Reputational management: AI and ethics: The reputation equation law firms cannot ignore

By Gina Rubel

Artificial intelligence has moved from curiosity to business imperative in the legal profession in fewer than three years. Recent industry research suggests roughly 9 in 10 legal practitioners are regularly using AI. Most usage remains shallow, centered on chat-based assistance to summarize documents, draft correspondence, conduct research, analyze contracts, and generate marketing content. 

In the meantime, AI has introduced one of the most significant reputation management challenges the industry has faced in a generation.

The dynamic is familiar to anyone in crisis communications. Clients are asking questions about confidentiality and oversight. Courts are sanctioning attorneys for filings that contain AI-generated errors. Bar associations are issuing ethics opinions at a pace the profession has rarely seen. State regulators are moving quickly. Meanwhile, federal policy is moving toward deregulation and preemption of state authority.

Law firms are caught in the middle. Move too aggressively without governance frameworks and the result is public embarrassment, ethics complaints, or damaged client trust. Move too cautiously and firms risk looking outdated and unsophisticated.

The difference with AI

Generative AI is different from earlier legal technology shifts because it creates content rather than performing programmed functions. That difference carries risk. AI systems can fabricate citations, misinterpret authority, and expose confidential information if used improperly. Consequently, lawyers remain professionally responsible for all work generated with AI assistance.

Corporate legal departments no longer ask whether their outside counsel uses AI. They are auditing how firms govern it and how it saves outside counsel time and the corporation’s money. The value-based conversations are no longer theoretical – they are required. Outside counsel guidelines increasingly require disclosure regarding AI use in matters. They ask: Who sees the data? Who reviews the output? What happens when something goes wrong? Where are the efficiency gains showing up? Are those savings reflected in the bill?

The productivity story is more complicated than it looks. AI-driven efficiency is increasingly absorbed into higher demand and faster turnaround expectations rather than reduced workload. Clients see the speed and ask if they are the recipients of the savings.

These concerns are sharpest in highly regulated industries such as healthcare, financial services, insurance, and government contracting. But the issue applies everywhere. AI is forcing firms to prove they can preserve the trust they have earned in a rapidly evolving digital environment.

This is where governance is a brand question. A firm’s reputation is no longer shaped only by legal skills or business results. It is influenced by how responsibly the firm adopts and implements technology.

Hallucinations: A failure of governance

No issue has captured public attention around legal AI risk more than hallucinated citations. The most widely covered example remains Mata v. Avianca, in which attorneys submitted fabricated citations generated by ChatGPT. Another is United States v. Cohen, in which the Southern District of New York criticized Michael Cohen and his attorney for citing AI-hallucinated cases.

These incidents are not isolated technology failures. They are reputational flashpoints. When attorneys submit fabricated authority to a court, the story rarely stays in legal media. Clients, prospects, employees and recruits see it. Consequences linger long after resolution.

More importantly, hallucinated citations reflect inadequate training, weak verification protocols and the absence of formal AI policies. The July 2024 ABA Formal Opinion 512 says, “lawyers’ uncritical reliance on content created by a GAI [generative artificial intelligence] tool can result in inaccurate legal advice to clients or misleading representations to courts and third parties.” The opinion reinforced that lawyers using AI remain bound by existing duties of competence, confidentiality, communication and supervision, and made plain that lawyers cannot delegate professional judgment to AI systems. 

The issue is not whether AI makes mistakes. It is whether the firm has built safeguards to catch them before they become public failures.

Widening gaps in policies

The regulatory landscape facing firms in 2026 is more complex today due to the gap between federal guidance and state ethics rules. On the state side, the momentum is clear. Formal guidance has been issued by California, D.C., Florida, Kentucky, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Texas, Virginia, and West Virginia. Other states are developing recommendations.

The Pennsylvania and Philadelphia Bar Associations’ Joint Formal Opinion 2024-200 addressed confidentiality, supervision and competence in the use of generative AI. The New York State Bar Association’s Task Force on Artificial Intelligence, updated in January 2026, produced one of the most comprehensive frameworks in the country. State activity has accelerated. Federal policy has reversed. 

In January 2025, the Trump administration issued Executive Order 14179, “Removing Barriers to American Leadership in Artificial Intelligence,” which revoked Biden-era directives and prioritized American AI dominance. The July 2025 AI Action Plan, “Winning the Race,” emphasized light-touch regulation and reduced state-by-state fragmentation. In December 2025, Executive Order 14365 went further, seeking to limit conflicting state AI laws and encourage federal preemption. In March 2026, the White House released a federal legislative framework that reinforced those priorities.

The federal posture is deregulatory and internally contested. In May 2026, the administration delayed signing a proposed executive order on AI oversight that would have established a voluntary federal review framework for advanced AI systems before public release. The signing was postponed amid concerns that even voluntary oversight might slow American AI competitiveness, revealing a split between those prioritizing innovation and speed and those concerned about national security, cybercrime, and systemic risk.

Then, on June 2, the president signed an executive order, “Promoting Advanced Artificial Intelligence Innovation and Security,” establishing a federal process to evaluate powerful AI models prior to their public release.

For law firms, all of this creates great uncertainty and tension. State bars emphasize competence, confidentiality, supervision, and client protection. Federal policy emphasizes innovation, speed, and reduced regulatory friction. The gap is not narrowing, and the federal direction is unsettled.

Reputation crises move at AI speed

Most AI-related reputation risks originate internally, whether from unauthorized tools, overreliance on automation, overstated capabilities, or flawed citations that get in filings. Each can quickly escalate in a 24/7 digital environment. Even a perceived confidentiality lapse can damage client relationships before the facts are clear, as reputational harm spreads faster than investigations or litigation.

AI-specific crisis planning

Law firm crisis communications and incident response plans must address AI-specific problems. They must answer:

• What happens if a lawyer submits fabricated citations generated by AI? 
• Who responds publicly? 
• If confidential information is exposed, how does the firm communicate with clients and the media? 
• If a court sanctions the firm, what messaging does leadership provide? 

These are no longer hypothetical. Firms best positioned to protect their reputations are prepared before problems occur.

The distinction worth holding on to is between lawful and defensible. Regulatory compliance answers the former. Reputation depends on the latter. Institutional legitimacy depends on more than compliance. Clients, courts, recruits, and the public are increasingly evaluating firms on both at once.

Governance as a competitive differentiator

Historically, law firm governance policies rarely appeared in business development conversations. AI changed that. Sophisticated clients want transparency around which platforms law firms use, how client data is protected, how lawyers verify AI-generated work, what internal safeguards exist, how firms address cybersecurity risks, and how efficiency gains are reflected in billing.

In response, firms are building formal AI governance programs with approved vendor policies, human review requirements, confidentiality protections, competency training, monitoring protocols, disclosure guidelines, and incident response plans. Many have established internal AI committees representing ethics, cybersecurity, information governance, risk management and marketing. Increasingly, AI risk tolerance is being set at the executive level rather than left to legal alone, which means governance decisions are reputational decisions.

These programs serve multiple purposes. They reduce operational risk, demonstrate accountability, and in a market where federal policy is unsettled, provide a credibility signal no executive order can confer. Governance is a marketing asset.

The communications wrinkle

AI adoption creates distinct reputational risks for legal marketing. Firms operate within strict ethical standards, and AI-generated content that exaggerates credentials, misstates results or creates misleading impressions can expose them to regulatory action and reputational harm. There is also an authenticity question. Clients hire lawyers because they trust judgment and human insight, and audiences are growing more skeptical about what is authentic and what is automated. The most effective firms treat AI as an enhancement tool rather than a replacement for strategic thinking and human voice.

What matters now

The legal profession has navigated technology disruptions before. Email transformed communication. E-discovery reshaped litigation. Social media altered marketing, public relations, and reputation management. AI is reshaping risk and workload, often increasing exposure rather than reducing it, and it touches authorship, judgment, accuracy, and professional responsibility.

Firms that navigate this transition successfully understand that AI governance is not a compliance exercise. It is a trust exercise. Clients want innovation and value. Courts expect accountability. Regulators, where they exist, demand competence. The public still expects lawyers to exercise judgment when the tools change.

Trust remains the foundation of reputation in the legal profession, and in 2026, trust runs through governance and preparedness. 

 

Gina Rubel is the CEO and general counsel of Furia Rubel Communications. She educates professionals on devising and implementing strategic and crisis communications plans to manage their reputation, develop and attract top talent, and drive business success. She is the co-host of On Record PR. Gina can be reached on LinkedIn at https://www.linkedin.com/in/ginafuriarubel/.