Biglaw, Billable Hours, In-House Counsel, Money, Partner Issues, Reader Polls

New Data on Hours, Billing Rates, and Corporate Legal Spending

What does 2013 hold for the world of large law firms? Let’s look into our crystal ball.

Actually, scratch that. Making predictions is a tricky business. Sometimes we’re right — like when we predicted robust bonuses out of Cravath, based on their large partner class — but sometimes we’re wrong.

For now, let’s keep our powder dry, and instead check out historical data about hours, billing rates, and corporate legal spending. Can we gain any insight into the future by looking back over the past?

We’ll start with hours. Last month, we conducted our usual survey on how many hours you billed during the year. Here are the results:

It seems that 2000 hours worked out as the midpoint, with 53 percent billing more than 2000 hours and 46 percent billing less than 2000 hours. This is an admittedly unscientific observation, but these hours strike me as solid, about right — not like the pre-2008 boom years, when many of you were billing like crazy, but not like the depths of the Great Recession either, when hours were hard to come by.

And additional recent data confirm this impression that hours have, well, held steady over the past two years or so. Last month, Aric Press of the American Lawyer crunched some numbers from the e-billing giant TyMetrix. Here’s what he found over the 2010 to 2012 period:

Hours are flat, but client spending is up for both partners and associates. Clients have increased the amount of work they’re giving to Am Law 200 firms. And lawyers who are paid at least $800 per hour now account for an increasing cut of the U.S. legal market.

A few years ago, $800 an hour was a much bigger deal than it is today, with rates generally topping out around $1,000 or $1,100 an hour. Now they go much higher. Former Solicitor General Ted Olson, for example, charges Gibson Dunn clients $1,800 an hour for his time. (And clients are generally happy to pay top dollar for top practitioners like Olson; they’re less enthusiastic about paying $600 or $700 an hour for associates.)

How much has spending climbed over the past few years? According to Am Law:

Even if clients weren’t buying many more hours, they were paying a good deal more for the privilege. Fees for the first two quarters of 2012 were $949.8 million, which was an increase of $122.3 million over 2010. That’s a 14.7 percent hike. Between 2011 and 2012, spending increased $49.3 million, or 5.5 percent, despite the drop in hours purchased. Also, fees were up for both partners and associates, a 14.9 percent gain for partners and 14.7 percent for associates. This suggests at least three things. First, firms are getting rate increases from at least some of their clients. Second, despite the consternation over junior associates, customers are continuing to pay at least some of their bills. And third, as we’ll see below, customers are buying more high-priced talent.

These are very interesting findings, and they’re not exactly what you’d expect. Despite all the buzz over alternative fee arrangements, refusals to pay for the time of first- or second-year associates, and clients having more bargaining power in general, at least some firms are still able to drag dollars out of their clients. Perhaps the rumors of Biglaw’s demise have been greatly exaggerated.

(You can read the full analysis, which also contains a discussion of market share dynamics, over here.)

New Data Set Shows What Clients Actually Bought Over Last Four-Plus Years [Am Law Daily]
Legal Fees Jump 15 Percent over Two Years, Even as Billables Remain Flat, Study Says [ABA Journal]

Earlier: The Hours Open Thread: How Much Did You Bill In 2012?

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