Lisa Erickson-HarrisFaster, better and cheaper is the mantra for legal process outsourcing (LPO), as it is for business in general. Sending legal support outside of the law firm to achieve efficient turnaround and lower overhead is the goal for LPO. Savings can be substantial.
According to Ash Anderson, founder and president of legal process outsourcing firm Novadios, LLC, “the cost to handle functions such as document review, eDiscovery and back-office support services can save as much as 80 to 90%.” What individual or business would not be supportive of reducing legal costs if it meant driving down service fees?
The LPO Business
LPO has been part of the legal profession’s delivery model for nearly a decade. The question is whether or not engaging with a third-party on highly sensitive legal matters causes cracks in our legal framework. Can legal ethics be maintained when work process is being managed overseas whether it is handled nearshore or offshore? Providers are based all over the world although Latin America and India in particular have both received high marks.
Novadios took its bold step in 2007 when the industry remained in its infancy and chose Argentina as its partner region due to a number of factors – not the least of which is a highly educated workforce. Anderson strongly believes the U.S. legal system can be supported in Latin America. Why? A lower cost, compatible business and legal climate and more readily available staff are the primary reasons.
Anderson believes legal ethics can be supported by the way workflow and business relationships are structured. He is confident that ethical considerations such as confidentiality outside the US border and depth and breadth of due diligence can be accommodated as well. In Novadios’ experience, large corporations typically want to understand what processes and procedures are in place and will conduct site visits to determine if adequate physical and data security measures are in place and that the organization is being run as a law firm and not a questionable establishment. Anderson was quick to point out that multiple U.S. bar organizations have issued ethics positions with regard to outsourcing.
Ethical Concerns
According to a 2010 study by Outsource Portfolio, there are many ethical considerations. The study identified the ethical concerns which have been addressed by the American Bar Association (ABA) as well as several state-level bar entities. Critical issues detailed in this report include:
- Conflict of Interest: Safeguarding clients to make sure there are no competing or conflicting interests being served not only by the law firm, but also its service provider(s).
- Confidentiality Issues: Protecting privacy of highly sensitive matters becomes much more complicated with vast geographic, cultural and potentially legal systems in place. Regardless of the LPO service providers’ location, the law firm acquiring services has responsibility to guarantee confidentially and must choose wisely its location and service provider in order to protect client interests.
- The Unauthorized Practice of Law: Legal credentials are required to practice law. While there are many supporting services, the hiring law firm must be certain a lawyer is leading the legal effort.
- Disclosure to Clients: There is a responsibility, in some instances to make the client aware of the LPO and on occasion obtain consent.
- Billing Practices: Sensitivity exists with regard to pricing and billing such that some cost savings should be passed along to the client.
Legal Opinion
In each of these areas, ethics can be compromised. Yet, they can also be protected in a meaningful way as each of the bar rulings outline. The ABA supports outsourcing both inside and outside of the US borders and has since August 5, 2008, when it published its Formal Opinion 08-451, an opinion that affirms outsourcing of legal procedures to a firm located in a foreign country. In essence, the ABA opinion takes the stand that LPO can be supported ethically depending on the scope, process and practices of the law firm seeking services. It acknowledges the globalization of all aspects of corporate business. The expectation is that the attorney remains responsible for all work product as well as ensuring that business will be conducted in a way that meets U.S. ethical and legal standards. Both the New York Bar Association and the Los Angeles County Bar have published similar opinions.
The ABA outlines steps that a law firm can take to ensure it has met its legal and ethical obligations for the client. Specifically, the ABA opinion states that, “…at a minimum, a lawyer outsourcing services for ultimate provision to a client should consider conducting reference checks and investigating the background of the lawyer or non-lawyer providing the services as well as any non-lawyer intermediary involved, such as a placement agency or service provider. The lawyer also might consider interviewing the principal lawyers, if any, involved in the project, among other things assessing their educational background. When dealing with an intermediary, the lawyer may wish to inquire into its hiring practices to evaluate the quality and character of the employees likely to have access to client information. Depending on the sensitivity of the information being provided to the service provider, the lawyer should consider investigating the security of the provider’s premises, computer network, and perhaps even it is recycling and refuse disposal procedures. In some instances, it may be prudent to pay a personal visit to the intermediary’s facility, regardless of its location or the difficulty of travel, to get a firsthand sense of its operation and the professionalism of the lawyers and non-lawyers it is procuring.”
Other aspects of LPO are also covered such as consideration of the government and legal system to the extent they may play a role in ensuring that documents and privacy can be maintained.
LPO Providers
There are attorney-centric and non-attorney firms offering LPO services. Novadios business model is to employ attorneys both in the U.S. and in Argentina which it believes to be similar to U.S. legal culture. Wipro and Infosys are two organizations that also provide a range of business process outsourcing. While Novadios brings a legal firm perspective to LPO, Infosys takes a business process perspective which utilizes attorneys though it is more process-centric. Companies run the gambit of process outsourcers to legally-oriented firms such as Novadios. The bottom line is that competition is stiff in the LPO market, with providers willing to navigate the ethically-sensitive landscape.
In fact, the LPO practice at Infosys is led by strategic practice head Michael Sonsteng who is a U.S.-licensed attorney. He supports the ABA position and is in alignment with Anderson’s viewpoint on the ethics of outsourcing legal processes. About ethics, Sonsteng says that “Infosys BPO takes the ethics of legal outsourcing very seriously and believes that with the right systems in place, legal outsourcing is not only ethical, but also an important part of the new manner in which legal services are delivered. Many bar associations have opined that it is ethically appropriate to outsource legal services. In fact, even the American Bar Association has stated in August 2008, in Formal Opinion 08-451 that ‘the outsourcing trend is a salutary one for our globalized economy.’” Infosys has the ability to deliver LPO services in Latin America from Brazil, Mexico, Costa Rica and Puerto Rico as well as regions outside of Latin America.
Conclusion
While the ethics around LPO will no doubt result in ongoing scrutiny, for the time being, most bar association opinions support its practice. Anderson has described an evolution that is taking place and characterized by him as phases. In this second phase of LPO services, he described new offerings that are “moving towards mid-tier level work that remains low-value, but still priority.
This level of work adds risk and would include work tasks such as brief writing, transactional work and legal research. With this increased level of sophistication, Anderson believes that corporations can realize a 60 – 70% savings by outsourcing such back office legal functions.” Contributors to reduced costs can include tax savings and cultural affinity that reduce cost and improve operational efficiencies. Where such substantive savings opportunities exist, legal profession executives will continue to seek nearshore and offshore solutions to streamline workload and increase profitability.
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