Bloomberg Law
Feb. 10, 2023, 9:00 AM

ChatGPT and AI Will Advance Efficiencies in the Legal Industry

Thomas Kearns
Thomas Kearns
Olshan Frome Wolosky
Michael Passarella
Michael Passarella
Olshan Frome Wolosky

The recent release of ChatGPT is another example of artificial intelligence’s use in daily business life. The legal industry is no exception, and will likely experience great impact from use of AI tools like ChatGPT.

High labor costs and need for efficiencies drive this demand. AI tools have the ability to remove a level of drudgery and wasted time for lawyers.

ChatGPT is an online tool released by OpenAI that answers questions posed in plain English—by searching information in a database and creating plain-English, commonsense answers. It’s a kind of search engine that reconciles online results it finds into a coherent (usually) mini-essay.

Some future iteration of a tool like ChatGPT will no doubt be able to create drafts of legal documents. These trends will profoundly affect the practice of law and legal employment, mostly for the good.

Efficient Searches

For example, a lawyer receives a term sheet for a real estate joint venture in the form of a limited liability company. They immediately recognize the structure is similar to an LLC agreement they had done in the past, but they can’t recall when or for which client.

They sift through numerous documents on the document management system, then finally remembers the deal. They find the precedent agreement. That process took about an hour and could easily have produced nothing—only the lawyer’s memory helped.

If an AI tool existed that could search a database of documents, they could have typed in “form of LLC agreement where two managers divide up responsibilities” and the AI tool would have instantaneously identified the precedent and maybe others done by partners that they had no knowledge of.

Having a first draft of a complex agreement is hugely beneficial to lawyers and clients. Even if a lawyer charges by the hour, they face business and ethical pressure to keep the bill reasonable. The client then receives a better document, faster.

Employment Impact

In addition to the practice of law, hiring and recruiting talent is critical to firm success. Companies and firms have started turning to AI and other algorithmic decision-making tools to assist with this process. According to a 2022 survey from the Society for Human Resource Management, 25% of employers use some form of AI to support HR-related activities, with another 25% saying they planned to start using or increase use of automation or AI in recruitment and hiring over the next five years.

Some firms have started using questionnaires and other forms to rank or eliminate candidates. Law firms, like all employers, should carefully use and rely on such technology to evaluate potential hires.

The Equal Employment Opportunity Commission reviews potential discriminatory issues from such workplace tools, such as whether certain decision-making algorithms have an adverse or disparate impact on those of a particular race, sex, age, or national origin.

And last month, the EEOC updated its guidance on the Americans with Disabilities Act and use of AI and other tools to assess job applicants and employees.

The agency cautions employers to avoid using any AI that would screen out individuals with a disability who would otherwise be able to perform the essential functions of a position with a reasonable accommodation.

For example, programs that eliminate or punish applicants with gaps in employment might disparately impact women or violate disability law if the break was related to a disability.

As use and sophistication of AI tools increases, law firm leaders should choose experienced, compliant vendors and consultants and otherwise follow law and guidance in this area.

The possibility that AI may help lawyers service a larger cross section of clients efficiently is very appealing. The biggest challenge for law firms will be to create and maintain a database of research and document precedents so when document management vendors add AI to their offerings, the database of approved research and deal documents can be analyzed and culled.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Author Information

Thomas D. Kearns is a partner at Olshan Frome Wolosky in New York.

Michael J. Passarella is a partner at Olshan Frome Wolosky in New York.