Remember when top lawyers charged $100 an hour? Then it went to $200? Well, would you believe $400 an hour?
Driven by the spiraling cost of wooing top law school graduates, major law firms in Los Angeles and other cities now are charging $350 to $400 an hour--or more--for the services of their senior partners.
"They're paying more for their (first-year) 'associates' and everything ratchets up from there," said Michael Waldorf, a Los Angeles headhunter who places lawyers with firms.
Salaries for 25-year-old associates are rising so fast that brochures printed for an American Bar Assn. conference last month, which said starting salaries in New York City were $76,000, were out of date by the time the conference was held. The salaries were already at $82,000.
In Los Angeles--and other second-tier legal markets--they are running at $65,000 to $72,000 at the highest-paying firms.
Lawyers' fees have been rising steadily at annual rates of 5% to 10% and, propelled by rising costs, there is no limit on how high they could go.
"Four hundred dollars isn't a big deal in L.A. for senior lawyers--or anyplace," said John Weil of Altman & Weil, a consulting firm for lawyers. "If you go to the top firms and you look at the really top partners, you're going to get rates in the $400 to $425 range."
Fees of $350 an hour are relatively commonplace.
"For a top partner . . . we're in the ($350 an hour) range and I'm sure most of the people are," said Michael H. Diamond, managing partner for the Los Angeles office of Skadden, Arps, Slate, Meagher & Flom, the world's third-largest law firm, with more than 1,000 attorneys.
The only brake on ever-rising fees in California is a court ruling that says lawyers cannot impose charges that "shock the conscience."
"It's a very vague standard," said Erica Tabachnick, one of the State Bar attorneys charged with enforcing it. A fee "can shock one guy's conscience and not another's."
As a result, it is rare for anyone to be disciplined for charging unconscionable fees.
All this is seen as wretched excess by some.
Senior U.S. District Judge John V. Singleton, after 23 years on the bench in Houston, earns $89,500--or less than some 26-year-old, second-year associates in New York.
He said he does not get as much respect from young lawyers as he once did, and he thinks salaries have something to do with it.
"I think that escalating salaries have had maybe a subliminal impact on young lawyers," the judge said. "They think to themselves . . . 'Why in the world should I pay a lot of attention to you? I'm making as much or more than you are--you dumb ass!' "
Not all legal services cost this much. Surveys show that senior partners in all firms nationwide average $150 an hour. On the Westside of Los Angeles, for example, a few family lawyers charge $400 an hour, but hourly fees for most legal problems typically run from $150 to $250.
In addition, many lawyers take cases on contingency--charging only if they win.
Corporate clients rarely complain about what senior partners charge because these lawyers tend to work fast and give good advice, analysts say. But clients are driven mad by hefty bills for the slower and less sophisticated work of gangs of inexperienced associates.
Young lawyers typically remain associates for 7 to 10 years. At first, they help the partners by doing grunt work, then graduate to more responsible tasks, then are typically made partners themselves or asked to leave.
In large firms, it is standard to bill clients for the work of the youngest associates at rates ranging from $75 to $95 per hour, and some firms are billing at $110 an hour or more.
"Anything above $95 for a low associate I think is outrageous," said Larry Smith, managing editor of the trade publication Of Counsel. "The client has absolutely no assurance that the person billing at that rate merits that amount. . . . He got here yesterday. I think he knows where the courthouse is, and I think he knows what the tax rates are."
But firms want to bill as much as they can for their associates, because associates are the partners' profit centers.
Historically, law firms have maintained ratios of three associates to one partner--with the higher-paid partners using associates to generate a high number of "billable hours."
Partners at the country's six most-profitable firms now earn in excess of $1 million a year, according to a recent survey by the American Lawyer magazine. At Los Angeles' most profitable firm, Latham & Watkins, profits-per-partner average $645,000, the survey showed.
Sometimes, law firms reap their largest rewards by billing according to the results they achieve, rather than the hours they work. This method is typically used when stakes to corporate clients are particularly high.