Business of Law

GC's fix for 'broken' law firm profit structure: Cut associate billing rates

  • Print.

Paying top dollar for work done by leading partners at major law firms doesn’t bother Brian Brooks.

But paying big bucks for associates and mid-level lawyers does, the Fannie Mae general counsel tells Bloomberg BNA in a lengthy interview.

As billing rates for senior partners have escalated, “I’m perfectly willing to pay it, because for the best partners at the biggest law firms, their value add is enormously high,” Brooks says.

However, as the hourly cost for junior lawyers has dramatically increased, too, “I can’t justify paying $700 an hour for a mid-level associate.”

This disconnect, he says, exemplifies the “broken” law firm profit structure. Only a few decades ago, corporate clients had little choice but to look to BigLaw firms to handle major cases requiring teams of lawyers. But as legal technology and litigation support services have improved, companies have been able to perform more work in-house or assign it to smaller firms.

Major firms make money by leveraging lots of associate hours for each rainmaking partner. When both associates and partner time are expensive, though, he and other corporate law chiefs want top talent for the price, Brooks says. A number of companies simply refuse to have junior associates do their work, especially if there is no guarantee they will be around for years to come.

There is a simple solution to this problem, Brooks says: Drastically reduce billable rates for associates.

“Do what you want with the senior partner rates, but you need to not only hold steady on associate rates, you need to dramatically reduce associate rates if you want to stimulate demand,” he told Bloomberg BNA.

Related coverage: “Is the law firm pyramid collapsing? BigLaw is aging with more partners than associates”

Legal Rebels: “9 ways to change the carnivorous partnership model and save BigLaw firms”

Give us feedback, share a story tip or update, or report an error.