In yet another example of how offshore legal outsourcing is not just for documents anymore, an expert team of US-law-trained professionals in India are busy doing legal research and drafting of a legal opinion letter to obtain insurance coverage and distribution in connection with the soon-to-be-released investigative documentary film about Sarah Palin. This film is not to be confused with the puff piece recently produced by a Tea Party activist. The Los Angeles Times reports on both films as follows: "Sarah Palin receives what is by all indications a very kind treatment in a new documentary that will premiere in theaters July 15. But a second, far more scathing Palin documentary is being prepared by a more experienced filmmaker. And it looks a lot more likely to stir the pot."
It is the latter film for which legal outsourcing company SDD Global Solutions has been tapped to provide outstanding, speedy, and cost-efficient legal services, in conjunction with its parent media law firm, SmithDehn LLP. Based on the Los Angeles Times report, it seems that offshore legal process outsourcing is having an impact not only in legal circles, but also in the US political world: "[This] movie could become a lightning rod as Palin either runs for president or plays an important part in defining the Republican Party’s 2012 platform." More information can be found on the SmithDehn LLP blog.
The huge cost and burden of discovery abuse is leading yet again to demands for reform, and not only in the US. And the calls for major revision of ediscovery and other rules are not only for the usual reasons. In a bizarre twist, Australia's Attorney-General now has cited legal outsourcing to India as a factor that cries out urgently for change. This is bizarre, because LPO (legal process outsourcing), by increasing speed and lowering costs, actually is part of the solution, not part of the problem. But this latest news does raise an interesting question: If procedural reforms are successful in dramatically reducing the amount of ediscovery and other document production in the US and elsewhere, will this derail the boom in LPO work? The answer is no.
The Wall Street Journal reports today that the Australian Law Reform Commission, with the backing of Attorney-General Robert McClelland, has issued "plans for a major overhaul of civil litigation" that could "slash tens of millions of dollars from the cost of justice":
If implemented, proposals drawn up by the Australian Law Reform Commission would save "millions in just one major case", said Attorney-General Robert McClelland. They could also end what he described as the "farce" that sometimes arises when the process of discovery is taken to extremes in large commercial disputes. "It is almost part of the ritualistic incantation of large litigation," he said. Mr. McClelland said he agreed with the overall direction of the commission's plan, which aims to give judges greater control over the way parties seek documentary evidence from each other during civil disputes.
According the the article, the Commission is proposing the following changes:
More dramatic reforms are being proposed in the United States, where discovery costs have been growing exponentially. These costs amount to a huge "litigation tax" that dries up capital, lowers employment, reduces innovation, pushes many companies into bankrupcty, prevents foreign companies from operating in the US (the most litigation-costly country on earth), and even threatens the preeminence of US securites markets. Discovery costs in the US were approximately $400 million in 2004, but today they amount to billions of dollars per year. This is not even counting the billions that defendants pay in settlements, just to make litigation go away.
Among the changes being urged in the US are the following: (a) requiring courts to consider cost-shifting every time a party makes a demand for electronic discovery, such that the requesting party would have to pay for it, which would defeat the main reason many discovery demands are made: to run up the legal bills of the other side, (b) requiring the loser in any discovery dispute to pay the attorneys' fees and costs of the winning party, and (c) suspending all discovery automatically during the pendency of motions to dismiss, so there would be no discovery in meritless cases.
Calls for discovery reform are not new, but because several previous reforms have failed, even after being implemented, tougher measures like the ones listed above are now being sought. One truly new development is the attempt of Australia's Attorney-General to attack offshore legal outsourcing as if it were part of the problem. As reported in today's Wall Street Journal article:
He said the costs associated with discovery had become so unrealistic that some litigators were outsourcing the process to low-cost centers in India. This threatens legal employment in Australia and potentially erodes the effectiveness of the process. "A lot of the material is sent on a USB drive or emailed to India and you have Indian lawyers who have a limited idea of what is involved in the case sifting through these documents and supposedly finding information of relevance," Mr. McClelland said. "When it gets to that level, it's a farce." Increasingly, this is an item of work that is not being undertaken by Australian lawyers and is being offshored. "It is appropriate that we take stock at this point and just ask, 'Where is all this going?'"
Putting aside the oddity of this government bureaucrat effectively saying that discovery abuse would be fine if Australian lawyers were doing the work, the impending reforms do present the question of what impact they might have on the LPO industry. It is true that the high-quality, efficient document review services provided by such industry leaders as Pangea3, UnitedLex, Integreon, and CPA Global is currently the engine driving most LPO growth. But that is only part of the LPO story, and at some point, it may be considered just a prelude.
In yesterday's lead article in the blog of the Association of Corporate Counsel (ACC), the point is made that "the majority of litigation costs" are not due to discovery, but rather "involve drafting of paperwork and related legal research," and that this "legal work done offshore can be about one-seventh as expensive," such that the implications for growth of LPO from this higher value work "could be huge." The article, aptly titled, "Legal Offshoring Is Not Just for Documents Anymore," is by Kwarma Vanderpuye, Chairperson of the ACC's General Counsel/Chief Legal Officer Practice Group, as well as Senior Vice President and General Counsel of legal outsourcing company SDD Global Solutions. Ms. Vanderpuye reports that LPO offers a legal-landscape-altering solution to the problem of litigation costs:
[C]ompanies are beginning to realize that when it comes to frivolous lawsuits and/or exaggerated damage claims, there is a new, alternative response that could change the legal landscape. Traditionally, the choice has been either (a) an all-too-often pyrrhic litigation battle, in which legal fees end up costing more than a settlement, or (b) an onerously expensive capitulation. Reportedly, there is now a third choice, which sounds like an oxymoron to most in-house lawyers: a cost-effective legal defense.
In conclusion, offshore legal outsourcing is by no means a part of the problem. To the contrary, it is potentially a very big part of the solution, not only to the problem of skyrocketing discovery costs, but also to address the even greater costs of litigation in general. Discovery reform may or may not succeed in reducing the volume and costs of document review. The US "reforms" in 2000 and 2006 did not do so. But in any event, even the strongest of the now-proposed reforms will not eliminate the lion's share of the "litigation tax." For that, LPO companies increasingly will help ease the burden.
In its blog, "In-house ACCess," the Association of Corporate Counsel today features an article discussing the advantages of offshore legal outsourcing when it comes to matters way beyond the document review chores that many people associate with LPO:
Legal experts are saying that with the use of offshore legal outsourcing for tasks such as legal research and the drafting of successful motions, companies are beginning to realize that when it comes to frivolous lawsuits and/or exaggerated damage claims, there is a new, alternative response that could change the legal landscape. Traditionally, the choice has been either (a) an all-too-often pyrrhic litigation battle, in which legal fees end up costing more than a settlement, or (b) an onerously expensive capitulation. Reportedly, there is now a third choice, which sounds like an oxymoron to most in-house lawyers: a cost-effective legal defense.
The ACC article is by Kwarma Vanderpuye, who, in addition to her duties as Senior Vice President and General Counsel of legal outsourcing company SDD Global Solutions, also serves on the Board of Directors of the Greater New York Chapter of the ACC, and is Chairperson of the ACC's General Counsel/Chief Legal Officer Practice Group.
In her article, Ms. Vanderpuye cites and discusses various expert reports, before concluding that the implications of high-end legal outsourcing could be "huge":
Given that the majority of litigation costs involve drafting of paperwork and related legal research, and because legal work done offshore can be about one-seventh as expensive, the implications of this development could be huge. The average large corporation spends $19.4 million per year on outside counsel fees, much of it for litigation. It’s typical for major multinational companies to reserve billions each year for expected legal fees and settlements.
The ACC, with over 26,000 members in 75 countries, is the trade association for in-house counsel, worldwide. The ACC promotes the common interests of its members, provides resources to help save time, money and effort, contributes to their continuing education, helps them succeed in their careers, and provides a voice on issues of national and international importance.
In news that may come as a surprise to those who believe offshore legal outsourcing is nothing but a vehicle for the loss of American jobs, it turns out that most of the largest LPOs are hiring hundreds of US lawyers, and they are doing so in the US. As The New York Times reported yesterday, leading offshore legal process outsourcing companies such as Pangea3, Integreon, and UnitedLex all have established significant US operations, which, if they were law firms, would be considered large firms.
For example, Mumbai-based Pangea3, having had operations in New York for years, now has set up a 400-seat facility in Carrollton, Texas. Integreon already has 500 employees in Fargo, North Dakota and elsewhere in the US, with expectations of hiring another 100 this year. For its part, UnitedLex, with 240 employees in the US already, is expanding to a 24,000-square-foot building in Overland, Kansas, so that it can expand its American operations even further. The New York Times reports that "[al]though the industry’s total number of employees in the United States is still estimated to be only in the hundreds, analysts predict fast growth for the field."
In another twist, Indians are training Americans. For example:
In April, Pangea3 sent Kirit Amichandwala, a senior manager from Mumbai, to train new employees in Texas on how to conduct document reviews and other tasks the way the company’s lawyers do in India. The new hires “all have good document review experience,” Mr. Amichandwala said, “but a lot of the processes we follow are pretty unique to us.”
One of Pangea3’s main competitors, UnitedLex, has started regularly swapping teams of lawyers between the United States and India so that employees in both countries can learn to work the same way.
The big challenge is “how do you get a bunch of American lawyers to believe that we might be doing things smarter” by using a process developed in India, said Shelly Dalrymple, senior vice president for global litigation support at UnitedLex.
One American law firm was so won over that it asked a UnitedLex document review manager from India to train its own team in Boston, Ms. Dalrymple said.
US lawyers and law firms who miss the old days, when clients would pay several hundred dollars per hour for armies of inexperienced young associates to pore through millions of pages of dreary discovery and due diligence documents, will continue to complain that legal outsourcing is depriving the economy of high-paying jobs. They strenuously will continue to object to the "commodification" of legal work. And they will complain and that "American salaries for outsourced work, typically in the $50,000 to $80,000 range," are "meager compared with the six figures that new associates might still hope to draw at a big firm."
But the old days are gone, and the old ways never made sense in the first place. No sophisticated client these days will pay hundreds of dollars an hour to a law firm for document coding that can be done by most English-speaking high school graduates after a couple of weeks of training.
Indeed, it is a mystery why some clients apparently are willing to fund even $50,000 to $80,000 in US salaries, plus US overhead costs, for such work. In India, thousands of attorneys at legal "document factories" are eager to provide the same services for a small fraction of the salary and cost, even on night shifts if needed. The work itself is not attractive, to say the least. But in India, it usually beats toiling in the sclerotic Indian legal system, in which court cases can take as long as a quarter of a century to be resolved, and where Indian "advocates" can earn as little as the rupee equivalent of $100 per month, or less, as their starting salary, if they receive any salary at all.
In any event, legal outsourcing, whether offshore, onshore, or nearshore, is not depriving American lawyers of high-paid document review jobs. Those jobs don't exist anymore. They aren't coming back, nor should they. They disappeared, not because of India or LPOs, but because those jobs never made sense. If LPO companies did not solve the problem, someone else would have done it, whether through the expansion of in-house legal departments, or creation of the kind of internal caste system that big law firms now are rushing toward. It is true that offshore legal outsourcing is likely to shake up the law world, but in other ways. For more on that, see the conveniently titled, previous post, "12 Ways Legal Outsourcing Could Shake Up the Law World in the Next Decade."