“It’s a game changer when the game has changed.”

Richard Tromans.

There has been a lot of speculation lately about the significant impact large language models (LLM) will have on the future of law practice. The theory goes that these models will tremendously reduce the time lawyers spend on many tasks. This reduction, in turn, will force lawyers and law firms to rethink the financial business models upon which the firms have primarily been built. Law firms will be forced to change what they do, especially when clients demand it. And many pundits think this sea change will happen quickly.

Richard Tromans, a thought leader in the industry, writer of the blog artificiallawyer and the force behind the well-known and ground breaking Legal Innovators conferences, reccenlyt weighed in on these theories. 

In a recent podcast interview and an excellent subsequent article, he analyzes change in the legal industry and what has to happen for real change to occur. Tromans concludes that change in legal will not come easily. Or quickly. (Tromans is hosting the U.S. version of Legal Innovators conference in San Francisco on June 7-8, at which the impact of artificial intelligence (AI) and LLMs on the legal industry will no doubt be a topic of substantial discussion.)

Never underestimate the power of lawyers to resist change

I agree that any change in the current model for paying for legal services will likely be slow. I say this in part based on history: over and over, we have been told that something will upset the apple cart in legal. Over and over, it hasn’t, or at least only a little bit. Never underestimate the power of lawyers to resist change.

And when you look at the payment method and how ingrained it is, you can see the reason for my pessimism. The law firm structure in the U.S. and elsewhere is built on the billable hour and leverage models. It is firmly entrenched. The model rules firm finance. Advancement and compensation within the firm by partners and associates are based in large part on the concept of billable hours and leverage. The highest compensated partners are those who not only have high billable rates. But who can also leverage their work and enable a slew of other people to bill to their files. Often, these highly compensated are the partners with the most clout and decision-making authority in the firm.

As Richard Susskind so aptly put it: it’s hard to tell a room full of millionaire partners their business model is all wrong. Law firms and lawyers have profited handsomely from the model and aren’t likely to change unless they have to. Moving to a model based on doing more for less cost, like alternative fee arrangements (AFA), is a severe threat. Most AFAs don’t provide any sort of success/bonus component, so there is little upside for law firms.

But What About the Clients?

Ever since I was a young lawyer, I have heard that in-house counsel have to do more with less and that they will demand their law firms change. And it’s true, as I have said often, real change will only come to law firms when clients demand it. When the in-house lawyers say, enough is enough. When they compel their outside lawyers to use LLMs to reduce the time spent on a matter. When they demand that law firms use alternative fees in lieu of billable hours. When they realize that the leverage model is inefficient in light of new technology. 

The problem is in-house counsel haven’t done so yet. Despite technology and all this wringing of hands, the demands of in-house to law firms for change have been slow. Will it be any different this time around? Let’s look at why in-house lawyers are slow to demand change.

In-House Counsel Are Lawyers Too

First and foremost, in-house counsel are lawyers too. Many of the same factors that keep law firms from changing keep in-house lawyers from demanding change from their law firms.

It’s the nature of lawyers, for example, to resist change. We have all heard this repeatedly, but the proof is in the pudding. Lawyers—outside or in-house–don’t like change. We see this over and over. A recent LexisNexis CounselLink Survey found that in 2022, clients allowed law firms to raise their rates to record levels. The Study also revealed that use of alternative fees remained around a paltry 6% of billings. That the number of people doing limited work on files –a breeding ground for inefficiencies– remained high. Clients approved all this even while whining about the bills from their lawyers.

Why do we think in-house counsel will demand generative A.I. efficiencies when they wouldn’t even reject massive rate increases?

As Kris Satkunas, Director of Strategic Consulting at LexisNexis and author of the report, was quoted in a recent article: “At the end of the day, I believe that most corporate counsel are just more comfortable negotiating an hourly rate discount than being creative. It’s easier to negotiate a rate than it is to have to think about what’s the value of this matter, what am I willing to pay for the outcome I want? I really would love to see a real, meaningful uptick in the use of AFA’s, but it just hasn’t happened.”

Why do we think in-house counsel will demand generative A.I. efficiencies when they wouldn’t even reject massive rate increases?

In-House Counsel Are Imbued with the Culture of the Billable Hour

All in-house counsel went to law school. Many of them worked for outside law firms before becoming in-house. They are all endowed with a certain culture. A culture that says to be cautious. Be risk-averse. Most in-house counsel have known little but the billable hour as the payment method for legal services. They are suspicious of anything else. 

In-house counsel are by and large comfortable with the billable hour model. It creates a measurable and is at least to some extent transparent. Yes, it can be abused. But it does provide some objectivity. 

Part of the problem is innate caution. In-house lawyers fear AFAs could lead to shoddy work by their lawyers who want to cut corners. Or it could result in their lawyers getting a windfall if they quickly resolve a matter with a hefty alternative fee and with little time spent. And as mentioned above, part of the problem is that, unlike plaintiffs’ contingency fee lawyers who have a “success fee” built in for good work, most billable hour work carries little opportunity for a bonus if successful. So in-house lawyers are right to be a little skeptical.

In-House Counsel May Lack the Necessary Technological Competence

It’s been documented that many in-house counsel are no more tech savvy than many of their lawyers. They don’t have the time or the inclination. They don’t understand technology and don’t maximize its use. So expecting them to cram technology like LLMs down outside counsels’ throats may be a pipe dream.

The In-House Counsel Mind Set

And another thing. Believe it or not, many lawyers-inside and out—don’t relish conflict. Lawyers especially don’t like conflict within an attorney-client relationship. The attorney-client relationship is, in large part, based on trust. Attacking how and how much lawyers billed strikes at the core of that trust. It creates conflict. And while lawyers spend lots of time in conflict with others—adversaries—they often will avoid conflict with those close to home. Like clients. 

Ever wonder why lawyers avoid asking clients for evaluations? Or why in house counsel avoid giving them? Same reason.

When outside lawyers identify problems to in-house, no matter how remote the likelihood the problems will develop, they are preaching to the choir in a real sense.

And finally, lawyers—inside and out—always look for the worst. They consistently let the perfect be the enemy of good. They look for problems and issues and then make the most of them. It’s part of their training as lawyers and may be a part of their personality. So when an outside lawyer says we can use LLMs, but I will really need my associate to check and confirm every detail of what the LLM tells us, the in-house counsel, who may not be up on the technology, will often be prone to believe their trusted adviser. 

And if in-house questions the conclusion? Outside lawyers are excellent and persuasive manipulators. So their answer is if we don’t take the time to be “certain,” here’s what could happen. And what could happen is the sky will fall. And if the sky falls, job reviews and bonuses of the inside counsel may be in jeopardy. When outside lawyers identify problems to in-house, no matter how remote the likelihood the problems will develop, they are preaching to the choir in a real sense.

What About the Business People?

But what about the business people? Individual clients? Won’t they drive change? They haven’t yet. They, too, are inclined to accept what their lawyers tell them: it’s why they consulted a lawyer, to begin with. It’s like when your doctor says you need a particular test. Most people accept that recommendation. And if clients don’t at first accept the lawyer’s recommendation? Lawyers are silver-tongued devils. They often persuade.

Perhaps legal ops could drive the kind of change many are suggesting. Legal ops people understand lawyers and law firms and how to get work done better and more efficiently. The problem is that lawyers still drive the boat in most legal departments. 

Will Change Ever Happen?

So for all these reasons, I think change—even with the great potential for disruption in LLMs and AI—will be slow in legal, just as it has always been. 

But I am also convinced that AI and LLMs will eventually be the cornerstones of change. The technology does too much to sit idle. Some law firms and in-house counsel are and will break from the herd. Change will happen, just not as soon as many of us think it will. As Bill Gates says, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” That’s especially true in legal.