Bressler Risk Blog

David Kluft asks: “Did Microsoft Teams AI just secretly record my meet and confer with opposing counsel?” —

• “After the Court ordered the parties in a California federal litigation to meet and confer over an issue, Plaintiff’s counsel filed a report with the Court in which they accused Defendant’s counsel of making certain admissions during the call. As proof of these admissions, Plaintiff presented ‘transcripts that appear to have been automatically generated by an Artificial Intelligence tool associated with the video conference software (Microsoft Teams) utilized by the parties,’ which turned out to be Otter.ai.”
• “Defendant objected on the grounds they were ‘completely unaware that it was being recorded until after the meeting ended and an email permitting a download of the transcript was provided.’ It turns out that Plaintiff was also unaware of the recording and received the same email, and thought Defendant had somehow triggered the AI.”
• “The Court, careful to put the word ‘transcript’ in quotes, saw ‘no reason to engage in greater depth in the resulting disputes over the ‘transcript’ because: (1) neither party appears to have known enough about Otter.ai to have used it deliberately in an unlawful or improper way; and (2) the Court will not consider … any arguments based upon those ‘transcripts’ for the simple reason that no party has made any effort to demonstrate its accuracy or trustworthiness.'”
• Order: here.

“Chancery Imposes Attorneys’ Fees for Breach of Confidentiality Order” —

• “The Delaware Court of Chancery recently imposed attorneys’ fees in connection with a request for sanctions for violation of a Confidentiality Order in the matter styled Accelerant Twister, LLC v. Marjo, LLC, C.A. No. 2023-0887-LWW (Del. Ch. April 10, 2026).”
• “This short letter ruling followed a prior decision in this case to disqualify a putative expert, based on the court’s finding that there was a ‘meaningful failure to obey the clear terms’ of the governing Confidentiality Order. Slip op. at 2, n.2 (citing transcript of rulings from the bench after a hearing on January 23, 2026).”
• “During that hearing, after briefing, the court found that over 300-pages of confidential material were submitted to a designated expert nearly six months before the expert executed the required undertaking. Id.”
• “The court awarded reasonable attorneys’ fees incurred in ‘bringing and briefing’ the motion for sanctions as a remedy. Id.”
• “In the prior Bench Ruling, the court found that a conflict of interest provided grounds for disqualification based on the prior representation of one of the parties. The court also found that the Confidentiality Order was flouted by disseminating sensitive material to the putative expert months before he agreed to be bound by it. The award of attorneys’ fees was necessary to cover the time spent to investigate the violation and to litigate the contumacious behavior. Slip op. at 3.”
• “After a discussion about the reasonableness of hourly rates, the court concluded that a blended rate of just over $1,000 was reasonable under the circumstances, referring to Rule 1.5 of the Delaware Lawyers’ Rules of Professional Conduct and the economic survey for hourly rates conducted by the American Intellectual Property Law Association. Patent-related issues in this case were integral, and the attorneys who performed the work had specialized skills in various other areas of the law. The partners involved ranged in experience from 12 through 40 years of practice.”

“AI Is Taking Over Audit Functions. Accounting Needs to Get Ready” —

• “KPMG’s rollout of advanced artificial intelligence agents is the start of something structurally significant: a ‘K-shaped’ remodeling of professional services, in which the top accelerates, the bottom collapses, and the distance between them becomes the competitive question.”
• “Last week’s news that KPMG is cutting roughly 10% of its US audit partners is the K-shape made literal. The average partner whose economics rested on leverage rather than origination is being removed. The pyramid is being compressed from both ends at once. Graduate hiring is being switched off at the bottom, and the average partner is being asked to leave at the top.”
• “Thomas Mackenzie, KPMG’s audit chief technology officer, recently said that within two to three years there will be ‘next to no human beings’ performing routine audit testing at KPMG. This is the most honest thing any Big Four leader has said about the direction of the profession this year. Vouching, transaction testing, and other tasks that for decades defined early-career life in public accounting are being absorbed by AI agents.”
• “But what does this do to the pipeline that produced every audit partner currently signing opinions? Audit has always developed judgment through repetition—exposure to hundreds of small misstatements before forming a view on a material one. Remove this type of apprenticeship and you have removed the mechanism by which the profession reproduces itself.”
• “Mackenzie’s own framing was telling. He said he will no longer hire a college graduate to create workpapers. That is a reasonable shift in job design and a complete rewrite of the conditions under which professional judgment has historically been developed.”
  K-shaped Remodeling”
• “The upper arm accelerates. Exceptional partners do more because clients buy them rather than the firm behind them, and AI amplifies their output rather than substituting for it. The lower arm collapses due to commoditized delivery work, time-and-materials billing, standardized compliance output, and the average partner whose economics rested on leverage rather than origination. AI actively widens the gap between the two because the tools that amplify the top are the same tools that substitute for the bottom”
• “This plays out at a firmwide level, and we are seeing it in real time. Looking at the first-quarter 2026 data, firms that have already made the shift to their operating models are clearly outgrowing those that haven’t.”
• “This is a pricing reset. The bottom half of the market becomes cheaper, faster, and harder to differentiate. The top becomes more expensive, more concentrated, and more dependent on individuals rather than institutions.”
• “In audit, the partner is amplified, the senior manager is divergent, and the associate is substituted. Each category carries a different economic, organizational, and talent implication. The firms that are planning workforces at firm-average level rather than role-by-role are going to find themselves with the wrong people in the wrong places by 2028.”
• “The KPMG news signals a deeper shift: that the old assumption about professional services growing as a tide that lifts every firm equally is over. The firms pulling ahead share a recognizable profile.”
• “They are private equity-backed or well-capitalized; their leadership that has translated conviction into decisions rather than working groups. They are already rebuilding workflows around AI, creating proprietary intellectual property on top of foundational models and restructuring compensation to attract the partners the emerging model requires.”
• “The private equity community has moved past the question of whether AI disrupts professional services. It is underwriting assets on how seriously and how early management acted. If a firm is still in the monitoring phase, it has already answered the question—just not in the way leadership thinks it has.”