Pricing

The asinine drivel talked about AFA’s does my head in…

WARNING: Law firms, clients and procurement get a gentle bollocking. If you are easily triggered, don’t read on… As you will gather from the title, this blog is underpinned by quite some frustration, so it is perhaps pithier than usual (we all need to let off steam now and again).

First some context. No, it’s not an exercise in hubris. Some context may be helpful so you can decide how much weight to attach to these comments, if any. You might think it is all drivel?

We are told by people whose views are respected within the profession, that we have a well-established reputation as the international leaders in the legal services pricing space. Why? Well that’s for others to judge and have a view. Sticking to the facts alone…Read more...

What Role Will Pricing Play in Your Firm’s Profitability This Year?

2023 is going to be challenging.

At least that seems to be the consensus amongst managing partners and firm’s management boards, and few would have cause to disagree. Over the last few months, many have been dusting off and refreshing their contingency plans developed at the start of the pandemic.

So, which levers to pull. Everyone knows what they are – hiring freezes/redundancies, postpone moving to the cloud, shelve expansionary plans and lateral hires etc. Which leaves our favourite topic – pricing. “Done that”, I hear you say. I presume you mean an across-the-board rate increase of 11% (some more, some less)? Hmm, well, yes, that’s a small part of it. Read more...

New York Law Firms Take Heavy Profit and Revenue Hits

Attorney cuts may come soon at New York law firms. "The numbers just aren’t there to support the staffing," said a Wells Fargo consultant.

As demand and revenue growth slowed down, New York law firm profits plummeted 18.3% through the first three quarters of the year, while head count and expenses soared, according to a bank survey of firms. So far, New York law firms have generally held off on personnel cuts tied to performance reviews—but that could be coming soon.

“We haven’t heard of New York firms doing these performance reviews as of yet,” said Owen Burman, senior consultant for Wells Fargo Legal Specialty Group. “But, we will likely see those in December and January. The numbers just aren’t there to support the staffing. They have all been suffering from a dearth of capital markets activity, and I’m not sure at what point they say they have had enough.” Read more...

A 'Worrisome' Start to 2023 Is Expected for Law Firms

Expectations for a quick surge in profitability appear to have fallen.

Law firms may end 2022 in better shape than they appear to be now. But firm leaders also anticipate rising expenses as well as continued declines in productivity, setting the stage for a “worrisome” 2023 in profitability.

Expectations for a quick surge in profitability appear to have fallen, according to the 2022 Law Firm Business Leaders Report, published in the last week. Read more...

Baker McKenzie Rolls Out 2022 Bonus Schedule, Omitting Additional Hours-Based Premiums

Annual bonuses for U.S. associates start at $20,000 for the class of 2021 and increase to $115,000 for the class of 2015 and beyond.

Baker McKenzie has announced its 2022 year-end bonuses for U.S. associates, maintaining its basic 2021 schedule but removing hours-based premiums for high-billing associates.

Annual bonuses start at $20,000 for the class of 2021 and increase to $115,000 for the class of 2015 and beyond. In an email to U.S. associates obtained by Above the Law, North America CEO Colin Murray said the bonuses would be paid Feb. 10, 2023. Read more...

Raising Billing Rates in 2023 Becomes a 'Singular Focus' for Law Firms

"We’re seeing higher planned rate increases at this point than we’ve ever seen, and we’ve been tracking this for 15 years," said a Wells Fargo analyst.

Law firms are preparing “aggressive” billing rate increases for 2023, seeking to overcome inflation amid challenges in their demand and productivity, according to legal industry analysts.

Law firm leaders told Wells Fargo Legal Specialty Group they will raise rates on average around 7% or 8%—before discounting—in 2023. Read more...

'Surprised, Angry, Dismayed': Legal Departments Vow to Fight Law Firms' Rate-Hike Plans

“This feels more like law firms throwing spaghetti up against a wall and seeing what sticks," said Jason Winmill, managing partner of Argopoint.

The in-house legal community is expressing outrage that law firms will be pressing for aggressive rate hikes in 2023, even though they know that legal departments are under extraordinary pressure as the economic outlook sours.

“Law firms are claiming to raise rates due to inflation, but anyone who’s ever taken an economics class knows that the real reason they’re raising rates is because they think no one will notice under the guise of inflation,” said Stephanie Corey, a former legal-ops leader at HP and VMware who now leads the consulting firm UpLevel Ops. Read more...

These Am Law 50 Law Firms Are Billing Seven-Figure Fees in Crypto Bankruptcies

Since July, Kirkland has applied for reimbursements totaling $6.5 million for Voyager and $7.1 million for its work for Celsius Network.

Am Law 50 firms Kirkland & Ellis, White & Case and Quinn Emanuel Urquhart & Sullivan are charging multimillion-dollar legal fees for representing parties in the Chapter 11 bankruptcies of cryptocurrency trading platforms Voyager and Celsius, with some partner hourly rates ranging as high as $2,130.

As law firms gather around the recently filed bankruptcy of FTX and BlockFi, fee statements in the Voyager and Celsius bankruptcies provide an insight into how much the wealthiest law firms in the world stand to gain in the restructuring of troubled crypto businesses. Both trading platforms filed for bankruptcy in July. Read more...

Boies Schiller Reveals 'Extraordinary' Bonuses for Associates

The firm is offering “extraordinary” bonuses for market associates who exceed the 2,350 and 2,600 creditable hour thresholds, said the firm’s managing partners.

Boies Schiller Flexner this morning revealed bonuses for associates, with some senior associates earning as much as $165,000 if they bill more than 2,600 hours, according to a Tuesday memo seen by American Lawyer.

The firm is offering year-end bonuses, starting with $15,000 for the class of 2022 and going to $115,000 for the class of 2015 and above. The scale roughly matches the bonuses announced by Baker McKenzie earlier this month and is in line with the Cravath Swaine & Moore bonuses last year. Read more...

Increasing Write-Offs in Client Bills Should Sound 'Loud Alarm Bells' For Firm Profits

Profit pressure from rising client discounts is also "driving lawyers hard to increase billable hours" and that could jeopardize talent if it continues, according to a new report.

Big Law is planning big billing rate increases to offset inflation and other costs. But growth in discounts and write-offs have also tamed profits this year and could threaten both profitability and talent retention in 2023, a new report finds.

Almost three-quarters of law firms in North America and more than two-thirds in the United Kingdom say write-offs have increased this year, according to a new report from legal tech company BigHand, with about half of respondents in each jurisdiction confirming they’ve increased by more than 10%. Read more...

Trust Fall: the limits of discounts, panels, billing guidelines, etc.

At present, the most universal priority for law departments is “controlling outside counsel costs” per 85% of respondents to the most recent TR Legal Department Operations Index.

I understand. I also doubt the marginal utility of simply pressing harder on the traditional levers of cost control (discounts, panels, RFPs, outside counsel guidelines, AFAs). My sometimes solicited, alternative advice:

• Package work. Identify opportunities to enter portfolio arrangements, including integrated law relationships with New Law offerings. Read more...

Law Firms and Clients Will Lean on Negotiated Discounts and AFAs in 2023

"Clients start by requesting an AFA and ultimately ask for a pre-negotiated discount," noted a report this week on the frequent usage of discounting plans.

Law firms have big plans to raise billing rates next year, but their discounting agreements with clients may already be underway.

Law firms will lean on prenegotiated discounts going forward, according to a report this week from Citi Private Bank and Hildebrandt Consulting, as firms aim to maintain strong, pandemic-era billing and collections practices in a more challenging, rate-sensitive environment. Read more...

Big UK firms ramp up billable targets as ‘profit leakage’ increases

The vast majority of big UK law firms have increased billable hours targets for their lawyers, new research has found, as they look to maintain profit levels in the face of rising write-offs.

A whopping 98% of UK outfits surveyed said they had increased target hours for lawyers, with nearly half (47%) doing so by over 10%.

The Legal Cheek Firms Most List 2023 provides a breakdown of billable hours targets across all the major outfits, with figures ranging from a high of 2,000 to a low of 800. It’s worth noting some firms choose not disclose these, while others say they don’t set them at all. Read more...

Will legal tech doom the billable hours model for law firms?

Oxford University history student Lewis Ogg looks into the impact of legal tech on the way firms charge for their legal services, and calls time on billable hours

There can be no doubt that in recent years, the excitement around the prospects of legal tech has reached dizzying heights. Concerned training contract applicants are taking every opportunity to question recruiters on whether it will lead to a contraction in trainee intakes and hopeful associates are praying that it will relieve them of their more menial work in the near future. Read more...

As Currencies Fluctuate, Law Firms Adjust Lawyer Pay and Billing Across the Globe

Firms are taking steps to minimize the impact exchange rates could have on partner compensation, associate salaries and other expenses.

From bonus pools to putting a cap on exchange rates for lawyer pay, global law firms have used several compensation techniques to try to insulate themselves from dramatic currency swings this year.

Law firms with operations in multiple countries often bill clients and pay lawyers in their local currency, meaning they are less prone to the risks that come with foreign exchange rate movements. But firms are still taking steps to minimize the impact exchange rates could have on partner compensation, associate salaries and other expenses. Read more...

Kingsley Napley wins claim for unpaid fees from property developer

A wealthy international businessman must pay Kingsley Napley £14,146.37 plus interest in unpaid fees after a judge threw out a counter claim for negligence against the London firm. In an excoriating judgment handed down today, His Honour Judge Richard Roberts found defendant Simon Halabi to be lacking in credibility.

Kingsley Napley sued Halabi for unpaid fees after it was retained to help him cancel an offender notification order. Halabi, who was an original developer of London’s Shard skyscraper, counter-sued for alleged negligence, which the firm denied. Read more...

Law Departments Expect Law Firm Rate Hikes, but They're Ready to Push Back

A survey from HBR Consulting found that 44% of law department leaders plan to enforce limitations on the types of increases they accept.

Those law departments that evaluate outside counsel rates on an annual basis are less willing to accept increases in the 2022-23 review cycle, the 2022 HBR Consulting Law Department survey found.

Coming out of the 2021-2022 rate review cycle, law departments showed a 5% median approved rate increase, with 20% of departments surveyed experiencing unusually high approved rate increases of 10% or more. Read more...

Lawyer David Boies bills $1,950 hourly in Google case, court filing shows

Prominent trial lawyer David Boies is billing $1,950 an hour in a case alleging privacy violations against Alphabet Inc's Google LLC, according to a court filing seeking fees after a judge sanctioned the company for litigation misconduct.

The fee petition filed on June 3 by Boies and other lawyers on the plaintiffs' team came in response to a U.S. magistrate judge's ruling in San Jose, California, federal court last month that said Google failed to timely disclose certain pieces of evidence, including the names of key employees. Read more...

Lawyer's $2,465 hourly rate draws objection in J&J talc bankruptcy case

The United States is objecting to a Johnson & Johnson subsidiary’s bid to add Hogan Lovells partner Neal Katyal to its legal team in a high-stakes bankruptcy case, citing his hourly rate of $2,465 — a possible new legal industry high.

Johnson & Johnson is using the proceedings to try to resolve claims that its baby powder and other talc-based products caused cancer. The company, which maintains the products are safe, in October assigned thousands of talc lawsuits to a new subsidiary, LTL Management LLC, and placed it in bankruptcy. Read more...

Costs

PI claimant may escape costs in 'perverse incentives' case

A court ruling could mean a clinical negligence claimant who asked for £5.7 million but settled for a fraction of that after two years of litigation, does not have ‘to pay a penny’ of the successful defendant’s costs.

The Court of Appeal heard that the current state of the law in PI cases could breach the 'rule against absurdity' and would be a 'perverse incentive' for defendants to take cases to trial rather than settle. Read more...

£750-an-hour fee challenge halted as proceedings ‘go awry’

A hearing of a dispute about a London law firm’s unpaid fees had to be adjourned on its second day following difficulties over access to documents.

Mayfair-based BlackLion Law LLP billed businessman Simon Lyons £750 an hour to act as general counsel with regard to two matters, costs judge Master Brown heard.

The hearing follows a county court judgment from earlier this year about an unpaid invoice of around £140,000. Following a £6,000 payment and the deduction of a commission, the disputed sum is now just under £120,000. The county court judge concluded that ‘line-by-line detailed assessment of the costs – the work done and the amount charged’ would be necessary. Read more...

Court allows costs challenge by client 'not informed' about options

The High Court has ruled that a costs bill can be challenged after the one-year time limit for requesting detailed assessment. In Menzies v Oakwood Solicitors, Mr Justice Bourne said Leeds firm Oakwood Solicitors had not made clear to a former client the procedure for objecting to the deduction of costs from his damages. Payment was therefore not effected by a settlement of account and a challenge could still be made.

He overturned the decision of Costs Judge Rowley who had ruled that the application for detailed assessment was time-barred because it was made more than a year after the relevant costs had been paid. Read more...