What’s your first reaction to the headline, “Lawyer Rates Top $1,500 an Hour?”
Envy? Pride? Excitement?
Mine was curiosity. I wanted to know what lawyers were billing at that rate – which comes out to $60K for a 40-hour week – and where they were practicing, because my lawyer friends in Carrboro and Smithfield don’t charge nearly that much.
It turns they’re just who you’d expect – senior partners at the world’s largest firms in New York and other major markets. Such as John Altorelli, a finance lawyer at DLA Piper in New York and one of the first to smash the $1,000-an-hour threshold a decade ago.
“Using hourly rates is really anachronistic, but we still do it,” he says here. “We just raise them every year.”
Rates at large corporate firms have risen three to four percent each year since the 2008 bust, according to a Citi Private Bank study. This is so even though inflation is low, demand is flat and clients are increasingly demanding fixed-price, lower-cost legal services.
“If you think of the rules of supply and demand, how in the world can they keep raising their rates?” muses one industry observer.
Rates up to $2,000 Per Hour
To be clear, even in Lower Manhattan, it is only the elite lawyers who are commanding fees approaching $2,000 an hour. And they tend to work in the least price-sensitive areas like taxation, antitrust, restructuring and mergers and acquisitions.
They keep hiking their rates because their clients keep paying them.
“The clients have kept coming back and growing during my 38-year career,” says one thousand-dollar-an-hour lawyer, who points out that his clients would rather work with him than a younger associate at a lower rate.
Of course, most lawyers even in large firms fall well below these heights. A 2015 study by BTI Consulting Group found that the average highest rate paid for law-firm partners was $875 an hour, up 27 percent over a three-year period.
Objective Standards for Setting Fees
Against this backdrop, some in the profession like U.S. District Judge Vaughn Walker are seeking an “objective source for setting counsel’s hourly rates,” according to Law 360.
Two of the more popular tools for doing this are the Laffey Matrix and the Real Rate Report.
The Laffey Matrix – which sounds like Keanu Reeves’ latest film – is a tiered-rate structure for calculating federal court counsel fees used by the U.S. Attorney’s Office for the District of Columbia.
The sliding scale is tagged to years of experience. In 2015, for example, the rate for a first-year lawyer was $255 per hour, rising to a high of $520 per hour for lawyers with 20 or more years of experience.
The matrix rates are only one factor for setting counsel fees. Other factors include the local standard of living and the cost of providing services.
Another fee-setting resource is the Real Rate Report, published since 2012 by information and software company Wolters Kluwer NV. The RRR analyzes fees and rates from the client’s perspective. In 2013, the survey crunched some $16.2 billion in fees paid by 90 companies to more than 5,600 law firms.
To dig deeper into the methodology of the Real Rate Report would require degrees in accounting and statistical analysis.
When it comes to hourly fees, the bottom line is the bottom line.
“Lots of law firms will charge whatever the market can bear,” said a partner at one of the nation’s 200 largest law firms.
- Law 360 http://www.law360.com/articles/641797/2-routes-to-hourly-rates-for-lawyers
- Yahoo! News https://www.yahoo.com/finance/news/legal-fees-cross-mark-1-010300039.html