To best economize their legal spend, businesses should look for lawyers in smaller firms in non-major markets, such as Hartford, according to a Connecticut analytics firm.
Hartford analytics provider TyMetrix publishes an annual report revealing the rates of lawyers in law firms across the country. The data helps clients determine the best use of their legal dollars, budget specific legal issues, and understand the best practices across the industry. Using the data, a company’s spending on legal services no longer varies case-by-case and lawyer-by-lawyer.
“The idea that you are legal and you are different no longer matters,” said Craig Raeburn, managing director of legal analytics for TyMetrix.
TyMetrix’s Real Rate Report isn’t designed to be an instructional booklet in helping businesses select lawyers, but rather a guide for what factors influence rates and how rates are changing. Companies then include the data when picking outside counsel on specific legal matters.
“Businesses are still going to be selecting their law firms and their lawyers based on their value,” said Kimberly Knox, president-elect at the Connecticut Bar Association and partner in Hartford law firm Horton, Shields & Knox, P.C. “They are going to be basing their decision on a lot of variables.”
The 2012 version of the report shows what five factors influence lawyers’ rates the most. The two biggest determinants are the size and location of the firm. The next most influencing factors are whether or not the lawyer is a partner, the level of professional experience, and the specific practice area.
So, if a business wants to hire a partner in a law firm at an efficient price, the company should look for smaller firms outside of major markets such as Boston and New York. A lawyer’s rate will rise $15 per hour for every 100 lawyers in the firm and rise $161 per hour in major markets, according to the 2012 Real Rate Report.
A lawyer’s fee will rise $95 per hour if he or she is a partner; rise $34 per hour for every 10 years of legal experience; rise $99 per hour if in the key practice area of finance or decrease $15 per hour if in the key practice area is litigation, according to the report.
“What it forces law firms to do is to be more careful in how they draft their bills,” said Lee Hoffman, attorney at Hartford law firm Pullman & Comley.
TyMetrix first started offering legal consulting services in 1994 and starting offering e-billing and matter management services in 2001. The company began its rate reporting in 2008 when 36 clients agreed to give TyMetrix all their legal spending data so it could establish industry benchmarks.
The popularity of the report has grown each year with more than 100 TyMetrix clients providing their spending data, offering views of lawyers and law firms across the country.
“It is all based on the actual invoices that our clients receive,” Raeburn said. “It allows us to go pretty deep into benchmarking.”
TyMetrix clients can use the report to look at a specific legal issue and see how much others are paying in those instances.
Since the recession started in 2008, law firm’s clients have been more focused on fees and fee structure, said Elizabeth Stewart, managing partner at Hartford law firm Murtha Cullina. Initially, clients asked for rates to freeze, but now they increasingly look for alternative options, such as only paying if the case is successful.
“Everyone has gotten more business-like about the pricing of their services,” Stewart said.
The greater understanding of rates and alternative possibilities has enabled firms such as Murtha Cullina to entice clients away from more expensive law firms or those with rigid fee structures, Stewart said.
“That has been going on forever, but people have gotten more businesslike since the downturn,” Stewart said.
Even with the change in attitude, businesses aren’t looking for the cheapest lawyer available, Knox said. They use analytics from firms such as TyMetrix and Thomson Reuters in decision-making, but other factors such as proximity and relationships remain factors.
“We need to bear in mind that clients… are the real decision makers in what fees need to be,” Knox said.
The 2012 TyMetrix report shows the number of lawyers charging more than the once unheard-of milestone of $1,000 per hour is rising. In 2009, the industry had 1.67 percent of lawyers charging above that benchmark. By 2011, that percentage increased to 2.91.
Even though $1,000 is far above the highest acceptable benchmark in the industry — about $800 per hour, Raeburn said — businesses still are willing to pay the high rate because a particular attorney might have unique expertise, a long-established relationship with the client, or be innovative in legal approach.
“They demonstrate a unique value to their client,” Raeburn said. “That is worth the premium, and that is a valid point.”
