NewMods Share the AI Cut Big Law Still Bills

NewMod law firms sell a fixed price for work that Big Law still bills by the hour. That split, not the shared chat window, is what separates them in 2026.

On September 8, 2026, legal-tech commentator Richard Tromans argued that AI-first is a stale label for shops such as Covenant and Crosby, because the same models now sit on desks across major firms. The tools converged. The P&L did not.

The Hour Now Fights the Tool

A time-based firm that speeds up a memo with an LLM has a commercial problem. Each hour the model saves is an hour that never hits the invoice, unless the firm raises the rate or finds more work to fill the gap.

Tromans’s point was that NewMods do not treat that speed as a threat. They price the file, keep the extra margin when the model is fast, and eat the loss when it is not. Covenant CEO Jen Berrent put the founding bet in one line back when the firm was still being called AI-native.

We started on the basis that AI exists, and if that’s the case, how would you build a law firm today?

Jen Berrent, CEO, Covenant

Build it as if time is not the product, and the hour becomes a cost to cut. Build it as a partnership that pays partners from billed time, and the same model is a leak.

THE GAP THE HOUR LEAVES OPEN

• Client demand: 71 percent of in-house lawyers told Thomson Reuters they expect outside firms to change how they charge as AI use rises, and only 28 percent of firms said they had done so.
• Quality ask: 77 percent of clients called AI-enabled quality gains very important or essential, and 5 percent said they get that from most or all of their firms.
• Still hourly: 90 percent of legal dollars still move through standard hourly rates, the same structure Thomson Reuters dates to the 1950s.
• Incumbent P&L: the average firm posted 13 percent profit growth in 2025, with worked rates up 7.3 percent, so the hour is still paying the partners.

Those four figures can sit together. Clients want the cut. Firms are still collecting it. NewMods are the offer on the table for the work that can be scoped.

What a Fixed-Fee NewMod Charges

A NewMod is a law firm that sells a complete job at a known price, then uses models and a small lawyer bench to deliver it. The lawyers often come from the same Big Law and in-house seats as everyone else. The difference is the container they sell.

Covenant, led by Berrent, the former chief legal officer and chief operating officer of WeWork, and Richard Perris, former general counsel of CVC Capital Partners, sells legal work to private-market investors rather than to other law firms. A September 30, 2025 release said its clients, endowments, sovereign wealth funds, and asset managers, total $2 trillion in assets, after a $4 million seed led by Flybridge Capital Partners. Berrent said the firm is not bolting automation onto old processes, it is trying to restructure the legal workflow.

Crosby, which reviews commercial contracts with lawyers sitting on a stack of agents, announced a $60 million Series B round on March 31, 2026, led by Lux Capital and Index Ventures, with Sequoia, Elad Gil, 01 Advisors, and Bain Capital Ventures in the round. Its founders wrote that America’s top 100 firms made $69 billion in profit the year before and paid every cent to partners, the capital they say a NewMod should put back into the product.

HOW THE FEE IS BUILT

Dan Mishin, chief executive of Manifest OS, a NewMod platform that raised $60 million at a $750 million valuation in April 2026, said his company refused to sell its software to firms that still get paid for more hours. The product and the invoice have to match, or the model is a toy.

THE NEWMOD CALENDAR

1. January 2024: Covenant begins selling AI-backed legal work to private-market investors.
2. September 2024: Crosby is founded as a contract-review firm built around agents plus lawyers.
3. March 31, 2026: Crosby closes the $60 million Series B.
4. July 7, 2026: Norm Ai raises a $120 million Series C at a $1.2 billion valuation and funds Norm Law, an affiliated firm that prices outcomes.
5. September 8, 2026: Tromans argues the useful name is NewMod, not AI-first.

None of those shops is a general-service replica of a global firm. They take slices, LPAs, MSAs, DPAs, NDAs, fund terms, where the work repeats enough to price.

In-House Teams Want the Surplus Back

The second-order pressure is not a blog label. It is a client who can now see that a first-pass review that used to take a night can run in minutes, and who still receives an hourly bill.

Raghu Ramanathan, who leads the legal-professionals business at Thomson Reuters, wrote that the firms pulling ahead are the ones putting the tools into the work, not the ones talking about them.

The firms creating a true competitive advantage today are not the ones talking about AI. They’re the ones operationalizing it.

Raghu Ramanathan, President, Legal Professionals, Thomson Reuters, Future of Professionals Report 2026

The same report found 32 percent of in-house lawyers already reconsidering firms that cannot show AI-enabled value. 24 percent of law-firm professionals said they would turn down a job that did not give them professional-grade tools. 38 percent reported financial pressure to move faster on AI, and 34 percent said they were using tools their firm had not approved.

Adam Meshel, global head of legal at Citigroup, said the bank’s expectation is blunt: if hours on a matter fall because of AI, the cost per deal should fall with them. Citigroup’s law-firm group found almost half of large firms saying AI had already touched their pricing, mostly at the edges, not as a firm-wide switch off the hour.

Morgan Stanley has been in the same conversation with panel firms. The buy side is no longer asking whether counsel uses a model. It is asking who keeps the minutes the model frees.

Trinity University’s chief investment officer, Craig Crow, said Covenant turned a legal review that used to take weeks into a job measured in days, with attorney checks still on the output. That is the NewMod pitch in a client’s mouth: same judgment, smaller invoice, shorter cycle.

Capital Goes Into the Tech Company, Not the Partnership

US ethics rules are why these shops look like two companies taped together. Model Rule 5.4 still bars nonlawyers from owning a law firm or sharing legal fees in most states, so the venture money cannot sit in the same entity that holds the client files.

The workaround is a management services organization. The licensed firm stays lawyer-owned. A second company holds the software, the brand, the nonlawyer staff, and the fundraising deck. The firm pays that company a management fee set at fair market value, not a slice of legal fees, because a slice is fee-sharing.

WHAT THE SPLIT IS FOR

• The licensed firm: Owns the matters, the professional judgment, and the legal fees.
• The MSO: Owns the models, the workflow software, and the back office, and can take outside capital.
• The fee: A management charge for services, not a cut of the client invoice.
• The bet: Investors underwrite research that a partnership would pay out as partner compensation.

Crosby uses that MSO shape. So do other US NewMods. In England and Wales, alternative business structures already let nonlawyers own a firm, so the same economic idea does not need the two-entity dance.

Norm Ai’s founder, John Nay, made the incentive case when he posted the Series C. Norm Law, chaired by Mike Schmidtberger, former chair of Sidley Austin’s executive committee, runs on that stack and prices outcomes. Nay said model vendors get paid on tokens, traditional firms get paid on hours, and an affiliated firm can send the AI gain to the client because the invoice is not a timesheet. Software clients on the Norm Ai side, he wrote, represent more than $30 trillion in assets. The raise took the company past $260 million in total capital, with a team of more than 200, mostly engineers and attorneys.

https://x.com/johnjnay/status/2074485345593245833

That post is the hidden balance sheet behind the NewMod label. The partnership cannot reinvest $69 billion because it already paid it out. The MSO can raise $120 million because it is allowed to.

Kirkland Is Spending $500 Million to Keep the Floor

Kirkland & Ellis is the example Tromans used, and it is a poor one if the test is “who has AI.” Chair Jon Ballis said the firm set aside $500 million to build its own platform, with more than $100 million of that to be spent in 2026, on top of licences for tools everyone else can buy. About 180 technologists are on the build, with a design group of 250 Kirkland lawyers, including 100 partners.

Ballis’s line was that widely available models raise the floor for everyone, and Kirkland does not get hired for the floor. That is a reputation business buying a private stack so the judgment layer stays in-house. It is not a promise to stop selling time.

The spend also shows why AI-first as a brand is empty. A two-year-old NewMod and the world’s highest-grossing firm can both run Claude, GPT, or a legal specialist model on a matter. Only one of them needs the hour to stay long for the partners to get paid.

Some large firms now describe themselves as AI-native because most of the payroll uses the software. That is adoption. It is not a new model. Goodwin Procter and others have set internal usage targets; none of that, on its own, changes the invoice a GC signs.

Why Big Law Still Bills 90 Cents

If the surplus argument were already priced in, the 90 percent hourly share would be falling and NewMods would be taking a visible slice of Am Law revenue. Neither has happened at scale. 2025 was a peak year for profits and rates. Midsize firms took more of the demand growth, which is a client moving down the rate card, not a client leaving the hour.

WHERE THE READINGS DISAGREE

• The client survey: Thomson Reuters finds in-house teams expecting a new commercial model and already shopping firms that cannot show the value.
• The firm P&L: The same research house finds 13 percent profit growth and 7.3 percent rate growth, with the hour still carrying almost all of the dollars.
• The NewMod claim: Nay, Berrent, and Crosby’s founders say the only way the gain reaches the client is to stop selling minutes, and they have raised the capital to operate that way on scoped work.

Both things can be true at once. Bet-the-company M&A, live litigation, and regulatory fights still buy a name on the letterhead and a partner who will pick up the phone at 1 a.m. That work is hard to scope, so the hour survives. Repeat contracts, fund-document review, and playbook markups are easy to scope, so they are where NewMods price against the pyramid.

Colorado’s 2026 statute tightening fee-sharing and alternative structures is a reminder that the MSO path is not a free pass. States are writing the workaround down, and some of them are writing it as a limit. The UK remains the more open jurisdiction for a single entity that mixes capital and a practising certificate.

Scoped Work Leaves First

The question that filled founder threads in 2026 was not whether an AI-native firm could exist. Several already did, and more will, often as a vertical with a handful of lawyers on custom software. The harder constraint, as contract-software builders keep noting, is that the useful context lives in the client’s Slack, email, and prior files. A NewMod that cannot plug into that pile is just a faster stranger.

Tromans wrote that in ten years the NewMod tag may sound dated, and that it will fade only when major firms restructure to look like these shops, which he called years away. Until then the useful test is simple. If the firm gets paid more when the model is slow, it is still selling time. If the client knows the number before the work starts, and the model’s speed is the firm’s problem, it is a NewMod.

The hour is winning the 2025 accounts. The people who pay those accounts have already said they want the other deal. Scoped files are where that other deal is on offer.

Disclaimer: This article is news reporting and analysis of law-firm business models, survey data, and public statements. It is informational only and is not legal advice, an assessment of any firm’s competence, or a recommendation to hire, fire, invest in, or avoid any legal provider or related company. Readers who need counsel on a matter, or who are weighing a change of outside counsel or a capital structure, should consult a licensed attorney in the relevant jurisdiction and, for any investment decision, a qualified financial adviser. Figures and firm statuses reflect the statements and research cited here as of the dates on those materials and can change with later filings, surveys, or fee schedules.