The Truth About Legal Fees
Posted on July 8th, 2015 by Legal Fee Advisors
It is no surprise that legal fees can vary in size. When cases regarding exorbitant legal fees reach the courts, it is not uncommon for the courts to reduce the legal fees to a rate prevailing in the community. But what about prestigious law firms? Where do they fall into play? An article from The Economist sheds light on this matter. [1]
The mid-2000’s brought about a lot of changes. Among them was the boom of legal fees. $1,000 an hour rates became the norm for the priciest lawyers in America’s prestigious law firms. Since then these rates have only gone up. A survey released by the National Law Journal in January 2014 found that rates now go as high as $1,800 and increase as much as 2-3% every year. There may have been a time when lawyers would submit their legal bills and expect to receive the exact amount charged. That is not today. Today, discounts and negotiation requests are rampant.
It began when general counsels of large business realized that they can ignore extravagant rates and insisted on big discounts and/or negotiate their way to lower legal fees. But why charge such high prices when prestigious law firms give back almost all the gain by accepting these requests? For one, it is the illusion of prestige – more on this later on. The main reason is that law firms sought to start at the highest prices for the inevitable discount and negotiation requests. Some clients will also allow firms to charge these prices, making it a win-win for law firms. Discounting also gives law firms the freedom to charge different prices, depending on their clients’ relationship to them and their willingness to pay. The illusion of prestige is a whole other matter. The article compares legal fees to luxury cars- a higher asking price is a sign of quality; no one wants to have hired the cheaper firm in a high-stakes lawsuit.
Times in the legal field have changed. In-house lawyers in large companies are well aware of fair legal fees. Their specialty relies on knowing the market value of each type of service in the field. Today, there is software that can look for inefficiencies in invoices. Businesses, such as Legal Fee Advisors, are dedicated to making sure law firms charge their clients fair legal fees by either partnering with in-house counsel or negotiating rates for private clients. 2015 is a post- recession time – everyone cares about where their money is going. If an invoice seems to have a problem, they will not hesitate to speak up about it or find a third party service who will.
Gladys Mozo
[1] http://www.economist.com/news/business/21594317-lawyers-biggest-customers-are-discovering-they-can-haggle-charging-more-getting-less