I watched the 1995 movie Clueless with my family over the weekend. Loosely based on Jane Austen’s novel Emma, it featured Alicia Silverstone as Cher, a wealthy, good-natured and sometimes (or perhaps often, depending on one’s point of view) superficial teenager. She lives in Beverly Hills with her tough yet warm-hearted lawyer father, played by Dan Hedaya.
I know you’re starting to wonder when we will get to the connection to our topic of managing legal expenses….Here goes….
Cher describes her litigator father as being so ferocious and good that clients would pay $500 an hour for his services, which must have seemed at the time to be quite the princely rate. That sounded about right to me as a BigLaw top-end billing rate in the mid-1990s. I was curious what that equated to in today’s terms, if we adjust for inflation using the Consumer Price Index, or CPI. With help from the Bureau of Labor Statistics, I determined that $500 in 1995 dollars is equivalent to approximately $753 in today’s dollars.
Anyone who has paid a bill from a major law firm recently knows that BigLaw’s billing rate increases over the past 17 years have far-exceeded the changes in the CPI. Law firms, just like any other business, seek to charge what they think the market will bear. I also recognize the shortcomings of the CPI as a metric for billing rates for professional services. Nonetheless, I suggest to my in-house friends – particularly those in commodity or commoditizing businesses experiencing significant pricing pressure from their customers – that this kind of data might be a starting point for a value-oriented conversation with your outside counsel about what is happening to the pricing model in your business, and comparing that to your counsel’s most recent, or next, annual round of rate increases.
Readers, do you have any other suggestions for movies or other works of fiction that mention lawyers’ billing rates?