Is There a Duty to Propose LPO?

Taking into account the harsh economic climate, the mood at ACI’s recent LPO summit was relatively upbeat. Having attended several LPO conferences over the last three years, it was particularly refreshing to witness several client case studies from leading firms and corporations, including, Clifford Chance, Baker McKenzie and Accenture.

On day two of the event, Maria McMahon from Baker McKenzie expertly navigated the maze pertaining to a large scale document review project, currently being undertaken offshore. Maria’s final slide contained a table highlighting the benefits of a well managed offshore document review project. She identified the benefits by comparing offshore to a domestic based solution. Her conclusion was that for first pass document review, measured across four metrics, namely, quality, learning curve, productivity and cost, offshore LPO scored extremely favorably on cost, was comparable in terms of productivity and quality, and with a marginally slower learning curve. Ok, hold that thought, and I’ll come back to this in one moment.

In my humble opinion however, clearly the most thought provoking, defining moment, of the conference, came when a question was raised, and a discussion ensued, during the Q&A session that immediately followed the Ethics of Outsourcing panel. The question raised, was whether there is a valid argument, that a U.S. law firm is now compelled, or even under a duty to at the very least inform their clients of the “offshore” option for document review?

Let’s revert back to the Baker McKenzie “experience”, and the conclusions reached, namely, that offshore review is significantly more cost-competitive and also comparable in terms of productivity and quality. If one doesn’t inform a client that conducting first pass document review offshore is an option, how does this sit with one’s ethical obligation set out in the Model Rules of Professional Conduct at Rule 1.5?

(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses.

Is it reasonable to assume that billing anything approaching AmLaw 200 junior associate hourly rates for first pass document review could be deemed to be “an unreasonable fee”?

While writing this post, I reflect back on the San Diego Bar Association Opinion and a post I wrote in April 2007. I commented at the time that the Opinion discusses the concept of a client’s “reasonable expectation”, as to whether the work would be performed in-house within a law firm, or outsourced. Click here for the full post. Where I felt the San Diego Opinion fell short was in failing to consider that “reasonable expectations” change over time. I commented:

“The Opinion only really considers the here and the now. A client’s “reasonable expectations” are not static, immovable, and unchanging over time. The legal industry now operates in a global marketplace and clients are evermore sophisticated and accepting of the concept of globalization. A client’s reasonable expectations today will be vastly different tomorrow. Soon, a client’s only “reasonable expectation” will be that the quality and confidentiality of the work-product is maintained by whoever completes it, wherever he or she may be. In fact, I would go as far to say that we are not far from the day when a client’s reasonable expectations will be that work-product should be outsourced to the most efficient and cost-effective provider!”

Almost two years have passed since I wrote this piece. Taking into consideration the debate I reference above from the ACI conference, I wonder if we are closer to reaching that “tipping point” day. If one stops for a moment to consider the potential wider reverberations here, the implications for both the legal profession and the growth of LPO are tremendous. I generally don’t formally solicit comment on my blog, but I would be delighted to hear your views on this point.