AI Use Does Not Cut $115,000 Fee Award, 10th Circuit Rules

A federal appeals court has upheld a $115,000 fee award for lawyers who used artificial intelligence on the case. The 10th U.S. Circuit Court of Appeals at Denver ruled Monday that a law firm's AI use does not, by itself, justify slashing its fees.

The unanimous three-judge panel affirmed the award to defense lawyers at Brownstein Hyatt Farber Schreck in a trade secrets dispute. A lower court had already found the fee reasonable. The appeals court also upheld the dismissal of the underlying lawsuit.

"Plaintiffs have not shown that defense counsel's use of AI rendered the hours that they actually expended unreasonable," wrote Judge Carolyn McHugh for the panel.

What was the case about?

The dispute began in 2024. Flux Drive, a maker of industrial motor-efficiency equipment, sued a Chinese manufacturer. Flux Drive alleged that a former engineer had stolen proprietary information and handed it to the manufacturer.

The trial court dismissed the suit. It then ordered Flux Drive to pay the defendants' legal fees — $115,000.

On appeal, Flux Drive attacked the bill from two directions. First, it argued the defense had billed for "ministerial tasks" (routine clerical work that courts often compensate at lower rates). Second, it claimed that AI use should have lowered the bill. The logic: if machines speed up research, clients should pay less for the hours saved.

The defendants pushed back. They said their lawyers checked every piece of AI-assisted research. And they noted that Flux Drive never identified a specific inflated entry, a redundant task, or an unreasonable charge. The challenge was all general attack, no particular target.

What does the ruling change?

The decision sets a practical boundary for fee disputes involving AI. Judges have long reduced fees when lawyers bill inefficiently or pad hours. This ruling says the losing party cannot get a discount simply by pointing at the technology.

The burden stays where it usually sits. The party challenging a fee must show specific unreasonable hours. A generic claim that "AI made this faster" does not meet that standard.

McHugh acknowledged that AI and similar research tools can make attorneys more efficient. But she stressed that lawyers must still verify legal authorities and arguments themselves. That framing matters. It treats AI as a speed tool, not a replacement for lawyer judgment — closer to a faster research assistant than a cheaper lawyer.

How did the lawyers react?

Christopher Ottele, a Brownstein Hyatt partner who represented the defendants, welcomed the ruling. He called AI a powerful tool that sophisticated firms should embrace.

"This decision confirms that the use of AI is not a substitute for the judgment and analysis that attorneys still must exercise in every filing with the court," Ottele told Reuters.

Counsel for the plaintiffs did not immediately respond to Reuters' requests for comment.

Why does this matter for practitioners?

For billing lawyers, the message is verification pays. The defense won partly because it could say every AI-assisted research product was checked by a human. Firms that document their review process will find that record useful when fees are challenged.

For fee challengers, the message is specificity. A court will not reduce an award on a theory alone. You need line items. You need entries. You need to show the court exactly which hours the AI should have shortened — and by how much.

The ruling also fits a wider judicial conversation about AI in litigation. Courts have sanctioned lawyers for filing AI-generated citations to cases that never existed. This decision comes from the other direction. It says efficient, verified AI use does not entitle the paying party to an automatic discount. The value priced in a fee award is the lawyer's judgment, not the raw hour count the software may have trimmed.