Legal Process Outsourcing (LPO) – Top Ten Service Providers
May 15, 2010
In addition and depending on the scope of the services provided, there are three broad classifications for LPO providers:
1. Full BPO/KPO Service Providers. These firms provide LPO services as a service line in addition to other BPO or KPO related services. Example firms would include Infosys, Wipro and specialized KPO services firm Integreon.
2. Full Spectrum LPO Service Providers. These firms specialize in providing a full range of LPO services and tend to be large and well established in the LPO industry. Their clients would include well known law firms and MNC corporate legal departments. Example firms include Mindcrest, Pangea3 and LawScribe.
3. Limited LPO or Legal Support Service Providers. These firms provide limited LPO or legal support services such as firms who are specialized in handling intellectual property rights matters or provide legal secretarial work. Their clients may range from large law firms and MNC corporate legal departments to small law firms and legal departments. Many of these LPO firms are based in India, are relatively new and are small operations.
4. What are the Key Advantages of Using a LPO Service?
There are several key advantages gained by using a LPO service and these advantages include the following:
- Cost-Effective. Depending upon the type of legal service being outsourced, a law firm or a corporate legal department could achieve as much as 30% to 80% in cost savings by outsourcing legal support work to a firm based in a lower cost market like India.
- Flexibility. Rather than hire full-time or even temporary in-house support staff to deal with the ups and downs in workflow, LPO firms can be utilized on an as need basis. Furthermore, LPO firms can allow a law firm or corporate legal department to tap into expertise that they may otherwise be lacking in-house.
- High Quality Legal Support. Given the differences in salary and overhead structures, many LPO firms employ fully licensed attorneys rather than just paralegals or legal secretaries.
- Increase Efficiency. LPO firms utilize low cost professionals as well as specially designed software that automates and streamlines repetitive tasks, especially tasks that involve significant amounts of paperwork and documents.
- Leverage Time Zone Differences. North American or European based clients have the ability to have work completed on a 24 hour basis or during the night.
- Optimize Costly Resources. For law firms, expensive resources in high cost markets are freed up in order to focus on high margin fee generating work rather than repetitive tasks while corporate legal departments are able to focus more attention to their core competencies rather than on handling legal paperwork.
5. What are the Ethical Implications of LPO?
The nature of the legal profession and the fact that many LPO service providers are based offshore complicates matters when any form of outsourcing is considered. Hence, the American Bar Association (ABA) along with various state bar associations in the USA have attempted to address the ethical implications of LPO and their rulings and statements have largely focused on the following five key issues:
- Conflicts of Interest
- Confidentiality Issues
- The Unauthorized Practice of Law
- Disclosure to Clients
- Billing Practices
Hence, lawyers and firms seeking to outsource legal work will need to keep these five issues in mind.
5.1. Conflicts of Interest
Various Bars such as the NYC Bar have ruled that any lawyer or firm that is involved in LPO types of services has a duty to at least examine potential conflicts of interests. Hence, someone using an LPO service should at least ask their LPO service provider the following questions:
What are your conflict-checking procedures?
How do you track the work performed for your clients?
Have you ever performed work or services for a client who might also be adverse to our interests or the interest of our clients?
However and while most Bars in general have yet to come up with particular questions or instructions with regard to outsourcing, it should be assumed that the onus regarding any conflicts of interest will always rest with whoever is seeking the outsourced legal service.
5.2. Confidentiality
It is always the duty of lawyers to keep all client information confidential. However, confidentiality becomes increasingly complicated when the internet and potentially unsecured networks are used to transmit information back and forth between an LPO and their law firm or corporate legal department clients.
Hence, the NYC Bar and the ABA have in effect ruled that if an outsourcing assignment requires that a client’s confidential secrets be revealed to a non-lawyer based overseas, the lawyer will need to receive the client’s informed consent in advance. Moreover, the onus is largely on that of those seeking the outsourced legal service to ensure that an LPO does not inadvertently reveal confidential information to those not entitled to receive such information.
5.3. The Unauthorized Practice of Law
The legal profession is governed by strict rules with regards to who is authorized to practice law plus lawyers are required to adequately supervise and monitor any lawyers or non-lawyers whom they manage in order to ensure that they abide by the legal profession’s professional conduct rules. However, the use of an LPO firm, especially one who performs their work from overseas where there are time zone differences can significantly complicate matters.
Hence, the NYC Bar in its Formal Opinion 2006-03 addressed outsourcing by outlining the following steps that should to be taken before engaging a LPO provider who employs non-lawyers:
- Obtain background information about the LPO firm who is engaging a non-lawyer and obtain the professional résumé of the non-lawyer who will be assigned to the project.
- Conduct the necessary reference checks.
- Interview the non-lawyer prior to his or her performing any work.
- Ensure proper levels of communication with the non-lawyer throughout the assignment to ensure that the non-lawyer understands the assignment and the expectations that come with it.
When engaging a foreign LPO service provider, the ABA’s Formal Opinion 08-451 broadly outlined additional questions to consider and these questions included the following:
1. How compatible is the foreign country’s legal system compared with that of the USA?
2. What are the relevant ethical principles and how effective is the foreign country’s legal system?
3. How secure are the LPO provider’s premises along with their computer networks and other procedures such as refuse and document disposal?
In other words, the onus is again on the lawyer or the firm who is seeking the outsourced service to perform the necessary due diligence to ensure that the work performed and those performing the work abide by the legal profession’s strict professional conduct rules.
5.4. Disclosure to Clients
As of now, there are no specific rules governing disclosure requirements in the context of using LPO firms. However, the ABA and most Bars have rules in place that ensure a client’s right to understanding how they are being represented by a lawyer and many of these rules specifically govern the use of non-lawyers. Nevertheless, it should be noted that the NYC Bar in Formal Opinion 2006-03 does recognize the duty to obtain consent from a client before a legal project is outsourced overseas.
5.5. Billing Practices
Lawyers are prohibited from collecting an unreasonable fee or amount for expenses. Hence, legal fees are typically based upon the following factors:
- Time and labor.
- Fees charged for similar types of legal work.
- The ability, experience and reputation of the lawyers performing the legal services.
However, the billing for LPO services is more complicated. NYC Bar Formal Opinion 2006-03 has stated that absent a specific agreement with the client, a lawyer should bill a client no more than the direct cost associated with the outsourced work, plus a reasonable allocation of overhead expenses that are directly associated with providing that service. On the other hand, the ABA stated in Formal Opinion 08-451 that billing for LPO type services should depend in large measure on the existing billing arrangement with a client.
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Great… Thanks for sharing us your review… I like the way you show us your point, very interesting!
Interesting report, I enjoyed reading the “Ethical Implications of LPO”. I am planning to start my own LPO soon, and this report helped me a lot.