And the Greatest of These is Fees
Adoption of AI by legal practitioners this year reached a level sufficient to prompt the ABA to issue Formal Opinion 512 regarding the ethical obligations of lawyers who utilize generative AI tools to deliver legal services.[i] The formal opinion caught my eye because I have long shared the ABA’s interest in the ethical use of AI in the legal space. I actually wrote a paper on the topic myself in 2021.[ii]
In their formal opinion, the ABA discusses how lawyers’ use of generative AI tools impacts their ethical duties of: (a) competence, (b) confidentiality, (c) communication, (d) consent, (e) candor/meritorious claims, and (f) supervision – some of the same professional responsibilities I touched on in my own 2021 essay. These are all important ethical considerations to be sure. But the ABA also mentions an ethical obligation I’d never contemplated – a lawyer’s duty to charge reasonable fees.
I was a little surprised after reading the opinion that I didn’t think of fees myself when I first began pondering the risks and benefits of Legal AI adoption. After all, fees are pretty darn important to lawyers, and reasonable fees are equally important to their clients. What’s more, increasing access to affordable legal services is not just one of the reasons I am such a vocal proponent of AI adoption in the legal space. The prospect of providing legal access to the underserved was one of the primary drivers in my decision to enter law school.
I feel like that was a pretty big miss on my part. Thankfully, the ABA Standing Committee on Ethics and Professional Responsibility’s aim was better than my own. But I digress. Rather than beating myself up publicly for failing to consider fees in my frequent philosophical musings on the topic of Legal AI ethics, I will offer myself some grace and accept this second chance to review the ABA’s legitimate concerns on the duty to charge reasonable fees - arguably one of the most broadly impactful ethical duties a lawyer possesses.
Formal Opinion 512 contains a great deal of wisdom on how lawyers may ensure that they fully comply with Model Rule 1.5 in their professional use of generative AI. I will share a brief overview here. We know that Model Rule 1.5(a) requires that a lawyer’s fees and expenses be reasonable, but how does that apply to gen AI? Here’s a quick breakdown.
Explain the Charges
Before billing a client for the use of generative AI, a lawyer must explain the basis of the charges. The ABA recommends that the explanation be given in advance and in writing.[iii]
Share the Savings
Generative AI delivers efficiencies that lawyers must pass on to their clients or risk sanctions. Gen AI can do in moments what might take a person hours to complete. Maybe AI can’t do those things as well as a competent attorney, but that is covered under other model rules.
When billing is set at an hourly rate, the client should only be billed for the actual time spent. Here, that means the time it takes the lawyer to interface with the AI tool and carefully review its output.
Critically, lawyers billing on a contingency or flat fee basis may need to reduce their fees if time efficiencies realized from the use of AI are significant enough to make their original fee agreement unreasonable. As Formal Opinion 512 reminds us, a large fee charged for a disproportionate amount of work could be viewed as both unreasonable and sanctionable.[iv]
No New Surcharges
Lawyers are permitted to bill clients for reasonable expenses specific to their matters. That includes the actual cost of direct expenses incurred to use a generative AI tool for a particular client’s case. But the ABA cautions lawyers not to bill clients directly, like through an impermissible surcharge, for the costs of gen AI tools in general use across their practices. Such expenses are likely unbillable overhead just like the electric bill.
On the other hand, lawyers may still be able to bill clients for the use of gen AI tools, but only if the charges and rates are agreed upon in advance and do not exceed the direct costs plus a reasonable allocation for overhead. The ABA compared these charges to the way lawyers bill for photocopies today. Formal Opinion 512 urges lawyers to exercise their best professional judgment in determining when (and how much) to bill a client for the use of gen AI tools.
Conclusion
While the use of gen AI tools in legal practice may be novel, the underlying ethical considerations underlying that use are not. When technology delivers shiny new tools, that does not equate to new ethical rules. Fees must still be fair and reasonable, and lawyers must continue to honor their ethical duties to their clients and the profession, especially when it comes to billing.
Ultimately, AI is a tool—albeit a powerful one—and lawyers must wield it wisely to ensure justice remains affordable and accessible. The duty to charge reasonable fees is one of the most important parts of that responsibility.
*Lead photo courtesy of ChatGPT (and me)
[i] No Named Author, “ABA issues first ethics guidance on a lawyer’s use of AI Tools”, American Bar Association News, https://www.americanbar.org/news/abanews/aba-news-archives/2024/07/aba-issues-first-ethics-guidance-ai-tools/
[ii] Cathy Melton, When Lawyers Hire Chatbots: Ethical Considerations, April 26, 2021, https://drive.google.com/file/d/1JjjIWk6h8ARWwP1Umf7BrttGC9YgQNjW/view?usp=drive_link.
[iii] American Bar Association Standing Committee on Ethics and Professional Responsibility, Formal Opinion 512:Generative Artificial Intelligence Tools, July 29, 2024, https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-512.pdf.
[iv] Id.
