On the whole, lawyers last year pushed through the biggest overall annual rate increase, 5.1%, since the recession, when many firms froze prices or scaled back increases to keep clients happy.

* * *

Before the recession, many law firms relied on annual rate increases of up to 8% to fuel profit growth. The pace of such increases dropped sharply between 2008 and 2009 and has been inching back up since.

This “back to the future” is not happy news for clients, of course.  The increases are even higher at the largest law firms, who offer the expected spin to justify their increases:

Average hourly billing rates are up 7.1% for partners at the top 12 firms, which include Skadden, Kirkland & Ellis LLP, Weil, Gotshal & Manges LLP, Latham & Watkins LLP, Greenberg Traurig LLP, White & Case LLP and DLA Piper, Valeo says.

“Our rate structure reflects the real costs and competitive environment in each market and practice,” said Greenberg Traurig Chief Executive Richard Rosenbaum. “Collaboration allows us to use that structure to deliver both quality and unique value to each client.” The other firms either declined to comment or didn’t respond to requests for comment.

Some work clearly merits higher pay, and some lawyers provide extraordinary value at whatever rate they choose to charge.  But too many use the excuse of being special to justify increases that their work quality does not merit–hence the 5.1% reflects greater increases at the higher end of the hourly rate scale.

At the end of day, clients must decide whether they will be like sheep being led to the slaughterhouse, or whether they, as the buyer, will dictate terms.

Manotti Jenkins

Valorem Law Groupis pleased to announce that Manotti Jenkins, a veteran IP attorney, has joined us as a partner.  After spending the last year in solo practice, Manotti felt that  Valorem  provided the perfect platform for his practice, which focuses on patent and trademark litigation and counseling, as well as copyrights, trade secrets and rights of publicity. Before coming to Valorem, and before his year as a solo, Manotti was a partner at Katten Muchin Rosenman in Chicago.  He began his career at Barnes & Thornburg in Indianapolis after graduating cum laude from the Indiana University School of Law in 1996. Manotti has substantial patent trial experience, and he worked with Marty Lefevour at Katten.  Marty brought his patent practice to Valorem in January.

We are psyched about adding two lawyers with the skill sets Marty and Manotti have.  Patent litigation is one of the “Mt. Everests” to conquer from an alternative fee standpoint.  Valorem is bringing its message of value, and its established approach to non-hourly billing, to patent litigation and Manotti and Marty together give us a fantastic platform to work from.

• 37% of GCs planned to hire more staff in 2011
• 65% of in-house departments use outside firms for litigation, compared with 69% in 2006
• 20% of in-house departments use outside firms for tax issues, compared with 30% in 2006
• 28% of in-house departments use outside firms for M&As, compared with 35% in 2006
• 22% of in-house lawyers earned more than $300,000 in 2011

In other words, work that was sent to outside lawyers in the go-go days is now being handled by inside lawyers.  Clients have learned the value of make vs. buy decisions, and outside lawyers are more often on the south side of that decision.

That trend, in combination with continued economic pressure on law departments and clients’ awakening to the realization that the power in the lawyer-client relationship is inherently theirs, should not make managing partners sleep more soundly any time soon.  The real question is what firms will do about this.

Against the wind
I’m still runnin’ against the wind
I’m older now but still
runnin’ against the wind

Well I’m older now and still runnin’
Against the wind

The cup's message: "Yup, I'm cool"

At Valorem, we periodically host “Lunch with a Coop Person.”  Today’s “cool person” was Sam Yagan, founder and CEO of OkCupid.com.  Sam is a serial entrepreneur, having started SparkNotes and eDonkey, among others.  It was great hearing his views on the traits of an entrepreneur.  One of the key traits he identified was a bias toward action, which made my colleagues and I feel good about ourselves, since we share that bias.  Sam also explained the workings of Excelerate Labs, a Chicago accelerator program for promising start-up companies.

There might be a lesson or two we learn from our LWACP lunch companions, but most of all we learn about the world outside the law.  It is a great program and the entire firm, from admins to founders, look forward to these lunches.  If you know any “cool people” in the Chicago area (or if you are one), let me know.

We really appreciate Sam taking the time from his busy schedule to share the lunch hour with us.

These service providers compete with many law firms, who like billing big bucks for process-rich work, whether document review or due diligence.  And many law firms are hesitant to rely on the work product of these service providers and so they find ways to “check it” that amount to a do-over on the client’s dime.  But as things evolve, law firms, at least those that want to thrive instead of fighting just to survive, will make the adjustments to work seamlessly with these subcontractors, just as a general contractor with good subs works seamlessly with those sub-contractors.  In the meantime, clients will have to be wary of the do-over tendencies of many firms.

The Corporate Counsel article ends with some interesting observations by Peter Zeughauser, with whom I agree.  But I would add that the number of large law firms is likely to decline at an accelerated rate until the equilibrium of the new normal is reached.

The College Law Practice Management was formed in 1994 to honor and recognize distinguished law practice management professionals, to set standards of achievement for others in the profession, and to fund and assist projects that enhance the highest quality of law practice management. The College and its Fellows inspire excellence and innovation in law practice management by:

• Honoring extraordinary achievement
• Developing, exchanging and disseminating knowledge
• Stimulating innovation in the delivery of legal services

If you’re an in-house business lawyer, an executive may give you a five-minute summary of a situation and ask for your legal advice. You can ask a couple of questions, but then you owe an answer. You typically can’t tell the executive that you’d like to gather all of the emails, review the contract language, interview the witnesses, and give the executive a precisely accurate answer six weeks from now. Business moves quickly; you must, too.

Sometimes when your in-house client contacts, she is moving at the speed of business and needs you to do the same.  Do you?  Do you even know how to?