ABA Eyes Rule Comments on Outsourcing

By Patricia Sallen, Director of Special Services and Ethics/Deputy General Counsel
January 4, 2011

The American Bar Association Commission on Ethics 20/20 is circulating for comment a draft of proposed Model Rule changes to address domestic and international outsourcing of legal work.

The changes would add comments to Model Rules 1.1 (competency), 5.3 (supervision of nonlawyer assistants) and 5.5 (unauthorized practice of law) providing guidance, according to the draft report, of "their applicability to the outsourcing of legal or non-legal services." In short, the proposal recommends clarifying that lawyers may outsource work but must take reasonable steps to ensure that the outsourced work is performed competently and otherwise ethically and that they are not aiding the unauthorized practice of law.

"The changes…constitute neither endorsement nor rejection of the practice of outsourcing by lawyers and law firms," the draft explains. "Rather, they are an important and direct response to the existence and growth of outsourcing practices, intended to help lawyers engaging in the practice to do so ethically and responsibly."

The draft report on outsourcing was produced by one of the ABA commission's several working groups. The full commission, which is conducting the ABA's first major review of the model ethical rules in about a decade, has not acted on it.

The outsourcing report is the first rule proposal released as part of the ABA commission's effort. Other major issues being addressed include cloud computing (using web-based applications and storing documents on servers), alternative litigation financing and globalization of the legal profession.

The draft report recommends adding this comment to Model Rule (MR) 1.1, which requires that lawyers competently represent clients:

A lawyer may retain other lawyers outside the lawyer's own firm to provide or assist in the provision of legal services to a client provided the lawyer reasonably concludes that the other lawyers' services will contribute to the competent and ethical representation of the client. The reasonableness of the conclusion 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 and ethical environment 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. When using the work of nonfirm lawyers in providing legal services to a client, a lawyer must also reasonably conclude that such work 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.

The draft recommends adding this comment to MR 5.3, which requires lawyers to supervise nonlawyer assistants:

The responsibilities stated in this Rule also apply when a lawyer or law firm utilizes nonlawyer service providers outside the lawyer's or law firm's office to assist in rendering legal services to clients. The lawyer or law firm must make reasonable efforts to ensure that the activities of any nonlawyer service providers are 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 requirement to protect client information; and the legal and ethical environment in which the services will be performed. Where the client has chosen or suggested a particular nonlawyer service provider, the lawyer or law firm ordinarily should consult with the client concerning the allocation of responsibility for monitoring as between the client and the lawyer or law firm. If information protected by Rule 1.6 will be disclosed to nonlawyer service providers outside the lawyer's or law firm's office, 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.

Noting that MR 5.3 has most often been interpreted as applying to nonlawyers employed in a law firm, the draft advises that the proposed comment would confirm that the rule extends to nonlawyers who are not actual employees.

Finally, the draft recommends adding one sentence to a paragraph in the comment to MR 5.5. Here is the existing paragraph, with the recommended addition underlined:

A lawyer may practice law only in a jurisdiction in which the lawyer is authorized to practice. A lawyer may be admitted to practice law in a jurisdiction on a regular basis or may be authorized by court rule or order or by law to practice for a limited purpose or on a restricted basis. Paragraph (a) applies to unauthorized practice of law by a lawyer, whether through the lawyer's direct action or by the lawyer assisting another person. For example, a lawyer may not assist a person in practicing law in violation of the rules governing professional conduct in that person's jurisdiction.

The draft advises that adding the sentence is important "[g]iven the increased prominence of the phenomenon of outsourcing, including in the international context."

What do these proposed Model Rule changes mean for Arizona? With some notable exceptions, our Ethical Rules closely follow the Model Rules. Arizona's versions of two of the three sets of rules and their comments are virtually identical to the existing Model Rules:

• ER 1.1: The language of our rule is identical to MR 1.1. Our comment has only minor differences.
• ER 5.3: The language of our rule is identical to MR 5.3. Our comment includes additional language that would not affect the outsourcing proposal.
• ER 5.5: Our ER 5.5 adds several subsections to MR 5.5. We also have not adopted most of the comment to MR 5.5, including the paragraph proposed to be expanded.

Any change to the Model Rules is significant, closely followed and analyzed. The State Bar's Committee on the Rules of Professional Conduct is reviewing the outsourcing discussion draft and the proposed additions and will make recommendations to the State Bar Board of Governors.

If you wish to send comments to the ABA on the discussion draft, email your comments by January 31 to ABA Senior Research Paralegal Natalia Vera at veran@staff.abanet.org. If you wish to send comments to the State Bar about the ABA proposals, email those to ethics@azbar.org.

 To view a draft of the report in its entirety, click here.