LAW FIRM OUTSOURCING - THE RULES, ETHICAL CONSIDERATIONS, & BENEFITS

By Chris Qualmann

“Legal Process Outsourcing” (“LPO”) refers to a law firm obtaining legal support services from an unaffiliated, exterior, third-party company. LPO is growing in popularity as a result of firms and corporate legal departments seeking to minimize costs, increase flexibility, use outside talent and expand their capabilities.

Common examples of LPO include legal research and writing organizations that assist firms in the drafting of pleadings, memorandums of law, appellate briefs and other legal documents. 

Another example (which, like legal writing, is provided by my company Mitigation Resource Alliance) is a loss-mitigation processing group that handles “back office” collection, preparation, and assembly of financial packages for delivery to mortgage lenders (along with prompt and persistent follow-up) to assist the law firm in negotiating loan modifications or short sales.

A major breakthrough for the legal outsourcing industry came on August 5, 2008 when the American Bar Association (ABA) Standing Committee on Ethics and Professional Responsibility released a statement regarding a new ethics opinion (Opinion 08-451), which concluded that U.S lawyers can outsource legal and non-legal work provided that they adhere to ethics rules. The opinion is highly supportive of LPO, and as a result, legal outsourcing has gained tremendous ground and is one of the fastest growing industries today.

Like the ABA, the Florida Bar has ruled that attorneys may engage the services of non-attorney third parties to assist in the rendering of services to a client - as long as the attorneys exercise appropriate supervision and address their ethical obligations under applicable bar rules (including the need to preserve a client’s confidences and secrets, and the obligation to avoid conflicts of interest).

The opinion of the Florida Bar’s Professional Ethics Committee with respect to this issue was approved by the Board of Governors in Clearwater, Florida on July 25, 2008 (Final Opinion 07-2).

II.  THE BENEFITS OF LEGAL OUTSOURCING

• Better Work Efficiency & Cost Savings:  Not only do firms save money from outsourcing various services, but LPO allows attorneys to spend their time where it is most valued and needed.  There is no reason why an attorney should be doing basic legal research on a daily basis; creating "form contracts"; or picking up the phone and remaining on “hold” for 20-30 minutes (or more) while waiting for a mortgage servicer's loss mitigation negotiator to “pick up the line” – when this work can be outsourced for a a very affordable price. 

• Access to External Talent: Outsourcing work to external vendors allows firms to access high level talent and “niche” expertise that may not exist internally.   Access to external talent is particularly useful for firms who seek to fill in “gaps” and expand into new practice areas.

• Reduced Turnaround Time & Greater Flexibility:  Using external personnel can expand internal “bandwidth” to reduce turnaround time for pressing legal projects.  Workflow challenges are particularly prevalent for small and mid-size firms, and LPO enables them to quickly scale up for a case or project, thereby “leveling the playing field” with larger firms.  Flexible staffing also allows firms to avoid the fixed expenses of salaries as well as the cost of office overhead and benefits associated with full-time, permanent personnel.