No, the headline above is not a typo. In a Report and Discussion Draft announced today, the American Bar Association Commission on Ethics 20/20 has issued what amounts to a ringing endorsement of offshore legal process outsourcing, while making sure to say that it is not an endorsement. ("[t]he changes... recommended herein constitute neither endorsement nor rejection of the practice of outsourcing by lawyers and law firms.")
No doubt the above disclaimer is due to the backlash the ABA encountered from some free-lance contract attorneys and others two years ago, in response to the ABA Formal Ethics Opinion 08-451. In that Opinion, the ABA Standing Committee on Ethics and Professional Responsibility came right out and "saluted" the outsourcing of legal services. ("The outsourcing trend is a salutary one for our globalized economy.") In the 2008 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 Committee's words, 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.)
In the new Report and Discussion Draft, the ABA Commission proposes nothing that contradicts the 2008 Opinion. Instead, in the Report, the Commission further extolls the success, virtues, and "appeal" of legal outsourcing, while of course being careful not to "endorse" it. The Commission even goes so far as to rebut complaints that offshore legal process outsourcing inevitably results in ethical problems such as breach of confidentiality and conflicts of interest. Below are some relevant excerpts from the Commission's Report:
The outsourcing of work domestically and internationally, although not new to the legal profession, is becoming increasingly widespread. The ABA Standing Committee on Ethics and Professional Responsibility and other state and local bar associations have recognized the reality of outsourcing and issued many opinions or reports giving guidance on how to outsource ethically.2 ABA Formal Opinion 08-451, entitled “Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services,” identified key ethical considerations lawyers should take into account under the Model Rules of Professional Conduct when outsourcing domestically or internationally. To date, however, the Model Rules and their accompanying Comments do not specifically address outsourcing.
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The changes to the Comments to Rules 1.1, 5.3, and 5.5 of the Model Rules of Professional Conduct recommended herein constitute neither endorsement nor rejection of the practice of outsourcing by lawyers and law firms. Rather, they are an important and direct response to the existence and growth of outsourcing practices, intended to help lawyers engaging in the practice to do so ethically and responsibly.
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Among the factors that have contributed to the significant growth of outsourcing are the technology-driven enhanced ability to provide cost-effective “24/7” service to clients and faster turnaround for labor-intensive projects; the enormous growth of electronic discovery; the dominance of the English language in law and commerce; and the steady escalation of legal fees.
For several reasons, outsourcing may appeal to the clients of U.S. lawyers and law firms as well as to the lawyers and law firms themselves. The work may be better done outside the firm because of efficiencies developed and utilized by providers of outsourced services. There are potential and possibly substantial cost-savings, whether the work is outsourced to providers in the U.S. or elsewhere. This cost differential may be of particular benefit to solo practitioners and small and medium-sized U.S. law firms, allowing them to compete more aggressively for large matters without fear that if they secure employment by the client they may lack adequate resources to perform the legal work.
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Exploring the range of additional guidance currently available to lawyers, the Commission reviewed materials from domestic and international outsourcing providers themselves, finding substantial evidence that the providers are also focused on the ethical considerations and obligations identified in the organized bars’ ethics opinions, and that they are motivated to do so. Protocols developed by the providers of outsourced legal and non-legal services evidence their use of ever more sophisticated technology to ensure quality control of the outsourced work, to provide adequate security over personnel and information, and to increase the opportunities for and convenience of oversight by the lawyers and law firms that are outsourcing the work.
Information the Commission reviewed shows that, for example, a wide variety of effective procedures are in place to protect the confidentiality of client information. Lawyer and nonlawyer employees of many outsourcing providers are required to sign confidentiality agreements, with some firms requiring employees to sign new and separate confidentiality agreements for each new assignment. Although the details of security measures implemented by outsourcing companies are often proprietary, certain generalizations are possible. The most effective of these measures include the use of the most up-to-date information security technology (e.g., for encryption, anti-virus, transmission, storage, and permanent deletion of information); use of biometric and other security measures for access to premises or data (including separate premises or areas for each project); maintenance of continuous video monitoring, monitoring of employee computers, disabling of employee computers’ portals for portable data storage devices, and repeated identity checks on admission to buildings, elevators, and other areas where work is being performed; extensive background checks on employees; and periodic internal and external audits of all of the foregoing measures.
The Commission heard from a number of sources that conflict-of-interest considerations are increasingly given careful attention. For example, a number of outsourcing providers conduct conflicts checks modeled after those conducted by large U.S. and U.K. law firms; others are developing similar systems. These may include maintaining extensive data bases for existing and former clients and screening the work history of new recruits and existing employees against both the information contained in the data bases and information supplied by the client.
Industry awareness and responsiveness to the ethical concerns and obligations of U.S. lawyers and law firms are resulting in outsourcing firms seeking input from and collaboration with the organized bar, and with lawyers and law firms, in the development of ethics policies and training regimes for the lawyer and nonlawyer employees of service providers. The Commission’s research has determined that a number of companies that provide outsourced services have established sophisticated training programs for nonlawyer and lawyer employees on a variety of topics, including U.S. substantive and procedural law, legal research and writing, and the rules of professional ethics. There may also be specific training to address the particularized needs of a client or project.
Regarding the Commission's proposed changes to the Comments in the Model Rules, as suggested in today's Discussion Draft, again they do not depart from the ABA's previous Ethics Opinion. For example, here is the proposed new comment to Model Rule 1.1 on "Competence":
Retention of Other Lawyers
 A lawyer may retain other lawyers outside the lawyer’s own firm to provide or assist in the provision of legal services to a client provided the lawyer reasonably concludes that the other lawyers’ services will contribute to the competent and ethical representation of the client. The reasonableness of the conclusion will depend upon the circumstances, including: the education, experience and reputation of the nonfirm lawyers; the nature of the services assigned to the nonfirm lawyers; and the legal and ethical environment in which the services will be performed. When retaining lawyers and others outside the lawyer’s own firm, the requirements of Rule 5.5 (a) must be observed. When using the work of nonfirm lawyers in providing legal services to a client, a lawyer must also reasonably conclude that such work meets the standard of competence under this Rule. If information protected by Rule 1.6 will be disclosed to the nonfirm lawyers, informed client consent to such disclosure may be required. For example, if the rules, laws or practices of a foreign jurisdiction provide substantially less protection for confidential client information than that provided in this jurisdiction, the lawyer should obtain the client’s informed consent to such disclosure.
The Commission makes a similar, almost identical proposal for a new Comment to Model Rule 5.3 on "Responsibilities Regarding Nonlawyer Assistants."
“We’re in an outreach mode of soliciting public comment,” says Judge Kathryn A. Oberly, from the District of Columbia Court of Appeals, who chairs the Commission's outsourcing working group. “It’s a draft proposal, but we’re not wedded to it. The point of our draft is to get comments from anybody and everybody who wants to comment on it. We’ll see what people have to say.”
The Commission will receive comments through January. After that, the outsourcing working group will review its draft before preparing a final version for consideration by the full commission. Then, depending on the nature of the final recommendations, the House of Delegates may consider them. While the Commission has set no specific schedule, it expects to submit most of its recommendations for consideration by the House during 2012.