Live from the ACI Legal Process Outsourcing conference in NYC. Session: Avoiding the Ethical and Liability Risks Associated with Outsourcing Legal Services, Speaker: Lawrence Schultis, Partner, Pillsbury, Winthrop, Shaw, Pittman LLP. 

The New York City Bar ethics opinion is the leading one for ethical issues in outsourcing and offshoring. In the eyes of the bar, any lawyer not licensed in NY are not considered lawyers for purposes of NY law (and is thus a non-lawyer). Lawyers must adequately supervise non-lawyer . Any time a licensed lawyer delegates work to a non-lawyer, she must assure the work is properly conducted.

For offshore work, lawyers must be “vigilant and creative” in supervising non-lawyers. Of course, these words are not defined and provide little guidance on their face. The NY opinion provides some guidance though:
– get background information on workers
– conduct reference checks
– interview workers for suitability
– ensure non-lawyers understand assignment and expectations

Factors showing supervision include:
– Discipline and termination for improper conduct
– Adjust compensation for poor performance
– Contractual right to get workers off your matter
– Lawyer provides training
– Lawyer reviews ethics and practices
– Discretion to confine areas of work or scope or responsibility
– Thorough review of work product. (MOST IMPORTANT)
– Lawyers MUST NOT delegate authority over strategy, question of judgment or final content.

Arrangements with LPOs are contractual, so contract must say the right things. In contrast, with US lawyers, ethics rules govern and create obligations. For example, confidentiality is protected by US ethical rules for US work; the LPO contract must contain confidentiality provisions. Customer must also follow strict conflict checking rules. The contract should have an explicit conflicts checking plan. There is no law yet on how far back an LPO needs to look for conflicts. Even in US, there is not a clear cut rule about how far back to look.

Disclosure and consent is not required unless:
– Non-lawyer will play a significant role
– Client confidences must be shared
– Client expects that only personannel employed by the law firm will handle the matter
– Non-lawyers are billed to client on a basis other than cost
NY bar uses “should” but this should be read as “must.”

Absent specific agreement, non-lawyer services should be a pass through cost. The mark-up rule does differ between a contract “lawyer” (meaning the person is a licensed NY lawyers) and offshore workers assuming. In practice, there is much “winking” at fact that some contract lawyers are NOT licensed in NY. If the contractor is not licensed in NY state, then rules concerning mark-ups would the same as for an offshore worker.

Draws analogy to initial ethics rules regarding use of e-mail. Some early opinions said e-mail waived privilege because message traversed the net. Thinks the rules will eventually change for LPO work, as they did for e-mail.