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Thoughts from a guest author on unbundling legal services: ethics and productivity

Stephen Nagin, Of Counsel, at Peretz, Chesal & Herrmann, in Miami, Florida, sent this after my post about unbundled, limited services by lawyers.

“The ABA model Code of Professional Responsibility never was crafted to deal with unbundling in a comprehensive manner. It protects the guild from unsupervised paraprofessionals. It does not, however, specify the quantum of supervision necessary; whether that supervision can be undertaken by an outsourced provider rather than by the lawyer who will use the work-product, etc.

Consequently, numerous ethical issues can arise. Those issues may deter some legal departments from embracing robust, efficiency-producing unbundling. The concept of productive efficiency — which is not coterminous with allocative efficiency — is not a concept law departments necessarily understand. Allocative Efficiency is achieved when resources are used to produce legal services that clients want; technological advances that increase utility or functionality improves allocative efficiency. By contrast, Productive Efficiency is achieved when least costly techniques are used to produce legal services; process innovations that lower the cost of producing and providing a service improve productive efficiency. Consequently, unbundling or outsourcing tends to yield greater productive efficiency.

The ethical issue is that the unbundling concept (and ancillary or parallel uses) simply is a market-driven, innovative approach that is ahead of the development of the law as well as the Rules of Professional Responsibility, first promulgated over a hundred years ago (and tinkered with three or four times since. The ABA should re-examine the Model Rules to determine whether consumer welfare would be harmed if lawyers ultimately responsible for work-product explicitly are permitted to drive prices closer to marginal cost by more productively efficient means. Such an analysis would better promote the goal of providing legal services to the poor and near poor, an important goal set forth in the Preamble to the Rules of Professional Responsibility. It also would unshackle legal departments to achieve cost reductions that enhance or reinforce productive efficiency.”