Clients Keep Complaining, But Law Firms Are STILL A Bargain Even After Historic Rate Hikes

Clients don't like to hear this, but outside counsel are offering a pretty fair deal.

Whenever a law firm raises its rates, clients bemoan the added stress to tightening budgets and might lodge some empty threats about refusing to pay, but ultimately everyone realizes that no one gets fired for hiring Cravath -- or another peer firm -- and in-house counsel fork over the cash. Law firms raised rates last year and while most coverage focuses on the hikes being the biggest in a decade, it turns out law firms are still running behind inflation.

LexisNexis CounselLink collects data from over $52 billion in legal spending in more than 1.4 million matters to capture insights into the state of legal spend in a new report. And clients are definitely spending more:

The average partner rate increased by 4.5% (compared to 3.4% in 2021 and 3.5% in 2020). Average rate increases were up compared to 2021 in all law firm tiers and practice areas.

"Inflation affected most sectors of the economy in 2022, and legal services were no exception," said Pam Gelfond, VP and GM of LexisNexis Legal Business Solutions. "We hope our report can help the legal community

Yeah... but inflation generally was up 6.5 percent in 2022. And it was up 7 percent in 2021. All told, attorneys have kept rate hikes below the rate of inflation. Admittedly 2020 outpaced inflation a tad, but lumping it all together, law departments still come out ahead.

That doesn't necessarily help corporate clients. A reasonable increase is still an increase that the department has to cover with a declining budget.

But why is the budget shrinking? The Fortune 500's profits were up 114 percent last year. Before blaming Biglaw for seeking a 5 percent revenue hike, maybe look in the mirror and ask why management can't kick at least a 6.5 percent cost of living boost.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you're interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.