Tenth Circuit: AI Use Does Not Automatically Cut Legal Fees

A unanimous Tenth Circuit panel has affirmed a $114,663.11 fee award to Brownstein Hyatt Farber Schreck, ruling that a law firm's use of AI does not by itself justify slashing its fees. Judge Carolyn McHugh wrote the opinion for the panel, issued November 2, 2026.

The losing party, Flux Drive, had pressed a novel argument on appeal. Flux Drive claimed the defense firm's use of AI and online research tools should have reduced the fees it owed, because the technology can speed up legal work. The court rejected that logic. Flux Drive failed to identify any specific inflated billing entry in the firm's submissions.

What did the court actually say?

The operative language is direct. Judge McHugh wrote: "Plaintiffs have not shown that defense counsel's use of AI rendered the hours that they actually expended unreasonable."

That sentence carries the holding. The burden sits with the party challenging the fees. A general assertion that AI makes lawyers faster does not meet it. The challenger must point to concrete entries and show the hours billed were unreasonable.

The panel did not pretend AI changes nothing. It acknowledged that AI may reduce research time. But the court paired that acknowledgment with a caution. Lawyers still must verify their authorities and their arguments before filing. Speed in research does not eliminate the verification duty.

The case arose from a trade secrets suit brought by Flux Drive, which was dismissed. Brownstein Hyatt Farber Schreck defended, and the fee award followed the dismissal. The precise appellate case reference was not stated in the source material.

Why does this matter for practitioners?

Fee litigation now has a usable precedent in the Tenth Circuit. A fee opponent cannot demand a discount simply because the prevailing firm uses modern research tools. Something more specific is required — a flagged entry, a documented inefficiency, a demonstrable overlap between AI output and billed hours.

Brownstein partner Christopher Ottele welcomed the ruling. He said AI "is not a substitute for the judgment and analysis that attorneys still must exercise" in court filings. That framing tracks the court's own caution about verifying authorities.

For billing partners, the decision offers modest comfort. Efficiency gains from AI do not automatically flow back to the client as a fee reduction. For clients and fee challengers, the lesson is procedural. Build a record. Identify entries. Show unreasonableness entry by entry. Generalities about technology will fail.

The ruling also quietly restates a professional-responsibility point. AI can accelerate research, but the verifying lawyer owns the result. Courts have sanctioned lawyers for unverified AI citations elsewhere, and this panel's language sits comfortably alongside that trend. The takeaway is simple: AI may change how fast lawyers work, but it does not yet change what they can bill for — unless someone proves the hours were unreasonable.