Big companies around the world are pushing back against rapidly rising legal bills, railing against hourly lawyer rates they say are the product of law-firm excess.
Lawyers’ hourly rates rose almost 9% in the first half of 2024, according to data from Wells Fargo legal specialty group, which surveys large law firms quarterly. That’s on top of an 8.3% increase in rates last year. Historically, fees would rise about 4% each year, Wells Fargo says.
Lawyers’ pay is skyrocketing. Brutal poaching wars for talent are now common, and top lawyers expect to be paid like investment bankers and private-equity principals.
“You don’t negotiate with those guys. You aren’t going to bet the company,” said Matthew Lepore, general counsel for chemical giant BASF. “Clients aren’t doing as well as the law firms are doing, and it’s not sustainable.”
In certain specialties, such as merger counseling, regulatory compliance, tax and private equity, corporate general counsels say there is only a small pool of firms to choose from. Companies venturing into high-stakes deals turn to the most elite firms, with the hopes that the high price tag promises the best outcomes. Hourly rates can run $2,500 or more for the most sought-after attorneys, and are expected to keep rising, according to legal recruiters and court filings.
“The market is driven by the top end. The top firms are spending money to compete for the best rock-star talent. That’s what is driving this,” said Alan Tse, chief legal officer at global commercial real-estate firm JLL. “Obviously not enough of us are saying no. Clients are part of the problem.”
The top law firms have grown in size and seen their revenues shoot upward as they’ve become one-stop shops for corporate clients for deal work, litigation, and tax advice. The legal industry has shifted its compensation structure, and only a few firms still have a classic lockstep pay system that rewards based on seniority. Instead, firms pay up for stars and based on productivity. The flexibility increases the cost of talent.
Law firm revenue growth was up 11.4% in the first six months of 2024, outpacing expenses, according to a Citi Global survey of top law firms.
Superstar attorney hires can command salaries of as much as $15 million to $20 million a year, eclipsing even the Wall Street bankers, lawyers, consultants, and legal recruiters say. Beyond that rarefied level, many lawyers have seen their pay double in recent years. At the lower end of attorney pay, junior associates at large law firms can start at $250,000 a year. That’s about a 30% jump in five years from the starting salary of $190,000 in 2018.
Law firms traditionally charge companies by billing rates per hour, and the firm will be hired for a project or issue and then charges based on how much time it spends on the project. Inside the firms, associates and partners are often judged based on the billable hours they produce, as well as the outcome for the client.
To bring down legal costs, companies are pitting firms against each other for more competitive bids and moving work in-house to their own legal departments.
At beer maker Heineken, general counsel Ernst van de Weert has moved some legal work away from large firms to smaller boutiques.
“You can get the same kind of quality for half the rate,” he said. “You have more choices than you realize.”
Indeed, rates are increasing fastest at the top firms. Fees at the top 50 law firms rose 10% in the first half of the year, compared with about 7% for the next tiers, ranked 51 to 100, and 100 to 200, according to Wells Fargo.
Lawyers at the nation’s largest firms billed between $500 to more than $1,300 per hour for litigation in 2023, according to the National Association of Legal Fee Analysis. It can be higher in other markets
