A Cry for Alternative Billing Methods by Law Firms Continues to Grow
This week, LegalWeek.com, a site that provides daily news alerts, blogs, wikis, user-generated content and archive of over 27,000 stories relating to the law, published two very telling articles about rising legal fees and the growing perception among in-house legal teams that the value provided by outside law firms is diminishing.
In the first article, New survey shows billing rates inching up slowly at US firms, author Karen Sloan reported that hourly rates continued to rise this year, albeit at a slightly slower rate:
US law firms increased their average firmwide billing rate by just 2.5% during the last year – one of the lowest increases in recent memory, reports The National Law Journal.
The small rise compares to a 4.3% increase in 2008 and a 7.7% rate climb in 2007.
The National Law Journal’s annual survey of billing rates covered the period from 1 October 2008 to 30 September 2009, with 190 firms providing at least some billing information. Firms were asked to report their billing rates as well as their use of variations on the billable hour and alternative billing arrangements.
Nationwide, the average hourly billing rate for partners was $457 in 2009, up from $451 in 2008. For associates, the average rate was $287, an increase from $282 last year.
Despite a drop in the amount of the rise, a rise it is, and in this difficult economic climate, in-house counsel lawyers are hard-pressed to continue to tout the value of supplementing their firms’ legal needs with hourly legal services, as reported by Alex Aldridge in his piece, Senior in-housers raise concerns over value for money from law firms:
Law firms represent worse value for money for clients than they did five years ago, according to a recent survey of senior in-house counsel.
Almost two thirds (62%) of respondents to the survey – conducted by US law firm Winston & Strawn at this autumn’s Legal Week Corporate Counsel forum – felt that their external law firms were offering less value for money than five years ago.
What we find most telling is what follows in Aldridge’s article:
However, in-house teams are optimistic that this could change as alternative billing arrangements replace the hourly rate as the dominant method of charging for legal services.
Some 40% of respondents predicted that, five years from now, hourly billing will only be used in exceptional situations (with a further 40% anticipating that hourly rates will become limited to specialist work). The findings suggest that clients’ patience with the charging model widely associated with spiralling legal fees is wearing thin.
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