There
is
a
great
hue
and
cry
these
days
heralding
the
replacement
of
the
billable
hour
model
with
alternative
fee
arrangements
(AFAs).
The
notion
seems
to
be
that
using
AI
won’t
change
much
about
the
practice
of
law
and
how
we
bill
for
services:
we
can
just
switch
from
the
billable
hour
to
flat
fees
and
nothing
will
be
all
that
different.
That’s
just
flat
wrong
and
avoids
the
real
issue.
AFAs
AFAs
can
take
the
form
of
flat
fees
for
the
handling
of
a
legal
matter
in
whole
or
in
part,
subscription
fees
where
a
client
pays
one
amount
for
a
defined
set
of
legal
services
over
a
specific
time
period,
value-based
fees,
and
similar
arrangements.
AFAs
are
designed
to
get
away
from
paying
for
legal
services
purely
based
on
the
time
spent
handling
the
matter.
I
pioneered
the
use
of
flat
fees
for
serial
litigation
(similar
litigation
involving
the
same
product
in
multiple
jurisdictions)
back
in
the
90s
and
learned
a
lot
about
how
to
make
them
work
and
their
pitfalls
and
benefits.
At
the
time,
we
entered
the
arrangement
for
several
reasons
that
were
unique
to
the
litigation
we
were
handling.
But
I
fear
that
the
present
rush
to
AFAs
may
be
for
the
wrong
reasons
and
based
on
misguided
expectations
that
will
lead
to
disappointment.
Why
Now?
AFAs
are
great
in
many
ways.
They
lead
to
innovative
ways
of
approaching
the
client
problems.
They
lead
to
efficiencies.
They
lead
to
predictability.
But
some
lawyers
and
law
firms
are
fearful
that
AI
will
replace
many
of
the
jobs
that
they
have
traditionally
been
able
to
bill
for.
Worse
yet,
they
see
AI
as
a
threat
to
the
economically
lucrative
leverage
model
that
has
powered
unfathomable
riches
particularly
among
Biglaw.
Instead
of
thinking
through
what
AI
could
mean
for
the
handling
of
legal
services
they
jump
to
the
conclusion
that
AFAs
will
enable
them
to
somehow
continue
what
they
do
and
how
they
do
it
without
any
economic
disruption.
That
is
not
the
case.
We
can
see
the
problem
when
we
consider
the
billable
hour
model
and
why
it
has
succeeded.
The
Billable
Hour
Model
The
billable
hour
model
has
been
roundly
thought
of
as
one
of
those
“can’t
live
with
it,
can’t
live
without
it”
things.
Most
outside
and
in-house
counsel
condemn
it
but
so
far
few
have
moved
off
it.
There
are
lots
of
reasons
but
one
that
is
particularly
relevant
as
lawyers
look
to
AFAs.
Simply
put,
the
billable
hour
model
incentivizes
thoroughness
and
quality.
And
traditionally
it
is
that
thoroughness
and
quality
that
leads
to
more
successful
legal
outcomes.
The
model
ensures
associates
will
research
long
and
hard,
for
example.
That
in-depth
depositions
will
be
taken.
That
all-encompassing
motions
will
be
filed.
That
drafts
will
be
polished
and
repolished
until
they
sing.
It
encourages
no
stone
be
left
unturned.
The
more
time
spent,
the
more
likely
the
better
result.
Where
the
model
gets
into
trouble
though
is
where
the
value
of
the
work
done
is
far
exceeded
by
the
value
of
the
thoroughness.
Spending
$100,000
in
time
on
a
$25,000
matter
leads
to
anger
and
frustration.
And,
yes,
I
know,
the
model
doesn’t
always
yield
a
better
result
but
on
an
overall
big
number
basis,
it’s
hard
to
quarrel
with
the
idea
that,
on
balance,
the
more
time
spent,
the
better
the
result.
And
I’m
aware
that
there
is
a
point
of
diminishing
returns
that
the
model
often
exceeds.
But
if
you
want
to
encourage
thoroughness
and
quality,
the
model
beats
any
other.
The
model
has
also
led
to
extraordinary
profits
as
using
leverage
(having
teams
of
lawyers
working
on
a
matter)
enabled
massive
number
of
hours
—
and
fees
—
to
be
accumulated.
Enter
AI
But
with
AI,
things
have
shifted.
It’s
now
theoretically
possible
to
achieve
some
level
of
thoroughness
and
even
accuracy
in
a
fraction
of
the
time.
The
result?
Less
time
spent.
Less
billable
hours.
I
say
theoretically
of
course
because
the
tools
still
can
make
mistakes
and
must
be
checked.
But,
again,
on
balance,
there
is
little
question
that
AI
will
allow
lawyers
to
achieve
the
same
and
perhaps
better
results
for
less
time.
Motions
can
be
prepared
in
a
fraction
of
the
time
and
mimic
the
author’s
previous
work.
Deposition
prep
can
be
aided
by
an
AI
assistant
who
sits
with
you
and
supplies
hints
during
the
deposition.
Case
themes
and
arguments
and
even
problem
ones
can
be
created
and
identified
at
the
click
of
the
mouse.
All
these
not
only
reduce
the
time
to
get
to
a
result,
but
they
may
also
even
lead
to
higher
quality.
So
AFAs
Are
the
Answer,
Right?
Yes,
But…
So,
the
knee-jerk
reaction
is
to
move
to
AFAs.
Time
doesn’t
matter.
We
can
get
paid
roughly
the
same
amount
for
handling
a
matter
as
we
did
when
we
billed
by
the
hour.
We
just
package
it
as
an
AFA,
and
everyone
is
happy.
But
that
doesn’t
necessarily
hold
true.
The
ethical
rules
are
pretty
clear
that
you
can’t
charge
for
the
time
you
would
have
spent
doing
a
task
that
an
LLM
does
in
seconds.
Merely
repackaging
the
fee
as
an
AFA
but
charging
roughly
the
same
amount
doesn’t
make
that
“reasonable”
within
Model
Rule
1.5
of
the
ABA
Rules
of
Professional
Conduct
which
governs
fees.
Indeed,
one
of
the
factors
to
consider
when
assessing
reasonableness
under
the
rule
is
the
time
spent.
There
is
also
the
rule
of
unintended
consequences.
The
key
to
making
AFAs
profitable
is
to
do
the
work
required
for
less
time
and
cost
than
the
fee
itself.
This
means
that
any
time
and
cost
that
can
be
reduced
or
eliminated
leads
to
more
profits.
So,
what
happens
when
lawyers
eliminate
cite
checking
as
a
time
savings
tool
and
court
sanctions
result?
What
happens
to
quality
when
corners
are
cut?
And
maybe
most
importantly,
what
happens
to
client
service?
One
of
the
fundamental
cornerstones
of
legal
service
involves
the
relationship
between
a
client
and
their
lawyer.
Building
that
relationship
and
trust
takes
time.
Time
is
often
considered
the
enemy
in
many
AFAs
relationships.
I
have
seen
flat
fees
do
exactly
that.
In
the
early
2000s,
I
witnessed
a
company
refer
all
its
product
liability
work
to
a
national
firm
for
a
yearly
fee.
The
lawyers
working
on
the
files
immediately
began
doing
less.
The
client
thought
it
could
ask
for
more
work
from
its
lawyers.
The
lawyers
came
to
resent
being
asked
to
do
things.
The
client
began
to
think
it
better
demand
more
so
it
can
get
what
it
really
needed.
The
arrangement
bred
distrust.
No
one
was
happy.
It
was
abandoned
mid-year.
Rethinking
AFAs
To
work,
the
underpinning
notion
of
what
AFAs
can
do
needs
to
be
rethought.
First,
AFAs
aren’t
a
replacement
for
the
fees
generated
by
the
billable
hour
model.
Instead,
the
value
of
the
AFA
has
less
to
do
with
time
and
more
to
do
with
profitability.
For
the
law
firm,
how
much
profit
can
be
made
with
a
flat
fee
set
at
a
particular
point
given
the
costs
associated
with
providing
the
service
is
the
key
question.
And
how
can
it
best
provide
the
service
given
that
cost
level?
It’s
more
about
profit
than
revenue.
And
profit
not
revenue
or
time
spent
has
to
become
the
metric
that
determines
the
value
and
worth
of
the
AFA
to
the
firm.
It
has
to
be
less
about
cutting
corners
and
more
about
accurately
assessing
the
cost
of
what
you
can
provide.
And
then
accurately
communicating
the
service
you
will
be
providing
for
that
fee.
When
I
set
up
the
flat
fee
for
national
litigation
in
the
90s,
the
interest
of
the
client
predictability,
capped
fees,
and
the
need
to
move
cases
to
mediation
quickly
lend
itself
to
a
flat
fee
that
rewarded
achieving
these
objectives.
This
is
why
it
was
successful.
The
lesson
is
that
moving
to
an
AFA
must
be
to
achieve
well-defined
objectives,
not
maintain
revenue
at
the
level
achieved
by
the
billable
hour
model.
AFAs
are
not
a
panacea.
It’s
a
New
World
As
a
profession,
we
need
to
accept
that
AI
may
be
driving
us
to
new
realities.
We
will
need
to
do
things
differently.
We
will
need
to
deliver
services
and
charge
for
them
in
new
ways.
We
need
to
define
and
measure
profitability
in
alternative
ways.
AFAs
are
great
but
they
don’t
mean
we
can
just
keep
doing
what
we
are
doing
and
calling
it
a
different
name.
It’s
not
just
changing
horses.
It’s
moving
from
the
horse
to
the
car.
In
midstream.
Stephen
Embry
is
a
lawyer,
speaker,
blogger,
and
writer.
He
publishes TechLaw
Crossroads,
a
blog
devoted
to
the
examination
of
the
tension
between
technology,
the
law,
and
the
practice
of
law.