The correct answer is: You don’t know.
You don’t know for three reasons. First, some $1000-an-hour guys are remarkably specialized.
The efficiencies triggered by specialization are obvious: If I need a lawyer to call the local real estate office and cause my form to be moved from the bottom of the pile to the top, there may be only one person in town who can make that call. He charges $1000 an hour; I buy a half hour of his time; I get off cheap. The $400-an-hour guy can assign a troop of $150-an-hour associates to research local real estate procedures until the cows come home, but that firm is not going to be cheap.
Specialization can yield efficiencies for other reasons, too. If I have a question about a particularly obscure subsection of some obscure law, there may be two ways to get an answer: (1) Call the $1000-an-hour lawyer whose entire practice is devoted to subsection VI(B)(2)(a)(iii) of the Obscurity Code, and have him respond in two hours with an answer, or (2) Have the $400-an-hour lawyer try to figure out the answer from scratch. Who do you suppose is cheaper?
But specialization is the easy case. $1000-an-hour guys can be inexpensive for other reasons, too….
The second reason why expensive lawyers can be cheap in the long run has to do with staffing. There are some $1000-an-hour lawyers who will staff a new case with one senior associate, one junior associate, and one legal assistant, and then work the matter to resolution. The guy at the top of the pyramid is actively involved in the case, handles many tasks personally, and works closely with his junior colleagues to pursue the client’s cause.
There are other lawyers (of both the $1000- and $400-an-hour variety) who land a new case and then head down to the firm cafeteria to brag to colleagues over lunch about the new retention and to pontificate about “staffing it up.” Those guys assign a half-dozen lawyers to the case and let things play out from there. Lawyer A talks to Lawyer B, who then passes the message on to Lawyer C, who then confirms the issue with Lawyer A, who then decides that this is best handled by Lawyer D. By the time the project reaches D, the words are so garbled that D spends three days researching the wrong issue. You get my drift.
Please note one critical difference between hiring a specialized lawyer and hiring a lawyer who staffs things efficiently: A client can often identify a specialized lawyer before retaining that person; a client learns whether a lawyer is efficient only through experience. Thus, if the former real estate commissioner, now in private practice, says that he can call the clerk at the commission and accelerate the processing of my form, those words have the ring of truth to them. If a lawyer’s deal list includes fifteen previous Obscurity Code Section VI(B)(2)(a)(iii) matters, then either the lawyer is a brazen liar or he may actually be familiar with that subsection. Clients can, albeit imperfectly, judge specialization before they retain counsel.
Efficient staffing is a different matter. I know that some lawyers staff cases efficiently and some do not. I’ve personally witnessed both situations with my own lying eyes. But now that I work in-house, every high-priced lawyer tells me that she minimizes costs by staffing efficiently: “We send in Special Operations. Other firms send in the Fifth Fleet. Even though our rates are higher, your overall cost will be lower.”
Right. But the next person I interview will say exactly the same thing. I haven’t yet met the lawyer who markets herself by boasting that “we send in the Fifth Fleet to waste your money left and right.” Before the fact — before I’ve hired the lawyer in a case and seen her efficiencies (and bills) in action — I simply cannot tell the lean-and-mean lawyer from the blubberbutt.
When else may an expensive lawyer ultimately be cheap? When that lawyer’s reputation (or actual ability) causes a matter to end more quickly (or on more favorable terms) than would happen if someone else were representing me. I can’t name names here — because the unnamed lawyers would feel slighted, and the unnamed firms would complain to my colleagues who place insurance for those firms — but there are a select few lawyers who are the real deal: Those lawyers are scary smart, gifted writers, talented managers, persuasive oral advocates, and comfortable in front of a jury. When opposing counsel comes up against one of those guys, opposing counsel (and client) may surrender quickly or on favorable terms. When that happens, my $1000 an hour was well spent.
Comparing hourly rates is not crazy, but it can be terribly deceiving. In the right situation, I’ll choose the specialized, lean, or gifted guy and sleep comfortably at night after having made that choice.
Mark Herrmann is the Vice President and Chief Counsel – Litigation at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law (affiliate link). You can reach him by email at [email protected].