By Paul Fletcher

VIRGINIA BEACH -- A lawyer who uses generative artificial intelligence does not have to cut the fee charged the client to the actual time spent on the matter, under a new Legal Ethics Opinion approved by the Virginia State Bar Council on June 12.

In presenting LEO 1901 to the Council for discussion, VSB Past President Michael Robinson, a member of the VSB Ethics Committee, said that the opinion was designed to account for the “changing landscape” of the AI-fees discussion.

The LEO gives lawyers “a greater ability to reflect value and not just time spent” on a client’s matter, Robinson said.  

The opinion is available here: Virginia State Bar LEO 1901

Tension between factors

Fees must be reasonable under Rule 1.5(a) of the Rules of Professional Conduct, and the rule provides eight factors to take into account to determine reasonable.

When applying Rule 1.5's reasonableness factors to value-based billing, the opinion noted that a tension lies between "the time and labor required" and "the skill requisite to perform the legal service properly," two of of the factors in the rule.

Use of Al on routine tasks such as document drafting might cut the time needed and therefore prompt a conclusion that the fee should be reduced. But the LEO stated that the skill needed “might actually increase, as effective Al use could require specialized knowledge to prompt, verify, supplement, and integrate Al outputs into competent legal work product.

“The lawyer's judgment in determining when and how to deploy Al tools, and the expertise needed to critically evaluate Al-generated content, represent valuable services for which the lawyer reasonably can be compensated,” stated the LEO.

And another two of the Rule’s factors - "the novelty and difficulty of the questions involved" and "the experience, reputation, and ability of the lawyer" - take on a new importance in the Al context, according to the opinion.

“The difficulty now includes properly configuring Al systems to address complex legal questions, understanding the limitations of current tools, and maintaining sufficient domain expertise to identify Al hallucinations or errors.”

The opinion continued, “A lawyer's unique value proposition might involve their ability to frame legal problems in ways technology can address while knowing when human judgment must predominate, which provides a  sound basis for maintaining value-based fees even as raw production time decreases.”

The ethics committee, which proposed LEO 1901, noted that some other ethics opinions, including an ABA Formal Opinion from 2024 and an opinion from the North Carolina Bar have reached a different conclusion, finding that a lawyer cannot inaccurately bill a client when an AI tool has brought greater efficiency to the work.

The committee disagreed with those opinions, stating, “it is not per se unreasonable for a lawyer to charge the same non-hourly fee for work done with the assistance of Al as work done without the use of Al.”

Time alone is not the determining factor: “Any legal fee, regardless of the basis or type of fee, must be reasonable considering all the factors identified in Rule 1.5(a), but the time spent on a task or the use of certain research or drafting tools should not be read as the preeminent or determinative factor in that analysis,” stated the LEO.  

The other ethics opinions “fail to appreciate the value of advancing technology and the reaction of the legal markets to that technology; while over time, the market rate might drop based on dramatic improvements in efficiency, Rule 1.5 should not require the lawyer to surrender any benefit from the efficiency gains if clients continue to receive value from the lawyer's output,” the opinion stated.

Explain it to the client

Part (a) of the Rule requires reasonableness of a fee. Part (b) requires the lawyer to provide an adequate explanation to the client of the fee.

“When a lawyer uses a fee arrangement that is primarily based on the lawyer's skills and the value of the anticipated final product, as opposed to time spent or reaching a fixed endpoint of a proceeding, the lawyer must ensure that the basis for that fee is adequately explained to the client, according to the opinion.

“This could also be particularly important if the lawyer's time spent on the specific representation is substantially reduced due to the productivity-enhancing tool, such that the client may need additional explanation of why the lawyer's experience, technical skills, or other efficiencies contribute to the value of the services and determination of the fee.”

Bottom line

The nut of LEO 1901 is this: When determining the reasonableness of fee charged by a lawyer who uses Al, Rule 1.5 does not equate reduced time with a reduced fee.

“Such an approach would fail to account for the investment lawyers make in developing Al expertise and the continuing value of their professional judgment.

The opinion concluded, “Instead, a proper analysis should recognize that reasonable non-hourly fees can reflect efficiency gains, the specialized skill of effectively incorporating technology, and the value of the relevant services and output.”

And the opinion notes that it addresses the use of generative AI, but the rationale and logic of LEO 1901 applies to other tools enhancing productivity.

The VSB Council approved LEO 1901 by a vote of 61-1. It now goes to the Supreme Court of Virginia for approval.