Why Law Firms Are Like Hotels: ‘Rack Rates’ Are Negotiable, Real Rates Vary by Client
Law firms, it appears, are like hotels. There is a higher “rack rate” that is held out as the norm, but the amount charged is often lower. And law firms have different billing rates for different clients, even when the work is similar.
Those are the findings of an analysis of more than $4 billion in law firm corporate billings between 2007 and 2009 by CT TyMetrix and The Corporate Executive Board. A press release outlines the preliminary findings, based on information from 4,000 law firms:
• Seventy-eight percent of partners, associates and paralegals bill different hourly rates to different clients for similar work. The largest rate differences range from $350 to $1,000 an hour.
• In 2009, law firm partners charged up to $1,590 per hour for work for major corporate customers, but the median partner rate was $340 per hour. That means “rates billed by partners were much lower than the typical ‘rack’ rates reported by commissioned surveys,” the press release says.
Julie Peck, vice president of corporate strategy and market development at CT TyMetrix, told Corporate Counsel that clients are being billed different rates, partly because of differences in their negotiating power and partly because of their alternative fee deals.
“There’s a significant amount of pricing elasticity in the market, and that negotiation can be very powerful,” she told the publication. The full report, set to be released in September, “will give general counsel an enormous amount of bargaining power,” she said.
The data for the study came from clients of CT TyMetrix, which sells software for legal e-billing, matter management and performance metrics.
