Big News For BigLaw Partner Billing, Bad News For Boutique Firm Prices

Just as conservatives gather news from Fox and liberals from NPR, so should large law firms and small ones read trend reports from separate sources. At least it seems, in recession reporting, good news for biglaw often means bad news for boutique firms.

Take, for example, this morning’s revelation from data collected by Valeo and summarized in the Wall Street Journal (see the WSJ article here).

Partners in the top 25 percent of hourly billers increased their average price to $873 per hour last year, up 4.9 percent from 2010, according to a report published Monday (via WSJ).

But, simultaneously, the lowest-billing partners barely kept pace with inflation, according to the same data. Partners in the bottom 25 percent billed an average of $204 per hour last year, up a mere 1.3 percent.

Attorneys are itching to ask, who dares to bill $1,000 per hour in a recession?

The answer: Ira Dizengoff, a financial restructuring partner at Akin Gump Strauss Hauer & Feld LLP, and Andrew Goldman, vice chairman of the bankruptcy practice at Wilmer Cutler Pickering Hale and Dorr LLP, both bill at $1,000 per hour or over, according to the WSJ.

Of course, those mega-billing Partners possess a specialty practice, working in areas such as high-end bankruptcy, tax, or costly corporate litigation, explains Valeo Partners, a consulting firm that maintains a database of legal rates pulled from court filings and other public information, to the WSJ.

Not only does type or niche of legal work make a difference in negotiating power for the firm, but volume comes into play with these percentages as well.

“That said, higher rates don’t necessarily mean higher profits, which also depend on the volume of work. Firms also don’t always collect the full amount that they bill. And some firms are simply making up for ground lost when they kept rates flat in 2009 or 2010,” tactfully wrote Jennifer Smith for the WSJ article.

Higher billing rates translates to higher revenue when the number of cases and clients is equally substantial.

Unfortunately, one overarching reality is that small firms are less successful in raising hourly billing rates. Although every firm in the industry is attempting to regain lost ground, smaller firms have less leverage with clients in routine matters, like bulk contract work or compiling documents for patent claims.

“I’m really seeing pretty much everybody across the board, big and small, trying to raise their rates. The small ones are not as successful,” Lewis Steverson, general counsel for Motorola Solutions Inc.,” said to the WSJ.

Nevertheless, average hourly billing rates are up 7.1 percent for partners at the top 12 firms, according to Valeo data as cited by the WSJ. On a positive note, this number is creeping gradually closer to the average 8 percent annual increase in billing rates that law firms experienced pre-recession.

So, let’s hope this is still good news for the entire industry, even if change is occuring top down.

-WB

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