Co-contributors Marc and Mike thank Mike’s father-in-law Tom Basehart for sharing an interesting April 10, 2013 article from The Wall Street Journal (authored by Jennifer Smith) which provides some insights into rising attorney billing rates and client reactions to such a trend.
Here are the highlights from this article:
*”Star” partners billing out at $1,150-plus an hour have doubled between the first quarter 2012 to first quarter 2013 according to consulting firm Valeo Partners (320 lawyers versus 158 a year earlier);
*The “gilded circle” billing at the rates described above includes tax, intellectual property, and M&A deal attorneys;
*Corporate clients almost always negotiate attorney rates down from “rack rates”, averaging discounts anywhere from 10-30% off of standard rates;
*The gap between law firms’ “sticker prices” (published rates/billed amounts) and collection rates (what is actually collected) has risen dramatically. According to data collected by Thomson Reuters Peer Monitor, big firms raised their average standard rate by about 9.3% over the past three years, but only increased collections by 6% over the same time frame. Firms that used to collect on average about 92 cents for every dollar of standard time their lawyers worked in 2007, before the economic downturn, now are getting less than 85 cents, a “historic low” according to a Georgetown Law Center for the Study of the Legal Profession senior fellow; and
*In the first quarter 2013, the 50 top-grossing U.S. law firms boosted their partner rates by as much as 5.7%, billing an average between $879-882 per hour, according to Valeo Partners, increases continuing an upward trend in attorney hourly rates from 2012--when legal fees in general rose 4.8% and associate billing rates rose by 7.4% according to a TyMetrix Legal Analytics/CEB report surveying data from more than 17,000 law firms.