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Hourly billing rates of law firms and some ramifications

Hourly billing rates of outside counsel cover this blog like spring pollen, as they settle everywhere you look, increase dramatically once a year, and cause some general counsel to suffer allergic reactions. References to rates being plentiful, it took a while to assemble my posts other than seven previously composted as metaposts about blended rates, discounts, effective billing rates, rate freezes, most-favored-nation terms, billing and rate increases (See my post of Dec. 5, 2005: blended billing rates with 7 references fees; Nov. 26, 2006: discounts with 15 references; March 9, 2009: effective billing rates with 9 references; Feb. 9, 2009: rate freezes with 8 references; April 30, 2009: MFN impositions with 8 posts; April 30, 2009: billing rate data of partners with 14 posts; and Dec. 5, 2008: rate increases by firms with 18 references.).

To vary the billing rates for the same lawyer, depending on circumstances, presents opportunities as great as the logistics are difficult (See my post of Oct. 22, 2006: multiple billing rates – inside vs. outside; Jan. 13, 2006: rates that vary according to value delivered; May 14, 2006: rates according to value; March 12, 2006: billing rate differentials by lawyer within the same class year; May 26, 2006: conditional billing rates; July 19, 2007: administrative hassles when partners seek dispensations from standard rates; and June 10, 2007: committees that must agree to rate changes by partners.).

Several posts offer information about the relationship between the number of lawyers in a firm and its billing rates (See my post of Sept. 10, 2005: rates correlated to size of firm; Dec. 28, 2006: differentials between partner and associate rates; Jan. 3, 2007: the effect of increased overhead on rates; March 24, 2007: overhead costs rise with size of firm; Oct. 25, 2007: correlation of rates to firm size; and Sept. 12, 2008: Burger King and lower-cost regional firms.).

Some posts highlight the trickiness of analyzing billing rates (See my post of Jan. 28, 2008: high partner rates distort law departments’ perceptions; Sept. 5, 2005: the “real action is not in rates and discounts”; Nov. 2, 2006: DaimlerChrysler and notional rates; March 12, 2006: nominal spending figures; Oct. 19, 2008: rationale for paying ever higher fees to some partners; and Jan. 2, 2009: rates may hold steady but reductions come through the back door.).

This blog contains multiple forays into atypical arrangements regarding rates (See my post of June 5, 2007: per diem rates are not an effective technique; Nov. 24, 2007: some situations where per diem rates may fit; April 29, 2009: law departments might cap rates of comparable partners; May 21, 2007: cap the hourly rates charged on certain work; and Oct. 24, 2005: disbursements built into billing rates.).

Hourly rates, the totem of law firms, have invoked comments derived from the disparate domains of neurology, epistemology, sociology, and economics (See my post of Feb. 17, 2008: high rates excite the medial orbital frontal cortex; Oct. 19, 2008: heightened neural excitation from expensive firms; Sept. 9, 2008: billing rates may have risen with complexity; Jan. 30, 2008: women bill at lower rates than men, other factors being controlled; and May 1, 2006: signaling function of standard rates.).

Law departments care about billing rates, but only as a secondary attribute (See my post of Jan. 30, 2006: among attributes of law firms, billing rates rank 4th; July 20, 2007: another survey on attributes, with rates ranked 4th; and Oct. 31, 2005: “low balling” at unprofitable rates.).