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Law firms showed healthy increases in billing rates this year, with the vast majority of those participating in The National Law Journal‘s annual survey boosting both associate and partner fees. This year, 125 law firms responded to questions about billing rates, which were part of the NLJ’s survey sent to about 300 firms to determine the NLJ 250, the annual list of the nation’s 250 largest law firms. Of those 125 firms responding to the survey’s questions about billing, 110 also supplied answers to those questions in the 2003 survey. The upshot of the results is that billing rates continued to climb this year, with some firms demonstrating notable upswings as perhaps a vote of confidence in the 2004 economy. At the high end of partners’ billing rates, meaning the most expensive rate a firm charges for its most accomplished partners, 88 of the 110 firms responding for the last two consecutive years raised their fees. At the high end of associates’ billing rates, meaning the most a law firm charges for associate work, 81 of the 110 firms increased those fees. Reed Smith reported the highest partner rate, at $875 per hour. It increased its high-end rate by $170 per hour, a major jump compared with other firms. But that increase, according to a firm spokesperson, was an anomaly created by one partner in the firm’s London office. The rate, when converted to American dollars, created the high number, the spokesperson said. The average rate for all Reed Smith attorneys billing was $302 per hour in 2004. In a comparison of large firms in regions across the country, those firms based in the Northeast or with their largest offices there consistently showed the highest increases. For example, New York-based Brown Raysman Millstein Felder & Steiner raised its high-end partner rate by $75 to $600 per hour. Richard Raysman, managing partner of the firm’s New York office, said that his firm had resisted increasing billing rates for the last three years. A stronger stock market, to which the firm’s real estate practice is closely tied, and rising expenses prompted the increase, he said. “If Wall Street does well, they have deals for us to do,” said Raysman, adding that a more robust technology sector also spurred the hike. Looking for the middle range In addition, Akin Gump Strauss Hauer & Feld, which has its largest offices in Washington and New York, raised its high-end partner rate this year by $125, up to $750. Billing rates for its partners ran from $425 to $750. For associates, the firm charged $205 to $395. Akin Gump chairman R. Bruce McLean said that even with this increase, the firm did not raise rates as high as the economy would have allowed this year. “We misjudged where the market was,” McLean said. He explained that in most of the firm’s practices, deciding where to set rates is often based on “vague and historic” information. The firm’s strategy, McLean said, is not to be a “market leader” in rates but to stay in the middle range of fees competitors are charging. But determining where the high and low margins lie can be difficult. “Most of the high-end firms still have problems with partners in increasing their rates to [match] the market,” said Joel Henning, vice president and general counsel for Hildebrandt International, a law firm consultancy. As a result, he said, law firms sometimes shortchange themselves. “Lawyers tend to be terrified of losing clients because of increased rates,” he said. Other firms with a strong presence in the Northeast that marked up their prices included Holland & Knight, which went from $600 last year to $665 per hour on the high end of partner rates. Philadelphia-based Duane Morris raised its high-end partner rate by $40 to $605. Likewise, the same type of rates at Edwards & Angell, which has its largest offices in Boston and Providence, R.I., went up by $50, to $600. However, high-end partner rates stayed the same at New York’s Epstein Becker & Green, which charged $550 as its top fee. Billing rate increases were less pronounced, but still notable, on the West Coast. For example, San Francisco-based Littler Mendelson’s highest-paid partners charged $525 for their services, a gain of $45 from 2003. High-end pay for associates at the firm increased $65, to $425. Also in San Francisco, Thelen Reid & Priest elevated its high-end partner rate to $650, up $25. Low-end pay for partner there was up by $45, to $350. Stoel Rives, which has its largest office in Portland, Ore., boosted its high-end partner fees, to $465, a $35 increase, and raised its low-end partner fees by $30, to $240. Los Angeles-based Sheppard, Mullin, Richter & Hampton upped its high-end partner rates by $20, to $595, and its low end to $365, up $25. The upturn in high-end fees is a “simple case of ‘Economics I,’ supply and demand,” Henning said. Under increased scrutiny from regulators, corporations apparently are willing to pay more for top-performing lawyers to get answers to their legal questions that they can trust. “Whether they feel it’s a ‘bet your company’ matter or whether they need 10 minutes or an hour, or 100 hours, when they feel they need the very best counsel, they’re going to pay whatever they need to,” he said. That the most handsomely paid lawyers may be able to get the job done in less time than a mid-level attorney presents a cost-saving benefit, but that reason is not the main purpose for general counsel’s decision, Henning said. “That’s not what drives their purchase,” he said. Many firms in the South and Southeast also stepped up their fees in 2004. Atlanta’s Alston & Bird, for example, charged $675 at the high end for partner work, up from $600 last year. Baker, Donelson, Bearman Caldwell & Berkowitz, whose largest office is in Nashville, Tenn., raised its high-end partner rate by $25, to $500. Columbia, S.C.-based Nelson Mullins Riley & Scarborough bucked the trend and kept its high-end partner fees the same, at $475, while decreasing its low-end partner rate by $10 and its high-end associate rate by $5. The Southeast’s biggest law firm, Greenberg Traurig, reported its high-end partner rate at $750, down $100 from the previous year. At the same time, the firm grew by 261 lawyers, the biggest growth spurt of any NLJ 250 firm in 2004. Greenberg Traurig’s Miami-based president and chief executive officer, Cesar Alvarez, said that the average billing rate for the firm, including associates and partners, increased from $334 last year to $350 this year. He attributed the decrease in high-end partner rates to the firm’s foreign offices, which charged lower fees. Greenberg has offices in Amsterdam, Netherlands, and Zurich, Switzerland. “The important thing is what the average is,” Alvarez said. “At the high end, it doesn’t much matter.” Many firms in the Midwest and Southwest also pushed up their rates. For example, Bryan Cave, in St. Louis, reported its top fee at $745 in 2004, up $195 from 2003. Partner rates at the low end increased $60, to $285. High-end associate fees rose to $420 per hour, up from $350. The increase in the high-end partner fee at Bryan Cave was due to a rise in one New York partner’s rate, said a spokesperson for the firm. The Midwest and Southwest were no exception to increases. Piper Rudnick raised its high-end partner fees by $50 to $800 for its most compensated partners in its Chicago office. In addition, Dallas-based Jenkens & Gilchrist, Detroit’s Dykema Gossett and Kansas City, Mo.-based Stinson Morrison Hecker all raised their high-end partner fees by $50 or less. By contrast, Michael Best & Friedrich, which has its largest office in Milwaukee, lowered its high-end partner rate by $25, to $425. Part of the rate increases among most firms may have come from higher operating costs, Henning said. Still, though law firms are apt to spread those costs among rates charged for associate and partner work, most of the well-managed firms continue to make more money every year, he added.

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