"Biggest Lawyers Grab Fee Bounty"

The priciest lawyers in the U.S. are getting even more expensive, but those at the opposite end are getting left behind.

Partners in the top 25% of hourly billers boosted their average price to $873 an hour last year, up 4.9% from 2010, according to a report being published Monday.

The country's lowest-billing partners struggled to keep pace with inflation, meanwhile. Partners in the bottom 25% charged an average of $204 last year, up just 1.3%, according to the report by TyMetrix Inc., a legal software and analytics company, and Corporate Executive Board Co., a business research and advisory firm. The study examined billing rates at more than 4,000 firms.

On the whole, lawyers last year pushed through the biggest overall annual rate increase, 5.1%, since the recession, when many firms froze prices or scaled back increases to keep clients happy.

The slow growth at the low end shows that clients who pushed back on legal bills during the economic downturn are continuing to hold the line, especially on routine matters, including bulk contract work or compiling documents for patent claims. And that disparity between who can raise prices—and who can't—spotlights a growing segmentation in the $100 billion corporate legal market.

At the very highest end, alternative fee structures can push effective billing rates to several thousand dollars an hour.

"There are a large number of lawyers today who find themselves in the uncomfortable position of being, for lack of a better phrase, commodity service providers," said Ken Grady, deputy general counsel at footwear company Wolverine World Wide Inc. "You don't see a lot of big rate increases being asked for in those areas, and that's not something they expect to get."
At the top, though, where clients have always been willing to pay top dollar for high-stakes litigation, mergers or other sophisticated legal work, the increase means more lawyers are joining the $1,000-an-hour club.

"The market just sort of gives people permission to jump over that line," said Julie Peck, vice president of strategy and market development at TyMetrix.

Practices commanding such hefty prices include high-end bankruptcy, tax and corporate work, according to Valeo Partners, a consulting firm that maintains a database of legal rates pulled from court filings and other public information.

Lawyers billing $1,000 an hour this year include Ira Dizengoff, a financial restructuring partner at Akin Gump Strauss Hauer & Feld LLP, and Andrew Goldman, vice chairman of the bankruptcy practice at Wilmer Cutler Pickering Hale and Dorr LLP, according to Valeo's data. So did litigator Peter Calamari of Quinn Emanuel Urquhart & Sullivan LLP. Akin Gump, Wilmer Hale and Mr. Calamari declined to comment.

That said, higher rates don't necessarily mean higher profits, which also depend on the volume of work. Firms also don't always collect the full amount that they bill. And some firms are simply making up for ground lost when they kept rates flat in 2009 or 2010.

At the lower end, less-expensive alternatives such as legal outsourcing firms and contract lawyers have made it harder for lawyers to justify rate increases.

"I'm really seeing pretty much everybody across the board, big and small, trying to raise their rates. The small ones are not as successful," said Lewis Steverson, general counsel for Motorola Solutions Inc., MSI -0.41% which makes two-way radios and other communications products for public-safety agencies. "We get more push-back from the big firms."
Rates have always varied widely, even among partners at the firms on the top rungs of the profession. And most lawyers customize their rates depending on the client or the task.

"There is a relatively small pool of people that can offer top-end advice," said Jeffrey Stone, co-chairman of McDermott Will & Emery LLP.

High-billing partners in the 12 law firms with the most revenue as ranked by American Lawyer magazine charge between $250 and $400 an hour more than low-billing partners at the same firm, according to Valeo. For example, the top publicly disclosed rate at Skadden, Arps, Slate, Meagher & Flom LLP was $1,095, compared with a bottom rate of $790.

Legal experts expect prices to push even higher.

Average hourly billing rates are up 7.1% for partners at the top 12 firms, which include Skadden, Kirkland & Ellis LLP, Weil, Gotshal & Manges LLP, Latham & Watkins LLP, Greenberg Traurig LLP, White & Case LLP and DLA Piper, Valeo says.

"Our rate structure reflects the real costs and competitive environment in each market and practice," said Greenberg Traurig Chief Executive Richard Rosenbaum. "Collaboration allows us to use that structure to deliver both quality and unique value to each client." The other firms either declined to comment or didn't respond to requests for comment.

Before the recession, many law firms relied on annual rate increases of up to 8% to fuel profit growth. The pace of such increases dropped sharply between 2008 and 2009 and has been inching back up since.

For some firms, that is plenty. Barnes & Thornburg LLP, a firm with more than 500 lawyers with roots in Indiana, didn't get resistance from clients when it increased rates last year by 4% to 5%, said Tracy Larsen, co-chairman of the firm's corporate practice.

The average partner rate at his office in Grand Rapids, Mich., is about $446 an hour—respectable, but not eye-popping, and lower than firms of similar size in New York or California.

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