Legal Rates Slow To Bounce Back | Central Mass. firms adjust how they bill to accommodate clients
The recession has a brought a fundamental shift in the relationship between clients and lawyers regarding legal fees, according to Mark Medice, who tracks financial performance of law firms for the Chicago-based consulting firm Hildebrandt Baker Robbins.
“The clients are calling the shots,” he said. “Nowadays, clients have the upper hand in demanding betters deals.”
Soon, the traditional hourly-billing rate may be a feature of the past. Medice and local lawyers said more clients are asking for alternative payment methods, including fixed-payments, cost ceilings, blended rates between multiple attorneys and billing in installments.
“It’s a fairly dramatic shift,” Medice said.
The Numbers
According to the Peer Monitor Index, which is produced by Hildebrandt and compiled by Medice, legal fee increases are beginning to move back to their pre-recession days.
In the first quarter of 2009, legal rates in the United States increased at a 2.9 percent annualized rate, the smallest annual increase in the decade Hildebrandt has been tracking legal fees.
Since then, the rate at which fees are rising has increased. During the first quarter of this year, rates rose 4.6 percent above last year. That compares to the earlier part of the 2000s when rates were going up 7 to 10 percent on an annual basis.
While rates are beginning to bounce back at the national level, they have been slower to creep back up locally, according to members of the legal community interviewed for this story.
“We haven’t changed our rates in three years,” said Westborough patent lawyer Barry Chapin. “We haven’t needed to.”
He said his firm, Chapin Intellectual Property Law, already does mostly fixed-price work anyway. That model, he said, allows customers to plan their expenses and guarantees that work gets done at a certain price.
Getting Creative
Robert Adler, managing partner at Seder & Chandler, a 15-attorney Worcester firm that also has an office in Westborough, said businesses across the country are looking for ways to cut costs, so law firms have to be able to give clients what they want. While the rates at Seder & Chandler haven’t gone up in about two years, the firm is trying to constantly evolve the practice.
“We’re seeing a demand for value-added,” Adler said. “It’s about taking the same ingredients that everyone has, the same eggs, milk and flower, and making a better cake. If you do that, clients recognize it and look at the payment as a reasonable fee.”
That requires giving clients a “holistic approach,” he said. It also means trying to handle all aspects of a customer’s legal needs, whereas before, some of those might have been sourced to different firms.
John Hanrahan, managing partner at Bowditch & Dewey, said the firm has not had an across-the-board increase in rates, but rates for some individual lawyers have risen in the past few years to accommodate seniority. He said clients are looking for more alternative billing methods, too.
Patricia Gates, who sits on the executive committee of Mountain Dearborne & Whiting LLP, a Worcester firm, said compared to larger markets like Boston and New York, Worcester already has conservative billing rates.
“I think the Worcester legal community is very cost conscientious in terms of billing rates,” she said. “I don’t think those increases that we saw even earlier in the decade were happening to the same degree here.”
While some firms decide on their rates on an annualized basis, Gates said it’s a less formal process at Mountain. Rates are evaluated as needed. She said they haven’t changed in the past few years.
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