I’m an attorney who never should have gone to law school. I’m an attorney who can’t stand most other attorneys. Far too many of them are obnoxious, arrogant, and only interested in how much money they can make. Litigators play a game in which the point is to hide the truth rather than reveal it. They are like children who never grew up with how they engage in tit-for-tat warfare in the courts. (OK. I’ll admit, there are a lot of generalizations in this paragraph and I typically hate generalizations, but I’m ranting, which means I get to make generalizations.)
I was talking with a friend the other day who commented that she was realizing that she just didn’t want to be an attorney any more. I know the feeling well. It is a role I also am eager to end.
I work for a government agency that relies significantly on private attorneys to perform a particular service. While we get a slightly discounted rate, the rates charged by many of the law firms who are in this field range from $500 to $800. Per hour. Yes, that’s right, if you’re a partner in a large firm in this field, you, too could charge $800 per hour for your work. Most of which is formulaic. Generally speaking a lot of the transactions are similar in nature. So, you take the documents for an earlier transaction, change the names and dates and amounts and you’re done. True, there are frequently twists and turns to the transactions that require a little more thought, but it’s not rocket science and it’s not like every transaction requires a whole new exploration of the applicable law and creating documents from the ground up.
But for this work, partners can charge all that amount. Over the last couple of years, because of my role, I’ve had to have conversations with some of the private attorneys we work with. About their fees. One of the responses I frequently get back has something to do with my not understanding how large law firm economics work. Too which I want to call bullshit. Maybe it’s not that I don’t understand how large law firm economics work. Maybe its that large law firm economics don’t work.
Let’s take the middle of the range I just quoted for partners. Let’s say a partner can charge $650 per hour for his or her work. In most of these law firms, the attorneys have mandatory billing requirements. They must bill a certain number of hours each year to justify their existence in the law firm. 1800 hours per year is on the low end of the scale. That’s about 35 hours per week, 52 weeks a year. So, if you want a vacation, you better increase your average to be able to get those two weeks off. I believe some firms may require as much as 2100 billable hours per year. That’s 40 hours per week, 52 weeks a year. Good luck getting that vacation. Here’s one of the realities of law firm life. I’m not sure if there is a standard formula for this, but based on what I’ve heard anecdotally, I think it’s safe to assume that the hours in the office will probably need to be about 1.5 times the billing requirement to be able to actually hit the mark. So, if the requirement is 35 hours per week, plan on being in the office 52.5 hours per week. 40 hour per week requirement — 60 hours in the office. Either that or you better be incredibly efficient and never talk to your co-workers about the family or what you did over the weekend or take an extended lunch to hit the gym.
So, what’s my point. Here’s my point. Let’s go back to $650 per hour. Let’s cut the difference between the low and high end of the billable hours requirement. 1,950 hours per year. Do the math. $1,267,500 generated by that one attorney. Where the hell does all of that money go and why must the clients pay such an exorbitant amount per hour to produce that amount of revenue for the partner and the law firm? Seriously. Now I get that attorneys who work in these large law firms performing the equivalent of brain surgery each and every day (what? it’s not brain surgery? or even close to it. oh. yeah. right. It isn’t.) believe they are entitled to a comfortable and wealth-fueled lifestyle. They work hard, dammit, and deserve it all.
No, actually, I don’t think they do and before they bitch and moan about people like me not understanding law firm economics, maybe they should explain where all that money goes. Here’s my thinking — give the partner one third of it and he or she gets a little over $420,000 a year. A great salary by any means. Then, add in the cost of benefits. I tried to figure this out — what the standard may be — and couldn’t find it. However, based on what I could find, I’m going to say it’s 33% of salary. That’s another $140,000. We’re at $560,000. There’s still slightly over $700,000 left from this one partner. Yes, he or she needs a secretary or assistant, but they are shared with another partner or two. So, let’s say $50,000 of this partner’s revenue goes towards salary and benefit for an assistant.
We’ve got $650,000 left. Yes, there are things like rent and insurance and other overhead costs, but really? $650,000 worth. I’m struggling with that number.
One more thing … these partners are also making money from the revenue generated by the associates and paralegals. All of that revenue flows upstream, padding the pockets of the partners. An associate charging $450 per hour generates almost $900,000 in revenue and may get a salary of $150,000-175,000 (not counting the cost of benefits). That’s nothing more than an estimate, but I think it’s reasonable. That means there’s another $600,000-650,000 in revenue going to the firm for every associate that charges that amount.
Law firm economics. You’re right I don’t get it. Maybe there’s a bit of bloat there that could be cut to benefit clients and the economy for the rest of the world. Maybe, just maybe, nobody is worth $600 or $800 an hour.