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Presentation to Eastern Michigan Chapter of ALSP

Presentation to Eastern Michigan Chapter of ALSP

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  • Now let’s talk about the unauthrized practice of law.

Transcript

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