By Kwarma Vanderpuye, senior vice president and general counsel of the India-based legal outsourcing company, SDD Global Solutions. She also serves on the Board of Directors of the Greater New York Chapter of the ACC, and is chairperson of the general counsel/chief legal officer practice group.
With the possible exception of people who’ve spent the last few years under a rock, everyone now knows that outsourcing of document review to legal process outsourcing (LPO) companies in low-cost jurisdictions like India and the Philippines can save corporate legal departments millions of dollars. For example, The Sunday Times reported that mining giant Rio Tinto “saved more than $1 million” in legal fees in the first two months alone, after shipping document work to an Indian LPO provider. Rio Tinto says it expects to reduce its legal spend by $20 million per year this way.
But there is another related trend and it could be even more momentous. Legal experts are saying that with the use of offshore legal outsourcing for tasks such as legal research and the drafting of successful motions, companies are beginning to realize that when it comes to frivolous lawsuits and/or exaggerated damage claims, there is a new, alternative response that could change the legal landscape. Traditionally, the choice has been either (a) an all-too-often pyrrhic litigation battle, in which legal fees end up costing more than a settlement, or (b) an onerously expensive capitulation. Reportedly, there is now a third choice, which sounds like an oxymoron to most in-house lawyers: a cost-effective legal defense.
In a 59-page law review article, “A Collaborative Model of Offshore Legal Outsourcing,” Professor Cassandra Burke Robertson of Case Western Reserve University School of Law discusses how offshore assistance in the resolution of frivolous lawsuits in particular “is reshaping the practice of law.” Professor Robertson uses an actual, high profile litigation in Los Angeles federal court to demonstrate how a major corporation recently employed an Indian LPO, to turn the tables on a libel plaintiff and inexpensively win a case that otherwise would have been settled:
Offshoring the defense in that case did not merely replace domestic legal services with a lower-cost alternative elsewhere; instead, it changed the nature of the defense entirely. It took a case that would likely have been handled outside the court system through a nuisance settlement and brought it within the formal adjudicatory system. As a result, the case was decided on the merits and the decision is publicly available, potentially discouraging further meritless claims.
[I]nternational outsourcing can transform individual lawsuits, [and] it also demonstrates how outsourcing is quickly becoming a part of mainstream legal practice. Clients who experiment with outsourcing tend to continue their contracts and institutionalize the practice.
A legal blog, The Complete Lawyer, provides another example, this one involving a major US law firm that didn’t wait for its corporate clients to insist on using an offshore legal outsourcing provider to lower the costs of sophisticated litigation work:
Although many law firms are still not eager to publicize the practice, at least one national firm in Boston has been using an LPO for three years to do first drafts of briefs. When the managing partner of the office presents the idea to her corporate clients, they are very supportive.
Given that the majority of litigation costs involve drafting of paperwork and related legal research, and because legal work done offshore can be about one-seventh as expensive, the implications of this development could be huge. The average large corporation spends $19.4 million per year on outside counsel fees, much of it for litigation. It’s typical for major multinational companies to reserve billions each year for expected legal fees and settlements.
One answer to capital funding of litigation?
The availability of offshore legal outsourcing to dramatically cut litigation costs might be especially welcome now, given the recent rise of third-party funding of plaintiffs’ litigation, to the tune of hundreds of millions of dollars, provided by large banks and other atypical, wealthy lawsuit investors. The New York Times reports as follows:
Total investments in lawsuits at any given time now exceed $1 billion, several industry participants estimated. Although no figures are available on the number of lawsuits supported by lenders, public records from one state, New York, show that over the last decade, more than 250 law firms borrowed on pending cases, often repeatedly.
One solution to this growing trend could be the use of litigation support services from offshore providers in partnering with an onshore legal team to perform any work involved in litigation, other than appearing in court, signing court papers and offering legal advice. Apart from dramatically reducing costs, offshore providers have demonstrated, as Professor Robertson points out, that they can help defendants actually win.