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A federal appeals court upheld a $114,663.11 fee award and said challengers must prove AI actually led to excessive billing
A federal appeals court has weighed in on a question that has been hovering over the legal industry: should a law firm bill less because it used artificial intelligence? The answer, at least in this case, was no.
The Denver-based 10th US Circuit Court of Appeals ruled on Friday that a law firm’s use of AI in a trade secrets lawsuit did not warrant reducing its legal fee award, according to Reuters. The court rejected arguments that the technology had led to excessive billing.
What the court decided #
The case is Flux Drive Inc. v. Qiang Rong, docketed as No. 25-1308. Flux Drive was the plaintiff. The defendants were based in Illinois.
Those defendants were represented by Brownstein Hyatt Farber Schreck. A Colorado district court awarded them $114,663.11 in fees.
Flux Drive challenged that award on appeal. Its argument centered on the firm’s use of AI tools, with the claim that the technology had produced unreasonable billing.
The appeals court was not persuaded. It noted that the lower court judge had reviewed the billing records the firm submitted and found the award reasonable.
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Judge Carolyn McHugh wrote the opinion. She sat on a three-judge panel alongside Judges Matheson and Federico.
The panel acknowledged that AI can make legal work more efficient. But it placed the burden squarely on the party crying foul. Anyone alleging that AI-assisted work inflated a bill has to back that claim up with evidence, and the court concluded Flux Drive had not done so.
The case behind the fee fight #
The fee dispute sits on top of a larger loss for Flux Drive. The underlying lawsuit involved allegations that the defendants misappropriated proprietary technology.
That case never got to the merits. The suit was dismissed for lack of personal jurisdiction over the Illinois-based defendants.
So Flux Drive found itself on the hook for the other side’s legal fees in a case it did not get to argue on substance. Then it lost the appeal over the size of that bill.
What this means for law firms, clients and AI billing #
The opinion does not say AI-assisted billing is immune from scrutiny. It says the challenger has to show the billing was actually unreasonable, using evidence. A party that can point to specific inflated entries may still have a case. A party that simply points to the presence of AI tools, on this reasoning, does not.
The appeals court leaned heavily on the fact that the trial judge had already reviewed the records. Fee determinations are often treated as the territory of the judge who watched the case unfold. Overturning one requires more than a theory.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.