Wednesday, August 22, 2007
Posted by Nancy Rapoport
Jeff's post on this latest rate increase points out that some lawyers are worth $1,000/hour or more, but the group of lawyers that can justify that rate is a much smaller pool than the group of lawyers charging (or about to charge) that rate. And that high rate is efficient only if the lawyer charging it is doing those tasks that use his or her specialized expertise. The problem, of course, is that the rate doesn't distinguish between "review file" and "develop brand-new legal theory that saves the day." And then there's the copycat issue, where lawyers who think that they're worth $1,000/hour want to increase their rates just to stay in the game.
I found Steve Susman's comment about his hourly rate most interesting:
Plaintiffs['] trial lawyers often bill on a contingency-fee basis, earning a share of a settlement or verdict -- an amount that can dwarf top rates. "It represents an opportunity cost when I am working by the hour," says Mr. Susman, who last year raised his hourly fee to $1,100. He did it in part, he says, "to discourage anyone hiring me on that basis."
That reason I can understand, and I set my own consulting rate very high (but not $1,000/hour high!) for the same reason. How many of the law firms increasing their rates to the new four-digit high spend much time calculating their "value added" part of the equation? I'll bet that, instead, they're just trying to make ends meet, given the still-increasing overhead caused by high associate salaries, and of course there's always the ego problem (he charges $X, therefore I will, too). Other folks (including here, here, and here) have been noticing the increasing disconnect between fees and value. Something's going to give, and soon--and Nero's new rates are speeding it along.