In BigLaw, with annual salaries for first-year associates at most firms over the $200,000 mark, with senior associates making more than $400,000 a year,[i] and with equity partners raking in millions of dollars annually,[ii] it’s no wonder that most people see a legal career as being lucrative—and why many harbor ill will toward attorneys for the money they make. But before the point can be made that lawyers are greedy scoundrels and that attorney fees are exorbitant, one must consider:
As for individual billing, attorneys generally can set their own fees and billable rates (but not in certain situations where attorney fees are set or restricted by federal or state law.)[iii] The only guiding principle is that fees must be reasonable and not excessive. Factors impacting what’s considered “reasonable” include time spent, the novelty and difficulty of the matter at hand, expertise, what services normally cost in the area, and demand.[iv]
Nonetheless, attorneys’ billable rates can be high—many would argue too high—and continue to rise. Is this course feasible?
Where We Are
Americans spend a lot of money per year on legal services. In 2021 alone, between businesses and individuals, various sources put the amount spent on legal fees between $320 billion[v] and $359.5 billion, which accounts for almost 40% of the global legal services market.[vi] And amid demand, Am Law 100 firms increased their billing rates 5.6% in 2021 and are expected to raise rates between 6% and 7% in 2022.[vii] Among six Atlanta firms surveyed earlier this year, rate increases were reported to be 12%.[viii]
Some other eye-opening statistics:
Even though not all attorneys earn outrageous salaries and bill at extraordinary rates—high paying BigLaw positions are generally reserved for students who graduated from top law schools or at the top of their class (or both)—the average salary for all lawyers as of May 2021 still was $148,030 a year.[xvi] And this accounts for lawyers making modest salaries in states with lower costs of living and in smaller cities or towns.
Options Moving Forward
So, is it sustainable for Americans to spend and for attorneys to make this kind of money? What alternatives exist to keep spending for legal services in check? We will review various options next week.
[i] Weiss, D.C. (2022, March 1). After Davis Polk sets new bar for associate raises, Cravath ups the ante. ABA Journal. https://www.abajournal.com/news/article/after-davis-polk-sets-new-bar-for-associate-raises-cravath-ups-the-ante
[ii] Strom, R. (2022, March 24). Profits Spike, Partners Ponder: Cash Out or Make a Fortune? Bloomberg Law. https://news.bloomberglaw.com/business-and-practice/profits-spike-and-partners-ponder-cash-out-or-make-a-fortune
[iii] USLegal. (n.d.). Statutory Fees. https://attorneys.uslegal.com/attorney-fees/types-of-fee-arrangements/statutory-fees/
[iv] American Bar Association, Rule 1.5. (2020, April 14). https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_5_fees/
[v] Henderson, B. (2022, January 23). Eight updated graphics on the US legal services market. Legal Evolution. https://www.legalevolution.org/2022/01/eight-updated-graphics-on-the-us-legal-services-market-285/
[vi] Grand View Research. (n.d.). Legal Services Market Size, Share & Trends Analysis Report By Services (Taxation, Real Estate, Litigation, Bankruptcy, Labor/Employment, Corporate), By Firm Size, By Provider, And Segment Forecasts, 2022-2030. Report Overview. https://www.grandviewresearch.com/industry-analysis/global-legal-services-market
[vii] Maloney, A. (2022, February 24). Billing Rate Increases Prompt Lateral Movement Throughout Am Law 200. Law.com. https://www.law.com/americanlawyer/2022/02/24/billing-rate-increases-prompt-lateral-movement-throughout-am-law-200/
[viii] Polacheck, J. (2022, August 18). Billing Rates at Atlanta Law Firms Are Surging. Law.com. https://www.law.com/dailyreportonline/2022/08/18/billing-rates-at-atlanta-law-firms-are-surging/
[ix] Law.com. (2022, April 26). The 2022 Am Law 100: Ranked by Gross Revenue. https://www.law.com/americanlawyer/2022/04/26/the-2022-am-law-100-ranked-by-gross-revenue/
[xi] Miki, S. (n.d.). Lawyer Statistics for Success in 2022. Clio. https://www.clio.com/blog/lawyer-statistics/
[xii] Thervo. (2022). How Much Are Attorney Fees? https://thervo.com/costs/attorney-fees
[xiii] Contracts Counsel. (2021, August 23). Average Cost of a Lawyer. https://www.contractscounsel.com/b/average-cost-of-a-lawyer
[xiv] Strom, R. (2022, June 9). Big Law Rates Topping $2,000 Leave Value ‘In Eye of Beholder.’ Bloomberg Law. https://news.bloomberglaw.com/business-and-practice/big-law-rates-topping-2-000-leave-value-in-eye-of-beholder
[xv] Thomsen, J. (2022, June 8). Covington law firm discloses $2,500 top hourly rate in new Ukraine contract. Reuters. https://www.reuters.com/legal/legalindustry/covington-law-firm-discloses-2500-top-hourly-rate-new-ukraine-contract-2022-06-08/
[xvi] U.S. Bureau of Labor Statistics. (2022, March 31). Occupational Employment and Wages, May 21. https://www.bls.gov/oes/current/oes231011.htm
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