OVERINFLATED - Apparently, the only thing rising faster than law firm prices is the price of everything else. As Law.com’s Andrew Maloney reports, law firm billing rates have increased across all law positions in 2022, but not necessarily enough to keep pace with inflation. That’s according to new reports released this week that point to some more challenges for law firm profits. The average going rate for partners in the U.S. this year is about $749 per hour, an increase from about $738 in 2021 (+1.5%), according to a report from Wolters Kluwer ELM Solutions. Last year, the average going rate for partners rose from about $705 in 2020 (+4.7%). The mean going rate for associates in 2022 is about $546, an increase from $541 the previous year (+0.9%). Last year, the number increased from $503 (+7.6%). And the average going rate for paralegals this year is about $247, an increase from $244 the previous year. The mean going rate last year for paralegals increased from $232 in 2020 (+5.2%). But inflation is still proving to be a challenge for law firm billing rates. Although the consumer price index has increased about 14% since the end of 2019, average law firm rates have increased by about 11% during that time span, according to a separate report from the legal tech company Clio.
TOUGH TALKS - As the IPO window remains shut, tech and life sciences companies and the law firms that serve them are going back to the boardroom—sometimes for difficult discussions, Law.com’s Jessie Yount reports. Late-stage private companies are increasingly employing common cost-cutting measures and contemplating down-round financings, as well as alternatives to traditional equity financings, according to a new report from Wilson Sonsini Goodrich & Rosati. “Capital markets has been robust for the past several years. It occurred to us that some entrepreneurs and investment professionals haven’t been through a down cycle,” according to Wilson Sonsini corporate partner and report co-author Michael Nordtvedt. “We certainly are [in a down cycle] for IPOs and that is trickling down to the private capital markets, so we designed a tool for folks to navigate that market environment.” While companies typically aim to avoid down-rounds because of public perception, Nordtvedt cautioned that alternative financings often include more complex governance and equity terms that can cause problems down the road. He recommended that companies “not get too caught up on valuation” but acknowledged that deals require more nuanced conversations with clients. Jon Avina, a corporate partner at Cooley, agreed. Down-round and more complex financing structures “are transactions that require difficult conversations with clients and investors, especially because people aren’t necessarily thrilled to be paying more advisory fees for a deal that’s already going to be marked down in terms of valuation,” Avina said.
ON THE RADAR - Gaming company International Game Technology and its top officers were hit with a securities class action on Friday in New Jersey District Court. The suit, brought by Pomerantz LLP, accuses the defendants of misleading investors about the company’s compliance with applicable gaming and lottery laws. The suit comes on the heels of an August 29 press release announcing that the company had agreed to pay nearly half a billion dollars to settle claims relating to the operation of the online gambling platform DoubleDown Casino. Counsel have not yet appeared for the defendants. The case is 1:22-cv-06094, Dundas v. International Game Technology PLC et al. Stay up on the latest deals and litigation with the new Law.com Radar.