Law firm billing rates steadily climbing despite down economy

Report finds a sharp increase in partners billing more than $1,000 per hour

At a time when corporate purse strings are still cinched relatively tightly, legal departments probably aren’t popping champagne bottles over the news that rates for their outside counsel are continuing to rise.

Legal software company TyMetrix, a business of Wolters Kluwer Corporate Legal Services, and the Corporate Executive Board research firm yesterday released their 2012 Real Rate Report. The report analyzes invoice data to quantify and explain what drives the billable hour, examines actual rates charged, law firm staffing behavior and matter phase costs. In doing so, the report analyzed more than $7.6 billion in law firm billings generated from 2007 to 2011 by more than 4,000 law firms and about 120,000 billers, including about 80,000 partners and associates. 

Other findings from the report:

  • Outside counsel charge different clients variant rates for similar work:  Ninety percent of lawyers charged different rates for similar types of work in 2011. Intellectual property (23.1 percent) and commercial contracts practices (18.7 percent) had the highest percentage difference in rates.
  • Use of entry-level lawyers can add significant costs:  The use of entry-level lawyers (associates with fewer than two years of experience since passing the bar exam) continues to decline.  Additionally, matters staffed with entry-level associates tend to cost up to 20 percent more.
  • Consolidation not necessarily associated with lower rates. While some in-house legal departments have successfully consolidated work into a single law firm, the report reveals that rates actually tend to increase as a law firm takes on more work from a client. 

But despite these billing trends, Julie Peck, TyMetrix’s vice president of strategy and market development, suggests that in-house legal departments shouldn’t base their staffing, strategy and outside counsel selection solely on the basis of rates.

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