I bet when you read that headline, you assumed I was referring to the once-proud BigLaw partners who have climbed into the pocket of our would-be American autocrat. That is sad, as I wrote about in the last newsletter:
But I’m actually not talking about that in this newsletter. I will, however, come back to it later.
What do I mean by “a lawyer in your pocket?” In the near future, AI is going to be able to do most things human lawyers do today. Since we all carry supercomputers in our pockets these days, I think that an “AI Lawyer in Your Pocket” is likely to be possible soon.
I use AI pretty regularly in my practice—generally to summarize large documents, draft clauses in agreements aligned with the client’s needs, and write some narrative for letters and briefs after I outline the arguments and the law—basically using AI as an “associate.” I think this is the right way to use AI: replacing people (associates and paralegals) with technology, while having a human lawyer (me) actually do the legal work of advising clients on risks, developing arguments and positions, seeing around corners, getting deals done, and resolving disputes.
My thinking goes like this: the world is full of good lawyers. The difference between a successful lawyer and a meddling lawyer comes down to one thing—clients. If I can use AI to serve my clients more efficiently, and get more clients by being efficient, that seems about right. I’m far from the only one thinking this. Replacing associates and “service partners” with technology is what every major law firm is trying to do over the next few years. That is, of course, when they're not appeasing autocrats—sorry, I can’t let that go.
This trend is not new. Technology basically replaced “paralegals” 10 years ago. The typing pool was replaced 20 years ago. Personal history: when I was a young associate in BigLaw, I actually had a secretary and could have, if I wanted, dictated my legal memos and briefs and sent them to a typing pool for transcription. It would have been weird to take advantage of that at the time. Today, it would be insane.
And now we have AI. AI is rapidly changing the way law is practiced. My feeling is that we’re still in alpha, however, because the vast, vast majority of legal AI products out there are being designed to sell to lawyers to make their work more efficient. There is AI to help you draft contracts, AI that digests large evidence sets, and AI that tells you the settlement value of cases. Soon, there will be AI that can do legal research for you, as opposed to making up cases. Most of these tools are just nice user interfaces for ChatGPT or other large language models, or consulting services applying AI to law firms’ proprietary databases. It's a good business, and I wish those products and services all the best.
But we all know that the end goal of the technologists designing AI is not to make human lawyers more efficient, but rather to replace lawyers with technology. So the question is: can they? Technology-wise, they probably can. In the two years AI technology has been commercially available, I’ve seen huge leaps. And it keeps getting better. AI has already made every lawyer a much better writer. I have no doubt that within the next five years, if not sooner, AI will be able to do what I do—except go to court and actually attend negotiations. But it could be a real-time companion, understanding everything happening around me and assisting me as it happens.
But the story of AI and the law is not about technology. It’s about how lawyers insulate themselves from competition from the likes of AI.
First, you can only practice law with a law license. Anything else is considered the unauthorized practice of law. That is actually a crime in New York. And aiding and abetting the unauthorized practice of law is an ethical violation. The bottom line is that AI can’t practice law, and a licensed lawyer probably can’t help with that effort.
But what about a group of lawyers getting together and openly saying that they are AI-assisted lawyers, using AI to do your legal work efficiently and cheaply? This is where things get interesting. I don’t think that would be the unauthorized practice of law or aiding and abetting it: the technology is just a tool that the lawyers are using. But there is a problem: while attorneys can offer that product, no one—except other attorneys—can own it. That’s due to a little-known but very significant provision of legal ethics that says lawyers can’t fee-split with non-lawyers in the U.S. It's the reason why there are no publicly or privately traded law firms (“LegalCorp”) in the U.S., and why large service firms like KPMG are not also law firms in the U.S., as they are in much of the world. Basically, if the fees come from legal services, you can’t share them with non-lawyers.
The world is changing, and one state—Arizona—now allows fee sharing. But the change is slow and the non-lawyer owned firms in Arizona can only practice in Arizona.
The prohibition on fee splitting is significant for AI in the law because to really develop a client-facing legal service, you need investors—and the only investors who could share profits with a client-facing legal AI company are other lawyers. While there are some lawyers who would cut checks for this type of thing, for the most part, they are not professional investors. Raising money for that kind of product would be difficult. And you could not reward your non-lawyer staff—the marketing, product management, and technical people who make startups great—with equity because they can’t own the company – that would be fee splitting. So you might not get top people for all those services that actually make a company work. Lawyers are notoriously bad at those things.
Personally, I think these rules should change. When it does, most lawyers will become employees at large service organizations that rely and deploy AI to do most legal work. Investors will own them, generally, (or even be publicly traded). They will probably keep the branding of the current firms (“Paul Weiss, Inc.”) - for what it's worth. I think that will expand access to quality legal services and lower costs. I have a product that maybe, one day, when I get to it, could do this: www.lawyerloop.ai. But we have a ways to go.
And this brings me to an important point about our current moment. In normal times, I would likely have a retort here about how human lawyers and law firms, insulated from investor pressure, are guardians of the rule of law. I would also argue that we need to be careful about replacing principled humans with amoral technology whose goal is efficiency and winning at all costs. But then again, when the best lawyers in the country are being so mercenary as to pander to an administration that is openly hostile to the rule of law, we need to seriously consider whether human lawyers offer anything superior to AI lawyers—except, of course, their ability to insulate themselves from competition.
Keep thinking, keep building,
Jesse
Hi, and welcome to my newsletter! I’m Jesse Strauss, Your Fractional General Counsel. I’m a lawyer with a private practice based in New York City, helping clients in the United States and globally with their U.S. legal needs. My expertise spans various areas, including raising funding rounds, employment issues, negotiating master service agreements, intellectual property, compliance, legal process management, and dispute resolution. My focus is on founding and nurturing great companies from seed to exit. Discover more at Your Fractional GC and book a complimentary 30-minute consultation. You can also follow me on Threads @lawyerjesse1977, on BlueSky @lawyerjesse.bsky.social, subscribe to my Substack here (follow me on notes), and follow me on LinkedIn here.