Law Firm Management Has No Idea What To Do About AI (But Clients Do)
Updated: 6 days ago
Reprinted from the “Shelton Shares” Column in Attorney at Law Magazine
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” – Charles Darwin I’ve been talking with developers, in-house counsel, private practice attorneys, academia and members of Congress about AI since January. Over the last few months, several things have become clear about the use of AI in the legal profession. No. 1: New, legal-specific AI platforms are being developed at a lightning pace. Every day, new functions are being augmented or completely automated in ways that are cost-effective, completely reliable and safe from breaches and hallucinations. No. 2: Overwhelmingly, attorneys and law firms are uninformed, under-informed or misinformed about AI. As a result, they are failing to take decisive action. No. 3: Due to pressure from senior executives, in-house counsel and legal departments are the most proactive, regarding the integration and use of AI. The Hydra of AI Products Last week, I spoke to four executives whose AI platforms will write, review and offer negotiating suggestions for contracts. During my discussion with the third executive, I said, “Writing about AI – even legal-specific AI, has been like fighting a hydra. Every time I finish an article about one product, two more appear.” He laughed and assured me that would continue to be the case. After all, we are only a few months into “The AI Era.” He’s right. In a short time, I’ve interviewed CEOs and founders, and actually experimented on GenAI that can do the following:
Client intake and case analysis or “Matter Profiling”
Legal research and analysis with complete accuracy
Write demand letters and responses
Create deposition outlines
Review deposition videos to look for micro-expressions and other telltale signs of lying and deceit from deponents
Write briefs and memoranda
Provide links to facts and citations for briefs that can be dragged and dropped into Word documents – and then automate all Tables & Exhibits
Do comprehensive analysis of judges and their preferences and proclivities, in regards to specific practice areas and types of cases
Predict with 86% accuracy, whether a judge will dismiss a case – without knowing the facts
Write, review and negotiate contracts
Draft a complete patent
Identify the best received and most successful professional witnesses for insurance defense counsel (PI attorneys take note! You don’t have an equivalent)
Translate any legal document into easy to understand, plain language
Accurately translate legal documents into any of 28 languages
Write RFPs for in-house counsel seeking more value, diversity, risk mitigation, etc.
This probably seems incredibly frightening, and it should be. Because lawyers and especially older lawyers (like the ones on the management committee) are usually resistant to change. Unfortunately and let’s be clear about this: attorneys don’t have a choice or the luxury of time, when it comes to AI. This was made clear to me, by Professor David Grenardo of St. Thomas University of Law. “Given the advantages of AI and its utility, the greatest misuse of AI by lawyers will likely be failing to use AI in many instances. Failing to understand and utilize generative AI leads to duty of competence issues (Rule 1.1) and possibly billing issues (Rule 1.5). Now, if a lawyer is writing a contract, reviewing documents, or researching, and they do not use AI to assist at all, then they are likely not completing these tasks competently. Lawyers cannot hide behind statements like, ‘I just don’t get AI; it’s not my deal; I’ll leave that to the tech lawyers; I’m a traditional, old-school lawyer.’ Moreover, if lawyers do not use AI and consequently spend a lot more time on tasks than they would have using AI, then that could (and should) be viewed as generating fees that are unreasonable.” While attending the AI4 Conference in Las Vegas, I asked the AI Practice Chairs from Jones Day, Kirkland & Ellis and Foley & Lardner, whether they felt Professor Grenardo was correct. They unanimously voiced their agreement with him. Given the need to take immediate and decisive action, one would think that law firm management would be acting quickly. Such an assumption would be wrong. 63% of Lawyers Think Firm Management Doesn’t Know What to Do About AI. Of course, there are nimble market adapters who are taking action and leading the pack. Even the 3,000 attorney Magic Circle Behemoth Allen & Overy, acted swiftly and collaborated with OpenAI to create Harvey, a legal specific ChatGPT (that doesn’t hallucinate!). But those are the exceptions and not the rule. From polling and feedback, less than 10% of law firms have actually started integrating AI in their practices. My company did a poll of 300 attorneys about AI – 100 were from AmLaw firms, 100 from mid-sized (50-250) firms and 100 were from small firms (10-49). Here is the question we asked and the results we received: How Has Your Firm’s Management Committee Responded to the Use of Artificial Intelligence in the Practice of Law? Embraced It & Educated Us Well: 42 Rejected It or Banned Its Use: 69 They Seem Unsure & Unclear About What To Do or How to Train Us: 189 Twenty of the attorneys who responded that their firm was embracing AI, were members of management committees or listed as having a management role. What’s more interesting is that when we found 81 attorneys who responded that Management was Unsure and Unclear, were from the firms claiming to embrace AI. Another five were under the impression those same firms had banned the use of GenAI altogether. That’s a serious disconnect. What have managing partners and management committees been doing for the last eight months? The overwhelming response has been that they have “formed committees” (the ultimate law firm procrastination tool), “done research” and had their attorneys give presentations on AI. How have these internal presentations been received? The partners I’ve spoken with say it’s like watching a student give a book report. Lots of dry data but nothing usable. For example, in follow up polling and emails, not one attorney said they have received any training at all, on the following:
How to effectively use GenAI, while avoiding breaches, hallucinations and AI cloning
Prompt engineering and re-engineering basics
The various legal-specific AI products, their capabilities & costs
How commoditized services (e.g. contract generation, doc review etc.) Will be re-priced in the AI Era
How to discuss the use of AI with clients
How to market themselves as an AI Era attorney
In other words, they have neglected virtually everything that has to do with the practical integration of AI into the practice of law. Why? There are two reasons:
Almost no one is teaching the practical nuts and bolts of how to use AI in the practice of law.
There is so much misinformation and confusion on this topic that some of the most intelligent people in the world, are frozen with analysis paralysis, like a deer in the headlights of an oncoming AI trick.
In-House Counsel are Experiencing The Greatest Pressure I was surprised the first time I heard an in-house counsel tell me they felt like they were under pressure to use AI or to find law firms that were safely and effectively using AI. But after speaking with several of them, the pattern became clear. One attorney put it perfectly but as is almost always the case, can’t be quoted on the record by the time this article is published, because it takes so long to get approval. This is what they told me: “Frederick, The Board and C-Levels are telling us that every time they pick up a business journal, they read about how companies should be saving 30-70% on legal fees because of AI. My marching orders have been given. Figure out a way to start saving all that money or they’ll find someone who can.” In-house counsel often have to justify their existence. Especially in a time when the outsourced general counsel model (which will also be required to be proficient with AI) is becoming ubiquitous. The previously mentioned companies whose AI writes, reviews and negotiates contracts, all have one thing in common: The overwhelming majority of their clients are in-house legal departments. If the firms won’t save their clients money on tasks that can be automated, in-house lawyers will simply cut out the firms altogether. The Perfect Storm That’s Approaching Law Firms in the AI Era Corporate Darwinism is hitting the legal profession like never before. The AI Era is here. Law firms have a year or maybe less to get trained and educated on how to integrate AI into their practices. With professional help, this is not actually as difficult as it may seem. I’ve sat down with attorneys who are self-proclaimed “technically-challenged” and within an hour, they knew everything they needed to know, about how to operate as an AI Era Attorney. But… Most law firms and lawyers are not acting. Most In-House Counsel are. Those who adapt to the new AI Era will survive and even thrive. They will capture heretofore, unimagined percentages of market share. Those who fail to adapt, will face extinction. We are entering an Era when for the first time, brand is not enough. It will be survival of the fittest.
Frederick Shelton is the CEO of Shelton & Steele and provides Rainmaking & Legal-Specific AI Consulting to lawyers and law firms. He can be reached at firstname.lastname@example.org