I have had some off-line discussions about my post on $1,000 an hour lawyers. One lawyer friend from Pittsburgh wrote to ask me where he can find clients willing to pay him $1,000 an hour. I wrote back that all he has to do is advertise that he is charging $1,000 an hour and clients will find him!
Actually, my facetious answer to his facetious question is not far from the truth at least according to an “expert” I spoke to a few weeks ago. This expert regularly consults with large law firms and corporations on litigation management issues. I asked him for his opinion on why it was that some corporations were willing to pay such high rates for services that could be capably performed by lawyers who charge far lower rates. One of the reasons he gave me was that lower rates are actually viewed as a negative by large corporations.
Also, the expert opined to me there could be a problem for a GC who suddenly decides to shift work to lawyers who charge lower rates. For instance, an alert CFO might starting asking some embarrassing questions such as “why didn’t you do this sooner and before we overspent for legal services by several millions?”
While many in the insurance industry (where high rates most definitely are viewed as a negative) may be reading this post with mild interest and asking “what do $1,000 an hour lawyers have to do with me?” Well, as one insurance defense lawyer in Chicago once told me, higher rates at larger firms tend to have a ripple effect downstream on smaller firms. This is because all firms have to compete for experienced associates and support staff. (A rising tide lifts all boats?) He said that it is similar to what occurs when the minimum wage is raised. The effects of the increase tend to ripple upwards throughout the business community.
If you have other theories on why some corporations are more willing to pay higher rates for legal services when capable attorneys are available at much lower rates or you disagree with me, please let me know either by your comments to this post or by sending me an e-mail.