Hi, Lisa.  Thanks for taking the time to Comment.  You don’t need an excuse to differ with me.  As I just said in an email to you, I do not have access to the ABA opinion and I hope you can get me a copy, so that I can put it in context and give your viewpoint more consideration.
By the way, when I used to do an occasional brief or motion for another firm, I insisted that the client be charged no more than they paid me (which was less than half of their usual hourly rate).

Hi, Lisa.  Thanks for taking the time to Comment.  You don’t need an excuse to differ with me.  As I just said in an email to you, I do not have access to the ABA opinion and I hope you can get me a copy, so that I can put it in context and give your viewpoint more consideration.
By the way, when I used to do an occasional brief or motion for another firm, I insisted that the client be charged no more than they paid me (which was less than half of their usual hourly rate).

Carolyn, if you’re so opinionated on this topic, why didn’t you voice your sentiments at your website?  I haven’t got time to respond in detail now.

Carolyn, if you’re so opinionated on this topic, why didn’t you voice your sentiments at your website?  I haven’t got time to respond in detail now.

I just wanted to clarify above that though associates are billed out at $200/hr, they do not earn anywhere near that much in salary – e.g., at 2000 billables a year, $200/hr is $400,000 and a first year makes about 1/4 of that.

I just wanted to clarify above that though associates are billed out at $200/hr, they do not earn anywhere near that much in salary – e.g., at 2000 billables a year, $200/hr is $400,000 and a first year makes about 1/4 of that.

David,
I have to disagree with your position here as well. Law firms routinely bill associates’ hours at far more than associates are compensated, even when you add in benefits, training and related overhead like secretaries and overhead. Thus, you may have a law firm charging $200/hr for a first year associate’s time and upwards of $300 for a sixth or seventh year. Isn’t it a far better situation where a firm hires an experienced attorney, perhaps with a decade of experience, on a contract basis, pays that attorney $125 an hour and bills the client $200/hr. Seems that everyone comes out ahead?

You may ask why the attorney should be able to profit at all? Well, first of all, many attorneys who sub-contract bear the risk of payment, often paying a per diem person up front before collecting. Thus, an attorney has a risk of non-collection. Also, the attorney who has the case has invested money in marketing to bring that client in. Finally, if profit is what it takes to encourage this type of arrangement – which is clearly beneficial to a conventional law firm set up, then why not reward those attorneys who do it?

David,
I have to disagree with your position here as well. Law firms routinely bill associates’ hours at far more than associates are compensated, even when you add in benefits, training and related overhead like secretaries and overhead. Thus, you may have a law firm charging $200/hr for a first year associate’s time and upwards of $300 for a sixth or seventh year. Isn’t it a far better situation where a firm hires an experienced attorney, perhaps with a decade of experience, on a contract basis, pays that attorney $125 an hour and bills the client $200/hr. Seems that everyone comes out ahead?

You may ask why the attorney should be able to profit at all? Well, first of all, many attorneys who sub-contract bear the risk of payment, often paying a per diem person up front before collecting. Thus, an attorney has a risk of non-collection. Also, the attorney who has the case has invested money in marketing to bring that client in. Finally, if profit is what it takes to encourage this type of arrangement – which is clearly beneficial to a conventional law firm set up, then why not reward those attorneys who do it?

Although I enjoy your blog and ordinarily agree with your analyses, I must strongly disagree with your conclusion that it is not ethical for attorneys to charge clients anything more than the actual amount paid for outsourced legal research and writing services.

As explained on my website, with one exception, all of the bar associations that have addressed the issue—including, most notably, the ABA—have determined that an attorney may charge the client a premium or reasonable measure of profit in excess of the research and writing provider’s cost to the attorney, as long as the total charges to the client are reasonable. (The sole exception is the Maryland Bar Association, which did not give any reason or cite any rule in support of its position).

The bar associations have addressed the issue in the context of questions concerning the use of “contract” or “temporary” lawyers. The following ethics opinions address this question: ABA Formal Op. 88-356; Alaska Bar Ass’n Ethics Op. 96-1; Calif. State Bar Ass’n Formal Op. 1994-138; Colo. Bar Ass’n Ethics Op. 105; D. C. Bar Op. 284; Ga. Formal Advisory Op. 97-1 (June 5, 1998); ISBA Op. No. 98-02; Oliver v. Board of Governors, Kentucky Bar Ass’n, 779 S.W.2d 212 (Ky. 1989); S.C. Op. 91-09 (1991); Virginia Legal Ethics Op. 1712 (July 22, 1998); and Wis. Op. E-94-4. Many of these opinions adopt ABA Formal Op. 88-356 in whole or in part, and many also note the importance of supervision by the hiring attorney. A lawyer admitted to practice in at least one US jurisdiction, who happens to provide legal research and writing services only (as distinguished from doing depositions or making court appearances) is still a “temporary attorney” covered by these opinions.

The basic fallacy underlying your analysis is that the cost of outsourced legal research and writing should be billed out to the client as a disbursement. In fact, ABA Formal Op. 88-356 states: “Assuming that a law firm simply pays the temporary lawyer reasonable compensation for the services performed for the firm and does not charge the payments thereafter to the client as a disbursement, the law firm has no obligation to reveal to the client the compensation arrangement with the temporary lawyer . . . .”

Furthermore, as I also point out on my website, regardless of whether or not an attorney chooses to charge the client more than the attorney pays for legal research and writing services, outsourcing is still cost-effective for the client, since even a rate that includes a reasonable profit to the attorney will generally be less than the attorney’s own hourly rate.

The article referenced in your post simply states that “Thomas Morgan, the professional responsibility expert, says bar association ethics rules require law firms to pass on to clients cost savings from outsourcing.” The article does not state the basis for Mr. Morgan’s opinion.

Finally, as noted above, my comments pertain to research and writing providers who, like me, are admitted to practice in at least one US jurisdiction. I agree with the proposition that a law firm should disclose to a client if an individual not admitted to any state bar (such as an Indian attorney) is performing work for the client, just as the firm would disclose the fact that research was being performed by a law student by identifying the student as a law clerk.

I hope you will revisit this issue in your blog once you have reviewed the ethics opinions cited above.

Although I enjoy your blog and ordinarily agree with your analyses, I must strongly disagree with your conclusion that it is not ethical for attorneys to charge clients anything more than the actual amount paid for outsourced legal research and writing services.

As explained on my website, with one exception, all of the bar associations that have addressed the issue—including, most notably, the ABA—have determined that an attorney may charge the client a premium or reasonable measure of profit in excess of the research and writing provider’s cost to the attorney, as long as the total charges to the client are reasonable. (The sole exception is the Maryland Bar Association, which did not give any reason or cite any rule in support of its position).

The bar associations have addressed the issue in the context of questions concerning the use of “contract” or “temporary” lawyers. The following ethics opinions address this question: ABA Formal Op. 88-356; Alaska Bar Ass’n Ethics Op. 96-1; Calif. State Bar Ass’n Formal Op. 1994-138; Colo. Bar Ass’n Ethics Op. 105; D. C. Bar Op. 284; Ga. Formal Advisory Op. 97-1 (June 5, 1998); ISBA Op. No. 98-02; Oliver v. Board of Governors, Kentucky Bar Ass’n, 779 S.W.2d 212 (Ky. 1989); S.C. Op. 91-09 (1991); Virginia Legal Ethics Op. 1712 (July 22, 1998); and Wis. Op. E-94-4. Many of these opinions adopt ABA Formal Op. 88-356 in whole or in part, and many also note the importance of supervision by the hiring attorney. A lawyer admitted to practice in at least one US jurisdiction, who happens to provide legal research and writing services only (as distinguished from doing depositions or making court appearances) is still a “temporary attorney” covered by these opinions.

The basic fallacy underlying your analysis is that the cost of outsourced legal research and writing should be billed out to the client as a disbursement. In fact, ABA Formal Op. 88-356 states: “Assuming that a law firm simply pays the temporary lawyer reasonable compensation for the services performed for the firm and does not charge the payments thereafter to the client as a disbursement, the law firm has no obligation to reveal to the client the compensation arrangement with the temporary lawyer . . . .”

Furthermore, as I also point out on my website, regardless of whether or not an attorney chooses to charge the client more than the attorney pays for legal research and writing services, outsourcing is still cost-effective for the client, since even a rate that includes a reasonable profit to the attorney will generally be less than the attorney’s own hourly rate.

The article referenced in your post simply states that “Thomas Morgan, the professional responsibility expert, says bar association ethics rules require law firms to pass on to clients cost savings from outsourcing.” The article does not state the basis for Mr. Morgan’s opinion.

Finally, as noted above, my comments pertain to research and writing providers who, like me, are admitted to practice in at least one US jurisdiction. I agree with the proposition that a law firm should disclose to a client if an individual not admitted to any state bar (such as an Indian attorney) is performing work for the client, just as the firm would disclose the fact that research was being performed by a law student by identifying the student as a law clerk.

I hope you will revisit this issue in your blog once you have reviewed the ethics opinions cited above.