Michigan Alsp 2009(3)


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Presentation to Eastern Michigan Chapter of ALSP

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  • Now let’s talk about the unauthrized practice of law.
  • Michigan Alsp 2009(3)

    1. 1. Practical and Ethical Issues of Legal Outsourcing Presented by:
    2. 2. Overview <ul><li>Evolution of offshore legal outsourcing </li></ul><ul><ul><li>What is it, who’s doing it, why </li></ul></ul><ul><li>General Considerations When Outsourcing </li></ul><ul><ul><li>Types of work, which vendor, which country </li></ul></ul><ul><li>Ethical Obligations In Outsourcing </li></ul><ul><ul><li>Unauthorized practice of law </li></ul></ul><ul><ul><li>Competence and Supervision </li></ul></ul><ul><ul><li>Conflicts of Interest </li></ul></ul><ul><ul><li>Privilege and Confidentiality </li></ul></ul><ul><ul><ul><li>Confidentiality </li></ul></ul></ul><ul><ul><ul><li>Data privacy and security </li></ul></ul></ul><ul><ul><ul><li>Attorney-Client Privilege </li></ul></ul></ul><ul><ul><li>Client Notice </li></ul></ul><ul><ul><li>Fee and Billing Issues </li></ul></ul>
    3. 3. History of Outsourcing <ul><li>The Progression of Sourcing </li></ul><ul><ul><li>Near Shoring </li></ul></ul><ul><ul><li>Outsourcing Domestically </li></ul></ul><ul><ul><li>Off-shoring (captive) </li></ul></ul><ul><ul><li>Offshore Outsourcing </li></ul></ul>
    4. 4. U.S. Companies Offshore <ul><li>General Electric was the first foreign conglomerate to offshore to India. </li></ul><ul><ul><ul><li>GE Plastics unit hired a lawyer to work in Gurgaon (near Delhi) to write and review contracts with vendors </li></ul></ul></ul><ul><ul><ul><li>GE executives say the India team saved the company $500,000 in 2001 and $700,000 in 2002. </li></ul></ul></ul>http://www.bmacewen.com/blog/pdf/AsiaLawJulyAugust2005LegalOutsourcingToIndia.pdf
    5. 5. Other U.S. Companies Off-shoring To India <ul><li>Microsoft </li></ul><ul><li>American Express </li></ul><ul><li>Morgan Stanley </li></ul><ul><li>Cisco </li></ul><ul><li>Oracle </li></ul><ul><li>DuPont </li></ul><ul><li>Intel </li></ul><ul><li>IBM </li></ul><ul><li>Texas Instruments </li></ul>
    6. 6. What Legal Services Are Outsourced? <ul><ul><li>Document review and abstraction </li></ul></ul><ul><ul><li>Contract drafting and management </li></ul></ul><ul><ul><li>Patent searching, analysis, drafting and prosecution support </li></ul></ul><ul><ul><li>Legal research and drafting </li></ul></ul><ul><ul><li>Litigation support, going as far as brief and motion writing </li></ul></ul><ul><ul><li>Business information and competitive intelligence research </li></ul></ul>
    7. 7. Are U.S. Law Firms Off-shoring Legal Work? <ul><li>Jones Day and Kirkland & Ellis both offshore work to India </li></ul><ul><ul><li>Sophisticated clients demand that the firms offshore work to get work done more cost effectively. </li></ul></ul><ul><li>Only 1 out of the top 10 highest grossing U.S. law firms denies that it outsources. </li></ul><ul><ul><li>The firms that are having success view it as a competitive advantage </li></ul></ul>http://www.bloomberg.com/apps/news?pid=20601103&refer=news&sid=aBo8DnfekWZQ
    8. 8. Trends in Legal Off-shoring <ul><li>Indian legal services industry will more than quadruple to $640 million by 2010 from $146 million in 2006. </li></ul><ul><li>U.S. legal outsourcing to exceed $4 billion by 2015. </li></ul>http://www.bloomberg.com/apps/news?pid=20601103&refer=news&sid=aBo8DnfekWZQ The Professional Lawyer , Publication of the American Bar Association Center for Professional Responsibility
    9. 9. Benefits of Offshore Outsourcing <ul><li>Improved quality – Indian professionals cost less so they can spend more time </li></ul><ul><li>US attorneys move up the value chain </li></ul><ul><li>Overflow work management </li></ul><ul><ul><ul><li>More than 50% of lawyers are at firms with 2 or fewer lawyers </li></ul></ul></ul><ul><ul><ul><li>Increases adaptability to supply and demand cycles </li></ul></ul></ul><ul><li>Better Associate Retention at U.S. firms </li></ul><ul><li>And of course….significant cost savings </li></ul>
    10. 10. Practical and General Considerations When Outsourcing <ul><li>Choosing an offshore destination </li></ul><ul><li>Selecting types of work to offshore </li></ul><ul><li>Precautions when outsourcing </li></ul>
    11. 11. Choosing the Right Destination: Why India? <ul><li>Similar legal system and training </li></ul><ul><ul><li>British common law system </li></ul></ul><ul><ul><li>Three to five years of post-secondary legal education based on common law </li></ul></ul><ul><ul><li>India’s official language is English, so Indian lawyers speak and write in English </li></ul></ul><ul><ul><li>India, like the U.S., is a constitutional democracy with similar political system </li></ul></ul>
    12. 12. India’s Differences are a Positive <ul><li>Wage disparity and adequate supply of skilled workforce </li></ul><ul><ul><li>Junior Indian lawyers $10,000-$30,000/year compared with $160,000/year average for associates in major U.S. cities </li></ul></ul><ul><ul><li>80,000 new lawyers produced every year and growing </li></ul></ul><ul><li>Time difference </li></ul><ul><ul><li>Night time in the U.S. is day time in India so U.S. lawyers can virtually work while they sleep. </li></ul></ul>
    13. 13. India’s Ultra Modern Facilities
    14. 14. The ABA on the Indian Lawyer <ul><li>“ High on the list of why a general counsel or partner should consider outsourcing his or her work to India. . .is the concept of the: Indian Lawyer: qualified lawyers in their own right, English-speaking and educated in a common law system.” </li></ul>The Indian Lawyer: Legal Education in India and Protecting the Duty of Confidentiality while Outsourcing , The Professional Lawyer, Vol. 18, Issue 3 2007.
    15. 15. Outsourcing the Right Types of Work <ul><li>Projects most suitable to outsource: </li></ul><ul><ul><li>Legal research </li></ul></ul><ul><ul><li>Due diligence document review and abstraction </li></ul></ul><ul><ul><li>Litigation document review and abstraction </li></ul></ul><ul><ul><li>Contract/lease review and management </li></ul></ul><ul><ul><li>Intellectual property services including: </li></ul></ul><ul><ul><ul><ul><li>Patent and trademark searching, patent drafting, patent research and mapping, IDS preparation and prior art summarization, etc. </li></ul></ul></ul></ul><ul><li>Focus on qualitative, highly skill-intensive legal services </li></ul>
    16. 16. Work Not Suitable for Off-shoring <ul><li>Matters which focus on the utilization of facts not just the harnessing of them </li></ul><ul><li>Matters requiring active negotiations </li></ul><ul><li>Matters involving local connections (political, etc) </li></ul><ul><li>Matters requiring decision-making (i.e. don’t substitute your decision-making role with the overseas attorney’s) </li></ul><ul><li>Work that does not pass export control test </li></ul>
    17. 17. Precautions When Outsourcing <ul><li>Malpractice and Ethical Issues </li></ul><ul><li>Attrition and Resulting Potential Conflicts of Interest </li></ul><ul><li>Cultural Gaps </li></ul><ul><li>Quality of Work Product </li></ul><ul><li>Export Control Issues </li></ul><ul><li>Uninterrupted Delivery of Legal Support Services </li></ul>
    18. 18. 4 Main Authorities on Offshore Outsourcing <ul><li>New York City Bar Opinion 2006-3 </li></ul><ul><li>San Diego County Bar Opinion 2007-1 </li></ul><ul><li>Florida Bar Opinion 07-02 </li></ul><ul><li>ABA Formal Opinion No. 08-451 </li></ul>
    19. 19. The Ethical Rules Still Apply <ul><li>“ Outsourcing does not alter the attorney’s obligations to the client, even though outsourcing may help the attorney discharge those obligations at a lower cost.” </li></ul><ul><li>San Diego Bar Opinion 2007-1 </li></ul>
    20. 20. How The Advantages of Offshoring Translate to Ethical Rules <ul><li>Better Quality </li></ul><ul><ul><li>Rule 1.1 (Competency) </li></ul></ul><ul><li>Reduced Response Time </li></ul><ul><ul><li>Rule 3.4 (expediting litigation) </li></ul></ul><ul><ul><li>Rule 1.3 (diligence) </li></ul></ul><ul><li>Work Overflow Management </li></ul><ul><ul><li>Rule 1.3 (diligence) </li></ul></ul>
    21. 21. Unauthorized Practice of Law <ul><li>Model Rule 5.5 </li></ul><ul><li>“ (a) lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction or, assist another in doing so.” </li></ul>
    22. 22. Lawyer-Supervised Legal Work Generally Not A Violation <ul><li>Paralegals may perform legal work under lawyer supervision </li></ul><ul><ul><li>Prepare legal memoranda </li></ul></ul><ul><ul><li>Draft contracts or pleadings </li></ul></ul><ul><li>Paralegal may not appear in court, take depositions, give independent legal advice, etc. </li></ul>
    23. 23. Duty to Supervise Non-Attorney Subordinates <ul><li>Model Rule 5.3 </li></ul><ul><li>Requires that “measures giving reasonable assurance that the person’s [non-attorney subordinate’s] conduct is compatible with the professional obligations of the lawyer.” </li></ul>
    24. 24. Applying the Duty to Supervise <ul><li>Ascertain prof. skills and experience level through background information on vendor’s personnel to be deployed on your matter </li></ul><ul><li>Inquire whether provider has done similar projects in the past, and demand writing samples and/or references </li></ul><ul><li>Review vendor’s internal work flow processes to determine level of internal review and oversight at the service provider’s end </li></ul><ul><li>Clearly set the scope of service provider’s work early in the engagement </li></ul><ul><li>Take adequate measures to inspect non-lawyer’s work to ensure quality </li></ul><ul><li>Start slow and test the service provider’s capabilities by giving controlled projects early on </li></ul>
    25. 25. How Legal Offshore Outsourcing Works for a U.S. Based Provider
    26. 26. Duty to Maintain Confidentiality ABA Model Rule 1.6 <ul><li>“ (a) a lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).” </li></ul>
    27. 27. Exceptions to the Rule of Confidentiality <ul><li>Client informed consent </li></ul><ul><li>Prevent death or bodily harm </li></ul><ul><li>Crime/fraud </li></ul><ul><li>Seeking Ethics Advice </li></ul><ul><li>Dispute over fees / services </li></ul><ul><li>Other law or court order </li></ul>
    28. 28. Applying the Duty to Maintain Confidentiality <ul><li>Ethics obligations in other countries can be different from those in the U.S. </li></ul><ul><li>Ensure legal outsourcing provider has strong U.S. presence, preferably a U.S. based company. </li></ul><ul><li>Ensure legal outsourcing provider operates according to U.S. confidentiality obligations </li></ul><ul><li>Ensure service provider employs managers who are U.S.-based attorneys who oversee the work product </li></ul><ul><ul><ul><li>Work product quality </li></ul></ul></ul><ul><ul><ul><li>Ethical obligations of managers </li></ul></ul></ul>
    29. 29. Applying the Duty to Maintain Confidences (continued) <ul><li>Explicit provision in retainer agreement with service provider creating obligation to preserve confidences and take adequate measures </li></ul><ul><li>Strictly limit service provider’s access to confidential information </li></ul><ul><li>Inquire in advance measures taken by the vendor to maintain security and confidentiality </li></ul><ul><li>Reiterate throughout the process that attorney-client privilege and attorney work-product doctrine apply </li></ul><ul><li>Obtain client’s informed consent in advance </li></ul>
    30. 30. Data Security <ul><li>Most information at issue in outsourced work will be transmitted electronically to the legal service provider </li></ul><ul><li>The sending attorney must ensure that the provider has the appropriate safeguards in place. </li></ul>
    31. 31. Data Security Safeguards <ul><li>Ensure all employees understand that confidentiality extends to ALL information </li></ul><ul><li>Utilize screening processes whereby confidential information is excised from what the employee has access to. </li></ul><ul><li>Vendor should have measures in place to prevent physical and/or electronic theft of information </li></ul><ul><ul><ul><li>Third party secure servers to host data </li></ul></ul></ul><ul><ul><ul><li>Secure facilities (locked doors, key cards, and ID badges) </li></ul></ul></ul><ul><ul><ul><li>Surveillance cameras </li></ul></ul></ul><ul><ul><ul><li>Recycling policies </li></ul></ul></ul>
    32. 32. Attorney-Client Privilege <ul><li>The attorney-client privilege protects communications between attorney or representative and client or representative </li></ul><ul><li>“ Made for the purpose of facilitating the rendition of professional legal services” </li></ul><ul><li>Revised Uniform Rule of Evidence 205 </li></ul>
    33. 33. Privilege Not Waived By Outsourcing <ul><li>The attorney-client privilege is not lost where a law firm shares privileged information with its associates, legal assistants, and secretaries. . . .nor, in this Court’s judgment, would the attorney-client privilege be lost if the law firm used an outside document copy service or hired an independent document copy service to copy privileged communications. </li></ul><ul><li>Compulit v. Banctec, Inc., 177 F.R.D. 410 (W.D. Mich. 1997)(discussing use of litigation services company) </li></ul>
    34. 34. Applying the Duty to Avoid Conflict of Interest <ul><li>Inquire into service provider’s conflict checking procedures and how it tracks work performed for other clients </li></ul><ul><li>Maintain accurate records of clients and matters on which the foreign attorneys have worked </li></ul><ul><li>Limit the foreign attorneys’ exposure to only those confidential materials necessary for the vendor to complete the actual assignment </li></ul><ul><li>To avoid the risk of imputed disqualification based on any conflicting work that the vendor may have undertaken, avoid any appearance of foreign attorneys “associated with” or “associated in” your firm </li></ul>
    35. 35. Duty to Reasonably Bill for Legal Support Services <ul><li>Billing legal support services as a direct expense: </li></ul><ul><ul><li>Charge actual cost plus law firm’s reasonable overhead involved with managing the outsourcing relationship </li></ul></ul><ul><ul><li>With outsourcing, this may mean charging only for time spent by the firm in delegating, reviewing, and supervising work </li></ul></ul><ul><li>Attorney can charge premium if billed as attorneys’ fees: </li></ul><ul><ul><li>Attorney vouches for overseas attorney’s work as his or her own and </li></ul></ul><ul><ul><li>Total fees charged are reasonable. Attorney applies the additional “value-added” service of analyzing such work product and drawing legal conclusions, i.e. rendering legal advice. </li></ul></ul>
    36. 36. Duty to Obtain Informed Consent from Client <ul><li>Local bars and state agencies conflict </li></ul><ul><li>ABA and most local and state bars follow the approach that a lawyer has a duty to obtain advance client consent before outsourcing legal work where: </li></ul><ul><ul><li>non-lawyer will play a significant role in the matter; </li></ul></ul><ul><ul><li>client confidences and secrets must be shared with non-lawyer; </li></ul></ul><ul><ul><li>client expects that only personnel employed by the law firm will handle the matter; or </li></ul></ul><ul><ul><li>where non-lawyers are to be directly billed to the client. </li></ul></ul>
    37. 37. What’s the Verdict? <ul><li>“ In sum, a lawyer is not prohibited from engaging the services of an overseas provider, as long as the lawyer adequately addresses the ethical obligations.” </li></ul><ul><li>FL Bar Opinion 07-02 </li></ul><ul><li>“ The outsourcing trend is a salutory one for our global economy.” </li></ul><ul><li>ABA Bar Opinion 08-451 </li></ul>
    38. 38. Embracing The Future – Practicing Law in a Global Environment <ul><ul><li>Over 200 corporate counsels surveyed from Fortune 1000 companies across 15 sectors </li></ul></ul><ul><ul><li>70% of companies dissatisfied with their primary outside counsel </li></ul></ul><ul><ul><li>Key factors causing dissatisfaction were law firms’ failure to: </li></ul></ul><ul><ul><ul><li>keep up with client’s changing needs </li></ul></ul></ul><ul><ul><ul><li>articulate the value they deliver </li></ul></ul></ul><ul><ul><ul><li>communicate well with the clients </li></ul></ul></ul>2005 BTI Consulting Group Survey (Massachusetts research and management consulting firm)
    39. 39. Thank You Puneet Mohey, Esq. pmohey@lexadigm.com 248.203.9777 x150 Mark Grobbel, Esq. [email_address] 248.203.9777 x230 30200 Telegraph Road, Suite 245 Bingham Farms, MI 48025 www.lexadigm.com
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