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Thoughts on cost differentials based on average hourly rates for litigation associates in 2011

The 2012 Real Rate Report, produced by TyMetrix and the Corporate Executive Board, includes some data on 2011 litigation rates. As explained in the ABA Journal, July 2012 at 33, the average hourly rate for associates was $357. Whether those rates are representative of other services provided by law firms the article does not explain.


If we assume that for every associate hour there is one-half of a partner hour, a leverage ratio which may be approximately correct for U.S. law firms when litigating, the overall rate – assuming partners are in the $500-$700 an hour range – would near $500 an hour.


This blog has repeatedly written how internal costs per lawyer hour for US law departments, when fully loaded, are around $200.


I do not know how to reconcile these figures except that law firms also bill for paralegals and we would need to include their rates and hours to make the comparison comparable to the fully loaded cost of law departments.  Second, the article does not say whether these rates are what the clients in fact paid or whether they were what was billed at standard rates and may have been subject to either discounts, write offs, or both.  If a law department receives a 15% discount on $450 an hour blended rates of lawyers, that drops the effective rate paid into the upper $300s.


All in all, if we take large law departments that hire large firms as the standard, thereby estimating fully-loaded internal costs at $225 and if we reduce the external costs by the paralegal time (and assume a discount), we might compare the internal cost to something like $350 an hour externally.  That gap of somewhat more than one-third (one-third of $225 is $75) is what others have estimated – it is the partner profit at law firms.



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