request to rescind MD ethics opinion re: markups of contract attorneys

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November 6, 2018
Theresa Michael
Executive Assistant and Governance
Maryland State Bar Association
Committee on Ethics
BY EMAIL
Re: Request for Rescission of Ethics Opinion No. 1992-19:
Prohibition on Markup for Outside Legal Research
Dear Ms. Michael,
My name is Carolyn Elefant. I am an attorney in good standing with the bars of New
York, Washington D.C. and Maryland. I own the Law Offices of Carolyn Elefant, a boutique,
national energy law practice and PowerUp Legal, an online marketplace for on-demand
energy counsel. I am also creator of the blog MyShingle.com, the longest running blog on
solo and small law firm practice. As both an attorney who regularly relies on freelance
lawyer services in my practice and the owner of a company that matches freelance energy
counsel to law firms and in-house counsel, I write to urge the Committee to rescind Ethics
Opinion No. 1992-19 which prohibits Maryland lawyers from marking up the cost of
contract lawyers.
The quarter of a century old MSBA Opinion 1992-19 (“Maryland Opinion”) is
outdated and runs counter to the rise of the gig economy. By prohibiting attorneys from
making up the cost of contract attorneys, the Maryland Opinion removes any financial
incentive for attorneys to outsource legal work to freelance attorneys to the detriment of
cost conscious clients and mom-attorneys who often seek out contract work as a way to
achieve work-life balance. The Maryland Opinion is also out of step with ABA Formal
Opinion 93-379 and 16 other state ethics rulings that allow attorneys to mark up the cost
of freelance attorneys so long as the overall fee to the client is reasonable.
Up until a few months ago, the MSBA ethics opinions remained shrouded in practical
obscurity because they were inaccessible online and available only to MSBA members. As a
result, many Maryland attorneys, unaware of the prohibitions in Ethics Opinion 1992-19
may have assumed that the ABA Formal Opinion governed and unknowingly run afoul of

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Maryland’s ethics requirements. Now that the MSBA Ethics Committee opinions are readily
available online, lawyers who may have inadvertently violated this rule and marked up
freelance contractor charges may now find themselves the subject of ethics complaints by
former clients or colleagues who may now access this opinion. Therefore, it is imperative
for the MBSA Ethics Committee to formally rescind this opinion and remove any
uncertainty regarding lawyers’ ability to mark up the cost of freelance attorneys.
I. Summary of MSBA Opinion 1992-19: Billing for Outside Research Services
MSBA Opinion 1992-19 arose out of an inquiry made by a “professional legal
research organization that contracts with law firms” to provide research and writing
support services to lawyers only. The company described its services as “those of an
in-house law clerk or associate,” but are “contractual in nature” and performed offsite. As
relevant here, the legal research organization asked:
Is there any Rule of Professional Conduct that prohibits the law firm from
billing its client for the contract associate’s time at the same hourly rate that
it would charge if the attorney was a permanent associate in the firm?
In response, the MSBA Ethics Committee rotely recited Rule 1 of the Maryland Rules of
Professional Conduct which obligates lawyers to charge reasonable fees. The Committee
then opined, with little discussion or analysis that:
The law firm must determine that its overall fee, including additional cost
of the contractual services, is reasonable. The Committee feels that the law
firm may not bill the client for any amount greater than that which it
actually paid for the contractual services.
However,the Committee allowed that “the attorney may bill for his or her services that are
required in reviewing or using the contract services.”
The Maryland Committee offered little justification for its ruling except a vague
“feeling” that a law firm should not markup contractual services. A closer reading of the
Maryland Opinion suggests that the Committee may have been suspicious of contract
services which it characterized as “an additional cost to which the client might not have
consented” rather than as a lower-cost alternative to a permanent associate.

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As described below, the legal landscape has changed significantly since Maryland
issued its ethics opinion. Today, freelance lawyering arrangements are practically the rule
rather than the exception and are welcomed by most clients. But without the ability to
markup freelance services, attorneys have no incentive to use them. What follows is a brief
history of the rise of freelance lawyering along with an explanation of the economics of
this practice.
II. Background on Freelance Lawyers and the Rise of the Gig Economy
A contract or freelance lawyer is essentially a sub-contractor to the principal
attorney or law firm that has been retained by the client. Freelance attorneys do not have a
contractual relationship with the client. Instead, they provide services such as document
review, legal research and writing or court appearances to a principal attorney or firm in
furtherance of their representation of the client.1
The practice of using attorneys on a contract or temporary basis is not a new
phenomenon. Large law firms employed large teams of document review attorneys dating
back to the early 1990s if not earlier. But with the advent of the Internet, contract and
freelance services could be performed remotely. As a result, contract services grew
accessible to solo and small firm lawyers who previously may have lacked the ability to
accommodate a contract lawyer working onsite. Indeed, the agency that solicited the
Maryland Opinion was likely an early provider of remote contract lawyer services.
Economic and social trends also hastened the rise of freelance attorneys. As2
biglaw rates skyrocketed upwards, cost-conscious clients sought out more budget-friendly
alternatives - which many solo and small firms were able to handle through remote
freelance attorneys who cost less than permanent employees. Meanwhile, Gen-Y attorneys
entering the workplace sought more balance and were willing to trade 80-hour weeks at3
1
​See generally​, D. Little, ​Contract Lawyering: Benefits & Obstacles​, 37 Colo. Lawyer
61 (Jan. 2008).
2
​ See generally K. Ciano, ​Loving the F-Word: Freelancing is Part of the New Normal​,
(January - February 2016)(describing history of the growth of freelance lawyering).
3
L. Gordon, Midcareer Malaise (September 2008) online at
http://www.abajournal.com/magazine/article/midcareer_malaise​ (describing GenY’s
prioritorization of worklife balance).

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biglaw for flexible freelance opportunities. These developments coincided with the rise of
the gig economy and birthed companies like Montage Legal, Hire an Esquire, Law Clerk and
more that match freelance lawyers with law firms in need of assistance. In short, a4
thriving ecosystem with benefits for cost-conscious clients and parents who practice has
emerged across the country. But Maryland’s ethics opinion prohibiting markups prevents
Maryland lawyers and clients from availing themselves of these promising developments.
II. The Economics of Freelance Lawyering
To fully comprehend the deleterious impact of the Maryland Opinion on the legal gig
economy, it is necessary to understand the economics of small firm law practice and
freelancing. Traditionally, law firms have been permitted to mark-up associate salaries to
recover the cost of overhead (salary, benefit, office space, malpractice) and generate profit
for the firm. Thus, we think nothing of a law firm paying a first year associate a salary of
$100,000/ year (or the equivalent of $46/hour based on a 45-hour work week 48
hours/year) and billing clients $200/hour for the associates time (which amounts to
$280,000 for the firm based on a 1400 hour billing requirement).
By contrast, freelance attorneys hired on an as-needed basis do not require the same
amount of overhead. But even so, freelance attorneys do not come without cost. For
starters, a firm relying on freelancers must secure additional malpractice insurance to
cover the work performed by the freelancer. The hiring firm also bears the risk of
non-payment because it remains obligated to compensate the freelancer for services
rendered even if the client disputes the firm’s bill or refuses to pay.
Finally, the reason that most solo and small firms have overflow work to begin with
is because of considerable investment of time and resources in marketing. Without the
ability to markup contract fees, an attorney could effectively invest money in marketing
and come away without any profit. Consider the table below:
4
​See C. Elefant, Pros & Cons of Using Freelance Attorneys, Above the Law, (Jaunary
2018), online at
https://abovethelaw.com/2018/01/the-pros-and-cons-of-using-freelance-attorneys-persp
ectives-from-a-hands-on-user/?rf=1​ (listing freelance companies).

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Table 1.1 Comparison of Return on $2500 Attorney Investment in Conference Under
Different Freelance Scenarios:
Scenario Attorney Client Comment
Attorney handles appeal
resulting from conference.
$300/hr * 66 hours =
$20,000 fee
Pays $20,000 Attorney recovers $20k for
$2500 investment. Traditional
solo biz model.
Attorney unavailable for
appeal until 5 days before
deadline but does not hire
freelancer.
$300/hr * 66 hours =
“20,000 fee
Pays $20,000 but receives
substandard product &
no opportunity to review.
Attorney recovers $20k for
$2500 investment but client
leaves bad review and loses
appeal. UNSUSTAINABLE.
Attorney unavailable for
appeal until 5 days before
deadline. Hires freelancer
w/10 yrs biglaw experience.
NO MARKUP.
Attorney pays freelancer
$75/hr * 66 hours =
$4950.
Billed $4950 Attorney effectively spent $2500
and gained zero. Good deal for
client UNSUSTAINABLE for
lawyer. Freelancer benefits from
project..
Attorney unavailable to
handle appeal until 5 days
before deadline. Hires
freelancer w/10 yrs. Biglaw
experience. ​MARKUP OK.
Attorney pays freelancer
$4950; bills client $200/hr
* 66 hours = $13,200
Client pays $13,200 for
excellent product.
Attorney recovers $8250 from
markup but is also freed up to
take another matter once
original matter is complete.
Client pays less. Freelancer
benefits from project​. WIN
WIN!!
The scenarios depicted in the table above show that mark-ups are a win-win for
small firm lawyers (by rewarding them for marketing investment), clients (by yielding
lower rates) and freelance attorneys (by providing them with work). These outcomes are
corroborated by my own experience. By relying on freelance lawyers, I have been able to
operate a sustainable practice for almost 25 years while representing clients involved in
complex energy regulatory and constitutional matters at rates that are 30-40 percent less
than the large firms that I often face. Meanwhile, my freelance placement service, PowerUp
Legal has helped find work for older lawyers downsized from their law firms and female
attorneys seeking to return to the workforce after taking time off to have children. Yet few
of the firms that have hired these PowerUp Legal attorneys would do so absent the ability
to mark-up their fees.

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III. The Maryland Opinion Is A Minority Position
Not only is Maryland’s prohibition on markup of contract attorneys out of step with
today’s economy and detrimental to both clients and female attorneys who
disproportionately comprise the ranks of freelancers, but it is also a minority view. The
ABA blessed the use of markups on freelance fees in ABA Formal Opinion 00-420 so long
as the overall charges to clients were reasonable. The ABA reaffirmed Formal Opinion
00-420 in a later decision, Formal Opinion 08-451 which required lawyers to disclose to
clients the use of contract attorneys though not the amount of the surcharge. Formal
Opinion 08-451 explained:
In Formal Opinion No. 00-420, we concluded that a law firm that engaged a
contract lawyer could add a surcharge to the cost paid by the billing lawyer
provided the total charge represented a reasonable fee for the services
provided to the client. This is not substantively different from the manner in
which a conventional law firm bills for the services of its lawyers. The firm
pays a lawyer a salary, provides him with employment benefits, incurs office
space and other overhead costs to support him, and also earns a profit from
his services; the client generally is not informed of the details of the financial
relationship between the law firm and the lawyer. Likewise, the lawyer is
not obligated to inform the client how much the firm is paying a contract
lawyer; the restraint is the overarching requirement that the fee charged for
the services not be unreasonable.
Of the jurisdictions that have addressed markups of freelancer fees, all permit this
practice with the exception of Texas.5
5
​See ​Va. Legal Ethics Op. 1712 (July 22, 1998); Va. Legal Ethics Op. 1735 (Oct. 20,
1999); Va. Legal Ethics Op. 1850 (Dec. 28, 2010); 2007 N.C. Formal Ethics Op. 12 (Apr. 25,
2008); Fla. Ethics Op. 07-2 (Jan. 18, 2008); Fla. Consol. Ethics Ops. 76-33, 76-38 (Mar. 15,
1977); Ala. Ethics Op. RO-2007-03 (May 18, 2007); Alaska Ethics Op. 96-1 (Jan. 13,
1996);Cal. Formal Ethics Op. 1994-138; Colo. Formal Ethics Op. 105 (May 22, 1999); D.C.
Ethics Op. 284 (Sept. 15, 1990); Ga. Formal Advisory Op. 05-9 (Ga. Sup. Ct. Apr. 13, 2006);
Ill. Advisory Op. on Prof'l Conduct 92-07 (Jan. 22, 1993); N.H. Formal Op. 1995-96/3 (Nov.
8, 1995); N.Y. City Formal Op. 1989-2 (May 10, 1989); N.Y. State Ethics Op. 721 (Sept. 27,
1999); Ohio Advisory Op. 2009-6 (Aug. 14, 2009); Pa. Informal Op. 97-20 (Sept. 19, 1997);
Phila. Ethics Op. 2010-4 (May 2010); S.C. Ethics Advisory Op. 91-09 (July 1991); S.C. Ethics
Advisory Op. 96-13 (1996)​.

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IV. Conclusion
When the MSBA Ethics Committee issued Opinion 1992-19 over a quarter of a
century ago, the legal profession was a very different place than it is today. With the
advent of the Internet and cloud-based law firm technology along with the rise of the gig
economy, lawyers offer clients superior legal service at lower cost while providing
meaningful and lucrative professional opportunities for talented female lawyers who
years ago had no option but to leave the law entirely to spend time with family. I urge the
MSBA Ethics Committee to rescind the now outdated Ethics Opinion 1992-19 and bless
the practice of allowing lawyers to mark up freelance attorney fees as permitted by the
ABA and 16 other states. Thank you for your consideration of this matter.
Respectfully submitted,
Carolyn Elefant