How much will clients fight an increase in attorneys’ hourly rates?
When we saw the results of a recent survey saying law firms are projecting an average increase in hourly rates of about 4.1% next year, we assumed it would not go over very well.
After all, companies have been demanding percentage discounts on hour rates since the crisis began, and the change in the calendar year alone is not likely to alter their perspective.
Zach Lowe of The Am Law Daily talked to one general counsel who has already laid down the law.
Am Law: Last month, Susan Blount, the general counsel of Prudential Financial, sent a letter to the 60 law firms the insurance giant uses regularly. The letter addressed the general economy and the need to cut costs, but one announcement stuck out: Prudential informed the firms that in calendar year 2010, the company expected to pay for legal services at 2008 hourly rates. It wasn’t a request as much as a take it or leave it deal, Blount says.
“The response,” Blount says, “has run the gamut, from acceptance to disgruntled acceptance to firms saying, ‘You just don’t understand!'”
“It’s a buyer’s market,” the founder of consulting company Hildebrandt International told Am Law, and that is no doubt true.
But, like in any client services business, the client has always maintained a large level of control. On the other hand, attorneys are not all created equal, so if they’ve got the goods and have been an asset to clients for years, they, too, have some negotiating power.
So what will happen? We’re guessing the published rates will go up, but clients will negotiate reductions individually. Both lawyers and clients alike know when a client can and cannot afford to pay; they’ll both consider the value of working with/for the other and figure it out.
And that, of course, makes the most sense. Cases and deals are different,
clients are different and relationships are different.
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