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What Can Be Learned from America’s Legal Spending in 2013?

Posted by Judie Bronsther | May 19, 2014 | 0 Comments

AmLaw Daily recently released the 2013 LegalView Legal Market Index, giving us some insight into the state of the legal market. Based on this study, consumption of legal service decreased in 2013 by 1.3%, continuing the nearly unabated economic downturn of the legal market that began in the third quarter of 2008. The decrease in legal spend was most prevalent in the corporate practice areas, which contains areas such as mergers and acquisitions that often command premium billing rates. Nonetheless, despite the decreased consumption, law firm fees increased by 1.6%.

The decreased consumption and the increase in fees did not affect firms of different sizes equally. Set forth below is a chart setting forth how the changes affected the various firms:

Change in

Consumption

Change in

Billing Rates

Change in Legal Fees

AmLaw 100

- 2.8%

+ 2.5%

- 0.003%

AmLaw Second 100

+ 3.1%

+ 1.7%

+ 4.9%

Non-AmLaw firms

- 1.3%

+ 1.0%

+ 2.5%

As illustrated above, the increase in fees was due in part to the billing rate increases of 2.5% for the AmLaw 100 (to an average blended rate of $473.12; $601.31 for the 25 AmLaw 100 firms), 1.7% of the AmLaw Second Hundred (to an average blended rate of $346.69) and 1% for the non-AmLaw firms (to an average blended rate of $233.70).

This LegalView Market Index shows that long gone are the days when law firms could raise their rates 6% to 8% a year without regard for the economic impact of their decision. It is no longer a seller's market. Rather, the buyers are now in the driver's seat and are demanding efficient and cost effectiveness in the delivery of legal services.

Clients should not be looking for cheap legal services for there is nothing more expensive than a cheap lawyer. But, they should be managing their outside counsel and making sure they are paying only reasonable legal fees.

About the Author

Judie Bronsther

Ms. Bronsther began her career in 1979 as an associate with Finley, Kumble, Wagner, Heine, Manley & Underberg specializing in corporate finance. In 1984, she joined forces with a client, Empire Securities, a brokerage house specializing in oil and gas transactions, and became Executive Vice President and General Counsel. In 1989, she joined Kaye, Scholer, Fierman, Hayes and Handler. Ms. Bronsther graduated from University of Rochester, magna cum laude, and New York University School of Law. Ms. Bronsther has written extensively on the subject of legal cost control and lectures frequently on this subject.

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