client's informed consent...."  In these times, when virtually all major corporations are already present in India, and when many forward-looking corporations are insisting that their outside law firms send legal work offshore, this advice should not be hard to follow.  I was speaking not long ago with a partner at one of the largest U.S. law firms, who told me that before being allowed to pitch for business at some of America's biggest companies, his firm was required to fill out a questionnaire.  The form included the question:  "What are your capabilities in the area of outsourcing legal work to India?"  Modern clients are not afraid to hear about legal services off-shoring -- they are demanding it.

Regarding data security and confidentiality, the ABA Committee recommends non-disclosure agreements and conflict checks. This is a no-brainer, and it should be implemented with U.S. law firms as well, even where no legal outsourcing abroad is involved.  Interestingly, despite the loudly publicized, anti-outsourcing lawsuit by a Maryland law firm, alleging all kinds of dangers to confidentiality, based on speculation that U.S. government spies are seizing and poring over all of the zillions of pages of mostly boring data being sent to legal services vendors in India, (see the motion to dismiss), the ABA Opinion contains no mention of this allegedly grave threat.  Instead, the Committee urges outsourcers to "consider" whether documents "may be susceptible to seizure in judicial or administrative proceedings" in a foreign country.  I have not thoroughly researched this, but none of the many lawyers I know in India are aware of anything the democratic government in that country is doing, or is allowed to do, that is more intrusive or violative of privacy than what the Bush administration already is doing in the United States.

On the subject of fees, the panel repeats the usual requirement that the charges to the client must be "reasonable," and it notes that if the outsourced work is billed to the client as an out-of-pocket expense of the law firm, "no mark-up is permitted," beyond "a reasonable allocation of associated overhead" or "the cost of supervising those services," unless there is "an agreement with the client authorizing a greater charge."  According to the ABA Committee, none of this requires the outsourcing law firm to bill for the work in India as a separate disbursement, or "to inform the client how much the firm is paying," so long as the legal fees charged by the law firm are not "unreasonable."  In other words, the loopholes are large enough for even the largest of law firms to drive through with an eighteen-wheel truck loaded with legal fees.

Lastly, the Opinion includes the obligatory warning against "the unauthorized practice of law," while making sure to point out that "this Committee lacks the authority to express an opinion" as to what that is.  This topic is of course a minefield, given that thousands of U.S. law firms, big and small, use paralegals, summer associates, interns, newly-minted associates, and others not admitted to any bar, to perform all sorts of legal services, ranging from legal research, to legal drafting, to document review and coding.  If utilizing excellent, U.S.-law trained, Indian lawyers to do this work were held to be "the unauthorized practice of law," then by analogy, nearly the entire U.S. legal world would be in trouble.

In short, the ABA panel, far from standing in the way of legal off-shoring, has embraced it, with mostly common sense caveats that are no impediment to this growing trend.

To see a copy of the ABA press release and summary of the Opinion, as well as a link to the full Opinion itself, click here.

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[Linda Sanders]

If Indians can "practice law" without a license, why not paralegals? www.AtYourPeril.net