The ABA released Formal Opinion 512 on July 29, 2024, on “Generative Artificial Intelligence Tools.” This opinion contained helpful guidance to lawyers on some of the ethical issues that may arise when using generative artificial intelligence (GAI). However, there has been some disagreement among lawyers as to whether the section on fees was accurate or truly reflected a modern practice. The opinion seemed to follow strict adherence to ABA Model Rule 1.5, whereas in practice, fees are much more nuanced.
The opinion discussed the reasonableness of fees under Model Rule 1.5 and discussed these areas:
The crux of this opinion focused on what would be considered a reasonable fee and transparency to the client. However, as discussed below, reasonableness is evolving in this fast-changing world.
When a client hires a lawyer for a case, there is a desired outcome. The lawyer drafts the scope of the representation agreement, and the end goal is a positive result in the case. If a lawyer can get the case completed in a much more efficient way, such as by using GAI, the client benefits in so many ways. There is a psychological component of being able to move past litigation and put the case to rest for the client. The client no longer has to worry about their case or wonder what is going on. The lawyer benefits as well since GAI gets cases completed faster and there may not be a need to monitor a case with all the ethical duties that come with it for years.
Let’s think of it this way. Imagine a lawyer from the 1970s who went to the law library and spent hours researching materials contained in casebooks.
Fast-forward to the 1990s — lawyers were moving away from casebook research and into electronic research. It became clear that lawyers needed to conduct electronic research on their cases as it made them more efficient. In fact, as a recent article points out, “[I]t is important to remember that law firms passed those technology costs directly onto clients at the beginning, and in various creative ways as time went on. Moreover, it is important to remember that the steep reduction in billable hours due to faster online research did not diminish law firms’ profitability. They have continued — and will continue to thrive — by embracing the right technology and adapting to innovation.”
Today, AI is just a toddler. However, it is being infused into almost every electronic tool lawyers use. Lawyers may even inadvertently be using an AI-baked-in product that the vendor provided in an update, with or without a new end-user agreement.
If a lawyer today insisted that the only way to conduct research was to travel to a law library and charge the client for the time, this could be seen as an unreasonable fee. If the end goal is the successful outcome of the case and the client agrees in advance to a fee, then the argument that it is unreasonable to charge a certain fee just because the lawyer is efficient falls flat.
AI-generated work gives real value to the client. As Charity Anastasio, practice and professionalism counsel for the American Immigration Lawyers Association, states, “Value-based billing isn’t about the hour but about the quality and service rendered. If the quality and service are the same or better, why would the payment go down?”
This statement could not be more accurate. The client is getting true value from the lawyer embracing AI technology tools. Substantial costs and time are involved in acquiring, developing, maintaining, and training staff on AI systems. But once in place and utilized properly, the firm’s systems would provide real value to clients in getting their cases done in a much more organized and managed way.
If AI gets the initial work done on the case, it will allow for higher-level legal services by the lawyer and even more time spent on face-to-face human interaction, which is ultimately what many clients crave.
Formal Opinion 512 uses outdated cost analogies that even predate the massive changes to the legal profession resulting from the COVID-19 pandemic. For example, the opinion states that routine overhead costs range from maintaining a library to renting office space and purchasing utilities. Many law firms now do not maintain a law library and have moved to a more virtual online presence with a hybrid staff.
Perhaps allowing lawyers to explore AI solutions for their clients and wrap those costs into the delivery of legal services would be considered reasonable.
In addition, perhaps there is room for a “tech fee” under the rules. Model Rule 1.5 comment 1 states: “Paragraph (a) requires that lawyers charge fees that are reasonable under the circumstances. The factors specified in (1) through (8) are not exclusive. Nor will each factor be relevant in each instance. Paragraph (a) also requires that expenses for which the client will be charged must be reasonable. A lawyer may seek reimbursement for the cost of services performed in-house, such as copying, or for other expenses incurred in-house, such as telephone charges, either by charging a reasonable amount to which the client has agreed in advance or by charging an amount that reasonably reflects the cost incurred by the lawyer.” So, arguably, lawyers should be able to charge a tech fee to the client to cover the transactional cost per prompt.
Innovation in the legal profession is a good thing. It allows lawyers to move to a higher level with new tools and, ultimately, provide a more expansive legal solution to their clients — perhaps as a team.
There is no doubt that clients and the marketplace will demand that lawyers stay in step with innovation. Lawyers who are worried about their fees may stick to what they know. However, just like researching cases in a law library, someday, electronic research might be completely outdated. Therefore, it may ultimately harm clients if lawyers are not incentivized to use new GAI tools.
In addition, large law firms may gain a competitive advantage in that they have the resources to implement GAI into their practices. Smaller law firms could fall behind, and their clients would suffer as well.
Visalaw.ai founder Greg Siskind provides an excellent analogy to an automaker: “You select a car based on a lot of subjective factors, including the reputation of the manufacturer and the perceived quality of the vehicle. Drivers usually don’t care whether the car is completely handmade or built with robots. But they do tend to care about things like the buying experience, the car’s look and feel, and the reputation and trustworthiness of the manufacturer. The buyers don’t care about how much automation was used in making the car. If a manufacturer produces a great product at a much lower cost to make the product because of superior technology, buyers are happy to reward them with higher profits. We would think it absurd if the government said that a car manufacturer had to lower their prices because of the savings they achieved through robots and automation. That would be the role of a competitive market. Why is law different?”
Lawyers should be able to set their fees using GAI tools without violating Model Rule 1.5 and remain profitable. The reasonableness standard of this rule should also be allowed to progress with innovation. Strictly adhering to only time spent on a case and not considering any of the nuanced factors of generating a successful outcome for the client in an efficient way with possibly more human interaction is shortsighted. Hopefully, state bars will be flexible in their approach to this issue.
