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Can a Single Fee Agreement Combine Flat Fees and Hourly Fees?

In flat fee cases, sometimes the attorney wins and sometimes she loses. But sometimes an attorney stands to lose much more badly than others. Take a family law or immigration matter, for example, where the client is represented on a flat fee and then commits a criminal law violation. May a fee agreement specify that work beyond a specified scope be billed at a flat rate? In other words, may a lawyer combine flat fee work and hourly work in a single fee agreement? A rigorously scientific survey conducted over lunch (n=6) suggests the answer is no. (In other news, the bánh xèo – Vietnamese savory pancakes – at Long Provincial are outstanding.) Several experienced colleagues, who regularly use flat fees, all believed that a single agreement may not combine a flat fee with hourly engagements. We’ll call these “combined fee agreements.”

The survey results caused me to panic, since I’ve been using combined fee agreements in two ways:

  1. Multi-stage cases. We’re an immigration firm. Bringing our foreign clients into the U.S. generally involves a multi-stage process: initial petition followed by application to the U.S. State Department. Because the second step involves substantial variance from case-to-case, we often bill the first step on a flat-fee basis and the second step hourly.
  2. Hedging. We also use combined fee agreements to plan for the possibility a case will become more complex than anticipated. These cover primarily new factual scenarios such as criminal violations by clients and changes in law. “Oops we didn’t realize this was a tough case” is emphatically not a basis for kicking-in hourly billing.

If you too use combined fee agreements, however, there is no cause for panic. In fact, Comment 16 to RPC 1.5 explicitly acknowledges that combined fee agreements are permissible, subject to red tape. Here’s what you need to keep in mind.

 

[This post first appeared as a guest piece for the Washington State Bar Association's Side Bar blog]

Lessons from a Legal Tech Startup: One Month as a “Lawyer in Residence” at Clio

Desk photo provided by Clio
Desk photo provided by Clio

This February, I headed up to Vancouver, B.C. to have a kid and spend some time as a “lawyer in residence” at the legal technology startup Clio. Regarding objective number one: my wife is a psychologist who practices part-time in B.C., and we decided free healthcare for the new baby sounded pretty good. Joshua Lenon, who serves on the WSBA Future of the Legal Profession Task Force, heard about the trip and offered to let me pilot Clio’s new incubator initiative. Essentially, Clio generously invites attorneys to share coworking space at their office. In exchange, Clio gets to benefit from bouncing ideas off lawyers who use their product.

Clio, for the uninitiated, is a cloud-based law practice management platform. Originally, they started as a collaborative project with the Law Society of British Columbia. After later spinning off as a private enterprise, Clio raised an astounding $27 million in venture capital, making it the most well-financed legal technology startup in the world.

The product offers an all-in-one solution for calendaring, invoicing, and communication/document management. Crucially (from my perspective), it provides a secure environment to exchange documents and messages with clients anywhere they can get an Internet connection. Full disclosure: I’m an avid Clio user and find it integral to the operation of my firm, but Clio hasn’t given me any carrots for writing this blurb.

Spending the better part of a month at Clio was an interesting window into the caffeine-fueled world of a tech startup. (To bring employees back down, there’s also a keg on tap.) Here are a few thoughts about how lawyers might borrow from the way Clio works.

1. Track personal and organizational goals. Like another small tech startup called Google, Clio uses “Objectives and Key Results” (OKRs) for all employees and divisions within the organization. The key idea behind OKRs is to set measurable targets so everyone can meaningfully judge success or failure. Teams and individuals set both actionable objectives (stuff they want to do) and measurable results (stuff they want to see happen). The OKRs are a big deal at Clio. They’re revised on a quarterly basis and organizational OKRs are reviewed weekly at a companywide meeting. (Which meeting, it should be noted, comes with a catered lunch that may or may not involve beer on tap).

  • Take-away: Lawyers often have laudable goals like, “Do great work for clients,” “Deliver value,” or “Grow my firm.” What does that even mean? Unless we set measurable goals for ourselves, we are guaranteed to neither succeed nor fail. If client satisfaction is the issue, put together a poll (use a freebie like Google Forms) that measures the operationalized version of that concept, and set a goal for improvement. Maybe your poll will reveal clients are already highly satisfied and you can set other priorities. If you want to think really big: what would happen if we stopped talking about “increasing diversity in the profession” and “improving access to justice,” and restated our goals in terms where success or failure is measurable? Maybe lawyerdom itself needs some OKRs.

2. Have priorities — and know what they are, too. Last year, on another trip to Vancouver, I sat down with Derek Rawlings and some folks from the software development team. I (selfishly) pointed out that it would be helpful if Clio could draft immigration forms based on questionnaires. Derek immediately understood the value, and riffed on how the concept could work for other form-driven practice areas like bankruptcy. But when I came back to Clio this year, nothing had happened to make that feature a reality. Why? “The Clio dev team keeps a database that currently has 3,203 improvements that we want to add to our product,” says Derek. “Each quarter we sit down as a team and decide which feature we’re going to launch, based on how big of an impact it will make for our users.” In the technology world, says Derek, “it’s better to get one thing 100% done than four things 25% done.”

  • Take-away: We lawyers have drunk the Kool-aid of the busyness cult. Being perceived as nauseatingly busy is some sort of credibility ante in our circles. Has a colleague ever responded to, “How are you doing?” with an enthusiastic, “Great! I’m really limiting my involvement in unimportant committees and I’m turning away most prospective clients to avoid undue stress.” Instead of focusing on doing a lot of stuff in our firms and our professional lives, what if we shifted to doing the right things? And maybe fewer of them. There are a million professional development activities you could do, but how do they stack up to your personal objectives? You did define them, right (see above)? I found myself inspired to say “no” to recent invitations to do some committee work, and have spent precisely zero seconds regretting those decisions. Thanks, Derek.
Clio employee walking white dog in lobby
Clio employee walking white dog in lobby

3. Institutionalize out-of-box thinking. Over lunch, I asked Neil Shankman, who heads marketing at Clio, to explain the difference between the marketing and business development departments. “At Clio,” he explained, “our Biz Dev department exists to pilot new ways we can build the Clio brand. So, for example, the fact that you’re here, testing out the incubator concept, that’s a Biz Dev initiative. Once the program is established it will be handed over to another department and Biz Dev will be working on something else new and interesting.”

  • Take-away: Think about carving out some of your time/money resources to pursue far-out ideas. Last year a bunch of law geeks, led by Dan Lear, threw a lot of energy into Seattle’s first Legal Technology Startup Weekend. None of us really had a clear idea of what was supposed to come of the event — it just seemed like a good idea at the time. But interesting projects and relationships resulted. (Miguel Willis, for example, an exceptionally motivated and creative law student at Seattle University created an app to help law students buy and sell textbooks). Think about reserving some resources in your organization and professional life for totally new things that will probably be a waste of time, but might open new doors.

4. Open lines of communication. The Clio office is built physically and operationally to facilitate cross-pollination of ideas within the organization. All employees, including CEO Jack Newton, work in an open-plan office, sitting collectively at long desks. (There’s debate about whether open design facilitates or hampers productivity).The company uses Google Apps (me too) for email and calendaring, and employees use the chat function for quick real-time exchanges. And every Friday, the company takes a big chunk of time to sit down together in a community meeting. Each department checks in and reviews its OKRs (see above) in front of the whole company; each month, the CEO gives a more granular presentation on where the company stands.

  • Take-away: What are you doing to make sure you hear the best ideas from everyone in your organization? At my own tiny firm, we have a Trello board where ideas for improvements can be posted, and we’ve instituted a policy of reviewing the board each Tuesday morning. Chances are that support staff and associates are best positioned to know where an organization is ineffective day-to-day.

Open invite (by proxy). If you find yourself visiting Vancouver, consider stopping by the Clio office and taking advantage of their incubator program. It’s a great place to hang out (and maybe work), and there is a lot that lawyers can learn from the legal technology sector. And regarding the main purpose for that trip to Vancouver: Kai McLawsen was born healthy and strong on March 7. He’s already hard at work at his dad’s law firm.

[This post first appeared on the Washington State Bar Association's Sidebar blog]

Free and low cost technology for starting a law firm

Free and low cost technology for starting a law firm

These materials outline some basic ideas for how free and low-cost technology can help you manage the day-to-day operations of your law practice. The tools described here are appropriate for the technology phobic and computer-impaired.  These are tools to make your life easier and your practice more successful, not toys for geeks. The ultimate criterion for these tools is easy: do they improve your practice? If the answer is no, trash them and spend your time elsewhere.

Social media ethics: 5 things to worry about and 6 red herrings

Social media ethics: 5 things to worry about and 6 red herrings

Social media marketing presents genuine ethical challenges for attorneys. But there are also plenty of non-issues. This is an attempt to separate some of the former from the latter. These materials were prepared for Business Development 101 Tools and Techniques to Build a Successful Law Practice (Seattle University School of Law, 2014)

A primer on the ethics of legal process outsourcing (LPO)

Solo and small firm practitioners are faced with tough choices as their practices grow. As demands increase, the traditional answer is to add a part time general assistant. The part time assistant becomes a fulltime employee, and more staff follow. With employees come huge responsibilities for the firm, including training, supervision, tax and regulatory compliance, and liability. So before turning reflexively to in-office staff, the contemporary practitioner should be sure to consider all her options.

This paper may be downloaded free of charge here


 

Introduction

Solo and small firm practitioners are faced with tough choices as their practices grow. As demands increase, the traditional answer is to add a part time general assistant. The part time assistant becomes a fulltime employee, and more staff follow. With employees come huge responsibilities for the firm, including training, supervision, tax and regulatory compliance, and liability. So before turning reflexively to in-office staff, the contemporary practitioner should be sure to consider all her options.

There are now a myriad of opportunities to take tasks traditionally performed within the walls of a law firm, and delegate these to independent service providers elsewhere. Outsourcing generally refers to “the practice of taking a specific task or function previously performed within a firm or entity and, for reasons including cost and efficiency, having it performed by an outside service provider.”[1] By 2010, India had in the neighborhood of 110 “legal process outsourcing” (LPO) providers, with the field growing at approximately 40 percent annually[2] or perhaps even faster.[3] This article discusses the many ethical considerations – none of them insurmountable – that come with this still-developing territory.

In its September 2001 report, the ABA Commission on Ethics 20/20 concluded that existing ethics rules provide adequate structure for addressing attorneys’ ethical responsibilities when outsourcing.[4] Issues relating to attorney use of LPO have been considered by ethics boards in Colorado, Florida, Los Angeles County, New York City, North Carolina, Ohio, and San Diego, as well as the American Bar Association.[5] Each has concluded that use of LPO is allowed by the rules of professional responsibility, so long as certain safeguards are taken.

The core principle at the heart of ethics issues concerning outsourcing is this: the attorney choosing to outsource work has ultimate responsibility for her work and this cannot be delegated. The remaining discussion amounts to details about how to ensure that the attorney remains at the helm in a representation. Outsourcing also raises the specter of tort liability for a firm delegating work, but that topic is beyond the scope of this article.[6]

This article offers practical advice for how an attorney may ethically utilize legal process outsourcing. Section II briefly explains some of the possible benefits of using LPO. Section III presents the many ethical issues that arise from LPO generally, and suggests steps to address each possible issue. Section IV identifies the additional ethical issues that arise from use of foreign LPO providers.

Potential Benefits

It is helpful to distinguish between domestic and foreign LPO. Domestically, firms may source work to “contract lawyers”[7] or to other professionals such as independent paralegals. Contract lawyers may perform legal research, review discovery material, or make court appearances.[8] Practitioners may be surprised to learn that even technological service providers – such as cloud storage businesses – may be governed by the same rules that apply to LPOs.[9] Foreign LPO firms provide both “objective” services, such as document management and review, transcription and legal research, as well as “subjective” services, such as brief writing and developing case strategies.[10] One LPO provider in India has crafted briefs for the U.S. Supreme Court and federal appeals courts.[11]

The leading reason law firms turn to legal process outsourcing is cost savings. Especially with foreign LPO providers, firms may be able to capture substantial benefit from labor arbitrage. Providers in India can perform legal services at a 20-60% cost savings compared to U.S. firms.[12] Document review services, for example, may be priced around $20 per hour,[13] and legal research around $60-80 per hour.[14]

Labor cost is only one possible benefit. Outsourcing can also allow a small law firm to take on work that would normally be outside its capacity or expertise:

A small firm might not regularly employ the lawyers and legal assistants required to handle a large, discovery-intensive litigation effectively. Outsourcing, however, can enable that firm to represent a client in such a matter effectively and efficiently, by engaging additional lawyers to conduct depositions or to review and analyze documents, together with a temporary staff of legal assistants to provide infrastructural support.[15]

Similarly, a small firm’s work quantity may be subject to higher short-term variations than a larger firm, where fluctuations in volume are more readily absorbed. Outsourcing can allow a small firm to quickly scale-up its capacity in response to increased demand.

Because of the time differences between the U.S. and Asian nations, law firms may capture “time efficiencies” by having work performed outside U.S. business hours.[16] A U.S. attorney could identify a legal issue late in the work day, pass it along to a colleague in India, and have the work product waiting on his desk in the morning.

Ethics issues – LPO generally

This section discusses each ethics rule that comes into play when a law firm seeks to use LPO. Citations are provided to the American Bar Association’s Model Rules of Professional Conduct (“Model Rules”), which serve as the model for most state bar associations’ ethics codes. [17]

Competence

Model Rule 1.1 requires that an attorney provide competent representation, which requires “the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.”[18] Work performed on a client matter by an LPO provider must ultimately contribute to a “competent” representation. One ethics body has opined that “a lawyer must take reasonable steps to determine that the non-lawyer assistant is competent.”[19] But this statement is potentially misleading. No ethics violation obtains if a non-lawyer performs work that would be incompetent by standards to which an attorney would be held, or even if it falls short of the standards in the non-lawyer’s profession. A lawyer, for example, has not committed an ethical breach if he receives (and rejects with criticism) a poor legal memo from a law clerk. Rather, the representation ultimately provided to the client must be competent, as must be the legal fee.

Practically speaking, the measures required of an attorney arise from the responsibilities to supervise attorney and non-lawyer staff.[20] Precisely what this requires is discussed below with regard to an attorney’s supervisory duty.[21]

Disclosure to Client

Model Rule 1.4 requires an attorney to “reasonably consult with the client about the means by which the client's objectives are to be accomplished.”[22] Ethics bodies have generally concluded that this rule requires an attorney to inform the client when part of a representation will be outsourced.[23]

The Ohio ethics board reasons: “For some clients, a lawyer’s or law firm’s decision to outsource legal or non-legal support services may be a deciding factor in whether or not to engage the services of the lawyer or the law firm.”[24] Although a client need not be informed of how legal work is delegated within a firm, the ABA has reasoned that a client must be informed if work is sourced outside the firm to service providers over whom the attorney has no direct control.[25]

An ethics opinion by the San Diego Bar Association considered this issue where a two-attorney litigation firm agreed to defend a complex intellectual property dispute.[26] Because the matter was outside their area of legal expertise, the attorneys – without informing their client – paid an India-based firm to perform most of the legal research and writing for the matter. The services were billed to the clients at cost under broad categories such as “legal research” and “preparation of pleadings.” The client discovered the outsourcing only after asking why the representation had been so inexpensive. The Bar Association concluded that the client reasonably could have expected the work to have been performed within the firm, and the attorney therefore should have secured advance approval for the outsourcing.[27]

The New York City bar takes the minority view that disclosure is not per se required.[28] Instead, disclosure is required, for example, if one of these factors is present:

(a) non-lawyers will play a significant role in the matter, e.g., several non-lawyers are being hired to do an important document review; (b) client confidences and secrets must be shared with the non-lawyer, in which case informed advance consent should be secured from the client; (c) the client expects that only personnel employed by the law firm will handle the matter; or (d) non-lawyers are to be billed to the client on a basis other than cost, in which case the client’s informed advance consent is needed.

Likewise, the Los Angeles County Bar – applying a California ethics rule that differs from its Model Rule counterpart – opines that a client must be informed only if use of an LPO constitutes a “significant development” in the representation.[29]

The safest view is most certainly to disclose use of LPO providers. As discussed below, the rules governing release of confidential client information probably also require a client to give informed consent to use of an LPO.

Confidentiality

Model Rule 1.6 prohibits an attorney from revealing information “relating to the representation of a client” absent informed consent or implied authorization from the client.[30] There are at least two distinct confidentiality concerns.

First, the attorney must have authorization to disclose information to the LPO. Virtually any use of an LPO will involve sharing information falling under Model Rule 1.6,[31] so its disclosure must be either impliedly or expressly authorized by the client. The prevailing view is that an attorney must secure informed consent to release confidential information to an LPO provider.[32] The Ohio ethics board rejects the notion that an attorney has implied authorization to share client information with an outsourcing provider, since “confidentiality is a hallmark of the attorney client relationship,” and the client is therefore justified in believing her information will remain within the law firm.[33] Likewise, the ABA has opined that a client impliedly consents to disclosure of information with contract attorneys working within a firm, but concludes that the more attenuated supervision and control makes LPO providers qualitatively different.[34] As the Colorado Bar Association has put it, there is no “convenience” exception to Model Rule 1.6.[35]

Second, the attorney must take steps to ensure client information is not disclosed by the LPO provider.[36] At the minimum an LPO provider should be required to sign a confidentiality agreement.[37] This agreement should require that the staff understand and adhere to U.S. confidentiality rules and outline the procedures the LPO provider will use to safeguard client information.[38] Further measures an attorney may take include:[39]

  • Release no more client information than necessary.
  • Periodically remind the LPO of confidentiality rules.

For foreign service providers the situation is far more complex as discussed below.

Conflicts of interest

Under Model Rule 1.8, attorney conflicts of interest are imputed to members of the same law firm.[40] “Firm” is defined by reference to traditional organizational models of law practices, such as a partnership.[41] Considering that an LPO provider operates beyond the organizational structure of the outsourcing firm, it is somewhat unclear what legal rule governs conflicts from the standpoint of the LPO provider.[42] The Model Rules define what constitutes a conflict of interest for an attorney, but not for a third-party non-lawyer. Further, a non-lawyer’s conduct must only be compatible with – not adherent to – the Model rules.[43] Ethics boards have generally failed to articulate a standard for assessing conflicts of interest among LPO providers.[44]

The New York Bar appears to take the view that an impermissible conflict exists if the LPO is currently – or has in the past – performed work for any adverse party.[45] Such a rule would be far narrower than conflict standards governing lawyers and law firms.[46] The ABA advises that the LPO provider must not work for adversaries of clients “on the same or substantially related matters.”[47] This language invokes the legal standard applicable to duties owed to former clients: an attorney cannot represent a new client in “the same or a substantially related matter” to the former client’s representation.[48] Other ethics bodies are far vaguer. One commentator takes the view that it may be possible for an LPO provider to work for both sides in a contested matter, so long as screens were established to segment each side’s information.[49]

Leaving aside the frustrating vagueness in what constitutes a conflict with respect to the LPO provider, commentators and ethics bodies agree that attorneys have a duty to take steps to avoid such conflicts.[50] Doing so may be as straightforward as simply asking the LPO provider if it has represented the other parties in a matter.[51] At least one commentator takes the dim view that it is “nearly impossible to screen for conflicts” with foreign LPOs,[52] by which he appears to mean impossible by the standards applicable to a firm itself. Yet it appears something less is required when screening conflicts for the LPO provider.

Apart from the need to screen for conflicts of interest as such, it may jeopardize the security of client information if an LPO provider has a motive to share the information with another party, creating an issue under Model Rule 1.6.[53]

Supervisory responsibility

Under Model Rules 5.1 and 5.3, an attorney has the responsibility to require ethical conduct of lawyers and non-lawyers under the attorney’s supervision. For lawyers, the attorney must take reasonable efforts to ensure their conduct “conforms” to the Model Rules;[54] for non-lawyers, the attorney must take reasonable efforts to ensure their conduct is “compatible with” the Model Rules.[55] With both lawyers and non-lawyers, a supervising attorney has committed an ethics violation if she orders or ratifies conduct that constitutes a rule violation.[56]

The supervisory responsibilities of an attorney
Who is being supervised? Supervision required: Supervisor responsible for ethics violation:
Lawyer “shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct” “the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved”
Non-Lawyer “shall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer”

 

Model Rule 5.3 deploys a very slippery legal rule. What does it mean to require a non-lawyer to act “compatibly,” though not “conform to,” the Model Rules? The Model Rules of Judicial Conduct contain a similar requirement for supervision of non-judicial staff,[57] but ethics bodies do not require court staff to adhere to the full rigors of judicial ethics as though staff were themselves judges.[58] The Los Angeles Bar Association opines, “the attorney must review the brief or other work provided by [an LPO provider] and independently verify that it is accurate, relevant, and complete, and the attorney must revise the brief, if necessary, before submitting it ...”[59] Though this seems agreeable enough, on close scrutiny it is difficult to identify precisely what this supervision would require.

Consider the following analogous situation. Commentators have long raised concerns that law clerks to U.S. Supreme Court justices may co-opt the decisional power of the justice.[60] This might occur overtly, as would be the case if a justice simply delegated an opinion to a clerk without any review, but may also occur covertly, as would be the case if the clerk turned in a slanted review of existing case law. The former is obviously problematic, and likewise an attorney may not simply sign-off on a brief drafted by an LPO provider.

Short of independently reviewing all law incorporated into a brief – largely obviating the point of delegating that work[61] – how does a Supreme Court justice or outsourcing attorney assure herself of the accuracy of legal work? Ethics bodies have not examined this question, and have been satisfied to opine only that some review and supervision is required. The practitioner should be adequately protected by adhering to the safeguards described below.

The supervisory duties highlight the core ethics concern with outsourcing: the attorney’s ultimate responsibility for a representation. Ethics bodies have agreed on certain measures that must be taken by the outsourcing attorney to provide adequate supervision.[62] The outsourcing lawyer should:

  • Review background information about the firm (such as industry reputation);
  • Review a sample of the firm’s work product that is comparable to the project at hand;
  • Review the resumé of the non-lawyer, assessing educational backgrounds.
  • Conduct reference checks and investigate the background of the non-lawyer.
  • Interview the lawyers involved;
  • Obtain background information about any intermediary engaging the non-lawyer.
  • Interview supervisors to be involved on the project.
  • Review ethical standards with individuals who will perform work and incorporate the ethical standards into the terms of the contract with the firm.
  • Ensure the non-lawyer understands the assignment at hand.
  • Set clear expectations about how the project will be discharged.

An ABA advisory opinion – after endorsing many of the factors set forth above – suggests more strenuous safeguards that may be taken by a firm. The ABA recommends:

  • Investigate the security measures in effect in the provider's premises, including its

computer network and refuse disposal systems; and

  • Depending on the circumstances, it may be prudent to conduct an on-site visit in order to get an impression of the professionalism of the lawyers and non-lawyers involved.[63]

The Ohio ethics board correctly opined that adherence to all of the ABA safeguards would be “onerous,” especially for a small firm outsourcing little work.[64] The legal standard in Model Rules 5.1 and 5.3 requires reasonable efforts, and it is difficult to see why reasonable diligence requires a solo practitioner to fly to Mumbai before asking for help on an appellate brief.

The LPO’s inevitable reliance on technology systems – to store and share files and to communicate, for example – adds substantial complexity. An attorney owes a duty of due diligence when selecting third-party technology providers.[65] In application this is quite complex, requiring analysis of technical specifications.[66] The ABA has opined that, “[d]epending on the sensitivity of the information being provided to the service provider, the lawyer should consider investigating the security of the provider’s premises, computer network, and perhaps even its recycling and refuse disposal procedures.”[67] This suggests an attorney would need to examine the provider’s technology systems as though the attorney herself were using them. Such a measure is almost certainly beyond the means of a small law firm with limited reliance on a LPO provider, so it is difficult to see how the measure could be “reasonably” required.

Firms may feel pressure from clients to limit their investment in supervision to trim the bottom line cost of representation.[68] But this sort of pressure is not unique to outsourcing: for any legal task an attorney must balance the need to do a complete and competent job against the desire to accomplish it as efficiently as possible.

Ultimately the practitioner should be protected by following the general safeguards suggested below. The elaborateness of the safeguards also depends on the scale of work at issue. The New York City Bar Association has advised what one commentator refers to as a “sliding scale of supervision… the ambit of tasks that an attorney may delegate to non-lawyers should be commensurate with the degree of supervision that the attorney provides over the work of the non-lawyers[69]

Reasonableness of Fees

Model Rule 1.5 requires that any legal fee billed to a client be reasonable. LPO providers typically bill attorneys a set amount for a specified service and indeed, other fee structures could violate the prohibition on fee-splitting with non-attorneys.[70] The cost of LPO services may be passed on to clients in at least two ways, and the method makes a difference.

First, the LPO service may be billed to the attorney’s client as an expense item.[71] If structured this way, ethics bodies generally agree that the client may be billed only for the actual cost of the service plus a share of the firm’s overhead expenses.[72] Yet the ABA seems to suggest the client may be billed only for overhead costs associated with providing the LPO services, which “may be minimal or nonexistent.”[73] The Los Angeles County bar association holds that a firm may add a markup when passing the cost of an LPO service, but must disclose this markup to the client.[74]

Second, it may be permissible for an attorney to wrap the cost of outsourcing into a sum billed as a legal fee, subject only to the ultimate reasonableness requirement. This approach is appealing to a firm which may take the benefit of the labor arbitrage, or elect to pass some or all of the cost savings to the client. The New York City Bar rejects this approach on the view that work by a non-lawyer is per se not a legal service.[75] The Ohio ethics board opines that billing LPO costs as a legal fee may be permissible, but that best practices call for billing separately as an expense plus a reasonable share of overhead.[76]

Marketing

Model Rule 7.1 forbids an attorney from making false or misleading statements regarding her services.[77] Could a firm’s marketing materials be misleading by failing to disclose that a firm outsources some of its work? Because of the varied training and qualifications of legal professionals in other countries, a firm will want to be careful about how it represents those qualifications to clients.[78] No known ethics opinions have addressed this issue.[79]

Further, Model Rule 7.5, governing representations about a law firm’s name, requires that such representations not be false or misleading.[80] Does a firm misrepresent itself if outsourcing attorneys do some or all of the firm’s legal work? The ABA has opined that Model Rule 7.5 implies that clients are entitled to know who is responsible for their representation.[81] But the best view is that the firm’s name need not reflect its choice to outsource, since it is the firm’s attorneys who shoulder responsibility for the representation.[82]

Special Considerations for Foreign Service Providers

It is inaccurate to say simply that “the location of the non-lawyer assistant is irrelevant.”[83] As discussed in this Section, use of foreign LPO providers adds additional ethical complexity.

Supervision

Jurisdictions to consider the issue have disagreed about whether to treat a foreign attorney as a lawyer 5.1 or non-lawyer for purpose of determining the duties of a supervisor.[84] It appears that the prevailing view[85] – and the more conservative approach for practitioners – is to treat the foreign attorney as a non-lawyer.

The San Diego Bar Association has recommended that the following factors be used to assess the level of supervision required for a foreign lawyer:[86]

  • Whether the non-attorney may be disciplined or terminated for improper conduct;
  • Whether the non-attorney's compensation can be adjusted for poor performance by the non-attorney;
  • Whether the non-attorney has been educated and/or trained in any way by the attorney;
  • Whether the attorney has the ability to review the non-attorney's work ethics and practices;
  • Whether the attorney regularly provides input to the non-attorney on his/her performance; and
  • Whether the attorney has the ability or discretion to restrict or confine the non-attorney’s areas of work or scope of responsibility.

Confidentiality

Of the two confidentiality concerns raised above, the second – release of information by the LPO provider – is especially complex with a foreign service provider. Most ethics decisions and commentators agree that an attorney has the responsibility to ascertain the foreign legal rules bearing on confidentiality concerns. For example:

Do those laws protect privacy? Do laws of the local jurisdiction require the outsource supplier to keep confidential information private? Do the laws provide an adequate remedy to the law firm and its client should the outsource supplier breach its obligations of confidentiality? Are contractual obligations of confidentiality recognized and sufficiently enforced in the outsourcing country? Are adequate and real remedies available in the event of a breach?[87]

While these inquiries would require extremely onerous research by a U.S. attorney, there is no reason the outsourcing firm should shoulder such responsibility. Rather, the queries should be posed to the prospective LPO provider, who should respond with appropriate legal citations in support of its answers.

Unauthorized practice of law

Under Model Rule 5.5, an attorney may not assist another individual in the unauthorized practice of law (UPL).[88] Again, the key point is that the attorney’s ultimate responsibility for the legal work cannot be delegated to a non-lawyer.[89] So long as adequate safeguards are taken to ensure this responsibility, most ethics bodies conclude that an attorney avoids aiding UPL.[90] In fact, most outsourcing firms specifically disclaim that they provide legal services, and disavow the creation of an attorney client relationship.[91]

In order to avoid assisting in UPL an attorney must be competent to – and must actually – supervise the work of a foreign lawyer.[92] If these safeguards are taken, ethics bodies have agreed that the supervising attorney can safely avoid facilitating the unauthorized practice of law.[93]

One commentator advises that “[a] law firm hiring an outside company needs to be sure that none of the assigned tasks could be considered the unauthorized practice of law.”[94] But the focus should be on the level of supervision and independent judgment exercised by the outsourcing attorney, rather than on the task itself. For example, a lawyer may delegate to a student law clerk a task that would constitute the unauthorized practice of law if performed without supervision.[95] As with a law clerk, the question is whether a licensed attorney has taken effective responsibility for the task.

The New York City Bar refused to adopt a per se rule by which attorney supervision would necessarily whitewash activity that would otherwise constitute UPL.[96] To safeguard against UPL, the lawyer must “first set the appropriate scope for the non-lawyer’s work and then vet the non-lawyer’s work and ensure its quality.”[97]

Appendix

The following checklist summarizes the steps an attorney should take when appraising a potential legal process outsourcing provider. As discussed above, some steps proposed by ethics regulatory bodies seem overly onerous for firms making only limited use of outsourcing. Steps are marked *if they are onerous, or unnecessary in the view of the author. Steps are marked + where the author suggests the burden should be placed on the LPO provider to supply the needed information.

The Outsourcing Checklist

  • Assessing the provider
    • Credibility of the LPO firm
      • A sample of work product+
      • Length of time in business
      • Existence of written policies and procedures concerning confidential information+
      • Past or pending lawsuits
      • Analyze security structure of computing systems+
      • Site visit*
    • Personnel:
      • Written hiring policies+
      • Job requirements+
      • Current resumes+
      • Background checks+
      • Interview the personnel regarding the project at hand.
    • For foreign providers:
      • Does the country’s law recognize privilege? +
      • Is a bar exam required?+
      • Is a law degree required? +
      • Must attorneys meet good character requirements? +
      • May the attorney be disciplined for unethical conduct? +
      • Will compensation be reduced for poor performance? +
      • Have the staff received training in U.S. ethics rules? +
    • Secure written service agreement with LPO provider
      • Provider agrees to adhere to Model Rules confidentiality obligations
      • Provider agrees to screen for conflicts based on attorney providing identity of adverse parties
      • Provider agrees to represent in writing whether conflicts exist
      • Venue and choice of law reflect attorney’s jurisdiction of practice
    • Create office policies for interfacing with the LPO provider
      • Client information will be disclosed to provider only if necessary for the LPO provider’s task.
      • Procedure is established for periodic discussions with LPO provider re: client confidence rules.
      • Procedure is established for supervision of LPO staff:
        • Tasks are clearly defined for LPO staff
        • Attorney discusses assignment with LPO staff to determine qualifications for task, drafts memo to client file
        • No work product is used without independent attorney review
      • Disclosure and informed consent from client:
        • Client is told in writing that outsourcing will be used. Describe the particular tasks to be outsourced.
        • Client consents in writing (this may be included in the representation agreement) to use of, and disclosure of confidential information to, the LPO provider.
        • Client is told how the outsourcing agreement is structured (i.e., is provider hired directly or through third-party).
      • Bill the client for the LPO service
        • Explain the fee
        • Establish office protocol for billing the cost of the LPO service plus a percent of office overhead

[1] ABA Commission on Ethics 20/20, Revised Proposal – Outsourcing (Sep. 19, 2001), at 2, available at http://tinyurl.com/mskpbca (last visited June 10, 2013). In the business world, “outsourcing” refers to delegating a particular process to a third party; “offshoring” refers to relocating work processes to capture efficiencies, usually of lower-cost labor. Mary C. Daly and Carole Silver, Flattening the World of Legal Services? The Ethical and Liability Minefields of Off-Shorting Legal and Law-Related Services, 38 Geo. J. Int'l L. 401, 402-03 (Spring 2007).

[2] Debbie Legall, Client Demand for Reduced Bills Is Forcing Law Firms to Think Carefully about the Business Benefits and Ethical Pitfalls of Outsourcing, 64 No. 5 Int’l B. News 57 (Oct. 2010).

[3] Joshua A. Bachrach, Note, Offshore Legal Outsourcing And Risk Management: Proposing Prospective Limitation of Liability Agreements Under Model Rule 1.8(h), 21 Geo. J. Legal Ethics 631, 631 (Summer 2008) (citing Vesna Jaksic, Guidelines for Outsourcing Grow: Three Bar Associations Advise on Fees and Disclosure to Clients, NAT'L L.J., Apr. 30, 2007, at 5, 5).

[4] See ABA Commission on Ethics 20/20, supra note 1. The Commission proposed comments to the Model Rules of Professional Conduct to address their application to outsourcing. The only proposed rule revision was to 5.3, clarifying that rules governing supervision of non-attorney assistants applies to service providers such as cloud-computing.

[5] Colo. Bar Ass’n Ethics Comm. , Formal Op. 121 (June 16,2009), available at http://tinyurl.com/kx4kpcf (last visited June 14, 2013); ABA Formal Op. 08-451 (Aug. 5, 2008); Prof. Ethics of the Fla. Bar, Op. 07-2 (Jan. 18, 2008), available at http://tinyurl.com/kruc232 (last visited June 14, 2013); N. Car. State Bar, Formal Ethics Op. 2007-12 (Apr. 25, 2008, available at http://tinyurl.com/lnm2auk (last visited June 14, 2013); Los Angeles Co. Bar Ass’n Prof. Resp. and Ethics Comm., Op. 518 (2006), available at http://tinyurl.com/kaq2pnm (last visited June 14, 2013); Ohio Sup. Crt. Bd. of Comm'rs on Grievance and Discipline, Advisory Op.2009-6 (Aug. 14, 2009), available at http://tinyurl.com/lgdecaa (last visited June 10, 2013); San Diego Bar Assn. Op. 2007-1 (2007), available at http://tinyurl.com/nxklxlb (last visited June 10, 2013); N.Y. City Bar Ass’n Comm. on Prof. and Jud. Ethics, Formal Op. 2006-3 (Aug. 2006), available at http://www2.nycbar.org/Ethics/eth2006.htm (last visited June 14, 2013).

[6] For a discussion of tort liability see Daly and Silver, supra note 1, at 440-44.

[7] See Pete Roberts, Practice Success 101: Contract Lawyering, available at http://tinyurl.com/n83l3x6 (last visited June 14, 2013) (“A contract lawyer enters into an agreement with another lawyer or law firm to do a certain scope of work, work generally for a certain period of time, or both.”).

[8] Brandon James Fischer, Note, Outsourcing Legal Services, In-Sourcing Ethical Issues: An Examination of the Ethical Considerations Arising From The Practice Of Outsourcing Legal Services Abroad, 16 Sw. J. Int'l L. 451, 456 (2010).

[9] San Diego Bar Assn. Op. 2007-1, supra note 5.

[10] Fischer, supra note 8, at 457.

[11] NPR On-Air Interview with Puneet Mohey, President of Lexadigm (May 1, 2005), available at http://tinyurl.com/kgd8xzl (last visited Apr. 30, 2007).

[12] Fischer, supra note 8, at 459.

[13] Martha A. Mazzone, Ethics Rules Require Close Supervision of Offshore Legal Process Outsourcing, 55 Boston Bar J. 25, 26 (Winter 2011).

[14] Daly and Silver, supra note 1, at 410-11.

[15] ABA Formal Op. 08-451, supra note 5, at 2.

[16] Fischer, supra note 8, at 460.

[17] The Model Rules are accessible free of cost at http://tinyurl.com/4omg5ch (last visited June 14, 2013).

[18] Model Rule 1.1.

[19] See N. Car. State Bar, Formal Ethics Op. 2007-12, supra note 5.

[20] See, e.g., N. Y. City Bar Formal Op. 2006-3, supra note 5 (“Proper supervision is also critical to ensuring that the lawyer represents his or her client competently… obviously, the better the non-lawyer’s work, the better the lawyer’s work-product”).

[21] See Section III(e), infra.

[22] Model RPC 1.4(a)(2). See also Model RPC 1.2(a) (“a lawyer shall abide by a client's decisions concerning the objectives of representation and, as required by Rule 1.4, shall consult with the client as to the means by which they are to be pursued”).

[23] See, e.g., Ohio Op.2009-6, supra note 5.

[24] Id., at 4.

[25] ABA Formal Opinion 08-451; ABA Commission on Ethics 20/20, supra note 5, at 4.

[26] San Diego Bar Assn. Op. 2007-1, supra note 5.

[27] Id. at 3.

[28] See N. Y. City Bar Formal Op. 2006-3, supra note 5.

[29] L.A. Co. Bar Op. 518, supra note 5.

[30] Model Rule 1.6(a). See also Model Rule 1.6(b) (setting forth further grounds for disclosure).

[31] For the view that an attorney is highly limited in what information may be disclosed see Jamila Johnson, Pillow Talk; The Obligations of RPC 1.6, 66 No. 11 Wash. St. B. News 11 (Nov. 2012), available at http://tinyurl.com/lqrmp52 (last visited June 12, 2013).

[32] See Ohio Advisory Op.2009-6, supra note 5; N. Y. City Bar Formal Op. 2006-3, supra note 5.

[33] Ohio Advisory Op.2009-6, supra note 5, at 4.

[34] ABA Formal Op. 08-451, supra note 5, at 5 (concluding implied authorization “does not extend to outside entities or to individuals over whom the firm lacks effective supervision and control”). Oddly, the Opinion suggests elsewhere that an attorney has a higher standard of care when supervising LPO providers. Id. at 3, n. 2. If a higher standard of supervision is required for overseeing LPO providers, why would implied consent not obtain as it does for the use of contract attorneys working within a firm?

[35] Colo. Bar Ass’n Ethics Comm., Formal Op. 121, supra note 5.

[36] Model Rule 1.7(c) “requires a lawyer to act competently to safeguard information relating to the representation of a client against unauthorized access by third parties and against inadvertent or unauthorized disclosure by the lawyer or other persons who are participating in the representation of the client or who are subject to the lawyer’s supervision.” Model Rule 1.7, cmt. 18.

[37] ABA Formal Op. 08-451, supra note 5, at 5.

[38] See James I. Ham, Ethical Considerations Relating to Outsourcing of Legal Services By Law Firms to Foreign Service Providers: Perspectives From The United States, 27 Penn St. Int'l L. Rev. 323, 336 (2008).

[39] See N. Y. City Bar Formal Op. 2006-3, supra note 5.

[40] MRPC 1.8(k).

[41] MRPC 1.0(c). But the ABA has interpreted “lawyers in a firm” – as used in Model Rule 5.1 governing supervisory duties – to include attorneys working for an LPO provider. ABA Formal Op. 08-451, at 3 n. 2

[42] See Daly and Silver, supra note 1, at 439 (noting summarily that rules governing conflicts within a firm “is a likely template for identifying the conflicts dilemmas springing from the offshoring of legal services to foreign lawyers”).

[43] See infra, Section III(e) (discussing supervision duties).

[44] See, e.g., N. Y. City Bar Formal Op. 2006-3, supra note 5 (explaining steps to be taken to assess conflicts, but articulating no rule for identifying impermissible conflicts); L.A. Co. Bar Op. 518, supra note 5.(same).

[45] N. Y. City Bar Formal Op. 2006-3, supra note 5.

[46] An impermissible conflict occurs if an attorney will be “materially limited” by his responsibilities to a third party, imposing a scope of potential conflicts far beyond the parties to a matter. Model Rule 1.7(a)(1).

[47] ABA Formal Op. 08-451, at 5.

[48] Model Rule 1.9(a).

[49] Ham, supra note 38 at 339.

[50] N. Y. City Bar Formal Op. 2006-3, supra note 5.

[51] Id.

[52] Fischer, supra note 9, at 466.

[53] See ABA Formal Op. 08-451, supra note 5, at 5 (“…to minimize the risk of potentially wrongful disclosure, the outsourcing lawyer should verify that the outside service provider does not also do work for adversaries of the clients…”).

[54] Model Rule 5.1(b).

[55] Model RPC 5.3(a).

[56] Model Rule 5.1(c) (lawyers); Model Rule 5.3(1) (non-lawyers).

[57] American Bar Association Model Rule of Judicial Conduct (Model CJC) 1.12(A) (“A judge shall require court staff, court officials, and others subject to the judge’s direction and control to act in a manner consistent with the judge’s obligations under this Code”). The Models CJC is accessible free of charge at http://tinyurl.com/k7ggp57 (last visited June 14, 2013).

[58] Ariz. Sup. Ct. Jud. Ethics Advi. Comm., Op. 92-13 (Sep. 1, 1993). See also N.M. Advis. Comm. On CJC., Op. 99-04 (Apr. 12, 1999) (advising that court staff attorney is “not generally subject to all of the same standards applicable to judges under the Code”).

[59] L.A. County Bar Ass'n. Op. 518, supra note 6, at 8-9.

[60] See, e.g., Todd C. Peppers & Christopher Zorn, Law Clerk Influence on Supreme Court Decision Making: An Empirical Assessment, 58 DePaul L. Rev. 51, 53 (2008) (assessing the influence of law clerk ideology on Supreme Court decisions); Carolyn Shapiro, The Law Clerk Proxy Wars: Secrecy, Accountability, and Ideology in the Supreme Court, 37 Fla. St. U. L. Rev. 101 (2009) (arguing that law clerk ideology may have weakened the Supreme Court’s legitimacy). See also Penelope Pether, Sorcerers, not Apprentices: How Judicial Clerks and Staff Attorneys Impoverish U.S. Law, 39 Ariz. St. L.J. 1 (2007) (arguing the pervasive reliance on law clerks has diminished the quality of the federal judiciary).

[61] See Sejal Patel, Is Legal Outsourcing Up To The Bar? A Reevaluation Of Current Legal Out-Sourcing Regulation, 35 J. Legal Prof. 81, 94 (Fall 2010) (noting the “irony” of needing to closely supervise work outsourced for efficiency).

[62] San Diego Bar Assn. Op. 2007-1, supra note 6 at 4; N.Y. City Bar Formal Op. 2006-3, supra note 6.

[63] ABA Formal Opinion 08-451, Lawyer's Obligations When Outsourcing Legal and Nonlegal Support Services (2008).

[64] Ohio Advisory Op.2009-6, supra note 6, at 8.

[65] For an excellent discussion see Greg Boos, Techno-Ethics: Rapid and Vast Technology Advances Drive Modest Changes to Ethics Rules, 18 Bender’s Immgr. Bull. 133 (Feb. 1, 2013). A truncated version of the article is available at http://tinyurl.com/ktqqpfj (last visited June 14, 2013); the complete article may be obtained by contacting Mr. Boos directly

[66] Cf. id.

[67] Id.

[68] See Ham, supra note 38 (“There may come a point where the drive for cost savings may conflict with the attorney's duty of independent judgment”).

[69] Ham, supra note 38, at 329.

[70] L.A. Co. Bar Op. 518, supra note 5.

[71] For the view this approach is required see N. Y. City Bar Formal Op. 2006-3, supra note 5.

[72] ABA Formal Opinion 08-451, supra note 5, at 6.

[73] Id.

[74] L.A. Co. Bar Op. 518, supra note 5.

[75] N.Y. City Bar Formal Op. 2006-3, supra note 5.

[76] Ohio Advisory Op.2009-6, supra note 5, at 11-12.

[77] Model Rule 7.1 (“…A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading”).

[78] See ABA Formal Op. 08-451, supra note 5, at 4 (noting that attorneys may not make affirmative misrepresentations regarding the “status” of lawyers and nonlawyers).

[79] At least once commentator believes not. Fischer, supra note 9, at 471-72.

[80] Model Rule 7.5(a).

[81] ABA Formal Opinion 88-356 (Dec. 16, 1988) (Temporary Lawyers).

[82] Fischer, supra note 8, at 472 (opining there would be no violation of Model Rule 7.5).

[83] N. Car. Formal Ethics Op. 2007-12, supra note 5.

[84] Mark L. Tuft, Supervising Offshore Outsourcing of Legal Services in a Global Environment: Re-Examining Current Ethical Standards, 43 Akron L. Rev. 825, 827 (2010).

[85] Id., at 841.

[86] San Diego Bar Assn. Op. 2007-1, supra note 5, at 5.

[87] Ham, supra note 38, at 336.

[88] Model Rule 5.5(a).

[89] See N.Y. City Bar Formal Op. 2006-3, supra note 5 (“to avoid aiding the unauthorized practice of law, the lawyer must at every step shoulder complete responsibility for the non-lawyer’s work”).

[90] See, e.g., L.A. Co. Bar Op. 518, supra note 5.

[91] Daly and Silver, supra note 1, at 408.

[92] Cf. Tuft, supra note 84, at 832-40 (summarizing and analyzing ethics opinions).

[93] See, e.g., ABA Formal Op. 08-451, supra note 65 New York City Bar Comm. Formal Op. 2006-3, supra note 5; Los Angeles County Bar Assn. Formal Op. 518, supra note 5; San Diego County Bar Assn. Formal Op. 2007-1, supra note 5; Fla. State Bar Assn. Proposed Advisory Op. 07-2, supra note 5; N.C. State Bar Formal Op. 12, supra note 5.

[94] Ham, supra note 38, at 329.

[95] Restatement (Third) of The Law Governing Lawyers (2012), § 4 (cmt. g) (“In the course of [work for a firm], a nonlawyer may conduct activities that, if conducted by that person alone in representing a client, would constitute unauthorized practice”).

[96] N. Y. City Bar Formal Op. 2006-3, supra note 5.

[97] Id.

Is Google Voice the right (free) phone system for your practice?

A version of this article was published by the American Immigration Lawyers Association


Law firms now have many alternatives to traditional multi-line phone systems. My firm uses Google Voice for its primary office line, and you might want to consider this uniquely powerful tool for your practice, even in addition to your current system. [Edit: we now use a LAN line through Regus in addition to Google Voice]

What do you get? Voice gives you a single phone number that rings to multiple devices and locations. A Voice number can ring directly to your desk, your office staff, your mobile phone, and a call answering service, to name just a few possibilities. Since Voice is a “Voice Over Internet Protocol” (VOIP) setup, calls can also be made to and from your desktop or notebook computer. I normally use my Voice line from an iPhone, but I’ve place calls from Europe on Voice using my tablet PC.

Fun functionality. Voice gives you much more than the ability to have a single number ring to multiple locations. A Voice number comes with its own online voicemail system, that also transcribes and emails your voicemails to you (if you want). I find the transcription quality reasonably good and certainly enough to get the gest of a call.

Voice also gives you the ability to send SMS text messages from your online Voice account or from email (if you’re responding). This can be tremendously helpful for communicating with younger clients. While drafting this article I used a series of brief messages with a client to quickly clarify a document request, complete payment arrangements, and setup an appointment. Also, text messages are easy to preserve in your client files.

International calls are extremely low cost over Voice, similar to other VOIP providers (India and Mexico City are both 2¢/minute). If you have an existing mobile (not landline) number, it can be converted into a Voice number for a fee of $20 (your mobile carrier may charge additional fees).

Voice has apps that work on all major data-enabled mobile phones, making it easy to place calls from your cell using a Voice number. One clunky aspect of Voice is that calls ring first to your device; you answer and then the intended caller is connected.

Marketing campaigns. The functionality and freebie-ness of Voice make it an attractive option for tracking marketing efforts, since you can setup a unique number for a given effort. A particular listing can be assigned its own number so you know how a client found you. Also, voicemail messages can be customized based on the caller’s number. Client-specific messages seem mostly creepy, but attorney colleagues – for example – could be funneled to a mercifully shortened message.

Drawbacks. I’ve found audio quality to be overall great, and this was echoed by other AILA attorneys who use the service. Quality appears most problematic when I make/receive calls using my computer rather than mobile. Although I seem to experience the most problems with 1-800 numbers and institutional phone systems, others didn’t share this experience.

Information sent though Voice is subject to Google’s general terms of service. These terms reserve to Google the right to access account content, and ethics experts debate whether use of Google products violates an attorney’s duty of confidentiality and/or waives privilege.  This should be seriously considered by an attorney choosing to use one or more Google products. Also, Voice allows the ability to record and transcribe calls, but this feature should be used with extreme caution as jurisdictions vary on the disclosure requirements for recording communications.

Voice might or might not be a good fit for your practice, but it’s at least worth exploring for some limited uses.