How Reasonable Are You?

Published March 4, 2008

This is the time of year when lawyers and law firms often review their billing rates and revise them upward. Of course that’s trickier to do than ever this year, with recession talk on everyone’s mind. If a rate increase is warranted, you shouldn’t be afraid to implement it, but you should analyze very carefully how much you want to increase—and why.

Ultimately, all pricing is arbitrary and depends on the seller’s understanding of costs, desired profits, and customers. The decision ultimately is the seller’s choice. When setting their billing rates, lawyers have only one formal requirement. According to Rule of Professional Conduct 1.5, “a lawyer shall not make an agreement for, charge, or collect an unreasonable fee.” The Code defines “reasonableness” by such factors as:

  • The time and labor required
  • The novelty and difficulty of the questions involved
  • The skill requisite to perform the legal service properly
  • The customary local fee for similar services
  • The amount involved and the results obtained
  • The time limitations imposed by the matter
  • The experience, reputation and ability of the lawyer

So, are lawyers who charge $1,000 an hour “reasonable”? How about $100 an hour? Ultimately, the rate that most lawyers charge is based on their “gut feeling” after evaluating such factors as their years of experience (more years out of law school means a higher billing rate), their practice area (mergers and acquisitions work, for example, is valued higher than family law), their geography (New York lawyers charge more than those in Des Moines), the number of lawyers in both the geographic and practice areas near them (the more lawyers there are, the higher the price competition), and type of billing method (hourly rate, flat fee, contingency fee, and so on).

There is no perfect time to raise fees, just make sure you have appropriate responses to support your case. Those clients who do not want to pay the higher fee will seek other counsel. Those who believe your service to be of value will accept the higher fees and remain with you.

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Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners