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Guidelines for Outsourcing Grow

Three Bar Associations advise on Fees and Disclosure to Clients

Responding to a growing trend of outsourcing legal services to other countries, three bar associations in the last year have issued opinions that aim to provide ethical guidelines for lawyers.

The Los Angeles County Bar Association was the first to tackle the issue when it delivered an opinion in June 2006. It was followed by the Association of the Bar of the City of New York in August and, most recently, by the San Diego County Bar Association in January.

The opinions are meant to guide lawyers considering outsourcing to foreign countries — a cost-saving strategy an increasing number of law firms are relying on for myriad services. They range from advising attorneys when they must inform clients that work is being outsourced to charging “appropriate” fees.

A 2005 study by Forrester Research, a technology and market research company in Cambridge, Mass., predicted that the value of legal outsourcing work to India could rise from $80 million to $4 billion by 2015.

Prism Legal Consulting of Arlington, Va., which advises law firms on a number of issues, found more than 60 offshore legal services companies in October, compared with only 20 in March 2005.

Paul Dutka, a partner in New York’s Weil, Gotshal & Manges who chairs the New York City bar association’s Committee on Professional and Judicial Ethics, said legal outsourcing will continue to command attention.

“I certainly would not be surprised if other bar associations took up the issue,” he said.

CONFIDENCE AND CONFLICTS

The San Diego County Bar Association’s Legal Ethics Committee said that if a client had a reasonable expectation that work would be done by the firm retained, the attorney has a duty to inform the client if work was being outsourced.

However, if no such expectation existed, the attorney is not bound to inform the client about outsourcing, the committee said.

The 13-page opinion also stated that work should be outsourced only if local attorneys “have sufficient knowledge to supervise the outsourced work properly,” and if it doesn’t compromise their other duties.

The New York City and Los Angeles County bar associations issued similar guidelines and said the local attorney is responsible for the final product, the attorney must charge an appropriate fee so the client is charged no more than the direct cost associated with outsourcing and a client’s confidences and secrets must be protected.

For example, the New York City bar association’s opinion says that in order to protect a client’s information, lawyers may need to restrict access to confidential materials and have contractual provisions that address confidentiality and suggest remedies in the event of breach.

The opinions also warn about conflicts of interest during outsourcing. If a firm hires lawyers through an outsourcing agency, it is the firm’s responsibility to check whether those attorneys or their support staff have performed services for any parties adverse to the client.

The Los Angeles County Bar Association’s opinion, for example, warns that the local attorney would be responsible for any conflicts of interest that may be created by hiring the outsourcing company.

Wendy Patrick Mazzarella, who chairs San Diego County Bar Association’s Legal Ethics Committee, said members started looking at the issue last year because of the rising popularity of outsourcing to India.

“I believe it will continue to be an issue for the legal community,” she said. “One of the best things we can do is inform lawyers that if you choose this option, you want to know these ethical issues. We’re thrilled we tackled this because of the fact that more and more people are talking about it.”

Louisa Lau, who chairs the Professional Responsibility and Ethics Committee of the Los Angeles County Bar Association, said it gave its opinion on the issue following a member’s inquiry.

The American Bar Association has not issued opinions on outsourcing, and a spokeswoman said that no one at the ABA would be available to comment on the topic.

But the National Federation of Paralegal Associations in Edmonds, Wash., published a position statement in 2005 declaring that outsourcing to foreign countries should be done “sparingly and only as a last resort.”

Vesna Jaksic
The National Law Journal
May 3, 2007