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Bill Flanagan’s Sunday Business Page

The temping of the workplace is becoming commonplace as companies emphasize core functions and contract out the rest. Now the trend is even showing up in the legal profession. A Pittsburgh company called The Legal Network is capitalizing on the opportunity by offering contract attorneys. Brad Franc is the President of Legal Network, Joe Silvaggio has worked as a contract attorney himself. Welcome, its nice to have you both.

Flanagan: So, you been around for a couple of years now?

Franc: We started actually in 1995 test marketing the idea but we went full force in 1996.

Flanagan: Well if you have a white collar job in Pittsburgh in one of the big companies you have heard about downsizing, rightsizing and not always in the happiest sense. What’s been happening in the legal profession that creates this opportunity?

Franc: Well a lot of things. I think the need to control costs- the just in time individual- and when a project is done what do you do with the particular employee when there is downsizing. What we have seen is in- house counsel as well as law firms looking to control costs, as well as on the other side many of the attorneys are looking for alternative work lifestyles. They don’t want to work the 40 or 60 hours a week and they want to look at different options.

Flanagan: We seem to have a lot of attorneys in Pittsburgh.

Franc: Actually we have more attorneys per capita anywhere in the United states except for Washington D.C.

Flanagan: How do you account for that?

Franc: I think its a result of it’s a nice place to live. I also think it’s a result that we have two law schools in the City of Pittsburgh and there is a lot of work, although some people would argue with that, there is a lot of work with the major corporations and many law firms.

Flanagan: Interesting. How did you get into working as an independent contractor.

Silvaggio: I started doing it actually to supplement my existing practice. I managed to find a law firm, which I am presently employed with now, that gave me the opportunity to do contractual work with them and from that you’re always looking to bring on a new client and to supplement your existing client base, and I was looking through, actually through the Pittsburgh Legal Journal and saw the Legal Network ad there and figured it was another good way to supplement my client base.

Flanagan: Was this something, you know, when you were going to law school, going to be a lawyer, envisioning that you would have this sort of independent relationship. I mean the typical model would be I am going to go work for a great big law firm, make a ton of money and have a steady job.

Silvaggio: That is I guess one of the common misconceptions that when one comes out of law school or goes to law school they think they are going come out and work for one of the top ten law firms in the city. When I came out of law school I wanted to gain as much experience as possible in the various fields of the law, and one way that has come to fruition has been through places like Legal Network and other firms that are willing to bring you on as a contract attorney or a part time attorney or an independent contractor. It gives the employer flexibility also because it saves them the medical benefits that they’ll have to pay a full time employee as well as the malpractice insurance, and so from a cost benefit approach it works for both the employer and gives the employee the flexibility to also do other aspects of the law that may interest him.

Flanagan: That’s a good question though. Whose employee is this? and whose responsibility is it if they screw up a case and wind up with a malpractice?

Franc: Many contract attorney organizations will treat the employee as an independent contractor but at Legal Network we treat them as our employees. That is a benefit to the hiring lawyer because they don’t have to worry about the FICA, the FUTA tax, the workers comp issues. We take that responsibility as well as that cost so that’s a savings there. With respect to malpractice, a lot of the attorneys will have malpractice insurance themselves. At many law firms, malpractice insurance carriers will allow the attorney on a contract basis to be added to their coverage. For in- house counsel it becomes really somewhat of a non- issue because they aren’t providing services to the general public- they are providing it to the corporation.

Flanagan: You must have to screen like crazy though to make sure that you can deliver the quality of person that your clients expect.

Franc: When we were developing our business process we developed something which we think is a relatively unique- which is a 3 tier process. We get the resume in, we go through a screening process, make sure their license is in good standing- whether there has been any disciplinary actions. We talk to them over the phone- we interview them. We touch these people three times before the candidate is placed in front of the clients, so that’s one of the benefits that we provide. We screen them, we set the pricing parameters and then within three to five business days of a request we will have candidates in front of people.

Flanagan: So if you are a potential client out there for legal services or a lawyer who is looking for some extra work, how do they get in touch with you.

Franc: Well we are certainly in the phone book and we advertise in the Pittsburgh Legal Journal so they can call us or look in the Pittsburgh Legal Journal.

Flanagan: The Legal Network, right

Franc: That’s right.

Flanagan: Brad Franc, President of the Legal Network, Joe Silvaggio Thank you both, Appreciate it. Thanks for coming by this morning.

Legal Malpractice and the Contract Attorney

77% of Pennsylvania law firms indicate they are now using contract attorneys in the 1997 PaLaw Survey and the New York Times recently estimated contract attorney use is a $500 Million industry growing 30% annually. Yet despite this growth, there is still some confusion on how legal malpractice is provided for these services and the legal malpractice risks associated with using contract attorneys.

According to Donald Ivol, Jr., RPLU, Director at Colburn Insurance, “as recently as two or three years ago, insurance carriers were unsure of the risks involved with insuring independent contractors that were being utilized by larger law firms. As a result, some carriers often were reluctant to offer coverage terms providing insurance protection to both the firm and the independent contractor. Today, however, the risks are better understood and more easily insured. Most carriers have methods to address the independent contractor situation and offer coverage either in the basic policy form or by endorsement.”

The reason for the shift in now offering law firms insurance for contract attorneys is experience has shown that the risk of malpractice with contract attorneys is arguably less than the risks which can occur when busy law firms stretch their resources to handle projects. Legal malpractice often occurs when busy law firms staff projects with attorneys who are juggling too many projects and/or not adequately experienced with the particular area of law required. Contract attorney use involves less risks due to adequate experience, less time pressures, superior oversight, and they are used in less risky areas.

EXPERIENCE: Inexperienced attorneys cause a high percentage of legal malpractice claims filed in Pennsylvania. Drawing from large pools of available contract attorneys, agencies often have little problem locating contract attorneys with applicable experience in performing the type of assignment requested.

LESS TIME PRESSURES: Administrative error is the number one cause of malpractice claims, largely caused by overworked attorneys juggling too many projects. Contract attorneys do not deal with the same pressures of juggling assignments that overworked partners and associates encounter. They are typically focussed on a limited number of assignments.

OVERSIGHT: Under the ABA Formal Opinion 88-356 for temporary attorneys (the “ABA Formal Opinion”), law firms are required to supervise the work of the contract attorney which further reduces the risks for legal malpractice.

PROJECT RISK: Contract attorneys are seldom in the highest risk areas of a legal project such as issuing securities and leading large real estate transactions. When contract attorneys are used in these types of projects, they are usually subjected to substantial oversight by the law firm but can often bring partner level experience to tasks ordinarily performed by more junior attorneys.

Given these factors, it is not surprising that I have not been unable to identify any reported decisions of legal malpractice in which a contract attorney was named in the suit. The same result reached by an authoritative treatise on using contract attorneys. The Complete Guide to Contract Lawyering, by Deborah Aaron and Deborah Guyol at pg.135, Niche Press, 1995. In addition, as a result of these risk-limiting factors, law firms can now easily obtain legal malpractice coverage for contract attorneys. However, should law firms incur the cost of providing this insurance or are there other alternatives. The basic answer is in most cases, having the law firm insure the contract attorney is the only guaranteed insurance coverage available.

A myth in the contract attorney field is that contract attorney agencies can provide legal malpractice coverage. In fact, what we have seen is that agencies offer Errors and Omissions (“E & O”) insurance and not legal malpractice insurance. E & O policies will not necessarily cover a law firm if there is legal malpractice involving a contract attorney. They are generally limited to coverage if the agency was negligent in providing an inappropriate contract attorney at the time the placement is made. This will probably not provide coverage for a mistake made during the course of a project. Furthermore, the ABA Formal Opinion advises that agencies should not interfere with the independent judgement of the contract attorney on an assignment. As a practical matter, this makes it impossible for an agency to act as a law firm and oversee an attorney’s work. This inability to control the attorney would make it difficult for the agency to purchase traditional legal malpractice insurance covering the contract attorney.

Some contract attorneys who are also solo practitioners do carry their own legal malpractice insurance. However, many contract attorneys practice law primarily from contract attorney assignments where their fees are equivalent to salary wages. As a result, legal malpractice coverage equivalent to what a solo practitioner carries is too expensive for most contract attorneys. In addition, less expensive part-time legal malpractice insurance policies limit the hours an attorney works each week and will not effectively cover contract attorneys who accept full-time projects. Because the agency and contract attorney generally can not be looked to for legal malpractice coverage, it is essential for law firms to provide their own coverage to ensure they have coverage in place.

Finally, it makes sense for the law firm to provide coverage because the contract attorney is providing legal services in the name of the law firm. Contract attorneys are akin to subcontractors working under the supervision of the law firm and producing work product in the law firm’s name. Essentially, the law firm is accepting and adopting the work product as its own work product. In fact, under the ABA Formal Opinion, the law firm has discretion on how much to charge the client for these services. Short of passing the risk directly to the client by having the agency and contract attorney contract directly with the client, it appears difficult for the law firm to avoid being looked to for malpractice coverage if a malpractice claim occurs.

In conclusion, there are many reasons why contract attorney use can reduce legal malpractice risk when a law firm’s attorneys are over worked or they lack adequate available resources for a project. Nevertheless, despite factors indicating limited risks, a law firm should still provide legal malpractice insurance for contract attorneys they deploy for a number of reasons. First, clients will most likely look to the law firm for coverage if there is a malpractice claim. This is because the law firm is the organization, which has been directly engaged to provide legal services, and the contract attorney is the equivalent of a supervised subcontractor. Also, such insurance coverage is readily available. In addition, there are few alternatives to having the law firm provide coverage. The insurance industry has not yet provided an affordable insurance policy which all contract attorneys can afford. Lastly, agencies providing contract attorneys are not law firms and can not obtain umbrella legal malpractice coverage for their contract attorneys.

By: Karl A. Schieneman, Esq. Managing Director of Legal Network Ltd., a Pittsburgh based provider of contract attorneys and paralegals and frequent lecturer and author on issues relating to contract attorney use.

Lawyers For Rent in the Small Business News

Legal Network Ltd, and the Technology Utilization Committee of the ACBA have formed an unique alliance to foster the use of online tools such as e-mail and the Internet by local legal professionals.

Another mechanism for increasing usage is providing legal web sites serving the informational needs of the local legal community. The Legal Network web site provides information on temporary legal staffing for both clients and employees. There are interactive pages allowing registration and order placing with Legal Network; answers to frequently asked questions; a map showing the national growth of contract legal personnel; classified ads; reprints of articles focusing on the industry; and lots of legal web links.

The ACBA’s web site provides free access to the local rules for Pennsylvania courts in Allegheny County; access to back issues of the Pittsburgh Legal Journal; useful legal web links and listings of upcoming events. The ACBA web site URL is http://www.acba.org.

In addition, Pittsburgh OnLine and Legal Network co-sponsor a web site promoting local law firms and legal service organizations doing business in Western Pennsylvania at http://www.law.pgh.com. Also, the ACBA Technology Utilization Committee has started a series of Listservs serving the local legal community.