Fennemore’s Lucent Merger Brings AI-Driven Push Into Flat Fees

Fennemore is accelerating efforts to explore alternative billing models and artificial intelligence with the acquisition of Lucent Law in Spokane, Washington.

Fennemore, with its fifth combination this year, aims to gain expertise from the four-lawyer Lucent Law on flat fees. Fennemore is also partnering with OpenAI, the developer of the generative AI chatbot ChatGPT, to make its work and lawyers more efficient.

“We are pushing in on alternative fees,” James Goodnow, chief executive of Fennemore, said in an interview. “Those that don’t are missing the boat. As you have these great new technologies that drive efficiencies, the question is, how do you price that?”

The West Coast-focused Fennemore is among the country’s 200 largest law firms by revenue, as it brought in $143 million in 2023, according to the American Lawyer. The firm’s average profit per equity partner, $501,000, is among the lowest of the 200 largest firms by revenue.

The fast-growing firm earlier this year combined with operations in Seattle, San Diego, Sacramento, and Denver. It also launched a remote-work platform called Fennemore Forward that combines the firm’s 20 offices with lawyers working remotely in 44 cities across the US.

Lucent Law has developed flat-fee pricing models for business formations, real estate purchase and sale agreements, and estate planning matters, firm co-founder Brett Sullivan said. Fennemore will “take what we’ve built at Lucent Law and see it expand and grow and add value,” he said.

Better Search

Fennemore will use OpenAI’s technology to provide lawyers with better search capabilities for internal data, including accounting, document management, and timekeeping, Goodnow said. No client data will be shared with OpenAI, and the firm’s internal data won’t be used for training AI models, he said.

Goodnow declined to say how much the firm is spending on its OpenAI investment though he acknowledged the firm’s technology costs for the first time have overtaken real estate as the second largest expense behind lawyer compensation. “It takes a lot of money and huge resources to deploy this in the right way,” he said.

Fennemore two years ago crafted what Goodnow calls a “roadmap” detailing how it would deliver more alternative fees. The Lucent Law combination will further that objective. Fennemore is hiring a director of emerging technologies and innovation to manage the project, he said.

Law firms have struggled to adopt alternative fees, partly due to concerns over how accurately they can forecast budgets for individual matters. Fennemore will view its return on the AI investment by how much “non-billable time” is eliminated for lawyers and how profit margins from alternative fees compare with hourly work, Goodnow said.

There will be “a growing percentage” of fees that move to alternative models over time, he said, without being specific. Profit margins will stay consistent or grow under new models, he predicted.

“There will be trial and error associated with this,” Goodnow said. “But we really think for the long-term viability of the firm, its future, and frankly for the legal industry, everybody needs to be looking at this.”