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The rising tide of billing rate rollbacks demanded by legal departments

Last month, Susan Blount, the general counsel of Prudential Financial, wrote to the 60 law firms the insurance giant uses regularly. She informed them that in 2010 the company expects to pay for legal services at 2008 hourly rates. It wasn’t a request as much as a take it or leave it deal, in the words of a post on the Am Law Daily Blog, Dec. 10, 2009

“The response,” Blount says, “has run the gamut, from acceptance to disgruntled acceptance to firms saying, ‘You just don’t understand!'” She is not alone in the rollback mode.

A year ago Paul Hurd, general counsel of Daimler Trucks North America, asked the 75 firms Daimler uses to set 2009 billing rates at about 90 percent of 2008 rates. For 2010? Hurd says Daimler will ask firms to stick with the current hourly rate. That translates to rates in 2010 that will be lower than the firms’ 2008 rates (See my post of Feb. 9, 2009: rate freezes with 8 references.).

Say no more. Except I will say more. Even with rate rollbacks, firms may be permitted to increase the rates of associates as they move from class year to class year (aka step or progression increases), but those rate levels will not rise and might even fall.