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With clients facing hard times in today's uncertain economy, Alexander Dubose Jones & Townsend is taking the unusual step of reducing its billing rates in current hourly-fee cases by 10 percent, beginning Jan. 1, 2009.
Douglas Alexander, a partner in the 13-lawyer appellate boutique's Austin office, says the firm notified its clients of the decrease in hourly fees in letters and e-mails sent the week of Dec. 8.
"We understand the laws of gravity," Alexander says. "It's very clear the economic downturn is impacting people all over the country, including our clients. . . . We felt we were in a position to respond to that."
Kevin Dubose, Alexander Dubose's coordinating partner, says the 10 percent fee reduction is the right thing to do for the firm's clients.
Alexander says clients are tightening their belts so "we're willing to tighten our belts in terms of what we charge them."
Roger Townsend, a partner in Alexander Dubose's Houston office, says the idea behind the reduction is to help the firm's clients.
But law firm consultant Bill Cobb, principal in Houston-based Cobb Consulting, says he can see another reason for Alexander Dubose's fee reduction. "It puts them in a better competitive position with other appellate boutiques out there," he says.
A firm that tells clients it understands their problems and is reducing its fees is likely to find those clients more receptive to hiring the firm again, Cobb says.
But Cobb says he thinks that given what people are looking at in 2009, "there is going to be a pretty heavy hammer coming down on all lawyers not to increase their rates."
Texas Lawyer reported results of its 2008 Salary and Billing Survey June 30. [See "Texas Firms Try to Boost Profits By Spending More on Marketing Directors," Texas Lawyer, June 30, 2008, page 1 .] According to that survey of 71 Texas firms — ranging in size from 100-plus attorneys to as few as 30 attorneys — hourly billing rates for equity partners increased an average of 4.8 percent in 2008. As noted in the Texas Lawyer survey, hourly billing rates for non-equity partners increased, on average, 5.8 percent and for seventh-year associates, the average increase was 5.1 percent. But these are larger firms and the economic conditions will be different in 2009.
Alexander says Alexander Dubose's fee reduction will impact clients with whom the firm currently has hourly-fee arrangements. "Firmwide, 70 to 75 percent of our annual revenue is derived from hourly work," he says.
Hourly-fee cases generated revenue "in the millions" for the firm during 2008, Alexander says. He says the firm has not calculated the revenue from hourly fees. "We don't track it that way."
Clients who will not be impacted by the cut in fees, Alexander says, include those who have contingent- or flat-fee arrangements with the firm.
Alexander says the firm's clients range from individuals to Fortune 100 companies. The firm represents those clients in state and federal appellate courts in all types of civil cases, involving anything from personal injury and wrongful death to taxation and breach of contract, he says.
Townsend says he was the first in the firm to suggest cutting hourly billing rates after the idea came to him while meditating. "The idea just floated into my head," he says.
Townsend says that when he and his partners founded Alexander Dubose in June 2003, they set up the firm to be of service to clients.
"We consciously said we would keep the firm relatively small, so we don't have large overhead and can pass the savings on to clients," Townsend says.
Reducing fees probably is easier for Alexander Dubose than it would be for other firms, Townsend says, because the firm has remained small. "We don't have offices all around the world," he says. "We don't have 300 people in administrative staff."
Alexander says the firm has only five support staffers in three offices for its 13 lawyers. Members of the support staff "wear multiple hats and wear them well," serving in administrative positions and as legal assistants, Alexander says. All the firm's lawyers keyboard their own briefs, he says.
"We are lean and mean, but we're not understaffed," Alexander says.
Townsend says big firms usually hire new associates at big salaries. According to the Texas Lawyer 's 2008 Salary and Billing Survey the average salary for a first-year associate at the 71 firms surveyed was $103,436 this year, a 5.3 percent increase compared to 2007.
Townsend says Alexander Dubose acquires new lawyers through lateral hires. "We don't have a huge overhead of baby lawyers with huge salaries," he says. "That's what gives us economic flexibility the big firms don't have."
Alexander says the firm will not cut its support staff, reduce salaries, close any offices or renegotiate leases for its office space to make up for any revenue loss due to the fee reduction. The reduction ultimately will hit the firm's lawyers, he says.
"We get less money," Alexander says. "That's something we're willing to do."
Townsend says no one asked Alexander Dubose to reduce its fees. But Alexander says the firm has received good feedback on its decision to lower the fees. "We've had nothing but great comments from people thus far," Alexander says.
Steven D. Cook of Houston, senior corporate counsel for LyondellBasell Industries, an Alexander Dubose client for the past year, says his company is pleased with the firm's decision to lower its fees. "This came unsolicited from us," Cook says.
That's not to say, however, that LyondellBasell, a chemical company headquartered in The Netherlands, would not have asked the firm to decrease its rates in the future.
"It saved me a phone call," Cook says of the rate reduction. "We're looking at significant cost reductions in all aspects of our business." That includes legal services, he says.
Townsend says Alexander Dubose represents Cook's company in Lyondell Chemical Co., et al. v. Lubrizol Corp., an environmental suit pending at the 5th U.S. Circuit Court of Appeals.
Alexander says that Alexander Dubose receives much of its work through referrals from trial firms. But he says the reduction in the hourly fees is not because of any concerns the firm has that not lowering its fees might resulting a loss of referrals.
"We have enjoyed relationships with a lot of good trial firms," Alexander says. "We have not been terribly concerned about losing that work."
Typically Alexander Dubose does not receive a "pure referral," Alexander says. In many cases, the appellate firm's attorneys collaborate with the attorneys at the trial firm that represents the client, he says.
David Keltner, a partner in Kelly Hart & Hallman in Fort Worth and head of the firm's appellate practice group, says he has not heard of another firm that is reducing its fees. With offices in Fort Worth, Austin and Houston, Kelly Hart has about 125 lawyers. "It might be a clever move," Keltner says of Alexander Dubose's fee reduction. "It's not a bad marketing ploy to say we'll do your work and do it cheaper."
Richard P. Hogan Jr., a partner in Hogan & Hogan, a three-lawyer appellate boutique in Houston, also says he has not heard of any firms lowering fees. When told of Alexander Dubose's 10 percent fee reduction, Hogan says, "I wish them the best of luck." Hogan says Dubose and Townsend were his partners until 2003, when they left to establish their own firm.
Asked if his firm will cut its fees, Hogan says, "If clients need fees reduced, we can certainly do that."
Private Matter
Keltner says, "A firm's decision to reduce fees generally is made privately with a client and is not discussed publicly."
A firm's reluctance to discuss publicly a decision to lower its fees may stem from fear of a domino effect. If a firm reduces its fees to an airline company at that company's request and another airline finds out about the fee reduction, the second airline also will ask for a reduction, Keltner says.
Keltner says the downturn in the economy has made many firms nervous. "A lot of lawyers are fearful that business will disappear, that legal business will dry up," he says. "I think large firms are getting ready for that."
Some large firms on the East Coast are reducing their support staff and the number of lawyers they have, Keltner says.
Alexander says, "We are not responding to the downturn by having any layoffs." In June, the firm opened a Dallas office, staffed by two attorneys.
Dubose says Alexander Dubose does not have standard billing rates. "We arrive at a rate in every case," he says. "We have the flexibility to change our rates at the drop of a hat."
Townsend says there is no typical range on Alexander Dubose's fees. But he says there is about a $200-per-hour difference between what he charges for his lowest fee case and the case for which he charges the highest fees. That range could change depending on the types of cases he takes on in 2009, Townsend says.
Each time the firm sets rates, Dubose says, it considers the eight factors in Rule 1.04 of the Texas Disciplinary Rules of Professional Conduct. Those factors are the time and labor involved, the complexity of the issues and the skill required to do the work; whether accepting the particular job will preclude the lawyer from taking other work; the fee customarily charged in the locale for similar legal services; the amount involved and the results obtained; any time limitations on doing the job; the nature of the professional relationship with the client; the expertise of the lawyer doing the work; whether the fee is fixed or contingent on results obtained or uncertainty of collection before the lawyer renders services.
Townsend says the reason Alexander Dubose is implementing the 10 percent fee reduction for existing clients is because it already has a rate established for those clients.
That does not mean clients who retain the firm for new legal matters automatically will not qualify for some reduction in the firm's fees. Alexander says the firm is considering the economic climate as one factor in setting fees for future engagements.
"The rates I'm quoting are lower than they would have been before," Alexander says. "It's not as if they're not impacted."
