An increasingly contentious lawsuit by a former client against law firm McDermott Will & Emery LLP is putting a spotlight on the legal industry's widespread use of itinerant "contract" attorneys who review documents for lower hourly wages.
J-M Manufacturing Co., the world's largest maker of plastic pipe, hired McDermott five years ago to help respond to prosecutors' request for documents after a former employee filed a whistleblower lawsuit. Late last week, Los Angeles-based J-M amended its pending lawsuit, abandoning some allegations against the law firm while adding others, including that the contract attorneys McDermott used "negligently performed their duties."
The legal malpractice lawsuit, in California state court in Los Angeles, and initially filed in June, is seen in the industry as an important case concerning the quality of work performed by a growing cadre of temp lawyers who are paid as little as $25 to $30 an hour to review documents related to litigation, internal company investigations or regulatory requests for documents. McDermott filed a response to the initial lawsuit last week denying J-M's claims, but hasn't yet filed an answer to its amended complaint.
The case "may well be a harbinger," said Jonathan M. Redgrave, a lawyer whose firm, Redgrave LLP, focuses on information law. There could be more disputes between clients and law firms over work performed by contract attorneys and outside vendors as they are used more in the pre-trial discovery process, he said.
Temporary legal staffing in the U.S. is projected to increase by 25% cumulatively over the next two years, according to the most recent estimate by Staffing Industry Analysts, a research group.
Many law firms use their own contract attorneys but others rely on third-party agencies to hire the temps. In the lawsuit, J-M, also known as JM Eagle, alleged that McDermott "participated in the hiring" of contract attorneys from third-party vendor Hudson Legal and "also assisted in their training," and that McDermott lawyers "negligently performed limited spot-checking of the contract attorneys' work."
The situation led to mistakes, J-M said in its lawsuit. In May and June, more than a year after it had replaced McDermott with another law firm, the company realized that about 3,900 privileged or irrelevant documents may have been mistakenly handed over to the U.S. Attorney's office in Los Angeles, which in turn provided the materials to plaintiffs who refuse to return them, J-M alleged in its amended lawsuit last week.
A spokesman for the U.S. Attorney's office in Los Angeles said he didn't have enough information to confirm J-M's account.
McDermott has defended itself against the allegations. "JM Eagle keeps changing its story," said a spokesman for the firm, which has about 1,000 lawyers and offices around the world, its biggest in Chicago. "Now, JM Eagle has amended its complaint by revising its equally baseless claims that McDermott failed to supervise the contract lawyers that JM retained, and somehow was damaged by the production of documents that JM Eagle cannot even identify."
Marcus Galindo, a spokesman for J-M, said it is still trying to determine how the alleged mistake took place. In addition to hiring contract attorneys, McDermott had relied on two third-party "electronic discovery" vendors that were supposed to automatically separate all privileged documents using a search term filter, he said.
McDermott's own attorneys billed J-M at "rates as high as $925 an hour," J-M alleged. The law firm paid the rate of $61 an hour to staffing firm Hudson Legal, according to the suit, which doesn't specify how much, in turn, the contract attorneys were paid.
The whistleblower lawsuit, set for trial in December, claims that J-M Manufacturing delivered defective PVC pipes to government utilities around the nation. Mr. Galindo described the claims as "baseless."
The federal government declined to intervene in the whistleblower case. According to court records, a number of municipalities elected to intervene. "As a result of McDermott's work, the U.S. government decided not to intervene in the case, and we stand behind the results we achieved for our client," the McDermott spokesman added.
In its lawsuit against McDermott, J-M said that "combined efforts" of the contract attorneys and the McDermott lawyers "fell below the applicable standard of care for lawyers because McDermott didn't properly supervise the contract lawyers and failed to thoroughly review the documents" to "determine whether any or a large number of privilege documents were being disclosed."
J-M "will be unable to prove its reckless and irresponsible allegations," said the McDermott spokesman, adding that McDermott "properly counseled its client."
"JM Eagle was kept in the dark regarding many of McDermott's practices while serving as our counsel," J-M's Mr. Galindo added. "As we have learned more about their conduct during that time we have adjusted our complaints accordingly."
Mark S. Yacano, executive vice president at Hudson Legal, a unit of New York-based Hudson Highland Group Inc., said the company doesn't believe it is "appropriate" to comment since it isn't a party to the lawsuit.
By Vanessa O'Connell, email@example.com