Billing Rates

Over time (and it doesn’t take long), law firm pitches all begin to sound the same.

“We save you money because we staff cases leanly. We send in the Navy SEALs, not the Fifth Fleet.”

Do you really think the guy in here last week was saying, “We waste your money hand over foot. We send in the Fifth Fleet where the Navy SEALs would do”?

Or: “You get big firm lawyers at small firm prices,” and then, the next day, “You get small firm attention combined with the advantages of our many offices.”

So my ears perked up recently when I heard two large firms make pitches based on fundamentally different world views. The first difference was on the need for international offices….

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[Lawyer Dennis] Gingold claims to have billed an astonishing 48,772 hours on this case—which works out to almost 9.5 hours a day, every day without a single day off, between November 4, 1995, and December 7, 2009. This includes a seven-year stretch where Mr. Gingold billed 28,230 hours—an average of eleven hours a day, every day seven days a week without a single day off.

As anyone who has had to keep billing records knows, it is rare for ten hours of billing to take only ten hours: there are bathroom breaks, coffee breaks, meal breaks, interruptions, and so forth. There are legendary accounts of tireless attorneys who forgo family and leisure; work on little sleep; and are able to regularly bill 3000 hours a year, but they are few and far between. Perhaps Mr. Gingold is one of these exceptional individuals, so far above average that he can routinely bill 4000 hours a year without loss of productivity or health, but this proposition merits scrutiny.

Ted Frank, founder of the Center for Class Action Fairness, in a brief objecting to the proposed $3.4 billion, taxpayer-funded Cobell Indian trust settlement. The settlement includes a fee request in which solo practitioner Dennis Gingold claims to have billed over 28,000 hours in seven years — at his hourly rate of $925 an hour.

Paul Clement (left) and John Boehner (right)

They say that everyone is entitled to a lawyer. [FN1] But is everyone entitled to the services of former U.S. Solicitor General Paul Clement, one of our nation’s finest appellate advocates? At a discounted rate, no less?

As we mentioned in yesterday’s Non-Sequiturs, the U.S. House of Representatives has hired Paul Clement and Clement’s law firm, the venerable King & Spalding, to defend the Defense of Marriage Act. DOMA, which essentially bars recognition of same-sex marriages for purposes of federal law, has been struck down in part by various federal courts, and the Obama Administration has decided to stop defending the 1996 law in constitutional challenges.

So the House Republicans have stepped up to the plate to defend DOMA. And they’ve hired some high-powered counsel for the task, namely, Clement and King & Spalding.

The contract between the House and King & Spalding was made public today by the office of House Minority Leader Nancy Pelosi (after Speaker John Boehner declined to release it). The agreement contains some interesting tidbits, including the hourly rate the House will be paying, as well as a cap (although an adjustable one) on the fees to be paid to K&S.

Let’s take a look, shall we?

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Ed. note: This is the latest installment of Small Firms, Big Lawyers, one of Above the Law’s new columns for small-firm lawyers.

Ever since I stopped billing by the hour in 2006, lawyers are constantly asking me, “How do you set your prices?” It’s a topic I’ve lectured on and written about frequently, and my new consulting firm, Prefix, LLC, focuses on teaching lawyers how to do it for themselves. But today, I want to turn the question around:

How do you set your billing rates?

It’s an important question, and one you should know the answer to.

I know what the books on starting your own firm say (I’ve read them). Most of them come up with a formula along these lines: Decide how much profit you want to make in a year, add your estimated annual overhead, then divide the sum by the number of hours you think you can bill in a year. That’s your hourly rate.

Yeah, right.

That’s not how anyone sets their billing rates, regardless of what the books say. Instead, their rates are based on three factors.…

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Ed. note: This is the latest installment of Small Firms, Big Lawyers, one of Above the Law’s new columns for small-firm lawyers.

I live near Wellesley, Massachusetts, a Boston suburb usually described with words like “leafy” and “tony.” (I get “leafy,” but I’ve never really figured out “tony.”) Think soccer moms in yoga pants and BMW SUVs. On the edge of town, where it is less leafy and tony, there is a small tailor shop. The owners are immigrants; English is not their first language. This is clear from the computer-printed signs on their windows and walls. My favorite sign is the one behind the register:

“YOU NEVER LOOKED SO EXPENSIVE!!”

(Unnecessary quotation marks and extra exclamation point included.) I’m not exactly sure what they were trying to say. Maybe expensive wasn’t the word they were going for. Good? Chic? Tony? I don’t know. But the amusing phrase has stuck with me, and with many of my neighbors. I’m not even sure of the name of the shop, but everyone knows what I mean when I mention the sign. It’s a tailor-shop meme.

And a good one. In fact, I’d like to see small-firm lawyers make a similar sign and tape it to their mirrors. (Yeah, I know. I’m not a mirror-message taper either. But indulge me here.) Because the tailor-shop meme might remind them not to make the single biggest mistake that small-firm lawyers usually make: pricing their services too low….

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If you are a client looking for a lawyer, what will be the biggest influence on how much you pay that lawyer per hour? The excellence of the lawyer you hire? Please; pull yourself up off the ground and get back on your turnip truck.

Doesn’t it make more sense to pay more for lawyers at bigger firms? After all, size is what your looking for, not great legal work — right?

A new report, called the Real Rate Report, illustrates that firm size and city have more to do with price than the experience of the attorneys charging you money…

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