Law firms often resist using freelance lawyers under the mistaken belief that they always have to notify their clients if they are using a freelance attorney. California rules are clear that no duty to disclose applies unless the work by the outside lawyer constitutes a “significant development” in the representation.
Under Rule of Professional Responsibility 3-500, “A member shall keep a client reasonably informed about significant developments relating to the employment or representation, including promptly complying with reasonable requests for information and copies of significant documents when necessary to keep the client so informed.”
When is Disclosure Required?
What constitutes a “significant development” for disclosure purposes depends on the individual case and circumstances. COPRAC Opinion 1994-138 enumerates examples of relevant factors to determine whether a firm is required to disclose the freelance attorney relationship, including: (i) whether responsibility for overseeing the client’s matter is being changed; (ii) whether the new attorney will be performing a significant portion or aspect of the work; or (iii) whether staffing of the matter has been changed from what was specifically represented to or agreed with the client. See San Diego County Bar Association Formal Opinion 2007-1 (discussing COPRAC 2004-165, and stating that in addition to the three factors listed in COPRAC 1994-138, whether use of a temporary lawyer constitutes a “significant development” also depends on whether the client had a “reasonable expectation under the circumstances” that a contract lawyer would be used to provide the service.)
It should be noted that in California, if a firm chooses to add a surcharge to a freelance attorney rate, i.e. pay a freelance attorney $150 but charges its client $250, this likely constitutes a “significant development,” regardless of the type of work the contract attorney intends to perform. LA County Bar Association Formal Opinion 518; OCBA Formal Opinion 2014-1.
Scope and Manner of Disclosure
If disclosure is required, California ethics opinions suggest that disclosures should be in writing in a fee agreement at the outset of the case, or as soon use of the contract attorney is anticipated. See OCBA Formal Opinion 2014-1 (stating “where the lawyer reasonably expects, at the outset of the case, that he will use the services of a contract lawyer to perform significant functions, he also should include such a disclosure in a written fee agreement.”)
While there is no formal opinion or rule that discusses specifically what information a firm must disclose to a client about involving an outside contract attorney, In re Wright, 290, B.R. 145, 151-52 (C.D. Cal. Bkrtcy. 2003) may be instructive. The Wright Court suggests that, in the bankruptcy context, a lawyer seeking fees for work performed by a contract lawyer must demonstrate that his client consented to the arrangement with the contract lawyer. In re Wright, 290 B.R. at 156. The lawyer who hired the contract lawyer also must “demonstrate that the client agreed to the use and billing rate of [the] contract attorney if the firm contemplated [his or her] use at the time that the firm was employed.” Id. at 156.
As the OCBA Ethics Committee concluded, “there is nothing inherently unethical with a client or lawyer hiring another lawyer – often a contract lawyer – to ghostwrite a document to be submitted to court, without identifying the contract lawyer or disclosing his involvement. Only when the client or lawyer seeks to recover his attorneys’ fees must the contract lawyer’s role be disclosed to the court. If, however, the involvement of the contract lawyer constitutes a significant development, then his involvement must be disclosed to the client.” OCBA Opinion 2014-1; see also ABA Formal Opinion 88-356 (stating that assuming there is no division of fees, and that the law office does not charge the outside lawyer’s compensation to the client as a disbursement, the law office has no obligation to reveal to the client the compensation arrangement with the outside lawyer whether that attorney is paid by salary or on an hourly basis.)
From A Practical Standpoint
Clients don’t like surprises. Even if a law firm does not technically have a duty to disclose their use of a freelance lawyer on a client’s matter, communication is key and we suggest notifying the client. If the law firm is using a highly skilled and competent freelance lawyer, especially if the client is being charged a reasonable rate, clients normally have no problem with the arrangement.
Do you have additional questions regarding the ethics of freelance lawyering? We are happy to help. Please email us at [email protected].