Ethics Series Part 4: To Bill or Not to Bill: 3 Ways Law Firms Can Manage Costs of Hiring a Freelance Attorney

Law firms have several options for managing freelance attorney costs. First, the law firm may simply absorb the cost of the freelance attorney, perhaps in a contingency fee arrangement. Second, the law firm may treat the costs as a direct expense to the client where no markup is taken. Or third, recognizing the additional costs associated with hiring and managing the freelance attorney, the law firm may apply a surcharge to the freelance attorney’s fees and bill the client appropriately. Each of these three fee arrangements satisfies the requirements of the Minnesota Rules of Professional Conduct (“MRPC”). Most importantly, MRPC Rule 1.5(a) requires attorney fees to be reasonable given the circumstances of the attorney-client relationship. Further, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility indicated in Ethics Opinion No. 08-451 that adding a surcharge for a contract attorney’s work is permitted as long as the fee charged is reasonable for the services rendered. The ABA Committee reasoned that such a profit is reasonable provided the hiring attorney supervises, directs, and reviews the freelance attorney’s work. In addition, just as law firms do not disclose how much they pay associates who work on a client’s legal matters, they are not required to disclose how much they pay a freelance lawyer. In essence, the key ethical obligation to billing clients for freelance attorney work product is reasonableness, which is demonstrated through the proper supervision of the freelance attorney and applying a reasonable surcharge for the law firm’s oversight. Hiring freelance attorneys is a convenient and practical way to solve temporary project staffing problems. Plus, if managed correctly, it is also a way to increase a firm’s revenue stream. Effective February 3, 2014, Susan has moved her law practice to the Environmental Law Group and is no longer working as a freelance attorney. You can reach her at swiens@envirolawgroup.com. MFAN...

Ethics Series Part 3: Understanding Malpractice Insurance for Freelance Attorneys

Understanding legal malpractice insurance coverage is critical, especially for freelance attorneys who may rely upon a hiring law firm for coverage. Although malpractice insurance is not ethically required, the practical reality is that freelance attorneys are only protected from malpractice claims if they ensure their work is covered by malpractice insurance. When working for a law firm, freelance attorneys may be tempted to scrimp on purchasing their own malpractice coverage believing that the hiring law firm’s policy will cover their work. But even when the law firm carries its own malpractice insurance, the partner hiring the freelance attorney may not understand the terms of the firm’s policy and may inadvertently skip the necessary steps to secure the appropriate coverage. For a freelance attorney to be covered by a law firm’s policy, the law firm must first have a rider or endorsement to its malpractice insurance policy that permits the firm to add independent contractors to its policy coverage. Second, and most importantly, the law firm must notify its carrier each time a freelance attorney is hired. Further, if the freelance attorney is added to the firm’s policy, the freelance attorney must ensure that when the firm renews its coverage that his or her name remains as an additional insured. If a claim arises and the freelance attorney is not named as an additional insured at the time the claim is filed, the freelance attorney will not be covered by the firm’s malpractice insurance. Hence, if a freelance attorney relies upon malpractice coverage from the contracting law firm, the freelance attorney should confirm that his or her name is added to the firm’s malpractice policy and that his or her name remains there in successive years if the freelance relationship continues. In the alternative, a freelance attorney can purchase his or her own malpractice coverage and not worry whether the...

Ethics Series Part 2: Informing Clients When Hiring Freelance Attorneys

As part of MFAN’s continuing discussion on potential ethical issues involved in the hiring of freelance attorneys, we next turn to the question of when must a law firm inform the client that a freelance attorney is assisting on its legal matters. At first glance, this seems like an easy question. After all, law firms routinely assign work to multiple associates within their firms and do not notify clients of these assignments in advance. But disclosing confidential information to outside counsel implicates an issue of confidentiality, which may require consent of the client. Attorneys are required to keep their clients informed of how their cases are being managed. Specifically, Rule 1.4(a)(2) of the Minnesota Rules of Professional Conduct (MRPC) requires that “a lawyer shall reasonably consult with the client about the means by which the client’s objectives are to be accomplished.” But according to Eric Cooperstein, keeping the client informed about the hiring of a freelance attorney “is more about confidentiality than it is about the more general guidelines of Rule 1.4.” Mr. Cooperstein is a former Senior Assistant Director of the Minnesota Office of Lawyers Professional Responsibility, whose current law practice is devoted to advising attorneys on ethical issues. “This is really an issue of confidentiality,” stated Cooperstein in a recent interview about potential ethical issues implicated in the hiring of freelance attorneys. Attorneys are permitted to share confidential information with others if the client “gives informed consent.” MRPC 1.6(b)(1). In addition, a lawyer is allowed to disclose confidential information if the lawyer “reasonably believes the disclosure is impliedly authorized in order to carry out the representation.” MRPC 1.6(b)(3). In our interview with the ethics maven himself, Mr. Cooperstein stated that the law is not clear whether hiring a freelance attorney is more like sharing information with an associate within the firm or whether it is more like...

Ethics Series Part 1: Managing Current and Future Conflicts of Interest When Hiring Freelance Attorneys

In this economic climate, law firms are paring down the number of new hires each year and managing their caseload with a very lean workforce. When cases heat up unexpectedly or when a law firm accepts a complicated new case, the firm may seek immediate outside assistance. Emerging trends in hiring show that freelance attorneys are often hired to fill in these gaps, which quickly leads to questions on how the ethical rules on conflicts of interest apply to this temporary contractual relationship. One of the most common questions freelance attorneys are asked is how can the law firm, together with the freelance attorney, manage current and future conflicts of interest. The Minnesota Rules of Professional Conduct (MRPC) do not include specific rules or references regarding the hiring of contract or freelance attorneys. But the customary duties and ethical obligations of an attorney set forth in the MRPC still apply to a freelance attorney as well as to the law firm that has the direct contact with the client. To comply with the MRPC and ensure that no conflicts exist when the law firm hires the freelance attorney and that all potential future conflicts are easily identifiable, the law firm should require that all its freelance attorneys keep accurate records of projects they work on. It is especially important for freelance attorneys to fulfill their obligation to keep accurate records for conflict checks because freelance attorneys often work for more than one firm. A freelance attorney should include all projects on which that attorney works for any law firm in any capacity in the freelance attorney’s conflicts log. To avoid imputing knowledge of other matters or other clients of the firm to the freelance attorney, case information provided to the freelance attorney by the firm should be limited in scope. Both the law firm and the freelance attorney benefit...

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