Law Firm Billing Rates
We’ve been extensively chronicling salary cuts for associates. One consistent firm rationale for cutting salaries is that firm clients are no longer willing to pay for junior associates. The consistent counter-argument is that clients don’t care what associates get paid, clients care about what clients are charged.
Unfortunately, there has been precious little information about what law firms are doing to reduce their billing rates. It seems that firms want to get the information out that they are cutting the salaries of their attorneys, but do not wish to discuss what they are charging their clients.
Today, Incisive Legal Intelligence released its 2009 Billing Rates and Practices Survey Report. Unfortunately, you have to pay for it. But here is the top-line summary from the press release:
The average hourly billing rate reported was $284. Nationally, plaintiffs’ contingency litigation is the practice area with the highest average hourly billing rate ($413), followed by labor/employment ($302), general law ($295) and real estate/land use ($294). The billing rate survey data represents a sample of more than 14,000 lawyers throughout the 50 United States, drawn from responses from 255 law firms.
More notes from the report, after the jump.
The report appears to focus on small and midsized firms. It’s based on firms who decided to self report to Incisive Legal Intelligence. Here’s the breakdown of respondents, according to the publication:
* 58% Attorneys from Small Firms (2 - 39 attorneys)
* 32% Solo Practitioners
* 10% Attorneys from Mid-size Firms (40 - 170 attorneys)
* 78% male, 22% female
* Over 80% of respondents have practiced for 10 or more years
* Most were the leader, manager, partner, shareholder, or owner of their firm.
From that data set, there are signs that some firms are passing the associate salary cutting savings on to their clients:
In addition to hourly billing, 88 percent of respondents reported offering alternatives to the billable hour. Larger firms are more likely to offer alternatives and variations to the billable hour than smaller firms. Nearly two-thirds of respondents offer contingency fees or fixed or flat fees.
Obviously, we need more information. If firms don’t want to be open about their billing rates — and they don’t — perhaps clients themselves will let us know which firms cut salaries in connection with a reduction in billing rates, and which firms do not.
2009 Billing Rates and Practices Survey Report [Incisive Legal Intelligence]
(72) Comments
Comments
first to say, rates are going down!
What? ATL can't fork out the cash for the report?
http://fashionista.com/2009/07/how_much_are_you_willing_to_ta.php?img=1
And first to say that a certain big firm's rates are actually increasing this summer (no kidding).
Rates aren't going down everywhere. Even though my firm froze associate salaries, my standard rate went up 12%. Why am I not surprised that clients are b***ing?
No wonder the TTT BigLaw firms are taking in the shorts and having to let go of so many. Time to play small ball, people!
how can there be an average billing rate for CONTINGENCY litigation? i understand perhaps that number might reflect what the lawyers earned on average for their time spent before making a recovery, but to classify that as a billable rate is completely false. also, if you are a contingency litigator and average only a shade above 400 per hour, then you suck.
First to say that rates are NOT going down and that everyone is overreacting. The ship is not sinking and the Biglaw model is not going away. Top V5 firms will continue to command the same rates from companies that want top service, period, full stop. The whole paranoia Above the Law and others are churning about the "changing law firm model" is ridiculous. Firms that are suffering will take the opportunity to change their associate compensation model to something unattractive to new graduates, but the top firms will retain the old model. As they say in the South and as the V5 will bear out, "if it ain't broke, don't fix it."
$400 an hour (~200k-500k a year) is plenty of money in most parts of this country #7. Note that these are NATIONAL numbers.
Have there been many reports that small/mid-sized firms are cutting salaries? I thought that was only the biglaw firms. I've heard of some small raises and freezes, but no cutting in smaller/mid-sized firms. So how can the billing rates for solo/small/mid-sized firms show us how cutting salaries of big law associatrd is being passed on to the clients (or not).
Just because big firms "offer" alternative arrangements doesn't mean that they are being utilized.
LOL 8, IBM had the same complacent attitude once. The top IT firms (IBM) will continue to command the same rates from companies that want top service, period, full stop. If the IBM model ain't broke, don't fix it.
IBM almost died in the early 1990s before they realized that they needed to change their business model. But keep on dreaming and reaching for that rainbow.
12,
Terrible analogy. It wasn't IBM's complacency that resulted in its demise. It was better technology elsewhere. If suddenly small firms start attracting all the best law school grads, then your analogy may hold true.
I make money on the side by selling roofies to college kids on the weekends.
My firm raised rates on January 1 as usual - an absolutely idiotic decision in my book. More firms should follow the "Schooner Tuna" model in times like this (see "Mr. Mom").
For the clients that I control, I am only charging 2008 rates. Of course, that means that my realization shows up at 97-98% even if I collect 100% of what I bill them.
The actions of big law firms these days prove that lawyers, on average, make horrible business decisions.
hey 7, it ever occur to you that they bill high - but reasonable - in case they can recover attorneys fees as part of a judgment, which may exceed the contingency fee.
hey 7, it ever occur to you that they bill high - but reasonable - in case they can recover attorneys fees as part of a judgment, which may exceed the contingency fee.
You're absolutely right, 12. Great analogy. All of us in the V5 are just like IBM--ready to give way to a better and completely different legal alternative. Never mind that we have the most legal talent and the best legal services available on the market. But keep kidding yourself. The tech analogy is spot on.
New York based law firms are either raising rates or keeping them constant. Not cutting them. The salary raises as well as salary cuts just reflect trends in the markeplace. Whatever the firms can get away with, they will. Law firms still have lots of money, it is just a matter of where they prioritize allocating those funds. Cutting associates and their salaries serves two purposes. Saves a bit of money now and shows clients that firms really feel their pain too. All a big p.r. stunt. Meanwhile, none of the firms give rat's ass about screwing up the careers of recent law grads.
$284---- ha ha. Summer associates bill out at a higher rate than that at my firm (ranked in the middle of AMLAW100).
My firm also raised billing rates by 10% at the start of the year but has said that it is accomodating requests from clients who ask for last year's rates to continue. I have always felt that raising our rates was a big mistake. For one thing, that 10% increase could have covered my salary increase that they revoked in just one month of full time billing.
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weil cut salaries in their london office and abovethelaw should find out if they are going to do it in their US offices next.
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IBM is not a peer firm. 18's use of the phrase "legal talent" is highly laughable.
24, you must not be V5. Predictable response.
I went to ILI's website (link in the article) and it said the numbers available were from 2007. Such a report won't show the change due to this economic downturn since 2007 was only the beginning.
21- What?
13/18, IBM still attracted the best talent and had the best technology at that time, you morons. IBM almost died because the best technology was too expensive and not responsive to their clients' needs. The clients discovered that they could shave a huge amount of the cost while getting _almost_ the same quality. That's good enough for a CTO, and will be good enough for a GC. Some clients will be cost-insensitive to premium work, but let's just say that there aren't as many as people think.
Cravath is merging with Wachtell.
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Legal talent is an ideal term to obscure any value to be had from excessive billing rates.
Also, 21+23 is an admirable troll of the day.
The billable hour needs to diminish in importance. Clients are becoming much smarter and judicious in their use of outside legal counsel. It's becoming all about the "value" being delivered and what therefore should be appropriate fee scale. "Bet the company" type legal work is at the top of the value pyramid and will always command top billing rates. But there is a LOT of legal work that is more boiler plate and commodity in nature than most lawyers dare admit, and it is that type of work that falls lower on the value pyramid of clients. Clients want alignment of fee with perception of value. Not rocket science. This is how the world of business works. And it is hitting the legal profession square in the eyes.
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28, you're missing the point. IBM lost because there was a better alternative available. Our point is that there is a not a qualitatively BETTER alternative than top V5 on the market. Yes, there are firms that are dropping hourly rates and offering discounts, but they are NOT the best firms and top V5 clients this. The problem is with your analogy. You cannot get the same quality with a lower ranking firm, although I am sure you will come back to me with multiple responses rebutting this claim. Yawn.
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All of the people saying that their so-called "V5" firms are immune to competition and economic forces, and can continue to thrive on price-insensitive premium work, are essentially saying that "nobody (or no general counsel) ever gets fired for picking a V5 firm."
Hey, why does that mantra sound familiar...
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36, no one ever said that. The point was that rates in the V5 do not need to change. This doesn't necessary mean they are immune from competition or economic forces.
hey 16 and 17, did it ever occur to you not to hit the post comment button multiple times? anyway, so....this study measured make believe billable rates for contingency litigation that may never be collected or awarded?!? nice! that really tells us a lot.
hey 16 and 17, did it ever occur to you not to hit the post comment button multiple times? anyway, so....this study measured make believe billable rates for contingency litigation that may never be collected or awarded?!? nice! that really tells us a lot.
34, IBM's better alternatives were lower-quality commodity PC makers. Their clients were willing to give up the guarantee of the best quality in exchange for much lower prices from Dell, etc. The Dell computers were not as good as IBM mainframes, but good enough. Do you understand how the analogy works now?
#32 hit the nail on head. Major companies are becoming much more rigorous in the analysis of outside legal counsel. They want predictability of legal fees and they want legal fees to be in alignment with the nature of the legal counsel provided.
Well-trained staff lawyers and counsel roles are going to become the rage of law firms across the country. The role of associates is going to be reserved for far fewer. Expectations placed upon those associates for production, skill development and developing a successful book of business over time are going to go through the roof. Compensation will come in the form of less guaranteed salary and more skin in the game via bonus opportunity.
Fact #1: Michael Jackson was rehearsing for his world tour at the Staples Center.
Fact #2: Michael Jackson's memorial service is being held at the Staples Center.
Fact #3: Organizers were able to print 18000 tickets for the event in only a few short days.
I'm telling you, MJ is going to pop out of that casket in full make-up to Thriller... mark my words.
TTThriller is not V5
Sorry for interrupting, but can someone please confirm layoffs at Cahill?
Okay, 41, I get your point. So the clients that are satisfied with second-rate will go elsewhere. Fine. I don't think anyone really cares about those clients. They were probably the ones over-scrutinizing bills to begin with. Better that mid-law deal with them anyway.
43, actually it's going to be Andy Kaufman.
Bethlehem Steel and GM are invincible. When you blend arrogance and money, soon you only have arrogance remaining.
PE will be hitting Kash up for a loan before Christmas. Mark my words.
Anyone have an update on the ship? When last I saw it a few years ago, it was sailing fast and true, in a state of perfect buoyancy. I naturally assume that its condition is completely unchanged, but if you've heard otherwise please let me know. Thanks.
Nice post, 49.
Just look at bankruptcy fee applications.
Cravath has a $900 million lease: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aar21pxL.2ow
If it had waited two years, it could have bought the whole building for 2/3 of that: http://www.rttnews.com/Content/BreakingNews.aspx?Node=B1&Id=997788%20&Category=Breaking%20News
That can't be good. Can they renegotiate that lease?
52...of course. I'm sure the landlord would be thrilled to renegotiate the lease. Or set bags of cash on fire, which is probably quicker and would produce the same basic result.
40, hopefully their hourly rates for contingency work are based on what is actually collected. it is common practice once a case settles to see how many hours I put into the case and calculate my effective hourly rate for the work- if it is not higher than what I could command doing regular billable work then I know not to take that kind of case again.
It is not clear to me exactly where the numbers come from but hopefully they are only based on actual judgments/collections/settlements divided by hours working on that matter.
I've been practicing in BigLaw for about 35 years. Most firms have rate ranges. My range is $750 to $1000. For clients who'll pay, I bill at $1000. For clients who bitch and moan about fees, I might charge $850. It just depends on how much I think I can get from a particular client, and that's the way it works almost everywhere else in the country. Associates tend to have a fixed rate, because the work they do is nothing but filler work, like cannon fodder during a war. The nice thing about getting paid by the hour is getting paid to sit in First Class and enjoy a nice drink with a good looking flight attendant. Of course, there are few good looking flight attendants left, but it sure is nice to be able to look at one while enjoying a drink and getting paid $1000 an hour. And folks wonder why the legal profession is about to collapse. Well, I've got mine already, so I really don't give a damn what happens next. To the world at large, "You can kiss my ass." To you associates getting laid off or deferred, you can kiss my ass as well.
The legal profession is getting its comeuppance. It was bound to happen sooner rather than later. Lots of parallels between law firms and the housing bubble. Things can't keep going insanely up, up and up. Well, the rules of engagement have changed to reflect the real world that 99% of our clients and nearly every other type of professional service provider face.
Solo practitioner here -
I bill whatever the market will pay. This is a business, not charity.
Client here at Fortune 500 company. Our firms tried hiking their rates. We told them to cut across the board or we'd be taking our business elsewhere. They complied.
34 is totally right. I am an attorney at a V5 and I only service top clients. First year associates at my firm are billed out at $750 per hour and our clients happily pay without question.
Only less desirable clients would dare question our rates or the number of hours we put in on a matter. Let the TTT firms have those clients. Me and 34 will be just fine without them.
"Lot's of parellels between _______" and the housing bubble" = epic analytical fail.
I want to make that much money. My Biglaw $160k paycheck works out to about 80 bucks an hour before taxes.
60 = epic quotation fail. It's easier if you just copy and paste.
Paul Hastings raised their rates 2-3 times per year despite the financial meltdown. Clients are grossly and routinely overbilled since associates are literally piling on (to survive) wherever they can. And now, since PH shitcanned most of their mid & sr level associates, partners are doing this work at outrageous PH partner rates. PH clients must be real suckers to fall for this.
63: You're right about the piling on. It's happening in NY (with a wink and a nod from administration) on all corporate and litigation (especially pharma) matters. It is truly shameful that PH clients are paying for this. But given the level of fear and paranoia in NY, what else can be expected?
Are clients out there anxious about potential bill padding?
You control costs to increase profits, but you set prices at what the market will bear. It's pretty basic to understand that the two are not necessarily connected. But some early-industrial-age-wiring in our brains insists that there should always be a correlation between the two. There's really just not, other than the correlation that sometimes costs need to be cut in an environment where market pressures are pushing down prices.
Layoffs happen because firms are cutting costs. Rates are set in response to market pressure. And mid-sized firms are most responsive to both factors, so this isn't a good group to study anyway.
65- They should be. It's happening in droves at Paul Hastings.
Did no one else read 39 + 40 and laugh?
The problem with rates is that there are many more small than large casesin which the dispute is over a few hundred or thousand dollars in which a client wants the attorney to do something----or they won't get the better cases from that client---and to get the better cases the client expects the attorney to handle the small. You end up eating your rate to keep the client happy.
What are BigLaw associate rates? Question coming from a small market "local counsel" working with BigLaw.
Yes, billing rates are going up; however, behind the scenes rates are being slashed for good clients. As in-house counsel, I am getting deep discounts from even the largest firms I use (although the firms would deny it publicly). Firms of all sizes and esteem are DESPARATE for legal work from clients that pay their bills, and therefore are willing to give deep discounts to keep a client's work.
Rates just keep increasing, no matter what happens to economy.