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Do Outside Billing Guidelines Hurt the Profession?

April 21, 2020 | Posted in : Billing / Fee Guidelines, Defense Fees / Costs, Ethics & Professional Responsibility, Fee Agreement / Fee Proposal, Fee Dispute, Legal Bills / Legal Costs, Legal Spend, Litigation Management

A recent Law 360 story by Aebra Coe, “Do Strict Outside Counsel Guidelines Hurt the Profession?, reports that an American Bar Association presentation offered two opposing perspectives on a debate that's raging over whether outside counsel guidelines place too many restrictions on attorneys, with one speaker saying a "total disparity of bargaining power" has led to "frighteningly" onerous provisions.

Clyde & Co. LLP of counsel Anthony Davis highlighted instances in which he believes outside counsel guidelines, which corporate legal departments often require their law firms to agree to before beginning representation, go "too far" by restricting the outside attorneys when it comes to conflicts of interest and confidentiality beyond what the rules of professional conduct prohibit.

"Lawyers are supposed to be exercising independent professional judgment for their clients.  These kinds of provisions, in my view, are intended by clients to limit lawyers' and law firms' ability to exercise independent, considered judgment," Davis said.

Davis, a professional responsibility lawyer who advises other attorneys and law firms on their ethical obligations, spoke during the ABA presentation titled "Are Outside Counsel Guidelines a Threat to the Practice?" alongside Bruce Green, director of the Stein Center for Law and Ethics at the Fordham University School of Law.

Some of the provisions that Davis pointed to that he believes are problematic include those that expand the definition of "client" to include a vast array of subsidiaries or joint ventures, those that restrict lawyers from providing services to the client's competitors, those that do not allow attorneys to take on clients that argue for positions on important legal issues that are contrary to the existing client, and those that require disclosure of confidential information of other clients.

Such rules can limit an attorney's ability to represent multiple clients in a given industry, hurting their opportunities to obtain wide-ranging expertise, and hurting potential clients' ability to find lawyers who specialize in the area in which they need legal help.  In other instances, such as a provision that requires disclosure of certain information, an attorney may be obligated to violate ethics rules by complying, he said.

"[Some of these provisions] limit the work the firm can do pretty much exclusively to this client.  And does it in a way that almost compels the firm to violate other ethics rules," Davis said. "In my mind that is highly problematic."  At least one bar association, the D.C. Bar, has considered implementing a rule that would prohibit certain outside counsel guideline provisions that are viewed as harmful to the profession, the speakers noted.

Green took a less alarmed view on the matter than Davis.  He said that while he believes law firms should not agree to some of the most outrageous provisions, it is something that should and can be negotiated between the client and outside counsel on an individual basis without the need for an ethics rule.

Lawyers have long negotiated with clients for consent to advance waivers for conflicts of interest, and these stringent outside counsel guidelines are the flip side of that, providing for a more strict application than the rules provide for, Green said.  "If lawyers can use their leverage to make clients waive conflicts rules, then clients can do the same to expand on the protections," he said.  Plus, he added, conflicts rules are meant to be a floor and not a ceiling.

"If you go below them you get punished. They're not supposed to define the most a lawyer can do for a client, but the least," Green said.  But Davis said that he believes the idea that outside counsel are in a position to negotiate with clients freely when it comes to legal engagements is flawed.  After the last recession, he explained, law transitioned to become a buyer's market, and as a result of that, corporate clients now wield substantially more bargaining power than law firms do.  "[There is a] total disparity of bargaining power that has arisen between law firms and clients since 2008," Davis said.