Better Call Reward: Reward Hacking as Strategic Abstention in Legal Reasoning Models

Subramanyam Sahoo, Justin Shenk

What happens when a legal AI model learns to look like a lawyer instead of reasoning like one? We fine tune Qwen3-8B with Group Relative Policy Optimisation (GRPO) against a proxy built from three surface features: citation count, legalese density, and response length. The model does not learn to reason more effectively. It learns to withhold commitment. Across 16 yes or no legal reasoning tasks from LegalBench (N=320), overall accuracy collapses from 0.500 (chance) to 0.072 (McNemar p < 10^-36), driven entirely by the rate of properly formatted answers falling from 0.900 to 0.109. The model stops committing to answers. Yet when it does commit, accuracy rises from 0.556 to 0.657, showing that the collapse is not a failure of capability but a strategic response: the model has learned that verbose responses packed with citations but empty of a direct answer score higher than terse correct ones. We term this the Saul Goodman effect, a policy that becomes maximally lawyerly while becoming maximally noncommittal, and prove formally that it is the optimal response to any surface feature proxy that attaches no penalty to abstention. We further show that 89.3% of citations produced after…