How AI is Reshaping Law Firms and the Practice of Law

AI is transforming the legal profession, forcing law firms to determine if – and how- to adapt to new tools that promise efficiency, cost reduction, and increased accessibility to legal services. But with these advancements come serious challenges, particularly the problem of AI-generated “hallucinations”—fabricated information presented with complete confidence.

A recent Fortune article, “How AI Will Change Law Firms,” outlines the shifting landscape, noting that AI will alter the structure and operation of law firms. And yet, the cautious approach to AI that persists at the top of some law firms shows that managing partners who still worry about moving too early are overlooking the significant adoption that’s already well underway. An international study of professionals conducted last year found that AI is the top strategic priority for law firms, and a sizable 22% of respondents classified their firm as an AI innovator or early adopter.

The next wave of generative AI adoption in the legal industry will come from those firms that realize they need to be “fast followers.” Managing partners report that there are many perceived advantages to being a fast follower rather than a leader. That’s because there are real costs associated with technology and training, and some firms want to wait for others to sort out the thornier issues of how to handle client privilege and data privacy in the era of AI.

AI at the Barone Defense Firm: Leading the Transformation with Client Confidentiality in Focus

At the Barone Defense Firm, we are at the bleeding edge of AI’s transformation in the legal industry. We leverage AI in innovative ways to enhance our legal strategies, improve efficiency, and provide the highest level of service to our clients. Our deep understanding of AI’s potential allows us to utilize it for complex case analysis, legal research, and trial preparation—all while maintaining strict adherence to ethical guidelines and confidentiality standards.

We have pioneered the use of prompt engineering techniques to refine how AI assists in summarizing police reports, analyzing trial transcripts, and generating legal arguments. By incorporating AI into our practice, we maximize its potential while avoiding pitfalls such as hallucinations or fabricated citations. Our team has extensively researched and written about prompt engineering strategies to ensure the most reliable and accurate AI-generated legal work.

However, at the core of our AI integration is an unwavering commitment to client confidentiality. We use AI solely for the benefit of our clients and never expose privileged or sensitive information to external AI systems. Every use of AI at our firm is carefully vetted to ensure it aligns with our mission to provide the best legal defense while safeguarding our clients’ rights and privacy.

Unlike firms hesitant to adopt AI due to concerns over accuracy or security, we have taken proactive steps to mitigate risks, investing in secure AI frameworks that allow us to reap the benefits of advanced technology without compromising trust. By leading this transformation, the Barone Defense Firm not only stays ahead of the curve but ensures our clients receive the most sophisticated and effective legal representation available.

The Evolution of Law Firm Revenue and Billing Models

As AI introduces significant time savings, traditional billing structures based on the billable hour are becoming less effective in measuring value. According to Fortune, “Because generative AI will provide significant time savings to law firms, the tried-and-true billable-hour model will become a less effective way to measure the value provided to clients.” This shift means law firms may need to adopt value-based or outcome-based billing models, or incorporate AI-related surcharges to account for technological efficiencies. While a consensus billing model has not yet emerged, firms must engage and educate clients on the benefits of AI adoption and how it affects their legal costs.

However, at the Barone Defense Firm, we are finding that while using AI presents myriad advantages, cost savings is not among them. While it is true that AI can summarize documents quickly, the output must be carefully reviewed and, in most instances, edited before it can be utilized. At best, even the top AI models are currently only capable of producing a rough working draft. Thus, in the context of criminal defense practice, the promised time savings remain elusive. The need for rigorous verification and refinement often offsets the automation benefits, making AI a tool for enhancement rather than outright efficiency gains.

That said, despite the lack of direct cost savings, we have found that AI significantly improves our work product, leading to better client outcomes. The ability to analyze vast amounts of case data, refine legal arguments, and streamline research allows us to offer a more comprehensive and strategic defense. While AI may not reduce time spent, it enhances the quality of representation we provide, reinforcing our commitment to excellence in criminal defense.

Moreover, the legal profession as a whole has seen a trend in recent years away from a billable-hour model in favor of value-based, project-based, or even outcome-based models. This shift is particularly relevant in criminal defense, where cases are often handled on a flat-fee or results-driven basis rather than hourly billing. AI allows us to refine our strategies and provide even greater value to our clients by improving the substance of our legal advocacy, rather than simply reducing the time required to perform tasks.

The Changing Structure of Legal Apprenticeship and Talent Development

Law firms must also reconsider their traditional talent pipeline. The longstanding apprenticeship model, where junior associates handle routine legal tasks to develop their skills, is being challenged by AI’s ability to automate much of this work. Fortune highlights the need for firms to “update the apprenticeship model” to ensure that early-career lawyers still gain critical experience in legal analysis and client service. The evolution of this structure will vary by firm, but partners must rethink career pathways and communicate how AI integration benefits both clients and employees.

New Business Opportunities and Expanded Legal Services

By automating routine legal tasks, AI enables law firms to focus on higher-value services and strategic advice. This evolution opens doors for firms to develop new service offerings, such as AI-powered platforms for contract review, corporate debt analysis, and deal syndication. Fortune provides an example: “By using AI tools to automate [corporate debt transactions], firms can significantly reduce the time and cost involved, while unlocking new business opportunities.” This innovation has the potential to fundamentally reshape law firms, making them not just providers of legal advice but also leaders in technology-driven solutions.

Client Privilege, Data Privacy, and Ethical Considerations

Despite AI’s advantages, law firms remain cautious about client privilege and data privacy. As Fortune notes, “Managing partners from several law firms worry that being on the bleeding edge of AI adoption could jeopardize the entire business if it comes at the expense of client privilege.” Firms must be diligent in selecting AI vendors, ensuring that client data remains confidential and is not used for external AI training purposes. Transparency with clients about AI usage is also crucial to maintaining trust and upholding ethical responsibilities.

The Reality of AI Hallucinations and Their Risks

Despite its promise, AI’s reliability remains a pressing issue. As highlighted in a Wall Street Journal report, AI models frequently produce inaccurate or completely fabricated legal citations. These errors, known as hallucinations, stem from the way AI generates responses. “AI models are designed to guess what word, or portion of a word, is most likely to come next in an answer. The whole process is, in a sense, highly educated guesswork,” explains the article. Because AI tools are built to provide responses rather than admit uncertainty, they sometimes generate false information rather than say, “I don’t know.”

José Hernández-Orallo, a professor at Spain’s Valencian Research Institute for Artificial Intelligence, further clarifies this issue: “The original reason why they hallucinate is because if you don’t guess anything, you don’t have any chance of succeeding.” In other words, AI is programmed to prioritize producing answers, even when accuracy is compromised. Researchers are now exploring solutions, such as retrieval-augmented generation, which allows AI to pull information from verified sources before generating responses. Others, like Anthropic’s chatbot Claude, attempt to mitigate hallucinations by programming the model to acknowledge uncertainty when answering niche questions.

Technology Investment and the Future of Law Firm Staffing

Law firms must also assess how much to invest in AI technology. While larger firms may have the resources to build proprietary AI solutions, smaller firms may benefit from white-labeling existing tools. Either approach requires careful planning to ensure differentiation from competitors while maintaining cost-effectiveness. Fortune cautions that “law firms must decide how to allocate technology budgets and to what degree it makes sense to customize tools,” highlighting the need for a balanced investment approach.

Conclusion: Balancing Innovation with Responsibility

As AI becomes more embedded in legal practice, firms will need to develop new strategies for managing its risks while leveraging its benefits. Lawyers must be vigilant in verifying AI-generated research, ensuring accuracy before relying on such tools in court filings. Moreover, firms that successfully integrate AI while maintaining human oversight and legal expertise will be better positioned to thrive in this evolving landscape.

The legal profession stands at a crossroads. AI offers unprecedented efficiencies but also demands new levels of caution and adaptability. As these technologies continue to reshape the industry, lawyers must balance innovation with responsibility, ensuring that the pursuit of efficiency does not come at the cost of accuracy and ethical practice.