Is Legal Outsourcing Where the Real Money Is?

According to Cynthia Cotts and Liane Kufchock writing for Bloomberg,

U.S. law firms are required under ethics rules to disclose markups on what they pay foreign attorneys who aren't licensed to practice law in the U.S. Such rules don't apply to contract legal work performed by lawyers admitted to practice in U.S. jurisdictions [as long as the charges are reasonable]. . . . "Law firms can earn more by using labor they can mark up without disclosure,'' said Stephen Gillers, professor of legal ethics at New York University School of Law in Manhattan. . . [And corprations] armed with the knowledge of how little law firms might pay for offshore work, can use the threat of cutting them out and sending legal tasks overseas on their own to force law firms to reduce fees. . . ."

Other points they make:

• India's Pangea3's says 80 percent of its clients are corporations, 20 percent law firms
• Integreon says it has about 45 company clients and 15 law firm clients
• ValueNotes says offshore revenue is 45 corporate, 36 percent law firm

"When does a mark-up become unreasonable within the meaning of the Code of Professional Responsibility's requirement that lawyers charge reasonable fees," asks Rees Morrison;

If a firm pays a temp agency $70 an hour for a contract lawyer (with the lawyer receiving $30 after the agency takes its cut) and bills clients $200 an hour for services, is that reasonable? Would a $300-an-hour rate be reasonable? If you find these rates troubling, is it because you believe that the client is getting ripped off -- or because the contract attorney is getting paid so little?

Of course, a few U.S. law firms might tell you that it costs $1000 per hour just to manage it all.