The Star Game: That Could Cost Your Corporate Legal Department Up to $2,500 an Hour (or more)

There is the old adage: What goes up must come down.

The top large law firms which keep raising their fees-per-hour to up to $2,500 or more might find themselves on short time - in revenue, brand, influence and power. Or their very existence. Those firms, reports The Wall Street Journal, include Watchell, Kirkand & Ellis, Davis Polk, Simpson and Paul Weiss. 

In the WSJ article the chair of Paul Weiss Brad Karp refers to the dynamic as a "game." That game, as in the old Hollywood studio system, operates on star power. As is well known, that Hollywood doesn't exist any more. Could the top layer of large law firms also collapse under the weight of its billing? Right now, though, the game is heady, drawing lots of media coverage. Star-poaching is sexy.

What could redirect the up into a down is a combination of the client search for a solution to the escalating fee-per-hour and Gen AI. 

Already, notes the WSJ, a client such as Shell has fused both. It has put on notice that it demands 1) cost efficiency, along with the quality of service of course, and 2) information about how Gen AI is being used. 

Also becoming standard are strategies such as setting up a kind of bidding war among firms for the assignment; mandating alternate fee arrangements; trying out mid-range firms which probably will wind up billing half what the top layer does; and doing more legal tasks in-house. 

The wrench in the work for real reform, though, is fear. In bet-the-ranch legal actions, there tends to be a flight to the "safety" of the brandname large firm with a track record of wins in those types of legal problems. A legal loss can be costly in money, including from a hit to the stock price, and reputation. What general counsel is willing to take on risk in those situations?

Meanwhile, already on the low-value task level AI is eliminating much of first-pass task of document review.  That could result in some reductions in the usual amount of billing to clients. It's a start. And it could motivate clients to require more and more gen-AI kinds of products in case management.

A cynical observation is that large law firms which keep increasing fees - up 10% during first half of 2024 - could be creating the seeds of their own downward trajectory. Like industry they might have adopted a mission of cost-efficiency. However the billable hour seems to make all kinds of efficiencies counterproductive for revenue growth. Without revenue growth it is difficult to recruit, retain and motivate those stars.

In my coaching clients who keep their fees reasonable position and package that as a competitive advantage.

UPDATE:

Noon, Saturday, New York Time. So far in response to the WSJ article there are 250 comments and many replies to those comments. For some reason, there have been no posts on this on professional anonymous networks Fishbowl Big Law and Reddit Big Law.

UPDATE:

1:30 PM New York Time. Posting on Reddit Big Law about this. Here you can read all about the response.

Life is hard. Business is even more difficult these days. Get answers – and relief. Jane Genova is a results-driven intuitive coach, tarot reader and content-creator related to careers. Complimentary consultation (please text/phone 203-468-8579 or email janegenova374@gmail.com)