Billed 12 Hours for a Few Seconds of Work: How AI Is Helping Law Firms Overcharge Clients

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Today's story is an example of the old saying, "When the cat's away, the mice will play." In litigation, you are the cat. Your attorney's large law firm is the mouse that bills you thousands of dollars in unjustifiable and grossly inflated — read: fraudulently inflated — attorney fees for "billable hours" your attorney did not work, but their firm made doing this the only way to remain employed.

In the mid-1900s, in an effort to increase incomes, the legal profession went from fee schedules in which creating a will, defending a DUI or handling a divorce would cost the same no matter how many hours it took, to the billable hour.

In 1958, the American Bar Association recommended a reasonable 1,300 yearly billable-hour goal, which meant a lawyer could be home for dinner with the family and lead a normal life.

Today, massive, heartless, soulless Big Law firms (and many midsize ones) require 2,200 or more billable hours, which translates into being at work 60-plus hours a week, or 10 to 12 hours a day, five days a week and often on weekends. This invites billing for time not spent on a client's matter, also known as fraud.

This marathon destroys families and leads to multiple divorces, burnout, depression and substance abuse.

As Lyle Sussman, professor emeritus in the College of Business at the University of Louisville (and a friend of this column), puts it, "I have consulted with executives across many industries. It is ludicrous to assume that anyone assigned to high-risk, high-reward work can consistently devote 60 hours per week without experiencing declining energy, commitment, efficiency and morale."

Withdrawal symptoms are appearing

If you are engaged to a lawyer who has been offered a job at one of these firms, ask yourself, "How happy will I be when having dinner with my spouse and kids is impossible? Do I want to be with someone who works in a sweatshop and is married to the firm?"

Well, today, the legal profession is starting to experience withdrawal symptoms as its drug of choice — overbilling clients — is being challenged by AI's incredible time-saving abilities.

"AI is creating seismic disruption in industries built on the scanning, collection, synthesis, formatting and reporting of data," Sussman says. And that includes the legal profession.

(For a fascinating history of billing fraud and how we got here, you can check out the article "Bill, Baby, Bill: How the Billable Hour Emerged as the Primary Method of Attorney Fee Generation" by Stuart Pardau in the Idaho Law Review. Another article, by Nancy Rapoport and Joseph Tiano Jr., both friends of this column, worth checking out is: “Fighting the Hypothetical: Why Law Firms Should Rethink The Billable Hour in the Generative AI Era,” published in the Washington Journal of Law, Technology & Arts.)

A real-world example

"Taylor" phoned my office from Little Rock, Arkansas, and was upset.

"My lawyer billed 12 hours for discovery in a simple debt lawsuit," she said. "Her invoice listed 'drafting interrogatories, requests for admissions and related written items,' copies of which I have. We are both country gals, but these are written oddly, not the way people usually speak — they are just too polished.

"Would you please go over them and tell me what you think? I know she is being considered to become a partner in the firm, but before this, I never saw anything that raised a doubt."

I agreed and asked for the particulars of the case — amount, services or product sold, location, date, parties and court jurisdiction.

I looked over what she sent, and Taylor was correct. The discovery requests didn't "sound" normal. So, I ran them through three different online AI checkers. Bingo! The AI checkers indicated the documents were 88% to 95% created by AI. (For the record, AI checkers can sometimes flag original content as being created by AI, which is why I used three different tools.)

Next, using a free AI resource, I entered Taylor's details and specified that I wanted content that was "at a sixth-grade level." I hit enter, and almost instantly, beautifully written documents appeared. It would have taken me hours to draft the same things.

Clearly, Taylor needed to discuss the billing issues with her lawyer (we'll call her Amanda) and challenge the number of hours. I gave Taylor tips on how to come across with a positive attitude.

A proper way to challenge the bill

State the issue factually. This will avoid confrontation and keep the focus on the issue, not Amanda's integrity or honesty. Taylor could say, "The discovery requests appear to have been generated by AI. As it produces drafts almost instantly, I don't understand the several hours billed for them."

Ask for an explanation, but don't make an accusation. She could say, "Can you show me how that time was calculated — what work went into the discovery that was not AI?" Let's assume Amanda does this but can't justify the time billed.

Be clear and reasonable in your request for a reduction. Taylor could say, "My understanding is that bills for professional services need to reflect the actual time it took to do the work. AI is a great tool, but doesn't the bill still need to be accurate? Can you help me understand it, or" — giving Amanda an out — "perhaps did a paralegal or secretary not realize that AI was used and billed a standard amount for the work?"

If you get a refusal to adjust the bill, remain polite and calm. "Well, anyway, it is always a pleasure to get together with you, as we have known each other all these years, so I will discuss this with my CPA and a friend who's also a lawyer" — the idea is to refer to another authority — "and get back to you on a resolution and whether to continue our relationship."

Should Taylor change lawyers? Based upon my experience, yes, she needs to obtain a new lawyer. She could contest the bill with her local bar association's fee arbitration, but even if they order a reduction, once trust is broken in the attorney/client relationship, doubt will remain forever.

This is true even if her attorney comes clean and apologizes; she's already made her character clear. You can't trust a lawyer who has tried to cheat you.

The billable hour has become a liability

An AI tsunami has hit the legal profession. Document review, once requiring weeks of several junior lawyers' billable time, can now take just hours, creating an existential challenge as branches fall off the money tree.

If lawyers take a giant leap back to a time of fixed or outcome-based fees, it will be a cultural earthquake, where retention and advancement, based on "hours billed," become meaningless.

Partner compensation dependent upon individual billings must be rethought.

Instead of fee-generation as their goal, lawyers might actually think about helping clients solve their legal problems without running up the bill.

And the billable hour may find itself in a museum display case.

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.