Don't Believe the Hype

Filed in archive Opinions & Insights on August 28, 2008

Photo courtesy of iStockphoto, Luis Pedrosa

Legal Process Outsourcing firms are buzzing about a recent ABA Opinion that discusses Legal Process Outsourcing. The hype would tell you that the ABA gave Legal Process Outsourcing a big "thumbs up," but a closer read of the opinion raises some very important issues (and potential concerns). Certainly, the article reads more like an acceptance of fact than a ringing endorsement - as some of the LPO bloggers would, no doubt, prefer.

As an initial point, it is important to remember that the ABA, while an important organization, has no real rule-making ability. That ability, instead, falls to the state bar associations.

Looking at the article, it is important to note that simply handing off the work to a foreign lawyer - and forgetting it - is not acceptable. Furthermore, the opinion suggests an active management role, including site visits, vetting individual attorneys and other management activities that have proven difficult for companies with a large outsourcing presence, and will likely be near-impossible for law firms, with somewhat arcane management practices, to fulfill.

Fees were another interesting area of the report. The door was open to marking up fees, but such a markup had to be "reasonable for the services rendered." Also, if charged as a disbursement, the fees should be passed through at cost, with a modest administrative charge. This approach is somewhat inconsistent with the approach taken by some local bar associations, who suggest that the charges are a disbursement and must be passed through without markup.

In the end, this Opinion letter will no doubt erase some concerns about Legal Process Outsourcing. However, many questions still remain - including acceptance by the client community, acceptance by more traditional law firms, and a clear understanding of the operation of the rules surrounding the practice of law.