Despite $1,500 hourly billing rates for top law firm partners and $180,000 entry-level salaries for some associates, in-house counsel face significant financial constraints.
These corporate lawyers continue to pressure outside firms to cut fees, cap them, or, at the very least, justify their exorbitant billing rates with more than just anecdotal success stories. In turn, law firms are having to spend money in a variety of ways to ensure they are fully prepared to beat their competition to secure – or hang on to – a client.
“There’s demand for law firms to make sure they’re providing clients with value for the work performed,” said Vince Vetri, a manager at Elevate Services, a legal analytics company based in Century City.
While demand for legal services has rebounded since a precipitous drop engendered by the recession, it has stayed almost flat in the aggregate since the first quarter of 2010, according to a study by Georgetown University Law Center released this year. In this environment, revenue per lawyer at top-ranked firms has risen only an average of 2.5 percent a year over that time frame – a far cry from the 5 percent to 8 percent growth seen in prerecession years, according to data compiled by American Lawyer.
These tight margins and mandates from corporate clients to provide more concrete proof of efficiency have firms turning to data-driven solutions. Many have contracts with third-party companies such as Elevate or Palo Alto-based Lex Machina to help provide a statistical backbone for client pitches and legal strategies. Where a general familiarity with a matter’s venue or particular judge might have been enough to sway a client to go with one firm over another in the past, hard data is now driving pitches, according to Lex Machina’s general counsel Owen Byrd.
“The ‘we heard that a judge likes to rule on claim construction in patent cases without a hearing’ no longer is enough,” he said. “Having data that allows you to demonstrate to a client that you deeply understand a judge and opposing parties is a huge advantage in a pitch.”
While employing legal analytics to win business is quickly becoming industry standard, some firms are beginning to take a more radical approach. Instead of contracting out for these services, they employ teams of specialists who mine data to not only provide internal value-based pitch support but also produce analytics about firm profits on a matter-by-matter basis.
Bryan Cave, which has offices in Santa Monica, has made its legal analytics team – dubbed the “practice economics group” – a priority and integrated basic business tactics into the firm’s operations. Chris Emerson, who heads the group, said taking the firm’s historical data and analyzing it has been crucial.
“Once you have performance data, you can start looking for trends and creating efficiencies,” he said. “In order to be profitable in a world of fixed fees, you have to increase efficiencies.”
The group operates almost like a consulting business in addition to its support role for attorneys, according to Emerson. In one instance, the team built out an entire contract management system for its client Red Robin Gourmet Burgers Inc. Emerson’s team and attorneys worked closely with Red Robin deputy general counsel Sarah Mussetter to refine the company’s legal contracting guidelines and procedures in addition to creating a central repository to store key performance metrics. This type of nonlegal client service is becoming a larger part of Emerson’s role at the firm.
“I’ve spent more than 50 percent of my time this year in front of clients,” he said. “I have the Southwest miles and Marriot stays to prove it.”
But it’s worth it, Emerson said, because the metrics-based model produces a symbiotic relationship with the client.
“The more information we share, the more we get back and the more we know about how they want their business run,” he said.
Doug Thompson, a partner in Bryan Cave’s Santa Monica office who works with financial institutions in class actions and other complex litigation matters, said it’s paramount for firms to match up their work and billing with client expectations.
He added that other firms are moving toward the internal analytics model, including Seyfarth Shaw and Davis Wright Tremaine, though most still turn to third-party companies to crunch the numbers.
But the trend is shifting.
“There’s been a noticeable increase in the number of people on their pricing and project management teams,” Evolution’s Vetri said.
Still, Evolution isn’t too worried about being squeezed out of the market.
According to the company, its three-year growth rate was more than 2,500 percent.
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