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Law firms showed healthy increases in billing rates in 2004, with boosts reported for fees charged by associates and partners alike at firms that participated in an annual survey conducted by The National Law Journal. The upshot of the survey, which of course portends higher legal costs for corporate law departments, is that billing rates continued to climb, with some firms demonstrating notable upswings as perhaps a vote of confidence in the economy. At the high end of partners’ billing rates, meaning the most expensive rate a firm charges for its most accomplished partners, 88 out of 110 responding firms that have provided billing figures for the past two years indicated that they have raised their fees. At the high end of associates’ billing rates, meaning the most a law firm charges for associate work, 81 firms reported increased fees. Reed Smith, a Pittsburgh-based firm, 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 was an anomaly created by one partner in the firm’s London office, according to a spokesman for the firm. The average hourly billing rate in 2004 for all Reed Smith attorneys was $302, according to the firm. In a comparison of large firms in regions across the country, firms that were either based in the Northeast or had 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 to $600 per hour — a $75 per hour increase from the previous year. Richard Raysman, managing partner of the firm’s New York office, says the firm had held off on increasing its rates for the previous three years. A stronger stock market, to which the firm’s real estate practice is closely tied, and rising expenses prompted the increase, he says. “If Wall Street does well, they have deals for us to do,” says Raysman, adding that a more robust technology sector also spurred the hike. Akin Gump Strauss Hauer & Feld, which has its largest offices in Washington, D.C., and New York, raised its high-end partner rate in 2004 to $750 — a $125 increase. Billing rates for its partners ranged from $425 to $750. For associates, the firm charged $205 to $395 per hour. R. Bruce McLean, the firm’s chairman, says 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,” says McLean. The firm’s strategy, he adds, is not to be a “market leader” in rates but to stay in the middle range of fees charged by competitors. 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,” says Joel Henning, vice president and general counsel for Hildebrandt International, a law firm consulting company. As a result, he says, law firms sometimes shortchange themselves. “Lawyers tend to be terrified of losing clients because of increased rates,” says Henning. 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 to $605 — a $40 increase. Increases in billing rates were less pronounced, but still notable, on the West Coast. For example, the highest paid partners at San Francisco’s Littler Mendelson charged $525 per hour for their services, a $45 increase over 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. The upturn in high-end fees is a “simple case of the basic economics of supply and demand,” says Henning. Faced with 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 says. Leigh Jones is a reporter for The National Law Journal, which is affiliated with GC California magazine.

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