Flattening the world of legal services? The ethical and liability minefields of offshoring legal and law-related services.

Author:Daly, Mary C.


Globalization recently has been described by Thomas Friedman as "flattening" the world through a combination of technology and "geoeconomics," resulting in a shift in the way work is accomplished and enabling new collaboration and competition. Technology enables the proliferation of information, and facilitates the division and distribution of tasks to those able to most efficiently accomplish them regardless of their location. As a result, individuals and organizations from less developed nations such as India and China are able to participate in highly sophisticated work without leaving their home countries, while previously they would have had to relocate for the same opportunities. (2)

This article addresses the impact of this aspect of globalization on the world of legal and law-related services. We ask whether the market for these services is "flattened" by globalization in the same ways described by Friedman. (3) Our focus here is on offshore outsourcing, which is possible when services are divided into discrete tasks that are delegated to less-costly service providers located far from the outsourcer. A business outsources by segmenting off an aspect of its activities and retaining a third party to perform the activities. (4) Offshoring, on the other hand, occurs when a business relocates its activities to a location that allows the business to capture some efficiency, often through lower labor costs. (5) The developments that drive globalization, including advances in transportation and technology, also support outsourcing offshore. Examples are ubiquitous, and include relocation of customer call centers, data processing activities, medical transcription services, (6) software design activities, (7) accounting services, (8) and even interpretation of x-rays. (9) One estimate is that "as many as 3.3 million [white-collar jobs could be shipped abroad] by 2015." (10)

Law practice tends to follow business, whether we focus on international expansion, diversity of the workforce or the acceptance of more casual standards of business attire. Outsourcing is no exception. Law firms have outsourced their libraries (11) and certain support services, such as data processing and copying, (12) for some time. Today, certain law firms outsource significant portions of their back-office support services. (13) One foreign offshore firm offers law firms the option of outsourcing ten categories of activities, including financial and accounting services, presentation preparation services, and litigation support services. (14) The outsourced work might be accomplished in a lower-cost area of the United States (which is sometimes called "homeshoring" or "farmshoring" (15)) or in another country, in either case taking advantage of lower labor and overhead costs.

Attention recently has shifted from outsourcing back-office, administrative and support functions for law firms and legal departments to outsourcing legal and law-related services themselves. (16) In this shift, the uniqueness of law, compared to business and even to other professional services such as accounting, is crystallized. Outsourcing legal services raises special concerns that implicate the professional obligations of lawyers and our self-regulatory regime. The ethical and regulatory issues are complicated by the outsourced activities being sent offshore to jurisdictions where regulatory restrictions and judicial systems differ from those in the United States and consequently issues from unauthorized practice to enforceability of contracts may be relevant. (17) Of course, these ethical and regulatory concerns are only part of the story, for outsourcing legal services implicates the judgment lawyers bring to their clients. In this regard, outsourcing legal services raises issues common to the outsourcing of any service involving judgment, nuance and experience.

In this article, we place offshore outsourcing of legal and law-related services in the larger context of globalization as it impacts the legal profession generally, and consider the ethical issues raised by offshore outsourcing, both as it exists today and as the practice may develop in the future. We begin in Part I with an examination of the existing offshore outsourcing activities of lawyers, law firms and corporate legal departments, in order to separate the hype surrounding outsourcing from reality. We then consider the motives for outsourcing, both for outsourcers and those receiving the assignments (frequently referred to as "vendors" or "providers"). In order to understand how the outsourcing relationship differs from typical lawyer-client and lawyer-lawyer relationships, in Part II we construct an analytical framework--based on traditional relationships among lawyers and between lawyers and their clients--to consider the ethical issues raised by offshore outsourcing. In Part III we look to professional regulation for guidance on the ethical issues raised by offshore outsourcing in the context of a law firm outsourcing to an offshore service provider. Finally, in Part IV we consider the potential benefits and disadvantages to law firms and legal departments in outsourcing offshore.


    Offshore outsourcing is headline news for businesses, and legal services are following here as elsewhere. (18) Reports of offshore outsourcing of legal services are announced with attention-grabbing proclamations such as "Corporate America Sending More Legal Work to Bombay," (19) "A Passage to India," (20) "New Jersey Law Firms to Outsource from India," (21) and "More U.S. Legal Work Moves to India's Low-Cost Lawyers." (22) Despite the warnings implicit in these banners, however, most of the reports tell of offshore outsourcing of back-office and support services for lawyers rather than of legal advisory services. (23) Back-office work is substantial in terms of dollars involved: one estimate is that the "top 200 [U.S.-based] law firms spend more than $20 billion a year for back-office work." (24)

    In addition to administrative back-office work, services commonly performed by paralegals and new law graduates are being outsourced, including preparation of patent applications and document review. Outsourcing of these sorts of activities illustrates how services can be disaggregated or "unbundled" for purposes of capitalizing on the efficiencies of sending work to lower cost service providers situated overseas. (25) Discrete tasks are outsourced to individuals, who may be licensed lawyers or experts in other fields such as engineering, working in remote locations. Once the outsourced work is completed it is integrated into the larger context of the client project, and this integration typically occurs in the United States. One of the earliest examples of offshore outsourcing by a law firm is the Bickel & Brewer law firm of Dallas, which opened a back-office support facility in India in 1995 in which it uses lawyers and non-lawyers to "scan, code, index and abstract documents" (26) to support its Texas litigation practice.

    Often, outsourcing is accomplished with the aid of an intermediary outsourcing firm. (27) Several intermediary firms were founded by U.S. lawyers with elite credentials, including Mindcrest (Ganesh Natarajan and George Hefferan, both formerly with McGuire Woods's Chicago office (28) and Atlas Legal Research (Abhay "Rocky" Dhir, former law clerk to U.S. District Judge Jerry Buchmeyer (29) ). Others are organized abroad, including Manthan Services, which has "120 Indian-trained lawyers, including two UK qualified solicitors and 50 senior lawyers" (30) and IP Pro, an affiliate of a Mumbai law firm. (31) Still another model is the expansion into legal process outsourcing from business process outsourcing followed by OfficeTiger, now owned by R.R. Donnelly. (32) These outsourcing intermediaries identify foreign lawyers to work on outsourced projects, communicate assignments to them, set and collect fees, and might even provide U.S.-lawyer review of outsourced work. (33) Each of the outsourcing firms is careful to note that they are not providing "legal services" and are not involved in any lawyer-client relationship.

    Such disclaimers raise important issues about the nature of the services being outsourced, which in turn leads to the dilemma of separating legal from law-related and non-legal services. When legal services are outsourced, the same rules of professional conduct regulating lawyers' activities generally apply, triggering concerns about unauthorized practice and other ethical issues. Law-related services, in contrast, raise a relatively limited set of ethical issues. Finally, back office, support, and paralegal services are appropriately performed by non-lawyers and generate application of the ethical rules in the larger context in which the services are integrated. The distinction among legal, law-related and non-legal services implicates the boundaries of the practice of law, which leads us to the circuitous definition that "the 'practice of law' is the rendering of professional services to a person who believes that he or she is a client dealing with a lawyer." (34) Unfortunately, this raises at least as many questions as it might resolve, since there is no general agreement on the definition of "the practice of law" and the activities currently being outsourced skate close to the divide between "legal" and "support" services. Examples of the type of work outsourced offshore include "patent applications and litigation support," (35) "legal research and pieces of M & A transaction [s]," (36) and even drafting pretrial motions and briefs. (37) Each of these activities might be performed by lawyers, paralegals, or other support staff working under the supervision of lawyers.

    More insight into outsourcing might be gained by focusing on the substantive areas of law involved. For example, much of the...

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