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Rates and cost per hour comparisons between inside lawyers and lawyers at law firms in the United States

This blog has often referred to the fully loaded cost per hour of corporate attorneys. It has also from post to post provided data on the effective hourly rate of law-firm partners and associates. More recent data came as to the latter from Law Practice, July/August 2012 at 46, which provides metrics from the Lexis Firm Insight website. Those metrics say that “median effective hourly rate for partners has declined from $394 in 2009 to $378 in 2011.” The median effective hourly rate for associates has declined from $243 in 2009 to $235 in 2011. Thus, over two years, a drop in outside counsel rates of nearly five percent in nominal dollars.

If it is roughly true that for every partner hour charged there is an associate hour (See my post of Feb. 4, 2007: partner time to other timekeepers’ time.), then in 2011 the combination of those two levels would result in close to a $307 hourly effective rate for outside counsel. Compare that figure to $191 per fully loaded attorney hour for 212 law departments in the United States from the latest data in the General Counsel Metrics benchmark survey. The gap is sizeable, $307 an hour is 60% higher than $191 an hour.

What is even more interesting to me is that the same source suggests that 1,600 chargeable hours is typical pace for lawyers at private law firms. If the law-department fully loaded cost were calculated not on 1,800 hours but on the lower 1,600 of law firms, the internal cost would rise 11% to $212. The difference between that higher cost per hour inside and the $307 external cost, is approximately 45% (See my post of Feb. 17, 2008: 1,850 assumed internal chargeable hours may be too high.).