Corporate America in 2011 will send less work to the largest 200 law firms than it did in 2010.  That is just one result from a client survey commissioned by Citibank and the Hildebrandt consulting firm.  Specifically, slightly more than half of our largest corporations reported that they intended to impose fee reductions on their largest outside law firms.

And for the first time in a very long time, the demand for large-firm legal services actually decline by 5%.

Generally speaking, what happens between the largest corporations and their outside law firms doesn't tell you much about the interactions between other companies and their attorneys.  The economics of hiring a lawyer are radically different when you're facing a billion dollar law suit, or are involved in a multi-billion dollar transaction. When you are dealing with "bet the company" legal issues, it's not hard to convince yourself that it's sensible to pay lawyers $800 and hour or more.  

When it comes to hiring lawyers, there is, however, a lesson that many companies can learn from the Fortune 500.  You have many more options that you used to.  Just as the biggest of the big are increasingly turning to smaller regional firms, smaller companies now have the option of working with much smaller law firms.  Technology has enable solo practitioners and firms with fewer than ten attorneys to handle transactions and law suits that a decade ago required more bodies.  Moreover, as large law firm continue layoffs, the number of highly trained and experienced lawyers who have the knowledge to handle complex business lawsuits and transactions is increasing.

So the next time you as a business owner are facing a law suit or complex transaction, don't ignore the small law firm.  They may be able to provide you the combination of expertise and value that you've been looking for.

Posted by Gideon on 01/31 at 01:40 PM
Categories: How To Work With Your Lawyer | Categories: Lawyer Earnings | Permalink

There are many myths about how much money lawyers earn. Too many people, especially those who aren’t experienced working with attorneys, wrongly assume that all lawyers are swimming in money. I recently came across this phenomenon in connection with the analysis of timesheets filled out by lawyers who bill by the hour. The report showed among other things that between 2006 and 2009, 75% of all lawyers had increased their hourly rates. This doesn’t strike me as particularly remarkable. I would assume that most service provides raised their fees over a three-year time frame, especially a period that preceded the beginning of the current recession.

The most interesting aspect of the report was how some of its findings were summarized. One person angrily denounced lawyers on Twitter, saying that the report showed that lawyers had raised their rates by 75% during the recession. That would be an eye-opening result.

It’s hard to imagine prices of anything going up so quickly without a seismic change in the forces of supply and demand. If you wait until the last second to buy tickets to a hot concert, prices may spike up. The same would be true if you wanted to buy bottled water in the days after a natural disaster struck an area. But nothing similar has happened with legal fees. In fact, lawyers have been hit hard by the recession. Large law firms laid off more than 10,000 lawyers in the last 18 months. Students graduating from law school are in a virtual panic about their job prospects. In the twenty years I have been involved in the law, there has never been a better time to be a client. This is definitely a buyer’s market, so please don’t buy into the myth that lawyers and law firms are immune to the economy or that they are universally thriving. They aren’t. You have a better chance than ever of striking a fair bargain with lawyers and establishing a good and professional working relationship with them.

Posted by Gideon on 10/11 at 07:54 AM
Categories: Lawyer Earnings | Permalink

Lawyers are rich; everyone knows that.

But if you look behind the curtain, the reality is quite different. Attorneys are among the highest paid occupations, but at least a quarter of all lawyers, perhaps more, wouldn't meet anyone's definition of a wealthy person.

According to the Bureau of Labor Statistics, the governmental agency that tracks wages, a quarter of all lawyers make less than $77,000 a year, and the bottom ten-percent earn $55,000 or less. These figures are from 2009, and the legal profession has been hard hit.  I would be surprised if the current earnings weren't lower now.

People's impressions of lawyers are driven to a large extent by the hourly rates that some lawyers charge. It's not surprising that clients feel that someone who charges $300 an hour must be wealthy. Public perceptions are also shaped by the salaries that the largest law firms pay and how much partners at those firms earn.  The large firms account for perhaps five percent of legal hiring. And they do pay a lot; more than $125,000 for lawyers out of law school and it's not uncommon for partners at these large firms to make more than $1 million a year.  But these firms often represent the largest of the large corporations.  That's where the money comes from to pay such high fees.

If you aren't working for a large corporation, it's more reasonable to expect that the lawyers you will hire are more likely to earn $100,000 than anything approaching $500,000.  The government estimates that half of lawyers make less than $115,000 a year. This is a substantial amount, but it does help show that the typical lawyer and most law firms are in fact small businesses.

Please keep that in mind the next time you look to hire a law firm.  Most are not rolling in money.  The bigger issue, of course, is not what lawyers are paid, but do they provide a good value for the money.

Posted by Gideon on 08/30 at 02:12 PM
Categories: Lawyer Earnings | Permalink