Robert Ambrogi Blog
The legal profession crossed a significant threshold in 2025: For the first time, more lawyers are using generative AI than not, even as firm leaders express widespread concern about the technology’s reliability, according to the 2025 State of the Legal Industry report released today by SurePoint Technologies.
The tension between adoption and apprehension defines the moment we are in. While 63% of mid-sized law firms have formally adopted gen AI – most commonly Microsoft Copilot – 81% of firm leaders report internal concern about its reliability and risk.
And though 94% predict the technology will increase revenue and improve client service, the structural changes many anticipate have yet to materialize. Nearly one-third expect AI to reshape their billing models, but none have actually made such changes.
To underscore the stakes of getting AI implementation wrong, the report cites data from Damien Charlotin’s database of AI hallucination cases showing U.S. courts recorded 487 instances of AI errors or hallucinations in court documents during 2025, more than 10 times the 2024 total. Licensed attorneys accounted for 37.8% of these problematic filings.
“AI governance is becoming as important as AI capability,” the report states.
How Lawyers Are Using AI
The most common applications for gen AI among lawyers include legal research (40% of users), drafting communications (25%), summarizing legal narratives (23%), reviewing legal documents (19%), drafting or templating contracts (13%), reviewing discovery (11%), and due diligence (8%).
Senior associates with five to nine years of experience showed the highest adoption rates at more than 75%, the report says, citing data from a Bloomberg Law survey.
Mid-sized firms are moving beyond experimentation into operational integration, the report says. Common implementations include automation of document creation (70%), email filing (60%), and data extraction (53%). Nearly half have changed their training programs to address artificial intelligence.
The demand for AI expertise is reflected in hiring patterns. Lateral hiring for attorneys with AI-related experience grew 68% in 2025 within the Am Law 200, with associate hiring in this specialty up 106% year over year.
Record Lateral Movement
The report documents a legal market experiencing significant structural change beyond technology. Law firms made 28,659 lateral hires in 2025, with hiring rising 8.8% in the Am Law 200 and 8.9% outside it – both reaching the highest levels since the post-pandemic surge.
The largest firms continue to consolidate their advantage in recruiting. The Am Law 50 captured nearly 40% of all Am Law 200 lateral hires, up from 35% in 2023. Counsel hiring showed the strongest momentum at 18% year-over-year growth, outpacing associates (11.7%) and partners (10.6%).
Retention remains a challenge that firms pursuing aggressive growth strategies must weigh. After three years, average retention rates in the Am Law 200 stand at 76% for partners, 61% for counsel, and 52% for associates.
“The number of resumes that I review that have very short stops – a year here and two there, and they’re already looking to move,” Lindsey Higgins, firmwide director of legal recruiting at WilmerHale, is quoted as saying in the report.
Government hiring increased notably in 2025, comprising 7% of Am Law 200 lateral hires compared to 4% in 2024 – exceeding even the 5% share seen in 2021 during the previous presidential administration change.
Merger Activity Sets Record
Law firm combinations reached 59 transactions in 2025, a 25% increase from the prior year and the highest level SurePoint has recorded. These deals involved 2,349 lawyers from acquired firms.
The data challenges the perception that consolidation is primarily a big-firm phenomenon. Two-thirds of the transactions originated outside the Am Law 200, and 22 were initiated by firms with fewer than 150 attorneys. Mid-sized firm involvement doubled from 17 transactions in 2021 to 36 in 2025.
Geographic expansion motivated many deals, with 30 of 59 transactions resulting in new office locations. Denver led with seven new offices, followed by Chicago with six and New York and Washington D.C. with five each.
Post-merger retention presents its own challenges. While firms that completed mergers in 2025 showed 92% retention at year-end, historical data from earlier cohorts suggests roughly one-third of acquired lawyers may leave within three years.
Partnership Models Under Pressure
Partner promotions increased 50.4% in 2025, the report finds, producing 3,732 new partners in the Am Law 200 – the largest class on record. The composition of these classes has shifted dramatically: 70.7% of new partners had entered their firms as lateral hires, nearly double the 37.2% share from a decade ago.
The expansion of non-equity partnership tiers is driving some of this growth. According to the report, 87 of the Am Law 100 now have such tiers, with 70 having increased in size since the pandemic.
The SurePoint survey found notable dissatisfaction among non-equity partners. At Am Law 200 firms, 38% said they earned only slightly more than senior associates, and nearly three-quarters reported having no decision-making power or only limited involvement in firm governance. Only 20% reported seeing colleagues successfully move from non-equity to equity status.
Private Equity Circling
A notable trend is the increasing interest of private equity in law firms. Two U.S. firms – 70-lawyer Cohen & Gresser and 1,750-lawyer McDermott Will & Emery – have publicly acknowledged exploring management services organization (MSO) structures that could accept outside investment while maintaining compliance with rules prohibiting non-lawyer ownership of law practices.
The U.K. market offers a preview of what expanded outside investment might look like. Private equity investors have put the equivalent of $1.6 billion into British law firms over five years, according to Pinsent Masons data cited in the report.
Seven of 10 mid-sized U.K. firms report being contacted by private equity investors or PE-backed firms about acquisition in the past year.
Regulatory changes in Arizona, Utah, and Puerto Rico – the latter preparing to allow up to 49% non-lawyer ownership – may accelerate similar activity in the U.S.
Practice Area Trends
Immigration led secondary practice areas in hiring growth at 88%, reflecting increased regulatory activity, the report says. Government and environmental practices also saw substantial increases at 38% and 34% respectively.
Among primary practices, real estate and banking showed the highest year-over-year growth at 31% and 29%, while litigation continued to account for the largest share of lateral hires at 37%.
Law school recruiting patterns are also shifting. The share of entry-level hires from T-14 law schools dropped from 47% in 2015 to 33.3% in 2025.
Notably, the report found that associates recruited from outside the T-14 show higher long-term retention rates: 53.8% compared to 49% for T-14 graduates.
The 2025 State of the Legal Industry Report is based on data compiled by SurePoint Legal Insights through January 2026.