This little bit of nonsense comes from the trade association for lawyers, which is apparently unaware of how the legal biz actually works. An arbitrary, but not statistically relevant, small sample of self-reporting law firms say that their revenues are up, which the publication speculates means that this is because clients are clamoring to pay more for “the best legal talent.” (No one apparently bothered to ask the clients.)
This goes against the overwhelming evidence that clients are actually becoming tougher — especially sophisticated clients who have to pay their own legal bills. There is a glut of legal talent, good and bad, and sophisticated clients have been turning the screws on the law firms for years — half the articles in the ABA Journal are about this.
As our own experience examining the work of all sorts of law firms has confirmed for decades, there is no necessary correlation between the cost of a lawyer and the quality or value of that lawyer’s work. We see both expensive lawyers who are inexperienced, incompetent, and worthless as well as less expensive lawyers (hard to say they are “cheap”) who have the right experience, are extremely competent, and worth every cent. I’m guessing it’s the former the ABA thinks are the “talent” clients crave, though it’s actually the group that clients always complain about.
Law firms are reaping more in legal fees, likely because of rate increases [that's probably the main reason, along with increases in staffing and billable hours quotas] and clients willing to pay top dollar for the best legal talent, according to a study of legal spending data.
Legal fees for 37 companies [this is a very small sample and apparently not a statistically valid sample of anything] studied were nearly $950 million for the first two quarters of 2012, a 14.7 percent increase compared to the same period in 2010, the Am Law Daily reports. [This dollar amount is also a very small sample, just a tiny fraction of the gross legal product -- less than the income in that period of time for dozens of US law firms.]
Yet billable hours increased only 1.2 percent for the same period. [This increase is remarkable partly because timekeepers were already billing at incredible levels -- we didn't add any more hours to a day, did we?] “Even if clients weren’t buying many more hours, they were paying a good deal more for the privilege,” the story says. [They're missing several parts of the equation.]…
Large law firms are benefiting from high-priced talent who charge at least $800 an hour [nonsense -- these are suggested retail or vanity rates, not as-collected across the whole firm. The money isn't made at the top of the pyramid, but from its broad base.] …
It seems to me that this study isn’t even based on fees as collected, but instead on the firm’s raw billing data, which is basically a wish more than a real number and tends to fall over time as some debts go bad. Nor does it seem to have corrected for changes in the number of timekeepers or inflation of expenses claimed.
Two things the story makes clear is that the billing software company that provided the data (1) has no clue about how the legal billing world actually works and (2) their software is useless when it comes to managing legal fees. (These are services my firm provides, including helping clients to select and verify billing software and fill in the legal fee management gap they necessarily leave open.)
It surprises me that the ABA — with its membership also skewed toward the same law firms — is so clueless about their business. There’s no magic in the legal business, especially not with the simple arithmetic that governs hourly fees. But, even something this simple, can be confusing to the uninformed. Hence the absurd conclusion that clients are searching out opportunities to pay more for the same old stuff. Clients are, as they should be, looking for true talent, at a reasonable price.
ABA Journal: Legal Fees Jump 15 Percent over Two Years, Even as Billables Remain Flat, Study Says
