The Tide Is Turning for LPO (At Least in the USA).

I had everything planned for this week’s column. But, as with many things in life, you can’t always plan for the unexpected. So, since my last column, there have been two very significant events that have taken place in the US with regard to the legal process outsourcing (“LPO”) industry. This week’s column is dedicated to those events.

Significant event number 1…..

Previously, the Bar committees in New York City, San Diego County, and Los Angeles County have ruled, that US lawyers may outsource legal work to foreign lawyers (or non-lawyers) outside the US, provided the US lawyer (a) supervises the foreign/non-lawyer; (b) preserves the client’s confidences and secrets when outsourcing; (c) avoids conflicts of interest when outsourcing; (d) bills for outsourcing appropriately; and (e) when necessary, obtains advance client consent to outsourcing.

This approach to offshore legal outsourcing has not surprised many legal experts. According to Bruce A. Green, New York City, professor at Fordham University School of Law and member of the Section of Litigation’s Council (referring to the New York City bar opinion), the rulings “take settled principles and familiar rules and apply them to a slightly different setting”.

In August 2008, the American Bar Association (“ABA”) Standing Committee on Ethics and Professional Responsibility issued a formal opinion (refer to Formal Opinion 08-451) stating that US lawyers are free to outsource legal work, including to lawyers or non-lawyers outside the United States, if they adhere to ethics rules requiring competence, supervision, protection of confidential information, reasonable fees and not assisting unauthorized practice of law.

The ABA described outsourcing as “a salutary trend in a global economy”; and stated that “outsourcing affords lawyers the ability to reduce their costs and often the cost to the client to the extent that the individuals or entities providing the outsourced services can do so at lower rates than the lawyer’s own staff.” 

It seems that some of my US colleagues are not surprised that the ABA has come out in favour of LPO. What is surprising to them though is that the ABA has “saluted” LPO.

If nothing else, the ABA opinion reaffirms the growing LPO trend and in my view represents an attitudinal shift towards the view that LPO is a “a salutary trend in a global economy”.

Significant event number 2…..

It was to my (and many others in the LPO industry’s) surprise that Newman McIntosh & Hennessy (“NMH”), a US law firm sued an India-based LPO company called Acumen Legal Services and none other than President George Bush. The case was filed in May 2008 and has been closely watched by many in the US legal community.
The lawsuit essentially revolved around the claim that the US Government practise (i.e. the National Security Agency’s practise) of intercepting electronic communications between US lawyers and foreign nationals (e.g. legal outsourcing providers such as Acumen Legal Services), is unconstitutional. NMH sought a court order against “all United States-based attorneys” who outsource legal work to India and “all foreign legal outsourcing providers”.

13 days after Acumen Legal Services filed its motion to dismiss the outsourcing lawsuit, NMH withdrew its case. Prior to this, confronted with the motion to dismiss, NMH had requested permission to further amend its complaint and expand the case into a class action on behalf of multiple US law firms. The day after that permission was denied, NMH withdrew the lawsuit.

This lawsuit was widely regarded as anti-outsourcing and in my view was an attempt by a law firm to maintain the status quo. Why didn’t NMH also sue all foreign law firms? After all, every cross border deal would involve the sending of electronic communications to “foreign nationals” (i.e. foreign law firms). Isn’t that a double standard?

It’s unfortunate that the outcome of the case was not the result of a court decision; however, the result is a good one nonetheless.

The tide is turning…..

All things being equal, my next column will focus on the Canadian LPO landscape.