Outsourcing Is Definitely In – As Part of the Model Rules

Published September 17, 2013

There is no question that using specialized service providers to meet client needs at reduced cost is the wave of the future for major law firms. The latest examples range from legal process outsourcers (LPO) that handle the details of a merger transaction under general supervision of law firm partners, or software companies that analyze millions of document pages electronically for lawyers’ final review as part of litigation due diligence. The goal in either case is to reduce rates and excess staffing, for clients’ benefit.

Perhaps the clearest sign that outsourcing has become an accepted part of the legal services model is that the American Bar Association House of Delegates last year quietly approved several changes in comments to the ABA Model rules to “clarify” the ethical obligations of lawyers when outsourcing legal services. These common sense clarifications are notable:

  • A comment to Rule 1.1 on competency says that a lawyer should ordinarily obtain informed consent from the client before retaining outside services, and should “reasonably” believe the outside services will contribute to the competent and ethical representation of the client.

  • A new comment to Rule on 5.3 says a lawyer may hire non-lawyers outside his or her firm but must ensure that the engagement is compatible with legal ethics obligations.

  • A new comment to Rule 5.5 clarifies that lawyers cannot engage in outsourcing when doing so would facilitate the unauthorized practice of law.

The message is clear – in an outsourcing relationship the client must know of and approve the contract arrangement, and the contracting lawyer retains final responsibility for the client relationship. The lawyer who engages the outsourced service becomes responsible, in a malpractice sense, for any errors committed even in a seemingly simple case. But that is when lawyers themselves do the outsourcing. What about when the impetus comes from the client?

The question increasingly will become more important. When I interviewed Ron Baker, founder of the Verisage Institute consulting firm which helps lawyers use value-based pricing and economic analysis, he said: “Price is a marketing function not a cost issue. Law firms need to focus on what’s important to the client and how they value it; yet most firms don’t know how to assess that. Cost is a fact; pricing is a policy. Value sets price and price sets cost. We must comprehend that each client is different and each assessment of value is different.” When clients increasingly seek cost-effective non-lawyer services, they do the valuation – and they take control of the legal service process. Applying this to outsourcing will have a major impact.

Categorized in: ,

Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners