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Category: Study / Report

Report: New Jersey Hourly Rates Near the Top Nationwide

October 31, 2017

A recent New Jersey Law Journal story by David Gialanella, “NJ Hourly Rates Near the Top Nationwide, Report, Report Finds” reports that New Jersey trails only a handful of markets when it comes to average hourly billing rates for law firms, a recent report has found.

The state’s $272 average hourly rate for 2016, which takes into account both lawyer and nonlawyer rates, ranks sixth in the nation, behind New York ($297), Connecticut ($296), the District of Columbia ($292), Nevada ($285) and California ($277), according to the “2017 Legal Trends Report” issued by Clio, a Canadian cloud-based researcher that tracks legal industry metrics.

New Jersey’s $272 average combined rate placed it ahead of markets such as Illinois ($261), Maryland ($257) and Pennsylvania ($243), the report stated.  New Jersey also was sixth in lawyer hourly rates, at $288, again behind the same five markets, which all topped $300 per hour.

The average nonlawyer billing rate for New Jersey was $199 — second only to Connecticut, whose $228 rate was highest by far. New Jersey’s average nonlawyer rate put it firmly ahead of Nebraska ($175) and Nevada ($174), as well as Pennsylvania and New York (each $171), according to the report.

“Real” hourly billing rates, which are adjusted for cost of living in 2016, also are included: In New Jersey, that rate is $251 for lawyers, $174 for nonlawyers and $237 combined.  The latter number trails the same five markets mentioned above, as well as Florida, Illinois, Texas, Georgia, Arizona and Pennsylvania.  The data was collected from some 60,000 Clio users, as well as surveys of legal professionals and consumers of legal services, the report notes.

The report is critical of law firms for what it calls poor “utilization” rates—contending that lawyers on average nationwide spend only 2.3 hours of the eight-hour workday on billable tasks.  It pegs the utilization rate in New Jersey at 30 percent, which is one point higher than the national rate of 29 percent (meaning that a New Jersey lawyer spends 2.4 hours per day on billables, rather than 2.3 hours).  The report ranks lawyers in West Virginia and Maine at the top in this category, with realization rates of about 40 percent.

New Jersey is toward the back of the pack when it comes to realization rates, the report finds: At 79 percent, the state ranks 34th and is well behind Utah, South Dakota, South Carolina, Wyoming and New Hampshire, which approach or eclipse 90 percent, but still ahead of such large markets as New York (39th), Florida (43rd), Delaware (46th) and D.C. (48th), according to the report.

New Jersey also fares badly in collection rate, according to the report.  At 82 percent, it was ahead of only six markets in that category: Arizona, New York, West Virginia, D.C., Mississippi and Michigan.

Paper: Restraining Lawyers: From ‘Cases’ to ‘Tasks’

February 3, 2017

A forthcoming Fordham Law Review article, “Restraining Lawyers: From ‘Cases’ to ‘Tasks (pdf),’” by Morris A. Ratner, Professor of Law at the University of California Hastings College of Law, argues that law practice is experiencing two parallel shifts: civil procedure amendments are focusing on cost and resource drain, and the private market is giving in-house departments more options to unbundle legal work for lower costs.  A draft version of this article was posted with permission.  The abstract reads:

Developments in the domains of procedure and private contract highlight a continuing shift in authority away from lawyers and towards courts and clients accomplished by a conceptual downshift from “cases” to “tasks.”  The 2015 amendments to the Federal Rules of Civil Procedure limit attorney and party discretion by further empowering the trial court judge to dissect, assess the value of, and sequence case activity, including discovery.  At the same time, in the private sphere, sophisticated clients aided by advances in project and information management are controlling legal spend by unbundling cases into tasks.  From that position, they can source projects to low-cost providers.  Clients are also increasingly demanding litigation budgets and seeking value-based pricing, both of which work best if there is heightened communication between lawyer and client regarding the means to be pursued to achieve litigation aims.  These regulatory and market restraints on lawyers and lawyer-driven adversarialism, while pointing in a similar direction, differ fundamentally in terms of their reach, efficacy, and fairness.  Despite their differences, these developments in tandem have the potential to inspire the creation of new norms and duties calling on litigators to think more deeply and inclusively about the value of litigation tasks from the perspective of court and client.

Fee Analysis: Energy Bankruptcy Cases

January 9, 2017

A recent Texas Lawbook article, “Exclusive: Legal & Financial Advisers Feast on Bankruptcy Fees from the Oil Patch,” reports that, when times were good in the oil patch and crude was selling at a $100 a barrel just three years ago, lawyers and bankers scored record profits advising companies on a record number of mergers, acquisitions, joint ventures and securities offerings.

For the past two-and-half years, the energy industry has been in crisis.  Oil slipped to $30 a barrel.  Thousands and thousands of people lost their jobs.  A record number of oil and gas companies and the businesses servicing them declared bankruptcy.

The law firms and financial counselors working for those distressed energy operations, however, continue to pocket hundreds of millions of dollars thanks to the complex federal bankruptcy system.

The energy companies that declared bankruptcy during the past 30 months – a majority of them based in Texas – have paid their legal and financial advisers – nearly all of them based in New York and Chicago – more than $1.4 billion in fees and expenses during the past two and one half years, according to a Texas Lawbook examination of court records.

Those same lawyers and consultants have requested another $260 million in payments that are pending the approval of federal bankruptcy judges in Texas, Delaware, New York and Oklahoma.  In addition, there are more than 60 active bankruptcy cases in which the legal and financial advisers have not yet filed their fee requests for the fourth quarter of 2016 – fees that experts conservatively estimate will add another $80 million to the final tab.

Since July 2014, three law firms – Kirkland & Ellis, Weil, Gotshal & Manges and Skadden Arps – have been paid a combined $354 million for their representation of distressed energy companies during the past two and a half years, which does not include pending requests for payment or yet-to-be filed invoices for expected for work already completed.

“The business of corporate bankruptcy has become very lucrative for a small group of professionals,” Gary Kennedy, the former American Airlines general counsel who guided the Fort Worth company through Chapter 11 two years ago, said at a seminar at SMU Dedman School of Law last year.  “It has gotten so expensive that some companies can no longer afford to go bankrupt.”

Before the current oil and gas crisis, bankruptcy law practice had been in the toilet for years because many larger businesses chose to avoid bankruptcy court by using the shadow banking system of private equity firms and hedge funds to re-balance their financials.  Companies that did seek bankruptcy protection tended to file in Delaware or New York instead of Texas.  As a result, Texas law firms either fired lawyers who specialized in restructurings or had them focus on other practice areas.

All that changed in the second half of 2014 when the price of petroleum sank.  More than 1,280 Texas businesses have filed for bankruptcy during the past two years – many of them related to the downturn in oil and gas prices, according to new data research provided by Androvett Legal Media.  “Most bankruptcy law practices were pretty slow, but now most bankruptcy lawyers are either busy or crazy busy,” says Vinson & Elkins partner Bill Wallander, who leads the firm’s reorganization and restructuring practice.

“Energy has been the dominant theme – lots of upstream, some midstream and some oil and gas services companies filing for bankruptcy,” Wallander says.  The Androvett data shows that 752 businesses filed for bankruptcy restructuring in Texas federal courts in 2016 – up 42 percent from 2015 and up 80 percent from 2014.  The data demonstrate a clear connection between bankruptcy activity in Texas and the financial health in the oil patch.

New business bankruptcies filed in the Western District of Texas increased by 100 percent during the past two years – from 73 in 2014 to 146 in 2016, according to the Androvett study.  The jump was even bigger in the Southern District, where 293 companies filed for Chapter 11 bankruptcy protection in 2016 – up from 141 in 2014.

The Northern District witnessed a 49 percent escalation in corporate bankruptcies from 2014 to 2016.  Business restructurings in the Eastern District climbed 75 percent during the past two years.  More than 150 oil and gas companies filed for bankruptcy in 2016 – 71 of them were exploration and production operations with a cumulative debt of $56.8 billion, according to Haynes and Boone’s Oil and Gas Bankruptcy Monitor (pdf).

The Haynes and Boone data shows that 70 oil and gas services companies and a dozen midstream firms also filed for Chapter 11 protection last year.  “We are not seeing the wave of E&P bankruptcies that we witnessed earlier, but there is still a lot of distress out there, and there’s still a lot of first lien debt that is non-performing,” says Thompson & Knight partner Tye Hancock, who specializes in oil and gas bankruptcy.  “A lot of it depends on where the assets are located,” Hancock says. “The cost of performing in North Dakota is a lot more than in the Permian Basin.”

When Houston-based Stone Energy sought Chapter 11 protection on Dec. 14, it was the 114th E&P company to declare bankruptcy.  The total debt of those companies, according to Haynes and Boone, was $74.2 billion.  More than 110 oil and gas service companies with a cumulative debt of $18.8 billion have filed.  The 16 midstream firms that are in bankruptcy have a combined debt of $17.2 billion.

This article was posted with permission.  For a full version of this article, visit www.texaslawbook.com.

Report: Hourly Billing Still Commonplace

December 16, 2016

A recent Corporate Counsel story, “The Billable Hour Just Won’t Die, Report Finds,” reports that, while alternative fee arrangements are gaining popularity, data recently collected by the consultancy Blickstein Group Inc. shows that discounted hourly billing rates are still much more common than AFAs.

The Ninth Annual Law Department Operations Survey, produced by Blickstein in cooperation with the legal consulting and services company Consilio, looks at feedback from more than 100 law department professionals. A supplement to the report is available here (pdf).  The full 45-page report, which was provided to Corporate Counsel, is available by request to Blickstein.

The majority of respondents—70 percent—said that between zero and 30 percent of their outside legal work is done through AFAs. Less than 2 percent of respondents said that between 71 and 100 percent of their outside legal work is done through AFAs.

A number of impediments to using alternative fee arrangements were offered by respondents, including a law firm's unwillingness, not knowing which AFA to use and no internal impetus to change the current system.  The greatest number of respondents, 36 percent, said the unpredictable nature of matter activity is the biggest thing standing in the way of using an AFA.  The second-most-cited reason was a lack of data.

Law departments that want to use AFAs are in a position to make it happen, Josh Rosenfeld, vice president of legal services at legal services provider QuisLex, said in a Dec. 14 webinar about the results from the study.  "Clients have way more leverage than I think they realize they do with respect to negotiating AFAs with their law firms," he said.  "And each of these impediments can be overcome and it is not a terribly high bar."

For example, for law departments worried about the unpredictability of matters, Rosenfeld said there are options like capped fee or fixed fee arrangements with provisions that allow for scope of work changes.  And on the concern that firms don't have the necessary data available to suggest an AFA, Rosenfeld said law firms are becoming increasingly sophisticated with budgeting tools.  "If your firm is telling you they are not in a position to propose an AFA because of a lack of data, you can easily find another firm to do that," he said.

The report also reveals that the law department operations (LDO) role is alive and well in legal departments and that LDO professionals are achieving a higher degree of responsibility, with 59 percent of the respondents reporting directly to the general counsel or chief legal officer—up from 50 percent last year.  Another 17 percent report to the deputy, associate or assistant general counsel.  "The LDO professional is a very strategic role.  Because of the scope of work the LDO professional touches, they need to be at the right hand of the general counsel," Elizabeth Jaworski, director of legal operations at Motorola Mobility, said in the supplemental report.

NALFA to Rate Outside Legal Bill Review Programs

June 22, 2016

Legal bill auditors are companies who provide quantitative analysis of legal billing entries.  Legal bill auditors help to categorize and summarize billing entries.  Legal bill auditors are hired by clients such as insurance carriers, law firms, corporations, government agencies and municipalities to analyze legal billing entries in underlying litigation and transactional matters.

Legal bill auditing is part art and part science.  No two legal bill auditing programs are the same.  As a professional body, our mission is to ensure quality and reliability across the legal fee analysis profession.  NALFA’s rating system will help fulfill part of this mission.  Our rating program will provide clarity to legal bill auditing.  Our rating system will also assist clients who use outside legal bill review programs.

Legal billing auditing programs will be rated by process, methodology, technology, personnel, customer service and leadership.  NALFA has identified the following U.S.-based outside legal bill review programs (members and non-members) to be rated:

Legal Fee Solutions, LLC (Member)

KPC Legal Audit Services (Member)

Bottomline Technologies (Member)

Alan Gray, Inc. (Mike Ceppi) (Non-Member)

Legal Fee Advisors (David Paige) (Non-Member)

Sterling Analytics (David Sterling) (Non-Member)

Stuart Maue (Harry Maue) (Non-Member)

Legal Cost Control (John Marquess) (Non-Member)

Elevate Services, Inc. (Lokendra Tomar) (Non-Member)

"We are not interested in legal bill auditing programs being uniform, just competent.  We look forward to working with members and non-members in rating the nation's top legal bill auditing programs," said Terry Jesse, Executive Director of NALFA.