The American Bar Association’s suggestion last year that it would be ethically problematic for lawyers to charge high fees for formerly time-intensive work made easy by generative artificial intelligence has prompted an arguably long-overdue examination of traditional law firm billing practices.
Who should benefit from exciting new legal technologies that can deliver better legal services in less time? The client or the law firm? (Or both?) Is the traditional billable hour approach to legal fees an anachronism in an age where value delivered is the client’s true objective? How can the legal profession meet client expectations that cost-saving technologies will be deployed to their benefit?
In our corner of the legal community, technology is already having a significant impact in the manner in which depositions are conducted and in the ways that the record of those depositions is captured, analyzed, and put to use in litigation. Remote depositions are part of the story, of course. Technology today can also produce an instant speech-to-text translation in real time during depositions. Technology streamlines the organization of digital deposition exhibits and allows lawyers to make efficient use of exhibits and other documents during remote depositions.
If AI assists a lawyer to achieve superior results more efficiently…the client benefits from both the improved outcome and potentially reduced total costs compared to a lawyer using traditional methods.
Generative AI has the ability to quickly produce summaries of deposition testimony, a necessary task that requires considerable time and effort when performed by lawyers and paralegals. Many attorneys are using generative AI to draft deposition questions. And just over the horizon, artificial intelligence tools will be able to provide sentiment analysis of deposition testimony and spot testimony that is inconsistent with prior testimony or other evidence in the case file.
Ideally, the end result is better attorney work product created in less time. How should the client be charged for these AI-enhanced legal services? Litigators today are just now coming to grips with this question.
Rule 1.5 of ABA Model Rule of Professional Conduct requires that legal fees be “reasonable.” To assist in determining the reasonableness of a lawyer’s fee for legal services, the rules drafters listed a number of factors, including:
- the time and labor required
- the novelty and difficulty of the questions involved
- the skill requisite to perform the legal service properly
- the fee customarily charged in the locality for similar legal services
- the amount involved and the results obtained
- the experience, reputation, and ability of the lawyer or lawyers performing the services
- whether the fee is fixed or contingent
Last year, the American Bar Association offered guidance on how Rule 1.5 should be applied to legal services delivered with the assistance of generative AI. While the ABA’s counsel on how to deploy AI in an ethical manner was widely appreciated, its suggestion that, in some cases, productivity gains might call for reduced legal fees caused concern in many quarters.
In Formal Opinion 512 (Generative Artificial Intelligence Tools) (July 29, 2024), the ABA remarked: “If using a GAI tool enables a lawyer to complete tasks much more quickly than without the tool, it may be unreasonable under Rule 1.5 for the lawyer to charge the same flat fee when using the GAI tool as when not using it.”
The ABA followed this suggestion by quoting a Maryland Supreme Court ruling, Att’y Grievance Comm’n v. Monfried, 794 A.2d 92, 103 (Md. 2002), where the court stated that “a fee charged for which little or no work was performed is an unreasonable fee.”
Not everyone agrees.
Recently, the Virginia State Bar Association entered the discussion with Proposed Legal Ethics Opinion 1901 (Reasonable Fees and the Use of Generative Artificial Intelligence), proposing an ethics opinion that highlights the lawyer’s ability to deliver value to the client through the deft use of technology. This is a valuable skill in itself, which lawyers should be able to charge for.
The drafters of the proposed Virginia ethics opinion observed that while generative AI can reduce the amount of time needed to complete a legal task, it does not follow that a lawyer is ethically required to reduce the fees charged on this basis alone. The “skill requisite to perform the legal service properly” — another factor in the reasonableness calculation — might actually increase, they note, because “effective AI use could require specialized knowledge to prompt, verify, supplement, and integrate AI outputs into competent legal work product.”
They wrote:
The lawyer’s judgment in determining when and how to deploy AI tools, and the expertise needed to critically evaluate AI-generated content, represent valuable services for which the lawyer reasonably can be compensated.
Two other reasonableness factors mentioned in Rule 1.5 — “the novelty and difficulty of the questions involved” and “the experience, reputation, and ability of the lawyer” are also relevant when evaluating fees for legal work accomplished through the use of generative artificial intelligence. The ability to use technology competently on client matters is an emerging skillset that lawyers are ethically obliged to develop. Lawyers must now be able to properly configure AI technologies to address the client’s problem. They must have an understanding of the limitations of current AI tools, particularly the ability to spot AI hallucinations and other not-easily-detected AI errors.
Again, quoting the proposed Virginia opinion:
A lawyer’s unique value proposition might involve their ability to frame legal problems in ways technology can address while knowing when human judgment must predominate, which provides a sound basis for maintaining value-based fees even as raw production time decreases.
Finally, as some commenters have suggested, the reasonableness factor, “the amount involved and the results obtained,” is a strong argument in support of transitioning to “value-based” billing practices that focus on value to the client instead of mere inputs such as lawyer time. “If AI assists a lawyer to achieve superior results more efficiently,” the Virginia opinion notes, “the client benefits from both the improved outcome and potentially reduced total costs compared to a lawyer using traditional methods.”
Public comments are due May 7. Anyone, not just members of the Virginia legal community, is welcome to join the discussion.
