Ethics 20/20 Commission’s Draft Proposal Supports Outsourcing, Clarifies Hiring Attorneys’ Obligations

Yesterday, the ABA’s Ethics 20/20 Commission released its initial proposal concerning changes to the Model Rules of Professional Conduct (or, more accurately, the comments to the Model Rules) as they relate to domestic and international outsourcing. The “initial draft proposal” shouldn’t be confused with the “discussion draft” of proposed changes, which was released last November.

The language of the initial draft is substantially identical to the language of the discussion draft. In turn, as I explained in November, the discussion draft didn’t introduce anything new or surprising; rather, it merely elevated many of the points made in ABA Formal Op. 08-451 to the level of Model Rule comments. I’ve highlighted below the handful of significant differences between the discussion draft and the initial draft.

The revised comment to Model Rule 1.1 stresses the importance of obtaining the client’s informed consent to outsourcing

Model Rule 1.1 states that “[a] lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” Here’s a redlined version of the proposed new Comment 6 to Model Rule 1.1 (insertions are in red; deletions are struck through):

Retention ofetaining or Contracting With Other Lawyers

[76] ABefore a lawyer may retainretains or contracts with other lawyers outside the lawyer’s own firm to provide or assist in the provision of legal services to a client provided, the lawyer should ordinarily obtain informed consent from the client and must reasonably concludes that the other lawyers’ services will contribute to the competent and ethical representation of the client. See also Rules 1.2 (allocation of authority), 1.4 (communication with client), 1.5(e) (fee sharing), 1.6 (confidentiality), and 5.5(a) (unauthorized practice of law). The reasonableness of the conclusiondecision to retain or contract with other lawyers outside the lawyer’s own firm will depend upon the circumstances, including: the education, experience and reputation of the nonfirm lawyers; the nature of the services assigned to the nonfirm lawyers; and the legal protections, professional conduct rules, and ethical environmentenvironments of the jurisdictions in which the services will be performed. When retaining lawyers and others outside the lawyer’s own firm, the requirements of Rule 5.5(a) must be observed, particularly relating to confidential information. When using the workservices of nonfirm lawyers in providing legal services to a client, a lawyer also must also reasonably conclude that such workservices meets the standard of competence under this Rule. If information protected by Rule 1.6 will be disclosed to the nonfirm lawyers, informed client consent to such disclosure may be required. For example, if the rules, laws or practices of a foreign jurisdiction provide substantially less protection for confidential client information than that provided in this jurisdiction, the lawyer should obtain the client’s informed consent to such disclosure.

Thus, the initial draft contains a presumption that the hiring attorney is required to obtain the client’s informed consent to outsourcing; by contrast, the discussion draft said only that informed consent may be required. Additionally, the issue of informed consent has been moved from the end of the comment to the beginning, better reflecting the requirement’s significance. Finally, in the initial draft, informed consent is couched as a fundamental requirement (in most circumstances), whereas the discussion draft treated the possibility that informed consent might be required as a byproduct of the sharing of confidential information.

The revised comments to Model Rule 5.3 make explicit the rule’s applicability to freelance (contract) lawyers and place more responsibility on the hiring attorney to provide non-lawyers with adequate guidance

Model Rule 5.3 governs a lawyer’s responsibilities regarding non-lawyer assistants. The discussion draft didn’t suggest any changes to the already-existing Comments [1] and [2]. The initial draft revises Comment [2] (and renumbers it as comment [1]) to explicitly expand the rule’s coverage to nonlawyers outside a firm (in addition to nonlawyers employed by a firm).

Additionally, the discussion draft included an entirely new comment [3] to Rule 5.3. The hiring attorney’s obligations under this rule are further refined in the initial draft:

[3] The responsibilities stated in this Rule also apply when a lawyer or law firm utilizes nonlawyer service providers

Nonlawyers Outside the Firm

[3] Lawyers often use nonlawyers outside the lawyer’s or law firm’s officefirm to assist in rendering legal services to clients. The lawyer or law firm clients. Examples include the retention of an investigative service, hiring a document management company to create and maintain a database for complex litigation, sending client documents to a third party for printing or scanning, and using an Internet-based service to store client information. When using such services outside the firm, a lawyer must make reasonable efforts to ensure that the activities of any nonlawyer service providers areservices are provided in a manner that is compatible with the lawyer’s professional obligations. The extent of this obligation will depend upon the circumstances, including: the education, experience and reputation of the nonlawyer service providers; the nature of the services involved; the requirementterms of any arrangements concerning to protectthe protection of client information; and the legal and ethical environments of the jurisdictions in which the services will be performed., particularly with regard to confidentiality. See also Rules 1.1 (competence), 1.2 (allocation of authority), 1.4 (communication with client), 1.6 (confidentiality), 5.4(a) (professional independence of the lawyer), and 5.5(a) (unauthorized practice of law). When retaining or directing a nonlawyer outside the firm, a lawyer should communicate directions appropriate under the circumstances to give reasonable assurance that the nonlawyer’s conduct is compatible with the professional obligations of the lawyer.

* * *

In the discussion draft, Comment [3] vaguely directed the hiring attorney to “make reasonable efforts” to ensure that nonlawyers act in a manner compatible with the hiring attorney’s professional obligations. The initial draft clarifies that those “reasonable efforts” include the communication of appropriate directions to the nonlawyer, thus arguably requiring the hiring attorney to take a more active role in assuring an acceptable level of performance by an outside-the-firm nonlawyer.

The Commission’s report continues to support outsourcing while disclaiming an intent to do so

In the introduction to its November 2010 draft report, the Commission disclaimed any intent to either endorse or reject the practice of outsourcing, but, like Op. 08-451, it discussed the benefits of outsourcing. The report accompanying the initial draft proposal adds even more laudatory language, noting that “[b]y reducing the cost of legal services, outsourcing can improve access to justice by making legal services more affordable. Additionally, the report (like the draft report) recognizes that the ability of solo practitioners and small- and mid-sized firms to retain outside high-quality outside providers, who can complete work at greater speed and lower cost than firm employees allows those firms to better compete for large matters without fear that they will lack adequate resources to perform the legal work involved.

The Commission Seeks Further Comment

The Commission seeks further comments in response to the initial draft proposal. Comments should be submitted by July 15, 2011, to Senior Research Paralegal Natalia Vera at natalia.vera@americanbar.org or by fax at 312-988-5280. [Ed. note: By fax? Anyone who’s still using fax over e-mail is highly unlikely to be interested in outsourcing….]. The Commission will submit to the ABA House of Delegates final versions of its proposals in May 2012 for House deliberation at the August 2012 ABA Annual Meeting.

Check back here in a few days for my summary and analysis of the comments the Commission received in response to the discussion draft.