ECONOMIC conditions have driven down client costs and forced law firms to reassess the way they bill clients. But some firms continue to overcharge and refuse to budge on rates.
Today’s news that the Lehman legal bill has now reached $84 million is just the most recent matter bringing law firm billing into light.
Weil Gotshal & Manges has billed the bank $55 million for 100,296.40 hours of work. As The New York Times points out, that adds up to more than 700 hours per day, seven days a week. Harvey Miller has billed the most hours, 794.80 at a rate of $950 an hour.
High fees have far from disappeared in this economic downturn, but they are being scrutinised in an increasing awareness about overcharging.
In SEC v Byers, et al. in December last year, in what is known as the WexTrust matter, arising from one of the largest pre-Madoff Ponzi schemes, US District Judge Denny Chin said: “In this economy, with law firms going out of existence or laying off lawyers for lack of work, and clients … insisting upon and obtaining alternative fee arrangements ... surely there would have been qualified law firms willing to perform these services at rates substantially lower than $850 or $950 per hour for partners.”
The court then reduced the Wextrust receiver and his firm’s fees by nearly $500,000, when the original fee application sought more than $2.2 million from the receivership estate for the first 20 days of work.
Meanwhile, faced with a new economic environment and increased competition in the legal market, some firms have overhauled the way they bill clients. Optim Legal, which launched in January this year, uses a satisfaction-based billing model. Lawyers don’t have billing targets and clients can pay on a sliding scale of an additional or minus 20 per cent of the fee.
Nick James, the co-founder of Optim Legal, said firms need to reconsider how they bill, for both their lawyer and the clients they service.
“In a big firm most often lawyers feel the pressure to bill as many hours as possible in order to rise up through the ranks,” said James
“In a big firm that really is a lose sum game. They do retain the client but almost all the drivers you face as a lawyer lead you to believe if it’s not a high billing file then you haven’t achieved,” James said.