Yesterday the Second Circuit decided Lola v. Skadden, Arps, Slate, Meagher & Flom LLP, et al., a case rich in ironic implications. (Hat tip to my friend Matt Sawchak at Campbell Law for the heads-up.) The Slip Opinion is here. A lot of people are going to try and tell you that this case holds that document review is not the “practice of law”; Above the Law already has (see here). But that grossly oversimplifies everything that’s important about it. What the decision actually does mean is much harder to discern, and once you figure it out it is very hard to justify.
Let me start by telling you what Lola is about. David Lola is a lawyer licensed to practice in the State of California. He took a position as a document reviewer for Skadden at $25 an hour. Skadden was involved in a big case in the Northern District of Ohio, and sent Lola to work on a huge document review that took place entirely in the state of North Carolina and lasted well over a year. Lola typically worked 45-55 hours per week, and was paid no overtime.
Lola eventually sued on behalf of himself and all others similarly situated for what these days is popularly referred to as “wage theft,” specifically and more technically violations of the federal Fair Labor Standards Act. The FLSA requires employees with the right kind of responsibilities to receive time-and-a-half for work in excess of 40 hours per week. The legal question presented is whether Lola did the right kind of work to be entitled to overtime. Long story short on the legal standard, certain kinds of professional work are exempt from the FLSA overtime requirement, specifically including the “practice of law.” So if Lola was engaging in the “practice of law,” he was exempt from any right to overtime; if he was not “practicing law,” and was engaged in merely clerical or other ministerial tasks, he was entitled to overtime, and presumably so would quite a few other document reviewers who work long hours for Skadden and other BigLaw firms on the document-heavy litigation in which they often are involved.
One big problem is that any meaningful definition of “practicing law” is (to put it politely) elusive, and the Second Circuit’s decision provides surprisingly little help in determining when the very common task of document review is or is not “practicing law” for any purpose. (A quick aside: The Second Circuit’s decision holds that the FLSA incorporates state law to determine when an employee is “practicing law” and thus exempt from overtime, and gives useful guidance on which state’s law a federal court should choose. In this case, the state law at issue is North Carolina’s, where all the document review work at issue was done. But North Carolina's definition of "practicing law" is similar to most states'.)
It’s the specific circumstances of this case that make the opinion so difficult to understand and apply more broadly: The District Court granted a motion to dismiss for failure to state a claim, so the Second Circuit is of course obliged to take the facts as the plaintiff pleads them. And Lola is at pains to allege in his Complaint that his work as a document reviewer accorded him no room at all for judgment or discretion. Streamlining just a little, he essentially asserts that he was handed piles of documents and lists of key words chosen by others, and instructed that if a document contained a particular word, he should “code” it into a particular category. Just that simple, just that rote.
That kind of arrangement is not unheard of, but it’s hardly typical. Usually, document reviewers are asked to make at least preliminary determinations about whether documents might be responsive to a document request, might pertain to a particular subject, or might be privileged. All of those tasks involve the exercise of legal judgment (that is, interpreting the scope of the document request and the document to determine if it falls within the terms of a particular demand or pertains to a subject of interest, or applying the law of privilege, all of which can be quite subtle and difficult, and frequently demand analysis and judgment) applied to the specific facts of the case (that is, the specific documents on the document reviewer’s desk or screen). And the nub of the Second Circuit’s decision is that the “practice of law” under North Carolina law (which is typical of most states’ definitions) must involve “at least a modicum of independent legal judgment” by applying general legal principles to a specific client’s particular circumstances. Thus the Second Circuit concludes that some document review—including the kind I just described as typical—does amount to the “practice of law,” but the more limited activities described in Lola’s complaint do not.
That doesn’t mean (and c’mon, you had to know it was coming) that whatever Lola wants, Lola gets. Skadden remains free to prove on summary judgment or at trial that, despite what Lola alleges in his Complaint, in fact it called upon Lola and those similarly situated to exercise that “modicum of independent legal judgment” typical of much document review that would free Skadden from paying them overtime. How much “independent legal judgment” amounts to the legally necessary “modicum” under all the prevailing facts and circumstances (with possible interjurisdictional variations for different workers in different places assigned to the same case based on differing state-law standards) is nobody’s fantasy of a predictable outcome.
And the Second Circuit provides us with no effective guidance on how much a “modicum” is. The closest we get to even a vaguely functional test is this:
“A fair reading of the complaint in the light most favorable to Lola is that he provided services that a machine could have provided. The parties themselves agreed at oral argument that an individual who, in the course of reviewing discovery documents, undertakes tasks that could otherwise be performed entirely by a machine cannot be said to engage in the practice of law.”
It is not clear whether the Second Circuit intends this “machine” test to define the outer limit of what is not “practicing law,” or whether it intends it merely as an example. Either way, it’s worthless. Does a legally-related task need to be so devoid of any judgment that a truly dumb machine could do it in order for it not to be “the practice of law”? That’s an awfully low bar, and it means that most people working for lawyers today are “practicing law” for wage-and-hour purposes, and exempt from the right to overtime. Virtually all secretaries and legal assistants, for example, could not be replaced by dumb machines; if they could have been, they would have been by now. (This is one reason why I suspect Lola’s allegations may not prove out as neatly as he might like—it seems implausible that a firm as sophisticated as Skadden would have paid large numbers of people $25 per hour to do something that could be accomplished more cheaply and accurately by nothing more than an optical-character reader and word-search software.) And why should the standard for “practicing law” be so strictly dependent on the rapidly developing state of computer technology? There already exists today “Predictive Coding” software that allows a machine (a computer) to make complex preliminary judgments about privilege and responsiveness. On that standard, Lola was not “practicing law” on either party’s version of the facts (because “a machine” could do whatever he turned out to have been doing). The lawyer representing Skadden should never have conceded at oral argument that the “machine” test is a proper standard for anything—he or she may have given away the overtime store to save one remote corner.
So Lola v. Skadden actually tells us next to nothing about when document review is the “practice of law.” But there is yet another, more subtle, reason why the Second Circuit’s standard makes no sense: The Second Circuit borrows the “modicum of independent judgment” standard from the state law defining what kinds of activities comprise “practicing law” for the purpose of determining when the person undertaking those activities needs a law license to do them, and then inexplicably misinterprets it. If Skadden is factually right that Lola was exercising a “modicum of independent legal judgment” and was therefore “practicing law,” then he was practicing law without a license (something commonly referred to as the “unauthorized practice of law,” or UPL, and remember that Lola was licensed in California, but not in North Carolina where he was working and whose law governs whether he was “practicing law”). Unauthorized practice is a misdemeanor in most states, and Skadden is effectively confessing to aiding and abetting it hundreds of times a day. And if any person who is making preliminary judgments about responsiveness or privilege, or preparing drafts of contracts or pleadings, is “practicing law,” then countless legal secretaries and paralegals all over the country have been practicing law without a license for at least a century.
But wait, you say, that can’t actually be the law. Well, you’re right. In every American jurisdiction I know of, if a lay person selected by the lawyer applies legal principles to the client’s specific circumstances under the lawyer’s supervision, the lawyer rather than the subordinate is the one “practicing law.” With a skilled secretary or paralegal and a responsible supervising lawyer—and there are hundreds of thousands of both all over the country—this supervisorial arrangement works just fine, saves lawyers a lot of time, and saves clients a lot of money. Thus a North Carolina State Bar Formal Ethics Opinion on which the Second Circuit in Lola expressly relies (and which is replicated in a number of other states) holds that a North Carolina lawyer may outsource document review to a foreign legal process firm (say, Pangea3 in India) staffed by numerous people there the lawyer has never met who are licensed to practice in no U.S. jurisdiction, so long as the North Carolina lawyer adheres to the applicable “selection and supervisory requirements.” And there’s always been a fair amount of play in determining how much “supervision” of lay staff by the licensed lawyer is sufficient, with the minimum consistently set a lot lower than you’d probably think to accommodate what’s actually been going on above-board and successfully as long as anyone can remember.
From this you might infer that someone without a law license in the relevant state and who is exercising “a modicum of independent legal judgment” under a licensed lawyer’s supervision is not “practicing law”—after all, if he were, then he would be “practicing law” without a license, and his employer would be aiding and abetting a crime. Yet Lola stands squarely for the proposition that, if David Lola’s document review involved the exercise of even a “modicum of independent legal judgment,” then Lola was “practicing law” under the state-law standard for what comprises activities that must be undertaken with a law license, regardless of the fact that Skadden lawyers were supervising his work in a manner universally viewed as proper.
In short, either all those document reviewers are “practicing law” without a license under the governing state law the FLSA borrows, and Skadden (while it need not pay them overtime) is the mastermind of an ongoing criminal conspiracy unless henceforward it hires only document reviewers who are licensed to practice law in the state whose laws govern the service provided, or else none of the document reviewers are “practicing law” and they should all get overtime. But you can’t have it both ways. In this commentator's humble opinion, the Second Circuit screwed the pooch.
The better answer, of course, is that—consistent with state law on what comprises practice and unauthorized practice all over the country—document reviewers who are properly supervised by licensed lawyers are not “practicing law” precisely because they are properly supervised. But that means the doc reviewers should all get their time-and-a-half.
Of course, if properly supervised document reviewers don’t need a law license to do their work—which is pretty clearly the case in most if not all states—then their law schools should not be reporting them as holding Bar Passage Required jobs. In fact, since they’re doing work that is indistinguishable from work that legal assistants and legal secretaries have done for a hundred years and are still doing, it’s a big, ugly stretch even to call those jobs “JD Advantaged,” unless you’re prepared to call legal secretary and paralegal jobs “JD Advantaged” too. Which no one in their right mind should. Should they?