Revisiting the Outsourcing of Law-Firm Contract Drafting

Last week the New York Times ran two stories on legal outsourcing. The first (click here), by Heather Timmons, describes the growth of legal outsourcing in India. The second (click here) is a “City Room” blog item by John Eligon; in it, two BigLaw partners offer differing takes on outsourcing.

I’ve written on this topic previously, but the following passage in the second article prompted me to revisit it:

Although the firms that rely on legal outsourcing seem to keep it to menial tasks like reviewing and filing documents, there is certainly some resistance from the New York legal world to let go of what many top lawyers see as their province.

“I think it’s too risky,” said Kenneth A. Lefkowitz, a partner at Hughes Hubbard & Reed and co-chairman of the firm’s corporate practice group. “We’ve got our people that we know, we work with. We bring them up through the system. I don’t think that legal research, or really anything, can be done other than by the people you train.”

Mr. Lefkowitz said that clients pay New York law firms big money for first-rate quality, and outsourcing could allow that to suffer.

“I don’t see how the real New York law firms would ever do that,” Mr. Lefkowitz said. “It’s not that we’re snobs. It’s because we couldn’t trust it. The reason clients pay us what they pay us is because they know we’re 100 percent quality control.”

I think that in two respects, Mr. Lefkowitz is laying it on a little thick.

First, there’s his suggestion that “I don’t think that … anything … can be done other than by the people you train.” It fails to take into account that outsourcing is routine at law firms. Indeed, they couldn’t perform cost-effective legal work without it. Whenever you make use of an outsider’s analysis of an issue rather than attempting to perform that analysis from scratch yourself, you’re in effect outsourcing legal work. That outsourcing can take the form of simply consulting a treatise. A more structured version is offered by companies that make available to subscribing law firms online analyses of issues related to a given topic—securities regulation, banking, what have you.

And when it comes to drafting, transactional lawyers are like magpies, always willing to copy someone else’s contract language whenever it’s expedient to do so. That’s nothing more than an informal sort of outsourcing.

So it’s inconceivable that the corporate group of a law firm would do by itself every single bit of legal analysis required for a given a transaction. Instead, the question is what can appropriately be outsourced—where do you draw the line?

My second reservation about Mr. Lefkowitz’s comments pertains to his suggestion that Hughes Hubbard and, presumably, other “real New York law firms” are “100 percent quality control.” If by that he means that Hughes Hubbard and comparable firms offer perfection, I suggest that Mr. Lefkowitz consult the appendix to MSCD, which contains three versions of a representative BigLaw contract—the “before” version, the “before” version annotated with two hundred footnotes to show its shortcomings, and the “after” version. That contract has an impeccable pedigree, but drafting perfection it ain’t. And it’s a safe bet that I’d be able to perform the same critique on any other mainstream BigLaw contract.

Because outsourcing, whether formal or informal, is already an essential part of BigLaw transactional practice, and because mainstream contract drafting is dysfunctional in terms of not only quality but also process, it’s legitimate to consider outsourcing the drafting process.

But how might you do that? I’ve previously suggested that shipping your drafting off to India is hardly a compelling solution—you’d be getting a cheaper version of the same old stuff. Outsourcing contract drafting would work only if a vendor with suitable credentials and technology were to make available for use by law firms a library of annotated document-assembly templates.

Document-assembly contract drafting is used in some industries, notably construction and middle-market lending. (The technology is of varying sophistication, and the contract language used wouldn’t get my seal of approval.) No broader offerings have yet appeared, at least not ones that most transactional types would consider using, but let’s see what develops in that regard.

Related Items:

In various articles, including this National Law Journal article, I’ve suggested that real progress in commoditizing contract drafting is out of the reach of law firms and would best be accomplished by a vendor.

I expressed my skepticism about sending your drafting work to India in my April 19, 2007 New York Law Journal article Sending Your Contracts Offshore (click here for a PDF copy) and in this June 2009 blog post.

In this September 2008 blog post I wrote about LaserPro, a document-assembly system for generating loan documentation, and in this December 2006 blog post I wrote about AIA Contract Documents, a document-assembly program for preparing contracts for construction projects.