In late August, the Iowa State Bar Association’s Committee on Ethics and Practice Guidelines issued Ethics Opinion 13-03, entitled The Use of Contracted Lawyers. Not surprisingly, the Committee’s conclusions concerning the issues of competency, consent, control, compensation and conflicts in the context of the relationship between the hiring attorney (which the Committee calls the “retained lawyer”) and the contract (a/k/a freelance) lawyer (which the Committee calls the “contracted lawyer”) are generally consistent with the conclusions of the ABA and all the states that have issued opinions concerning the use of contract lawyers. In fact, the opinion extensively cites ABA Formal Op. 08-451, Lawyer’s Obligations When Outsourcing Legal and Non-Legal Support Services. Strangely, though, the opinion does not cite the more recent revised ABA Model Rules Comments concerning outsourcing, even though at least one comment (Cmt.  to Model Rule 1.1, concerning competency) imposes more stringent obligations on hiring attorneys than Op. 08-451 imposed.
Preliminarily, Op. 13-03 defines a “contracted lawyer” as one who is “utilized under a contract for temporary employment.” Later, the opinion states that contract lawyers “provide their services on an ad hoc basis as assigned by an intermediary agency.” Although the opinion thus seems to ignore freelance lawyers (who contract directly with hiring attorneys to provide services on an ad hoc basis), there is no reason to believe that this was intentional. Accordingly, Iowa hiring attorneys and the freelance lawyers who work for them should consider Op. 13-03 to be governing.
Consistent with both Op. 08-451 and Comment  to Model Rule 1.1, Op. 13-03 recognizes recognized that the hiring attorney must perform the same level of due diligence when hiring a contract lawyer as when hiring an associate, including ensuring that the contract lawyer has the necessary legal expertise and is “ethically sound.” The opinion also notes in this section that firms frequently turn to contract lawyers when they are faced with a “volume of business that suddenly overwhelms the law firm’s legal staff.”
Op. 13-03 concludes that Iowa R. Prof’l Conduct 32:5.1(b) (which requires a lawyer to make reasonable efforts to ensure that any lawyer over whom he has direct supervisory control conforms to the Iowa Rules of Professional Conduct) and (c) (which details the circumstances under which an attorney is vicariously liable for ethical breaches by a lawyer over whom he has direct supervisory control) apply to the relationship between hiring attorneys and freelance attorneys. The opinion notes that, by contrast, Rules 32:5.1(b) and (c) usually do not apply to “of counsel” or co-counsel relationships.
Op. 13-03 incorrectly stated that ABA Ops. 88-356 and 08-451, together, require the hiring attorney to obtain client consent to the use of a contract lawyer where an intermediary placement agency is involved, but do not require the hiring attorney to obtain client consent “where there is an employer-employee relationship between the [hiring] and [contract] lawyer.” This cannot be correct, because, by definition, there is never an employer/employee relationship between the parties to an actual outsourcing relationship (as opposed to a relationship in which the hiring attorney attempts to avoid being held liable as an employer [for purposes such as the payment of employment taxes] by mischaracterizing an employee as an independent contractor).
In fact, ABA Formal Op. 08-451 required disclosure of the use of a freelance lawyer only if the freelance lawyer was to perform independent work for the outsourcing lawyer without the “close supervision” of the outsourcing lawyer or another lawyer associated with the outsourcing lawyer’s firm. This has been superseded by Comment  to Model Rule 1.1, which states that a lawyer should “ordinarily” obtain the client’s informed consent to outsourcing. Though Op. 13-03 states that “Iowa lawyers who anticipate engaging the services of a contract lawyer should do so with the consent of their client,” (emphasis supplied) it seems clear that the Committee meant to make client consent mandatory (“must”) rather than precatory (“should”).
Like every other ethics opinion that has dealt with this subject (except Texas Op. 577), Op. 13-03 concludes that the hiring attorney can make a profit on work performed by a contract lawyer, as long as the work is billed as a legal fee rather than an expense.
Op. 13-03 states that Iowa Rules of Prof’l Conduct 32:1.7, 1.9 and 1.0, concerning conflicts of interest and imputed conflicts of interest, apply equally to associates, partners and contract lawyers. With respect to imputed conflicts, the opinion provides that “the burden rests with the contract lawyer to recognize direct conflicts and to avoid placement in law firms that represent clients adverse to the contract lawyer’s current or former clients. The opinion reasons that screening measures—which, under ABA Op. 88-356, are sufficient to enable a contract lawyer to avoid imputed disqualification—are not practical or possible in some situations, and that the efficacy of screening measures cannot be guaranteed. In my view, this concern is misplaced: even assuming that screening is not practical or possible in some situations, and that its efficacy can’t be guaranteed, these limitations do not undermine the practicality and efficacy of screening in many, if not most, outsourcing relationships.