The disparity in legal fees charged by the highest-billing lawyers and those at the bottom is growing larger, reports Thomson Reuters. The results from a 4 year study spanning 2007-2011 conducted by TyMetrix Legal Analytics and Corporate Executive Board gathering data from 4,000 law firms, including 120,000 individual attorneys, were released on Monday. The finding of an average increase in billing rates of 4% from 2009 to 2011 is certainly unsettling; however other study results are arguably far more alarming.
When focusing on large firms specifically, the study found that firms with more than 1,000 attorneys increased their rates at a percentage increase which was double that of attorneys at smaller firms. In addition, from 2009 to 2011 hourly rates for attorneys working for firms of 501 to 1,000 lawyers increased by 13%, compared with a mere 4% increase for firms with only 1 to 50 attorneys.
The cost of an average billable hour rose from $435 in 2007 up to $540 in 2011. However, most of the attorneys driving up the cost of the average billable hour are considered “top billers” – those charging $800 or more per hour. The rise in hourly rates among top billers grew 5 times faster than the rates of lower billing associates (those who charge about $200/hour).
Joel Henning, principal of Chicago firm Joel Henning & Associates attributed the higher billing rates to clients decreasing the amount of firms they rely on for outside legal work in an attempt to consolidate and reduce costs. Instead of reducing a client’s legal costs as expected, rates are actually increasing as clients employ fewer firms for their outside legal needs. Because only one or two firms are being used to handle all of the client’s legal matters, “the associates on these teams become more experienced and can charge more.”
Although some argue the rise in billing rates is inevitable given the traditional business model of law firms, it poses the question as to just how high the rates will go before the bubble bursts. As we see many clients looking to utilize alternative fee arrangements in this economy, perhaps the top firms – and the top billers – will hit the proverbial “glass ceiling” of legal fees.
