Can Small Models Reason About Legal Documents? A Comparative Study

Small language models (SLMs) are promising for real-world deployment due to their efficiency and low operational cost. However, their limited capacity struggles with high-stakes legal reasoning tasks that require coherent statute interpretation and logically consistent deduction. Furthermore, training SLMs for such tasks demands high-quality, concise reasoning trajectories, which are prohibitively expensive to manually collect and difficult to curate via standard rejection sampling, lacking granularity beyond final verdicts. To address these challenges, we propose {LegalDrill}, a diagnosis-driven synthesis framework that extracts and iteratively refines reasoning trajectories from a capable teacher via fine-grained prompting, then a self-reflective verification is employed to adaptively select the most effective data for the SLM student. The resulting data empower SLM training through supervised fine-tuning and direct preference optimization. Extensive experiments on several legal benchmarks demonstrate that {LegalDrill} significantly bolsters the legal reasoning capabilities of representative SLMs while bypassing the need for scarce expert annotations, paving a scalable path toward practical legal reasoning systems.

We introduce LegalBench-BR, the first public benchmark for evaluating language models on Brazilian legal text classification. The dataset comprises 3,105 appellate proceedings from the Santa Catarina State Court (TJSC), collected via the DataJud API (CNJ) and annotated across five legal areas through LLM-assisted labeling with heuristic validation. On a class-balanced test set, BERTimbau-LoRA, updating only 0.3% of model parameters, achieves 87.6% accuracy and 0.87 macro-F1 (+22pp over Claude 3.5 Haiku, +28pp over GPT-4o mini). The gap is most striking on administrativo (administrative law): GPT-4o mini scores F1 = 0.00 and Claude 3.5 Haiku scores F1 = 0.08 on this class, while the fine-tuned model reaches F1 = 0.91. Both commercial LLMs exhibit a systematic bias toward civel (civil law), absorbing ambiguous classes rather than discriminating them, a failure mode that domain-adapted fine-tuning eliminates. These results demonstrate that general-purpose LLMs cannot substitute for domain-adapted models in Brazilian legal classification, even when the task is a simple 5-class problem, and that LoRA fine-tuning on a consumer GPU closes the gap at zero marginal inference cost. We release the full dataset, model, and pipeline to enable reproducible research in Portuguese legal NLP.

The rapid proliferation of Large Language Models (LLMs) has revolutionized Natural Language Processing (NLP) but has simultaneously created a "resource divide." State-of-the-art legal intelligence systems typically rely on massive parameter counts (7B+) and cloud-based inference, rendering them inaccessible to practitioners in resource-constrained environments and posing significant data sovereignty risks. This paper introduces Quecto-V1, a domain-specific Small Language Model (SLM) engineered to democratize access to Indian legal intelligence. Built upon a custom configuration of the GPT-2 architecture (124 million parameters), Quecto-V1 was trained from scratch exclusively on a corpus of Indian statutes, including the Indian Penal Code (IPC), the Code of Criminal Procedure (CrPC), and the Constitution of India. Unlike generalist models, which prioritize broad world knowledge, our approach maximizes "lexical density" within the legal domain. Furthermore, we address the deployment bottleneck by applying post-training 8-bit quantization (GGUF format), compressing the model to a memory footprint of under 150 MB. Our empirical analysis demonstrates that Quecto-V1 achieves high fidelity in retrieving statutory definitions and penal provisions, outperforming general-purpose SLMs in domain-specific exact match tasks while running entirely offline on consumer-grade CPUs. We further present an ablation study showing that 8-bit quantization yields a 74% reduction in model size with less than 3.5% degradation in retrieval accuracy compared to full-precision baselines. These findings suggest that for specialized, high-stakes domains like law, domain-specific training coupled with aggressive quantization offers a viable, privacy-preserving alternative to monolithic cloud models.