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Bankruptcy lawyers across the country learned this lesson in 2015: A fine year can be a flat year.
The number of bankruptcies themselves may have fluctuated, especially with corporate suffering in the energy industry. But a lack of volatility in bankruptcy lawyers’ billing rates, evidenced by a collection of almost 3,000 attorney fee disclosures in bankruptcy records, have calmed practitioners. In major markets, bankruptcy partners make $1,000 an hour or more.
“Looking back at last year, it was a slow year. Most bankruptcy practitioners will agree with that,” said Jason Gold, chairman of the bankruptcy practice at Nelson Mullins Riley & Scarborough. That’s not necessarily bad, though, especially since bankruptcy practices went on a roller coaster of demand during and after the recession. “It’s almost like we don’t know we’re that busy until we’re busy for awhile,” Gold said.
The experience of the practice area falls in line with the on-the-whole flat panorama of the legal industry in 2015.
The National Law Journal’s findings came from a study by ALM Legal Intelligence that collected attorneys’ hourly billing rates as reported in bankruptcy filings in the largest 20 federal bankruptcy courts. Although some of the rates may apply to lawyers who focus on other practices, most are bankruptcy law practice rates. Firms that appeared in the NLJ 350, the ranking of the nation’s 350 largest law firms by head count, are included, for a total of 2,307 lawyer rates. ALM also surveyed about 25 law firms independently about their rates.
In 2015, small law firms nationwide with fewer than 25 attorneys charged, at the median, $350 an hour for partners and $300 for associates, according to bankruptcy filings from the 20 largest federal bankruptcy jurisdictions last year. Medium-sized law firms, with up to 150 lawyers, hit $460 an hour as a median price for partners, and $300 for associates. Law large firms reported partner rates of $595 at the median and associate rates at $325. See chart below.
Last year, the NLJ reported partner rates at bankruptcy practices averaging about $475 an hour from 2012 to 2014.
Gold said even he noticed that most bankruptcy lawyers’ rates held steady in 2015 — whereas rates had jumped during the recession years then declined until 2014 — and some elite bankruptcy lawyers in major markets ticked up. The comprehensive data collected by the NLJ in bankruptcy records highlights the disparity between legal markets.
Nine firms in the NLJ data, for instance, disclosed rates of more than $1,000. Those firms were Pachulski Stang Ziehl & Jones; Kirkland & Ellis; Young Conaway Stargatt & Taylor; Klee, Tuchin, Bogdanoff & Stern; Akin Gump Strauss Hauer & Feld; Stroock & Stroock & Lavan; Debevoise & Plimpton; Bracewell; and Ropes & Gray.
The District of Columbia earned the status of highest-priced market where bankruptcy cases were filed, according to the median rates ranked by state. The median in Washington for partners was $1,035, while the median rate for associates was $750.
Bankruptcy filings in New York had the largest disparity between highest and lowest rates for partners. At most, those partners made $1,295, and at least, $100.
In the states with the four biggest U.S. legal markets — Chicago, New York, San Francisco and Washington — on average partners made at most $1,113 and at least $368. Associates made at most $822 and at least $222, while of counsel lawyers made at most $855 and at least $273 in those markets, on average.
The numbers speak to the truism that clients will still pay more for high-stakes legal work — the types that many firms in those premium markets offer like intellectual property litigation, corporate transactions, even bankruptcy.
“But they’re still asking for discounts off of standardized rates,” according to Mari Henry Leigh of Legal Fee Solutions, a billing-rate consulting business that’s owned by the law firm Cozen O’Connor.
Attorneys have responded to clients’ pressure to keep legal fees low. Gold said he was able to reduce his rates last year. Wiley Rein, the Washington firm, cut its bankruptcy practice at the end of 2014, so Gold’s group landed at Nelson Mullin’s office across town.
The Columbia, South Carolina-based firm carries less overhead than Wiley Rein, so Gold held steady on his profitability while reducing his billable hour rates by about 20 percent, he said.
“The idea is to expand your business to do better,” he said. “Maybe I could have kept my rates the same, but I probably wouldn’t have as much work.”
Across the board, law firm consultants and attorneys say that although billing rates aren’t changing much, the approach to billing is.
Alternative fee arrangements and discounts have crept into the market, however slowly. Although more and more firms discuss their attempts to offer alternative fee arrangements, the approach hasn’t piled up cash.
Sharon Quaintance of HBR Consulting said only 15 percent of revenues at law firms come from these types of fee arrangements. “They’re still spending a lot more money on traditional billable hour work,” she said, about corporate clients.
GUILFORD THORNTON, JR.: “There’s always something to worry about,” the attorney said.
Guilford Thornton Jr., who is based in Nashville as the managing partner of Adams and Reese, said his firm had heard of consultants’ push to focus on project management. That approach allows attorneys to give clients more exact cost estimates at the beginning of an engagement. It also allows clients to track fees more closely while the private practice lawyers’ work is ongoing.
“Lawyers themselves have to get better. The rate becomes less important if the lawyer can demonstrate competence and predictability,” Leigh of Legal Fee Solutions said.
Thornton said he has also focused on certain practices that set the firm apart, like its timber and forestry-industries practice in several Southern offices. Those practices don’t necessarily invite pressures from clients to lower rates.
For some clients, Thornton said the firm negotiates rates differently, such as with discounts for large volumes of work or for long-time, reliable clients. “Generally speaking, outside legal spend by corporate America was flat. That suggests in the aggregate that services from private law firms was not growing,” he said. So what to do now? “There’s always something to worry about.”