Increasingly, consumer bankruptcy lawyers will be using AI in the future. It therefore is incumbent upon them to develop procedures and policies for its use and in billing for such services. Doing so will be a combination of art and science controlled by both ethical and practical considerations. Because its use is in an embryotic phase, standards are still being developed, and the area is plagued by a dearth of both case law and statutory guidelines. Practitioners also have to be cognizant that AI is a rapidly and ever-changing tool characterized by advances made on a constant basis.
This article is designed to highlight the issues that need to be addressed and to provide an impetus for discussion and additional analysis.
Why Use AI?
The benefits of AI are numerous, but many of them are not as evident as others. The expertise of the user can play a significant role in the efficacy of its use. In the hands of a skilled user, those benefits include:
- reduced cost;
- consistency in work product;
- accuracy of work product;
- speed of production;
- freeing up time; and
- widespread access to sources of material.
Prerequisites of AI Use
In the hands of skilled professionals, AI’s usefulness may be unlimited. However, it is fraught with risks and dangers when used irresponsibly. It therefore is crucial that the following be considered when promulgating an AI policy:
- proper training for the user;
- firm policies for how it will be used;
- billing policies;
- ethical considerations;
- staying updated on products available;
- promulgating policies for oversight of the AI work product;
- being aware of your court’s rules and procedures regarding AI use;
- recognition of AI options; and
- reviewing insurance coverage for its use.
Risks of Its Use
Everyone is aware of the sanctions assessed against the New York lawyer who irresponsibly relied upon AI in an unwitting manner. Because his misuse occurred in the relative infancy of AI’s use, the court exhibited some sympathy for the respected lawyer. One can assume that the court’s attitude will become far less forgiving as attorneys become more aware of AI’s shortcomings.
The following is a summary of the risks of using AI:
- improper charging;
- inaccurate information;
- actual cost of its use exceeds traditional legal work not using AI;
- lawyer complacency;
- unskilled user triggering an erroneous response;
- misplaced client expectation by its use; and
- you could violate your court’s rules and procedures regarding AI use.
Considerations in Billing for It
Without question, lawyers appreciate that AI should expedite the production of legal work product at a reduced cost. Otherwise, its usefulness would be limited. This, of course, leaves the law firm facing a quandary as to how to bill for AI work.
The firm needs to assume it cannot pass on the cost of designing and implementing AI procedures and use, nor can it charge for training costs. Those expenses are the cost of doing business. Consequently, law firms have to consider how to maximize the benefits of AI while not chipping away at the bottom line, since AI could very well decrease the time needed to provide a variety of legal services.
Consequently, firms should consider alternative forms of billing, starting with the necessity that whatever is offered is clearly spelled out in the firm’s fee agreement with all clients. Those options include:
- Normal hourly billing: The firm will probably need to confirm that certain services can be provided for less cost. Obviously, the AI product needs to be reviewed and edited to ensure accuracy, but if the final work product was more expensive than work produced by traditional means, little reason exists to utilize AI.
- Set fee-billing: This option focuses on the overall cost of the final product and shifts part of the economic risk of the representation to the law firm.
- Contingency billing: In certain cases, representation can be handled on the basis of the law firm accepting a percentage of the recovery. As in the case of set fee-billing, any efficiency and economic savings may justify the law firm reducing its charges.
- Hybrid fee arrangement: The law firm can combine different options that would divide the risk and cost savings between the client and law firm. Depending on the outcome of the case, the client could save money and the law firm may be able to recoup some of the lost revenue triggered by the use of AI.
- Set monthly charging: This is similar to set fee-billing but is a negotiated amount for agreed-upon services to be provided for a set monthly fee. Once again, both the client and the law firm would be absorbing a certain amount of risk and cost savings by the use of AI.
From a consumer debtor lawyer’s perspective, some of the above options might not be practical or feasible, but a consumer creditor’s lawyer could quickly realize that AI might be the impetus for that lawyer to consider alternative billing strategies.
No one knows how prevalent AI might be in the near future. Since it is constantly evolving, it would be impossible to now anticipate its application in the coming years, but a practitioner would be foolish not to understand and utilize AI now.