Rethinking lawyers practice in the age of artificial Intelligence
23 Aug 2024 | Victoria Kammerath
Let’s kick off this reflection with a concrete fact: specialized legal practitioners who tailor solutions for each client are increasingly challenged by new service providers and tools. These newcomers are characterized by low and predictable costs, extensive automation, recyclable legal knowledge, and widespread use of artificial intelligence.
This context serves as a significant catalyst to scrutinize the defining characteristics of law firms as traditional legal service providers. We must ask ourselves whether lawyers can weather the fourth industrial revolution (largely driven by artificial intelligence) without substantial alterations to the conception and practice of our profession.
This article aims to initiate a reflection about the work method, pricing system, and primary objective of the legal service we lawyers provide, and the potential for transformation in the age of artificial intelligence.
Work Method
In his “Discourse on the Method” Descartes, among his other brilliant ideas that reflect his methodology for seeking truth, emphasized the need of breaking down difficulties into as many parts as possible and addressing each in the most effective way.
Drawing from Descartes’ approach, let’s examine the traditional mechanism by which legal needs of clients are addressed by law firms. Let’s consider an example of advising a person accused of a crime or a small business negotiating a contract with a supplier. Despite differing subjects, the work process is quite similar. Streamlining to the utmost, most cases follow this basic outline:
1. Initial meeting with the client introducing needs or describing the conflict.
2. Proposal of attorney fees and agreement on letter of engagement.
3. Diligence on facts and available documentation.
4. Client-lawyer meeting to agree on strategy and implications.
5. Legal research to identify standards, judicial precedents, and secondary sources supporting the client’s position.
6. Drafting documents to execute the strategy.
7. Sharing documents with the parties or filing them in court.
8. Follow-up and subsequent negotiations or additional filings.
Whether it’s a small law firm somewhere in Argentina 40 years ago or a major global law firm based in New York in 2023, the process is quite similar: sequential work within the law firm covering the tasks described in points 1 to 8. Of course, the New York firm in August 2023 involves more individuals of varying hierarchies and training, as well as numerous technological applications to support their work, such as access to a vast online repository of document templates, contracts, and sophisticated legal research tools. Meetings now occur over Zoom, and communications via email. Changes that were unimaginable 40 years ago, indeed.
Nevertheless, upon closer examination, it seems that technology is primarily being used to maintain the same conceptual framework and work methodology. In essence, technological advancements are mostly employed to optimize the very same tasks carried out by the same agents.
Now, let’s consider the range of legal service providers existing today: large, medium, and small firms, generalists and specialists; alternative legal service providers, like the so-called “Big Four” accounting firms offering strategic advice among hundreds of other services; platforms like LegalZoom providing legal deliverables and specialized consultation in certain areas; machine learning models generating reports on judicial precedents or relevant databases for data-driven legal decisions; and artificial intelligence (whether generative or not), seemingly poised to accomplish all the above and more.
In practice, clients choose one provider over another based on available resources and circumstances. At this point, the question arises: does it make sense for the same legal service provider to handle all tasks with a waterfall methodology and charge for it? Is it cost-effective and does it ensure the highest quality legal output for the same provider to execute the tasks described in points 1 to 8 of the aforementioned example? It seems not.
While the specialized law firm that tailors solutions for each client should certainly lead the strategy in most scenarios, it’s far less clear whether this provider should spend weeks reviewing thousands of documents that a model could process in a matter of hours.
As Richard Susskind states in his amazing book “Tomorrow’s Lawyers” we need to contemplate breaking down legal work into various tasks and executing each one as efficiently as possible. There are approaches to individual legal tasks that offer quality on par with the most prestigious law firms, but at a significantly lower cost. Within this framework, I believe legal service providers need to work collaboratively to offer clients the best solutions for each need. It is us lawyers who should pioneer this new collaborative work approach, so that our high costs and limited scalability don’t render us obsolete.
Pricing System
Regarding the payment structure for legal services, in situations where court-awarded attorney fees are not applicable, the pricing is typically structured around the hourly rate of the attorneys or paralegals engaged in each project. This hourly billing approach has, in fact, been the prevailing method of payment for legal services since 1975.
That said, this pricing system presents at least two challenges. The first, perhaps the most obvious, is the absence of upfront certainty regarding the complete cost of legal counsel. Individuals or businesses cannot immediately calculate, as they can with nearly all other goods and services they hire, the impact of legal services on their budget. The involved firm can estimate at the client’s request, but in most cases, it results in price ranges that hinder precise forecasts.
The second challenge, and probably the most significant, is the concept reflected in this attorney work model founded on the hourly rate mechanism. Put simply, lawyers, in general, charge for their time rather than the outcome of their work. Therefore, clients often expect exceptional results and round-the-clock attention from lawyers. Additionally, under this system, lawyers may unconsciously be incentivized for tasks to take as much time as reasonably possible, as this would impact their fees.
The hourly billing system, which might be the most efficient mechanism for providing legal services in some scenarios, doesn’t necessarily work for all cases. Hours of work, in numerous situations, do not accurately reflect the value the lawyer adds to the project, which can be greater or lesser than that time span.
For these reasons, I believe lawyers should advocate for an agile-based practice, where billing is for the value of the work rather than the time spent. This billing model assigns a value to project deliverables through a general flat fee, a price per project or sprint, and even an hourly rate when most suitable. All of which is negotiated and agreed upon between the client and attorney within a collaborative relationship with multiple tracking points.
Primary Objective
Last but not least, these times present the perfect moment to reflect on the objective lawyers pursue while representing clients’ interests.
“What happened?” is often the first question we ask when a client contacts us out of the blue. Lawyers are mostly involved in a matter to react to an existing conflict and seek resolution. However, the reactive approach, which likely served for the majority of our profession over thousands of years, is not enough in a complex system like the world where legal relationships unfold today. There are hundreds of ever-changing laws, regulations, and judicial precedents, a diverse range of stakeholders, and various types and drivers of liability in each jurisdiction.
Thus, I believe we better serve our clients’ interests today by primarily focusing on managing and mitigating the current and potential legal risks each one faces. It’s about preventing clients from inadvertently exposing themselves to some form of liability. Certainly, there will always be problems to solve, and we’ll need to react. But if we don’t also address, in my opinion primarily, the proactive management of the legal risks associated with each activity, more significant problems will arise in the future.
Interestingly, legal risk can be managed in numerous ways. For example, enhancing knowledge of applicable regulations, introducing work protocols, using standard documents, and involving lawyers initially (not just when problems arise) in company matters. And of course, one of the incredible opportunities presented is the use of artificial intelligence for risk assessments.
Final Recap
The fourth industrial revolution poses critical challenges to the work methodology, pricing system, and primary objective of law firms as traditional legal service providers. How can lawyers remain efficient, profitable, and contribute maximum value to our professional practice?
It will undoubtedly be a lengthy journey, but I believe several opportunities are already emerging to embark on it. First, collaboration among diverse legal service providers, rather than centralization within a single firm, emerges as a route toward greater productivity and flexibility. Moreover, adopting agile pricing models based on the value of deliverables can provide increased predictability and transparency in the client-lawyer relationship. Finally, the focus on proactive legal risk management emerges as a priority in this new era.
References
Susskind, Richard. Tomorrow’s Lawyers: An Introduction to Your Future. 2nd ed., Oxford University Press, 2017. American Bar Association. Model Rules of Professional Conduct. Jacoby, Conrad J., Esq. “Non-lawyer ownership of law firms — Are winds of change coming for Rule 5.4?” Thomson Reuters Institute, March 2022. Carr, David C. “Legislature Chills Non-Lawyer Participation in Providing Legal Services”. BLAWG 401, June 2022. Barton, Roger E. “Changing the stakes: how evolving law firm ownership rules could (or could not) re-shape the legal industry”. Thomson Reuters Institute, August 2021. Curle, David. “Scaling and Amplifying Legal Work, Part 3: Disaggregation in Legal Services”. OKira – Next Gen Lawyers, 2020. Stephanie Wilkins. “Cornell Tech Professor and Former Reed Smith Partner (Ed Estrada) Talks Legal Tech and Law Firm Business Strategy”. LegalTech News Online, November 7, 2022. Reynolds, Matt. “When it comes to deregulation of the legal industry, divisions run deep”. ABA Journal, November 16, 2023. Engstrom, David Freeman, Ricca, Lucy, Ambrose, Graham, and Walsh, Maddie. Legal Innovation After Reform: Evidence From Regulatory Change. Stanford Law School, September 2022.