Billing Rates Surge Past $2k in the World of High-Stakes Litigation
In the world of high-stakes litigation, where every hour counts, renowned litigator David Boies has made headlines once again. His hourly billing rate? A jaw-dropping $2,110. No, we didn't accidentally add an extra "0."
Boies is a heavyweight attorney known for his involvement (usually on the plaintiff's side) in some of the most high-profile cases in recent memory. Some of his biggest and most notable cases include:
- The United States v. Microsoft Corporation, the famous antitrust case that resulted in a landmark settlement that had a significant impact on the technology industry.
- Vice President Al Gore's counsel in Bush v. Gore, the case that decided the outcome of the 2000 presidential election.
- The litigation against the health technology company Theranos and its founder, Elizabeth Holmes.
Now, Boies is making headlines for his representation of his anonymous female client who accused Jeffrey Epstein of sexually abusing her. Boies is arguing Deutsche Bank missed red flags regarding Epstein's misconduct. Attorneys for the plaintiffs in that case, including Boies, are asking the court to sign off on a $22.5 million fee award. This is almost a third of the overall $75 million settlement.
If these kinds of rates are shocking, they were unheard of a decade ago. But with recent trends in the legal industry, billing rates are going up across the board. Let's explore a brief history of legal fees and explore the current landscape.
The Road to Recovery from the GFC
Lawyers and non-lawyers alike will remember the Great Financial Crisis of 2007-2008, sometimes called the GFC. Although it originated in the United States, particularly in the housing and financial sectors, it had far-reaching global repercussions, including a global recession. The GFC hit law firms hard. There was reduced demand for legal services in certain areas such as corporate law, real estate law, and finance law, since the economic downturn led to a decrease in corporate activities, mergers and acquisitions, and various types of transactions. On the flip side, corporate clients became more cost-conscious and pressured law firms to provide more value for their legal fees. This led to changes in billing structures and increased competition among law firms.
Unsurprisingly, it took some time for the legal industry to recover. In the first few years after the GFC, firms implemented cost-cutting measures and reduced overheads. And some areas of law (bankruptcy and litigation) actually saw an increase in demand related to the GFC. In the mid-2010s, the legal industry started to see modest growth as firms continued to adapt to changing client demands and explore alternative fee arrangements. Right before the pandemic saw a consistent expansion for many law firms and even corporate clients, as mergers and acquisitions activity picked up. In the pandemic, the legal industry continued to evolve, with a growing emphasis on technology adoption and remote work. There was a surge in demand for legal services in areas like cybersecurity, data privacy, and healthcare law.
Rate Surge and Client Resistance
Although there was a historic low at the end of last year, in 2023, things looked pretty healthy overall. By the first quarter of this year, firms experienced a notable improvement in financial performance, according to Thomson Reuters' Law Firm Financial Index (LFFI) score. Law firms achieved a swift 5.5% rate of growth, the fastest first-quarter increase since the GFC.
This trend came with a significant increase in firms' agreed-upon hourly rates. An increase was expected, but the extent of it exceeded predictions. As a result, experts have anticipated that clients will become more assertive in pushing back against rising hourly rates. For example, there is already some evidence of a widening gap between billing realization and collected realization. This would be caused by clients requesting larger discounts off the published standard rates or seeking larger discounts on their invoices after receiving them, which would be evident in. It's not yet clear if these observations represent a lasting trend or a regular part of the realization cycle.
Remember, clients facing increased rates have the option to choose lower-cost law firms. However, for clients, the cost is still worth it if the firm is delivering value effectively by providing quality, efficient legal advice aligned with the client's needs and broader business objectives. This is likely all the more true when there is a longstanding relationship between the firm and client. David Boies' eye-popping billing rates are not completely unique in the industry of elite law firms, so clearly, clients are finding some value in the work. But just how sustainable the trend of increasing rates is will remain to be seen.
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