Whether a $1,000 an Hour for a Lawyer is Reasonable Depends on Whether You Need a Cadillac Escalade or a Honda Civic

“[T]he Court’s review of Sheppard Mullin’s bills suggests that the Beastie Boys opted to pay for, and received, the Cadillac Escalade, not the Honda Civic.” Beastie Boys v. Monster Energy Co., 112 F. Supp. 3d 31  (Dist. Court, SD New York 2015).

A D.C. lawyer recently asked me if I thought $1,000 an hour for a lawyer was reasonable. Being a lawyer myself, I gave him a lawyerly answer that “it depends.”

I’ve written posts before in this blog about $1,000 and even $2,000 an hour lawyers.  As I stated in one of those prior posts, an “expert” who consults on litigation management issues with corporations (who are the ones who mainly hire the $1,000 and $2,000 an hour lawyers) told me that lower rates are actually viewed as a negative by large corporations. Apparently very good $500 an hour lawyers are not looked at in the same favorable way that mediocre $1,000 lawyers are simply based upon their hourly billing rates.

But what corporations (or high net worth individuals) pay their lawyers is their business. Where it becomes someone else’s business is when that someone else is asked to pay for another’s lawyers’ bills such as in the Beastie Boys case. There the court did what every other court does when asked to decide on appropriate hourly rates or whether the work performed during the course of a representation was appropriate, they look to what was “reasonable” to do under the circumstances.

And notwithstanding the “vanity” factor of using $1,000 (or $2,000) an hour lawyers versus using $500 an hour (or cheaper) lawyers, I will concede there are those cases when using $1,000 or even $2,000 an hour lawyers is the reasonable thing to do. Such a case might be the so-called “bet the company” type of case where an adverse verdict could have catastrophic consequences for a company.

But even in a “bet the company” type of case, it really is not so much a matter of a firm’s hourly rates as it is the overall capacity of the firm in terms of depth and breadth to be able to competently handle the case.  Would it surprise anyone to know that larger firms (with higher billing rates) generally have more capacity to handle the larger and more complex cases than do smaller boutique firms (with lower billing rates)?

But as the old saying goes, “saying something is so doesn’t make it so.” That is, just saying you have a “bet the company” or some other type of complex case is not enough. You must to be able to adequately demonstrate to a court why it was that you chose a firm with higher billing rates and opted “to pay for a limousine when a sedan could have done the job.”  See Simmons v. New York City Transit Authority, 575 F.3d 170 (2d Cir. 2009)

Finally, as I have stated before, I find it amusing, if not ironic that many in the corporate legal community are at the forefront of the movement to move from hourly fee agreements to alternative fee agreements as if using AFAs will magically lower their legal costs.   I have a message for those in the corporate legal community who are pushing AFAs as a way to save on legal costs:   just do a better job in finding those firms that can produce a good result for less money. And, oh yes, do a better job in auditing your legal bills before you pay them!