by Peter F. Valori, Managing Partner, Damian & Valori, LLP | Culmo Trial Attorneys
Recently a client shared a BigLaw bill sent to him where his company had paid $950 an hour for partner time and $750 an hour for associate time. Yikes! He was shocked when I let him know that the same lawyers that broke off of that same firm (and applied a lower overhead cost model) could deliver the same high quality services at 30-50% lower cost.
Clients are often lured by BigLaw because they are a “one stop shop” or because they have the misconception that a larger firm will intimidate the opposing party, yielding better and faster results. The opposite, however, is more likely. A savvy opponent is happy that their adversary has chosen a firm that is supporting other practice areas and a large overhead with their litigation practice and that the opposing party is paying twice as much as they are because they now have twice the staying power, and stronger settlement position.
Indeed, staying power and the related factor of overall litigation expense are critical factors to success because they weigh heavily in settlement negotiations and litigation strategy. They also weigh heavily on the bottom line of a litigant!
Many times, clients involved in complex business litigation have come to us after working with a renowned BigLaw firm. Having used 90% of their budget and only completed 10% of their case, they turn to us to resolve their case with the remaining funds after seeing the budget to continue with Big Law is not feasible. Or worse, they call us up to litigate the case after an insolvency. In nearly every one of these instances, had the client selected a firm with a more efficient staffing model, reasonable hourly rates, and worked on a thorough litigation plan, their case would have been concluded with less time, money, and effort.
Litigation boutiques offer clients—especially small to medium-sized businesses—several advantages. Most importantly— the hourly billing rates. According to the LexisNexis CounselLink 2020 Enterprise Legal Management Trends Report, partner billing rates in the “Largest 50” firms of more than 750 lawyers were 51% higher than partner rates in firms with 501-750. In firms with 201-500 lawyers, partner billing rates are 29% higher than in firms with 101-200 lawyers. I have personally seen gaps as wide a 100-200% — especially in firms with effective billing rates that consider all staffing on a file.
BigLaw firms do not work more hours or provide any more services in return for those increased rates. Like any big corporation, BigLaw firms have a lot of overhead. Their fees support other larger departments, like their corporate, real estate, and tax practices. Each of these increase the number of personnel and need for physical plant. In turn, clients pay higher billing rates to cover additional costs.
Typically, litigation-only firms are smaller, have less lavish office space, lower overall staffing costs, are more efficient users of technology, and therefore, have lower overhead costs. They pass on those cost savings to clients, but still provide the same quality services.
And, smaller firms have more flexibility to negotiate billing rates and fees structures. On the other hand, BigLaw firms typically cannot negotiate billing rates because they would need approval from their many partners and their administrators. Most of the time, they also cannot take cases on a contingency fee basis. Litigation-only law firms are usually more nimble, flexible, and more able to work with you to develop a fee structure that suits your needs and budget.
In addition, small to medium businesses will not likely be a priority at BigLaw firms. Rather, Biglaw will focus on “whale” clients and only small and mid cap clients to fill in the gaps. At a litigation only firm, on the other hand, your business is significant, and valued.
In sum, litigation boutique firms provide a cost-efficient alternative to BigLaw and may add to your company’s bottom line!