I had a different topic in mind for this post and then someone sent me a screenshot from a fee request filing on Pacer (the federal courts’ e-filing system). Here’s just a snippet:
This is not a joke. You are reading this correctly – $775.00 per hour for first-year litigation associate lawyers. $1,205.00 per hour for a third-year! In a world that often feels insane, we’ve reached a new level of rate insanity when it comes to legal fees, especially those demanded by the mega firms. If you are like me, you looked at this chart and then fell out of your chair, unconscious and involuntarily flopping on the floor like a dying fish. Or maybe that’s just me? Unconscious or not, there is a lot wrong with these numbers, but I do not want to spend 3,000 words bashing the business model of the mega law firms. I know you all get it. Hell, even the folks at Big Law get it – they just can’t change the trajectory. But, the bigger questions to me are: (1) is this rate insanity sustainable, and (2) what can in-house legal departments do about it? Personally, I believe that the number of clients who can afford these rates (or have matters justifying these rates) is shrinking, like George Costanza at the beach house coming out of a cold swimming pool. In other words, is a reckoning coming?
I have no idea. These rates may, in fact, be sustainable. The legal services marketplace seems to be immune to pressures other businesses face. So, let’s just set that question to the side. Instead, today I want to talk about – once you stop flopping around and get back into your chair – what in-house legal teams can do in response to rates like this. In particular, I want to discuss alternative fee arrangements as I have been asked about these numerous times over the past month or so and they are likely to be (if done correctly) one of the most promising ways legal departments can get some control over the cost of legal services, especially when economic times appear to be as uncertain as they do here in the first half of 2023. This edition of “Ten Things” will tell you what in-house lawyers need to know about alternative fee arrangements: