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Grand Scale

November 23, 2007 | Boston Business Journal

Grand Scale

Billable hours in New York's trend-setting legal market have breached the $1,000 mark. It's just a matter of time before Boston follows suit, but are clients willing to pay?

Boston Business Journal - by Lisa van der Pool Journal staff

Stuart Garfield
WilmerHale managing partner Bill Lee charges $850 per hour, the ceiling among Boston-based lawyers. “Many top attorneys in Boston are practicing at a national level and working for national clients, and that means that the ceiling for rates is going to be the national ceiling,” he said.
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News that attorneys in New York City crossed the thousand-dollar mark has raised the million-dollar question here: When will Boston lawyers follow suit?

A number of New York lawyers, who already command the highest rates in the country, began charging $1,000 per hour earlier this year. Boston's billing rates are the third highest in the country; lawyers here charge anywhere from $450 at smaller law firms to $800 at larger outfits.

But since New York traditionally blazes the trail for legal markets elsewhere, industry insiders agree it's just a matter of time before attorneys here bring their rates up to a level that not so long ago would have seemed unthinkable.

"Absolutely it will happen," said Mark Kwatcher of Kwatcher Legal Placement LLC in Boston. "When New York raises salaries and raises rates, other major cities follow. Costs in the legal profession are not fixed, they're always changing. Rates have to be adjusted."

But if they raise it, will clients come?

While some in the market insist that quality legal service can be had without breaking a company's coffers -- Hanify & King PC, for example, is gearing up for a marketing campaign based on lower price points -- others say an experienced attorney is worth top dollar. Plus, there's a lot to be said for brand: A widely known lawyer from a marquee firm is a powerful, if pricey, asset.

"I've been interviewing clients for almost 20 years and they talk about price and cost and value a lot," said Jeff Coburn, managing director of Coburn Consulting LLC in Boston. "I've rarely heard clients who are happy with their firms complain about the fee at the top level -- usually the fee is justified."

The most senior partners at the largest firms in Boston are usually among the lawyers that are able charge around $800, the ceiling to Boston rates.

Bill Lee, managing partner at WilmerHale, is one of those partners. Lee charges $850 per hour and says that his rate is a reflection not of what is going on in one city, but the fact the his firm plays on a national litigation platform.

"Many top attorneys in Boston are practicing at a national level and working for national clients, and that means that the ceiling for rates is going to be the national ceiling," said Lee. "I believe rates can't go up and up forever, but my rate is much more a product of what's going on nationally in the litigation area."

Still, many clients raise an eyebrow at the current high rates -- and the notion that they very likely will go even higher.

"Outside counsel rates are like college tuitions: They only go up, and the market is very forgiving," said Vivian Tseng, vice president and general counsel at Welch Foods Inc. in Concord. "If we raise prices on juice beyond a certain point, people stop buying it. My entire budget has, in spite of these rising rates, been on a steady decline. I don't know who pays those rates."

Tseng, who often hires outside counsel for legal work, often looks for lawyers in markets that charge lower rates.

Kenneth Boger, senior vice president and general counsel at at Vertex Pharmaceuticals Inc. (Nasdaq: VRTX) in Cambridge, found another way to avoid the price trap for outside counsel: Bring the counsel in-house. Boger said Vertex's legal department is four times larger than it was when he started there six years ago

"There were lots of years when it would have been very hard for outside companies to lure lawyers. Now, it's not as difficult. If feel that I can get really high-quality, motivated lawyers in house, I'm not going to pay when it's much cheaper to bring people inside," Boger said.

"Part of my job as general counsel is running a business and providing legal services. Like any other business person, you have to weigh cost benefit and at some point cost benefit analysis drives you in a different direction," he said.

But even if some in the market will balk, lawyers will adjust their rates if the market so demands.

"We're constantly looking at our rates," said Peter Devlin, managing partner at Fish & Richardson PC in Boston. Devlin bills $675 an hour.

"It's pretty common for our rates to be adjusted periodically, but our rates don't approach (the thousand-dollar mark). But who knows where it will go? Ten years ago people thought the idea of billing $500 was crazy. It's a market-driven business and people are worth what the market will bear."

Lisa van der Pool can be reached at lvandderpool@bizjournals.com.

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