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Collaborating with Outside Attorneys as a Solo or Small Firm: Ethical and Practical Considerations

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Collaborating with Outside Attorneys as a Solo or Small Firm: Ethical and Practical Considerations

Solo and small firm attorneys often face the familiar challenge of handling work demands during peak times. How can a small firm continue to offer excellent client service when there are only so many hours in the day? Small firms often look outside to contract attorneys, co-counsel, or refer work out in order to ensure client needs are met. This program will discuss the ethical considerations involved when working with contract attorneys, co-counsel relationships, and referral relationships.

Presenters

Erin Giglia
Founder
Montage Legal Group

Transcript

Erin Giglia: Hello, my name is Erin Giglia and I am Co-owner and Founder of Montage Legal Group. I'm here to talk to you today about collaborating with outside attorneys as a solo or a small firm and the ethical and practical considerations that go along with those types of decisions. As you know, being a solo practitioner or a small firm comes with certain challenges. And one of them is finding the talent that you need in order to grow your practice and continue servicing your clients in an exceptional way. So a few of the ways that law firms manage and grow their practices are with forming lawyer relationships outside of their current firm. There are a few ways to do that. And I'll be talking about four of them. So first, I'll be talking about temporary attorney relationships. So that's contract lawyers, freelance attorneys. I'll also talk about Of Counsel relationships, what that means, and the definitions and the different considerations that need to go into that type of designation. I'll talk about co-counsel relationships. And I'll also talk about referral relationships.

  So when it comes to these outside firm relationships, there are really no special rules that apply specifically to these areas. Instead, the overall rules apply. So contract attorneys, Of Counsel attorneys, law firms, et cetera, they all have to follow just the regular Rules of Professional Conduct, Business and Professions Code, and all of the typical ethics, rules and statutes that go along with those. In addition, we have ethics opinions that give us guidance and discuss different ideas. There are a lot of gray areas because as I mentioned, there are no specific rules that discuss these types of relationships in particular. It's just overall rules that will apply to these situations. So contract attorneys that have been around forever, clients and firms have been using them for a very long time. And now, but the definitions, or at least the concept of contract lawyers has changed quite a bit over the last decade.

  In the past, a contract lawyer might have had a somewhat negative connotation attached, meaning someone who maybe couldn't find full-time legal employment or had some type of other issue. But now with the world of technology and remote working options and alternative arrangements and other things, there have been a lot of people who have taken up contract lawyering as just an alternative lifestyle choice in order to continue legal practice, as opposed to the traditional type of employment. And similarly law firms have really been capitalizing on this resource because it can be really difficult to ramp up in times that there's an increased need, especially when law firms don't always have that perfect information about when something is going to get very busy versus when something is going to go away settle, or a deal might die, or other things. So working with remote lawyers has become increasingly popular. So I'll be talking about some of those issues today.

  As I mentioned, there are several rules of professional responsibility that apply to an outside attorney relationship. And I'll be discussing many of them today. I'll be talking about the duty of competence. I'll be talking about diligence to your client, communications with clients, conflicts of interest, fees, the duty to preserve client confidences, and aiding and abetting the unauthorized practice of law. In addition to some practical considerations, the slides have outlined all of the different rules that may apply. And so you'll want to take a closer look at these types of rules. The first thing I'm going to talk about is what it looks like as far as working with a traditional law firm client representation versus bringing in an outside third party representation or assistance for working with a firm. The traditional legal arrangement is just what you'd imagine. A law firm works directly with a client. Whereas if you bring in an outside option, then you have your freelance contract attorney or your Of Counsel lawyer who's working for the law firm while the law firm is working for the client.

  So you can see that there is now an in-between between the freelance attorney and the ultimate client. So what that normally would mean is that contract attorney does not have an independent engagement with the client directly. Their agreement is with the law firm. So before we get started, I'll want to introduce some of the hypotheticals that I'll be using to discuss some of these issues. So we have Law Firm Lisa. She is a solo practitioner in California. She has some decent litigation experience, general litigation. Law Firm Lisa has been retained by Kate the Client who is a sophisticated software company, general counsel. That client is a defendant in a fairly complicated trade-secret litigation case. Law Firm Lisa is completely capable of handling the case, but has never actually tried a trade-secret matter. And then we have freelancer Faye. She graduated from a great law school, previously practiced at an excellent law firm, licensed in California, 12 years of litigation experience, mostly on trade-secret cases. So we have a fairly ideal situation here. We've got a very comfortably competent attorney who's going to be working with a fairly competent freelance lawyer.

  So that's great news for the client. So what is Law Firm Lisa's option? They're going to work with freelancer Faye. So a lot of times law firms immediately want to designate an outside lawyer as Of Counsel, but there are several considerations before that law firm can do this. First of all, the law firm needs to understand what Of Counsel actually means. It means a close, personal, continuous and regular relationship. It's very fact dependent. What it does not mean is working on projects here and there, just kind of randomly. It does not mean if you're bringing someone in to consult with your firm for five hours total, and that's it ever. That is not enough counsel lawyer. It just doesn't meet the definition. You need that close, personal, continuous, regular relationship.

  It is possible for a freelance attorney or any attorney to be Of Counsel to multiple law firms at the same time, as long as the attorneys and firms involved comply with all of the rules and requirements relating to the Of Counsel relationship, and as well as that association is beneficial financially and otherwise to that firm and to the freelance lawyers. So what does this mean? It's very tricky because Of Counsel typically has meant, it could mean many different things. Sometimes it might mean a retired partner who's available to the firm for consultation here and there. It might mean a part-time practitioner at a law firm. It could potentially mean a senior attorney who is on a different non-partnership track. Or it could be a temporary lawyer who's working with that firm on an extended basis, but still not a part of that firm specifically.

  And that's really where we need to, we're going to be focusing. It's critically important to remember that when you have an "Of Counsel" title, regardless of the actual relationship, just even the substantive relationship, it implicates automatic de facto imputed conflicts of interest. So what that means is if I'm Of Counsel to Smith and Jones, every single matter that Smith and Jones brings in to that firm, they have to clear conflicts with me. And if I'm a freelance lawyer and I'm working for five other law firms, every single matter that I'm working on, I need to clear conflicts with Smith and Jones if my title with that firm is Of Counsel. That's automatic, that's de facto. There's no wiggle room in this. So it doesn't make any sense to call an attorney or an outside attorney Of Counsel, unless there's a true substantive reason to do so. If I'm working with Smith and Jones for two years, and I work with them 20 hours a week, then sure, call me Of Counsel.

  That would make sense. My relationship with the firm is close. It's regular. It's continuous. And that type of relationship would probably implicate imputed conflicts of interest anyway. So calling me Of Counsel would be an accurate reflection of that relationship. And in addition to that, you don't really need to worry about the extra imputed conflicts because they probably exist anyway. There are rules that we need to look at. And so, as we know, there's actual conflicts, which is Rule 1.7. We have to clear conflicts. Every lawyer has to clear conflicts with each matter they handle, regardless of the relationship with the firm. And then while lawyers are associated in a firm, none of them can be breaching any conflict rules that apply to any of the other attorneys that are also associated with that firm.

  And this goes for every single matter that the firm is handling even if an outside attorney never steps foot into an office and only works on a single matter that "Of Counsel" title does implicate those automatic imputed conflicts. So is Faye really Of Counsel to Law Firm Lisa? Well, that's going to depend. Does the relationship meet the minimum requirement: close, personal, continuous and regular? If so, then they might consider the "Of Counsel" title. Is it honest with your client and to the court? Are you somehow misleading your client or the court or anyone by calling that relationship Of Counsel? You can imagine a scenario where a law firm, and this is a real situation, a law firm has many works with many contract lawyers just throughout the course of its existence. And they require every attorney that works with their firm to be called Of Counsel.

  Well, you can imagine that this would create quite a conflicts of interest mass potentially because there's a very high probability that law firm is not respecting the conflicts rules. Number one, it's doubtful that any law firm has hundreds of relationships with contract lawyers that would meet the definition of "Of Counsel," number one. And secondly, it's also doubtful that firm is actually clearing conflicts appropriately with each one of those "Of Counsel attorneys" each time that firm is bringing on a new matter. So it's definitely not something that you'd want to do. It's not something to be taken lightly. It's important to really consider the title that you're giving to the outside lawyer. If any, a lot of times law firms ask, what should I call this contract lawyer or freelance attorney? And the answer is, well, you can call them really anything.

  You can't call them Of Counsel if it's not true. You can't call them associate if that's not an accurate reflection of the relationship. You could just call them attorney, or counsel, or consulting attorney, or really any other thing. Maybe they don't even need a title. It's not necessarily required. So there's all kinds of different options. And we don't need the title Of Counsel, even though it might be an easy just idea to call them that, but it's really not worth it most of the time. So how do we avoid those imputed conflicts of interest? First of all, we want to avoid that "Of Counsel" title, unless it's truly what is intended or needed by the relationship. You want to have your contractors work remotely, which is usually not a problem right now. Most everyone has access to those technologies and equipments, equipment necessary to be working remotely. And you want them to have their own equipment, and that they're not held out to the public as a part of the law firm.

  You don't want to give those outside lawyers any access to your client databases, files, or software beyond what's needed for the actual assignment. You want to avoid having any contractors attend a team meeting beyond the particular matters they're handling. And in addition to that, you want to limit the amount of information given to that contract attorney to the actual matter or assignment that they're handling. There's no reason to give additional information or documents or anything else. And if you can do those things, then you'll have a pretty decent chance of making sure that you're avoiding those imputed conflicts of interest. So now you want to work with a contract lawyer who is not called Of Counsel. What do you need to bear in mind with the conflicts rules under this situation? So first of all, the rules are still the rules.

  You still need to clear conflicts of interest. But if you do so ethically, then imputed conflicts should not be an issue. So what that means is each time you are going to assign a matter or a project or whatever it is to a contract attorney, you need to make sure that contract attorney is clearing conflicts first. So as soon as you have those conflicts clear, then the contract lawyer is free to handle that work. But you probably will not have imputed conflicts of interest unless that contract attorney is deemed associated with the firm. So what does this mean? Because if you're deemed associated with the firm, now you have imputed conflicts of interest. So you'd want to avoid having that contract lawyer deemed associated with your firm. How do you do that? Well, there is no clear definition.

  But as usual, we love factors as lawyers. So we have some factors to consider: sharing office space using the firm equipment; having access to confidential client files or information beyond the scope of a particular assignment; attending team meetings, where multiple matters are discussed; the volume of the work, if you keep it below a certain level, then you're probably not going to be dealing with an as deemed associated situation; and also that freelance attorney is not held out as a part of the firm. So the basic idea here is you want to keep the information that the freelance attorney has limited to their actual need to handle that matter. So any additional information that they get, then you're starting to walk towards the deemed associated situation. So for example, if you have an online system that has your client files, don't give that outside lawyer access to the entire system.

  Somehow only give that freelance attorney access to the information and documents that are needed specifically just for the matters that they're going to be handling. Don't give anything else, because otherwise they have to not surprisingly clear conflicts for all of the matters that they have access to. Otherwise, then you would have an issue with a potential conflicts of interest situation. Other things that you want to think about when you're working with an outside lawyer, especially a freelance attorney is the duty of competence. So all attorneys must perform legal services competently. An attorney is not able to ever discharge her duty of competence. It's not a possibility. You can't bring in someone and then discharge your own duty of competence. The duty includes the duty to supervise all non-lawyers and all junior lawyers and anyone else that's working within the firm.

  So as an attorney, you have that duty of competence to your client. And therefore, everything that leaves your firm is on you. That's according to the different rules. And I have them listed here, 5.1 and 5.3. The hiring firm is ultimately responsible for everything. And so a lot of times firms will want to bring in an outside attorney to really elevate their level of competence on a certain matter. And that's completely fine. A consulting lawyer, freelance or contract, or however you want to do it can absolutely contribute to the competency of that hiring firm. But the hiring firm also must be able to independently determine that outsourced work is completed competently. So what does this mean just as an logistical matter? So if let's just say we have an employment law firm that brings an employment freelance attorney to assist with a motion.

  Well, that employment firm is presumably competent in handling employment matters and can easily supervise that employment freelance attorney's work. What if you're a hiring firm and you bring in document review attorneys. Okay, well, how do you check and make sure that all of those outside document review attorneys are handling those matters competently? Well, firms have been dealing with this for ages. You have to come up with systems, go and spot check, make sure rules and procedures are outlined carefully, that you're using good software, et cetera. There are ways to do it. So what if though you have an employment law firm, let's say you're a solo practitioner and your really great client that you've been representing for years comes to you and says, "Hey, I know you're not this type of lawyer, but I'm getting a divorce. And I really would like you to handle my marriage dissolution."

  You're an employment lawyer. You've never handled a dissolution before. Are you competent to handle this divorce? Well, the answer is probably maybe. Are you willing to get yourself up to speed enough, educate yourself enough with the help of an outside freelance attorney that specializes in family law to handle this type of work? Well, the answer really depends on you. Are you capable of doing it? Again, it depends on you how much time are you willing to put in, in order to handle this for your client. But if you're not willing to look at anything to educate yourself, et cetera, then the answer is probably no. And you'd want to refer that out. So usually I always recommend sticking to your practice area within reason. So because your hiring firm is ultimately responsible for everything that leaves your firm, you want to stick kind of close.

  And so what do I mean by that? Well, let's say you are a general litigator and someone comes to you and says, "Hey, I need you to handle this real estate litigation case." And maybe you've never done real estate litigation. That's not your specialty, but that's okay because in legal practice, we all know that the information that you would need is fairly available. You go, you do the research, just like we all do. We're not expected to be necessarily experts in each just minute area of the law because we have the tools available to get us the information that we need in order to handle these issues. Okay, totally fine. But if I'm a general litigator and someone asks me to lead an international tax transaction, well, okay, no. There's no possible way that even if I spend a year trying to learn about international tax laws that I'm going to get myself up to speed on something incredibly complex, where I have had absolutely no exposure or any information whatsoever, training, background in handling that type of issue.

  That's something that I'm going to either send out or bring in someone to co-counsel, because I cannot discharge my duty of competence even if I want to bring in an international tax transaction specialist, it doesn't really matter. There's no possible way I'm ever going to be able to supervise that attorney's work. So that's a situation that you'd really want to do some kind of referral or other thing. Okay. So if you can't discharge your duty of competence, then if you're bringing in outside help, then it is very important that you know who you're hiring. You bring in people. I always recommend bringing in people that you would want to hire if you had the need or the desire to bring in someone on a more permanent basis. And if the answer is no, then you should probably move on to someone else.

  And I know it can be difficult to find those really excellent contract lawyers, but luckily there are a lot of them out there. And so it's not something that is overall difficult and it's... But at the same time, it's better to probably pass on work than to bring in someone that's going to not do the level of work that you expect from your own self. The next thing we're going to be talking about is, is there a duty to inform your client if you're going to be working with an outside attorney? So the rule is that you have a duty to inform your client of a significant development in the representation, but what does this mean? So if you're bringing in an outside contract attorney, freelance attorney, there's a few things that could make this a significant development.

  So if the responsibility for overseeing your client's case has been changed, if the new outside attorney is going to be performing a significant portion or aspect of the work, if the staffing has changed from what was initially agreed, if your client has a reasonable expectation that a contract attorney may be assisting or if they don't, and then there's some ethics, formal opinions that may apply to this situation. So first of all, if you want to talk about whether or not the representation has changed from what was originally agreed, you might want to think about it this way in your client engagement that you have your client sign when you bring them into your firm. Does that engagement letter talk about whether or not the firm has the ability to bring in an outside attorney? If it doesn't, then you're going to want to include that language in your fee agreement.

  In addition to that, if you haven't mentioned it verbally, then you might want to have those conversations in addition to having it in writing as well. So as far as application, what if the firm hires a freelance attorney to do just research and writing? Probably not a significant development. That's something that potentially a law student or a law clerk or paralegal could do. So it's probably not considered a significant development. What if your firm hires a freelance attorney to come in and second chair a trial? Well, that is certainly a much grander scale of representation, going to be interacting with the court, interacting with the opposing counsel. And that probably would be a significant development in the representation. Similarly, what if you have an employment firm that brings in a freelance attorney to help with an employment case? Less significant because that firm expertise is employment.

  And so therefore they absolutely have full capability to supervise that employment matter that they're working on. But if you have a employment firm that's hiring a freelance attorney to do an estate planning project, then that may be more significant and it likely is. You can imagine that type of scenario going something like this, again, solo practitioners, an employment lawyer, and a long standing client who really trusts that relationship comes in and says, "Hey, I know that you're an employment firm, but I need to have this estate plan done. Can you please handle it for me? I'd like you to do it, even though I know this is not what you do." Same going back to the duty of competence issue combining with this one. If you are capable of and willing to spend the time to get up to speed on those issues. And in addition to that, you've disclosed to your client, "Hey, this is not what I do. I'm going to bring in this outside counsel to assist me with this matter."

  Then you will have fulfilled both of those duties. And that is you can't just, sometimes let's just say you have a client who may not appreciate the difference between an employment lawyer and estate planning attorney. It would be important in this instance to disclose to the client that this is not your practice area. And in most situations, you'd probably want to refer that out unless there's some very special circumstance which could happen. So take away lessons. You want to promptly inform the client of any decision or circumstance with regard to disclosure of your client's informed consent. So just as an example, again, if you have a duty to disclose to your client, you want to do that as quickly as possible. And ideally do it in writing, have them sign a document just as soon as you can, that you're going to be bringing in outside consulting counsel if it isn't already in the fee agreement that they've signed.

  You want to reasonably consult with your client about how you're going to be accomplishing your client's objectives. And a lot of the time that explanation is fairly simple. So it might be something like, "Hey, we have this big matter going. I'm a solo practitioner. There's just a lot of work to be done. Opposing counsel is really sending a lot of motions and discovery and other things. And the best way to get this done in the most efficient and cost effective way possible in order to comply with all of the court deadlines, et cetera, is to bring in an outside consulting lawyer." And so that way the client fully understands and appreciates why you're doing this and that it's in their best interest to do so. You want to advise your client of any limitations to that person's involvement in the matter.

  And then you want to explain it in a way that lets your client accept or decline. And that might mean for whatever reason that the client decides that they don't want to work with that outside consulting lawyer, then they at least have the opportunity to voice that and have a discussion with you. So this isn't something that comes up very often. I've in fact never heard of a situation where a client declines to bring in outside consulting counsel when it really is needed. But again, it's the disclosure rules and the duty to inform that you want to make sure that you're having those conversations with your client. So I personally am always in favor of upfront honest communication with your client, because what you don't want to have happened is you don't want to be working with an outside consulting lawyer, not have your client know about it.

  And then somehow they find out about it later and they are unhappy, not because you're working with an outside consulting attorney, but because you didn't tell them. So this is where just honesty is the best policy for the most part. And you really want to have those conversations with your client so that they fully understand just the level of service that you're providing to them so that they can truly appreciate all of the work that goes into their very important work and their matter. The next issue that comes up in these outside contract freelance attorney situations is the duty to preserve client confidences. So it's the same duty that exists for all of us. As lawyers, we all have a duty to preserve our client confidences. And that goes for contract lawyers, freelance lawyers. The duty is the same for all of us. So the confidential information that you have access to as your client's counsel, it can be disclosed to outside contractors as long as the contractors understand that is confidential information and it's privileged.

  So just like if you have an office staff, anything of that nature, all of those people are also going to keep that information confidential as well. Most of the time, just the regular duty of preserving client confidences covers that situation. You don't need anything extra. But there are some instances where a firm may elect to have the contract lawyer or outside attorney sign an additional nondisclosure agreement. So the only instance where I've seen that come up is if the representation itself is subject to an NDA. So for example, if you have a client that makes you and all of your staff sign an NDA that says something like, you're not allowed to tell anyone that you represent me as your client, which goes beyond just the typical duty to preserve client confidences, then you'd need to have any outside attorney or anyone else for that matter dealing with that client sign the same NDA.

  I've only seen that happen a couple of times, but it does come up. So something to keep in mind, but typically it's not necessary. Although some firms like to feel extra protected and it's usually not an issue to have somebody sign an extra NDA. So the next thing that we'll talk about is, how do you charge your client if you're going to be bringing in an outside lawyer? There's a few different options. The law firm can absorb the cost of that contract attorney. This is not a very popular option, but it is an option just in the event that you have a really excellent relationship with your firm and just want to make sure they're getting the work done. And you can just absorb that cost with your firm. The second thing that's permissible is that you can pass that freelance attorney rate directly to the client as a cost.

  So just like you would do for, for example, copies or just any other type of expense that you wouldn't mark up, you can do the same thing. Every state allows the third option, except for two, which is that you may add a surcharge to the freelance attorney rate and charge the client that marked-up rate. So the two states that do not allow this are Texas and Maryland, the last time I checked. And so what that means is just as an example, if your firm is paying a contract lawyer $150 an hour to do their work, let's just pretend, then it is within your right to mark-up that rate to something up to your own rate, or just depending on what they're doing, and then to charge your client that marked-up rate. So let's just pretend your billing rate is $500 an hour.

  You're paying $150 an hour to a contract attorney. You could then turn around and mark-up that rate to $300 an hour or $400 an hour or whatever rate makes sense. Usually taking into account things like level of seniority or expertise, credentials, other things, whatever it makes sense to you, that's how you're going to want to do it. And making sure that you're communicating this with your client and also making sure that the client is understanding the value of what they're receiving. Now, the thing that is not required to be disclosed is you don't need to tell them the amount you're marking up. So you don't need to disclose what you're paying the freelance attorney versus what you're charging the client for their time. Just like you wouldn't need to disclose to a client your associate salary divided by their hours, and then multiplying by an hourly rate.

  These are not things that we have conversations with our clients. Everyone understands the economics of how these things work. You're always going to be charging your client more than what you're actually paying for the help. This is just how normal businesses run. So the fourth option is that you can charge your client a flat fee, and then just embed that time into the fee that the client is already paying for that work. There is an ethics opinion that says that if you're marking up the contract attorney's rate, that may be deemed a significant development as far as disclosure is concerned. And so what that means is let's just say, for example, we take a pretty basic research and writing contract lawyer. It's going to come in and do some research memos and other things. And you're going to be paying that contract lawyer $150 an hour, but you're going to decide to charge your client $300 an hour for that time.

  Okay. So now do you have to tell your client that you are working with an outside lawyer, who's going to be consulting with your firm? And the answer according to the LA County Bar Association is yes, you need to disclose to your client at that point that you are going to be working with an outside consulting lawyer. Again, the easiest way that most firms handle this situation is, as I mentioned in that original fee agreement that you sign, that you have your client sign, all of the information would be laid out within that agreement. So that way the firm understands, or not the firm, the client understands right off the bat that is how the arrangement is going to work.

  So talking about how to disclose to your client. The when is always going to be, as I've recommended, at the outset of the representation, or as soon as you know. So the easiest and best time again is in that fee agreement at the outset, so that you have gotten it out of the way. The manner is in writing and preferably in that fee agreement, like I've mentioned a few times. The rate, if you intend to seek those fees, then you're going to need to disclose the rate charged to the client, so the client can approve it. Usually in those fee agreements that I've seen, the language tends to be fairly vague. So it might be something like my rate is $500 an hour, and then consulting attorney rather than listing by name, but just consulting attorney. Zero to five years experience would be 300 an hour. Consulting attorney, five plus years experience would be 400 an hour, just as an example. And then what needs to be disclosed.

  And according to the opinions, it's enough information to let the client have the opportunity to consider whether they're comfortable with the proposed staffing arrangement and whether or not the client would prefer something different instead. So you want to give them enough information. You want to give it in writing and you want to be as clear as you can, but it doesn't need to be ultra specific. As I mentioned, there are certain rules and considerations that you'll need to keep in mind when you are going to be upcharging that outside attorney's rate. So same thing, if it's a significant development, because you're doing that upcharge, then you're going to want to follow those guidelines that I previously mentioned. So in writing at the outset, what the rate is going to be, and enough information for your client to make a decision. As I mentioned, there are no rules or opinions that require you to disclose the rate that you're paying the contract attorney or the amount of the surcharge that you're adding to that contract attorney's rate.

  So you definitely don't need to disclose the actual dollars and cents of that type of arrangement, as long as the total fee is not unconscionable. My general rule of thumb that I suggest is you'd want to keep it at the hiring firm's rate or lower. So if you're charging 500 an hour, then you're definitely going to want to keep that contract attorney's rate at $500 an hour or less, unless there's some just absolutely really good reason to charge more and there may be specific reasons why. But you're going to want to just keep it within the realm of your own rate so that your client will probably just be more inclined to agree to that anyway. So the next thing I'm going be talking about is aiding and abetting the unauthorized practice of law. So what does this mean?

  It would come up in a situation that if you're not using a contract lawyer that is licensed in your state. So let's say here you are, you're a law firm in California. You're licensed in California and you need a research and writing attorney. And the research and writing attorney that you find happens to be licensed in New York, but not in California. Okay. So it also can arise if you're going to be working with attorneys who are not licensed in the United States at all. So for example, we have these legal process outsourcing companies that are offshore typically in the Philippines or India, somewhere like that. Those types of scenarios arise when you're dealing with more of like a document review situation in some instances. So what happens when you're working with those types of attorneys? First of all, if they're not licensed in your state, whether they're an attorney in another location or not, it doesn't matter because that person is not an attorney if they're not licensed in a particular state.

  So like I mentioned, if we're in California and we're licensed in California, and we bring in help from someone who is licensed in New York, but not in California, that person is not a lawyer in California. So it's very important that we not allow that person to "practice law" within our state under our own firm, because then we could potentially be aiding and abetting the unauthorized practice of law. It's important to note that the unauthorized practice of law is actually a crime. So if I hold myself out as an attorney, but I'm not licensed in that state, then I'm committing a crime. And you can imagine why it's defrauding the public. So it's critically important that we not in addition to not holding ourselves out as attorneys where we're not licensed, but that we cannot aid and abet essentially committing a crime of unauthorized practice of law.

  So what does it mean to practice law in a particular state? There's a few definitions. Of course, none of them are exactly clear or specific, but it might depend on the context, the situation involved, if difficult or doubtful legal questions are involved, you're wanting to safeguard the public. You can imagine the reasons why. So there's a few different court cases and definitions that kind of come into play here, but the common law definition of practice of law. And we'll talk about a few examples of that. So examples are interpreting legal terms, determining for a party the kind of legal document that's necessary to effect that party's purpose, making an appearance before a state court or an agency, giving legal advice to clients, preparing documents for a client, preparing legal documents, negotiating and settling claims on behalf of others.

  These are all examples of things that could be deemed practicing law and have been examples of the unauthorized practice of law in the past. So how do we avoid aiding and abetting this type of scenario? I should go back and say that bringing in an outside or non-licensed attorney to help, so back to that situation where we've got the California firm that brings in the New York attorney to help with research and writing, this is perfectly acceptable within every rule and ethics opinion. They all say that this is deemed "ghostwriting." This is completely fine to do behind the scenes that is actually not practicing law. And so that's something that is acceptable to do and is done all the time. And so we need to figure out the line between that clear situation where it's very clearly allowed versus a potential aiding and abetting situation that we all want to avoid.

  So avoiding aiding and abetting, as long as the work is preparatory in nature, then you're pretty safe. So for example, research, writing, investigating, drafting, any other type of work that assists the hiring attorney. And the way I like to look at it is if it's something that you can hire a law student or a clerk or a paralegal to do for you, then you can bring in another outside lawyer to do it as well. Similarly, you need to make sure, just as I mentioned previously, that as long as that work is supervised and becomes the work of the hiring attorney or is merged into the hiring attorney's work. So if I'm a contract attorney and I'm licensed in New York and I'm working for a California firm, I can research, write motions, do all of that work, but I cannot sign my name to that document and my name cannot be included as counsel of record because I am not an attorney in California if I'm only licensed in New York.

  The other example that I like to use is the situation where you have a national counsel combined with a local counsel situation. So if we have a national law firm that, let's just say again, is licensed in California, but nowhere else, then it's perfectly acceptable for that firm to do high level writing, drafting, for example, discovery or other things, as long as they're working with a local firm that can then merge that work product into their own firm. Let's say it's in Kansas. And then that way it's on that Kansas firm's letterhead. The Kansas firm is signing off on it and making sure that it complies with all of the different Kansas procedures, et cetera. Perfectly acceptable to do that.

  The other thing that's important to avoid the aiding and abetting is that we not hold the person out as entitled to practice law. And we're also advising our clients that person is not a lawyer in that state. So if you're going to bring in an outside lawyer to help you with any type of work that's going to do consulting, completely fine. You don't want to hold that person out as a lawyer to your client. Just you need to be more clear about that situation. So for example, client, I'm going to be bringing in an outside consulting attorney who's licensed in New York. This person is not licensed in California, and they're not a lawyer in California, but they're going to be drafting these motions for me. They're going to be doing research. Completely fine and acceptable under the rules. And then very clearly there's no appearances or signing documents.

  So now I'm going to be talking about a different type of arrangement entirely, and that is the co-counsel relationship. Co-counseling can be great, can be a really good way to spread work around. Or if you have multiple firms with different types of expertise, then it can be a really good situation and it can create some value for a client. But there are some things to keep in mind. So I always want to mention avoiding the dreaded group project. You want to proceed cautiously. Each firm has to be capable of exercising their independent judgment and give candid advice. So the best way to do this is to have a crystal clear co-counsel agreement upfront in writing that addresses all the main issues. Who's responsible for what? Who's tracking those deadlines? Who's making sure that everything is getting done? How is work getting divvied up? How are we going to resolve fee disagreements or other disagreements? Who gets paid?

  What and when? Who's going to hold onto those client funds? Who's billing the clients? Who's paying expenses? Who is going to be discussing which topics with the client? And then how the dollars, how the fees are going to get split if a client is only partially paying, et cetera? The other thing that you're going to want to do is to verify insurance coverage. So you want to make sure that if there ever is a dispute, that it's not going to be entirely your insurance that's on the hook. You want to make sure that's going to be split up between you and any type of co-counsel who does have an independent liability to the client, regardless of what the other is doing. And neither one of you can discharge that any of those duties, if you bring in a co-counsel. Okay. So now I'm going to be talking about referrals. And there's a few different rules that apply.

  So referrals are great because as lawyers kind of like doctors, a lot of us have specialties that don't overlap very easily. And so it can be really great and create value for your clients when you can refer to trusted experts that handle other types of law. So you want to look at Fee Divisions Among Lawyers, which is rule 1.5.1. You want to be aware of financial arrangements with non-lawyers, which is rule 5.4. And then Information about Legal Services, which are rules 7.1 through 7.3. So first, between lawyers. If you're going to be doing any type of a referral fee arrangement, then this is allowed in several states. And what's required is you need a written agreement between the attorneys and you also need your client to consent, and that is required. So if you're going to be paying another firm a referral fee, or if you're going to expect one, then the existence of that referral fee needs to be disclosed to the client immediately.

  And it needs to be in writing and it needs to be agreed to with a signature. So you need the fact of the fee, you need the identity of the parties and the terms, and you need a signature. And so the other thing is that the total fee that the client would be paying cannot increase because of the referral fee. This happens a lot. It happens often in a personal injury, lots tends to be fairly popular and those fees tend to be contingent. So it might be something like the firm is going to pay 20% or 25% of the recovered amount after expenses to the referring lawyer. Completely fine as long as you're following all of these rules and your client is consenting to the arrangement.

  When you are making a referral, there is a few things that you want to keep in mind because there's no risk-free endeavor, even giving names to a potential client of possible referrals. You can't do anything in giving a referral that you can't do when you're advertising yourself. So you can't guarantee results. You can't make false or misleading statements. You want to avoid that negligent referral, which could potentially come back if that potential client is unhappy with the representation. And the way I usually do this is I'll usually offer multiple referrals so that it's clear to the client or the potential client that they are going to need to make that decision for themselves. So I'll typically give between two to four names if ever I'm asked for a referral because clients need different things and it might be that a fee is different, or personality, or what have you.

  And so usually I'll make that language in a referral somewhat vague. Like, here are a few attorneys who may be able to assist you or who may be able to point you in the right direction. In the process of doing that, I'll make it clear that I'm unable to represent them. And so therefore I'm giving some names of people who may be able to do it. And it's usually in writing because typically I'm asked to give referrals in writing. And so I just respond in writing. And so that's how I make it so that I don't ever implicate myself in possibly negligently referring someone. And I, of course, never would guarantee results or tell them anything that would make it seem like I'm advocating that they hire a particular firm. So if you're going to be getting referrals from non-lawyers, well, what are the rules in that situation?

  First of all, it is prohibited in California to share legal fees directly or indirectly with a non-lawyer. So you basically can't do that. So if you're planning on offering 25% of a recovery to a referring lawyer, that's great. You can do that. But you absolutely cannot do that if the referring entity is a non-lawyer. You cannot form a partnership with a non-lawyer in order to do these types of arrangements. It's impermissible in California. So you can't compensate for a referral, except you can give little gifts provided that the gift or the gratuity was not in consideration of any promise or agreement that you're going to be giving gifts in the future for referrals. So it's nice to say thank you when people send you business. That's completely fine.

  Keep it small if you're going to give a referral and like, oh, here's a bottle of wine or here's something. A token of appreciation is okay as long as it's not like a $2,000 bottle of wine, just as an example. You just want to keep it within the realm of just something that's going to be acceptable to anyone who's looking. So the bottom line here. Actually, before I talk about the bottom line, the thing that I usually like to talk about is some practical considerations when you're working with outside lawyers. So I know that I've mentioned this word a few times, but I would say the biggest and most important tip that I can give is communication. Communication solves all manner of problems and the best way to do it is upfront and in writing. A lot of times people ask me, what advice do you have to give if I'm going to bring in an outside lawyer to help?

  And the number one thing that I always say is to make your expectations clear, upfront and in writing, especially when it comes to the amount of time that you want them to spend on any particular task. As an example, you have a motion for summary judgment that needs to be opposed. It lands on your desk. There's eight issues. There's 5,000 pages of discovery. It's going to take between 75 and a 100 hours to write this opposition, including the separate statement and everything else. Okay. You don't have time for this because you're in the middle of expert discovery in another case. And that case is gearing up for trial. So what do you do? You bring in a contract lawyer. You look at this and you say, "Okay, how long do you think this is going to take?" And if they look at it and they say, "I think it's going to take 300 hours," then you could say, "No, I think this should take between 75 and a 100 hours."

  And then if they disagree, then you can at least have a conversation about it upfront, because what you don't want to have happened is you don't want them to spend double or triple the amount of time that you can charge your client for the work. So at the same time, it allows them to tell you if your estimate is off. Because as an example, if that same motion, if you want them to spend no more than 15 hours opposing it, well, that's not physically possible. So you want to have those conversations upfront. You definitely don't want to just give willy-nilly amount of time for somebody to do a particular task because then you might have them do far more in depth research than you intended. And it might be something that you can't charge a client, and then you end up eating that time.

  Similarly, you need to make those deadlines really clear. If you need something done by Friday at 10:00 AM, then maybe consider asking for it Thursday evening. Or if you need something, what you don't want to say is take all the time you need and get it to me whenever you can, because that could mean tomorrow, or it could mean four months from now. So especially if you're working with someone that you haven't worked with before, it's really important to make sure that you're communicating very clearly, making sure that they have all of the documents and information that they need in order to be the most successful in handling that project. Similarly, if you have any other documents that have been prepared in a style that you want them to try to mimic, that can also be helpful.

  So if you've written an opposition to a motion for summary judgment recently, you can give that to them so that they can kind of copy and paste some of the points and authorities that might be relevant in terms of the applicable law, or you might consider giving them a mediation brief that has all of the facts laid out according to how you want them to be conveyed to the court, et cetera. So that way it can cut down on the time and they can get a sense of your style before you let them loose. So because most contract lawyers are going to want to give you what you're looking for and have it matched up as closely as possible with your style. And ideally you're going to be bringing in someone who's very talented. And so it could even potentially add to the overall product quality, which is even a better goal.

  So the bottom line here is that the same rules apply to all lawyers. And whether or not you're working with someone on a temporary basis or anything else, that person is still bound by all of the same rules that you are and bringing in a lawyer that's outside your firm does not discharge any of those duties that you have. You always want to work with competent contract lawyers and still supervise all of their work because everything that leaves your firm is just within your firm's umbrella and liability. You always want to clear those conflicts of interest and be careful to avoid imputed conflicts whenever possible.

  Make sure everyone understands the fee arrangements and the payment schedule upfront, and sticks to it. So if you're going to be working with a contract lawyer, make sure you're paying them and paying them on time. And then always communicate. Communicate with your contract lawyer. Communicate with your client. The more information that you can share between each other the better. And it makes it so much easier to avoid any conflicts down the line. Thank you so much for listening to this webinar. I appreciate it. And if there's anything I can do to help, I'd be happy to do so. Thanks so much.

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