Do legal ethics require law firms to pass on cost savings?

Legalaffairs (May/June 2005 at pgs 10-12) discusses sending legal work to Indian firms. The editor who wrote the piece, Daniel Brook, notes that “third-party outsourcers … remain popular mostly with corporate legal departments, which use outsourcing to keep costs down.” (He mentions GE and Microsoft.)

He then cites a law professor (Thomas Morgan of GW University Law School): “Bar association ethics rules require law firms to pass on to clients cost savings from outsourcing.” I did not know about such an ethical requirement. If there is one, why would it not apply to cost savings achieved in other ways, such as through investments in technology, training, systems, cost control measures, knowledge management, practice group efficiencies, and more?

Brook’s piece does not pursue this wallet-busting notion, but closes with a different clincher: “In theory, at least, it would take only one big firm looking for a competitive advantage to start a bidding war that could change the cost of buying legal advice in the U.S.” It is already reported that Milbank Tweed has moved word processing work to Chennai, India.