Understanding Attorney Fees in the Current Market

Welcome to Accountants Law Pod, where accounting professionals and law firms converge, hosted by Linda Artesani, Sarah Prevost, and Steven Libhart.

Woo-hoo!

It's Monday. Welcome back, my friends.

Happy Monday.

Happy Monday in the summer. Linda's about to go on a big trip.

Which will be cooler.

It was exciting.

It's gonna be a lot cooler where I'm going than here. It's hot here, you know.

Well, what's your— what is your heat index thingamajig over there?

Here? It's really muggy today. It's hot. Last time I looked, it's not sunny, so it's only 77. It feels— oh, wait a minute. Sorry. That's where I'm going. 90, and it feels like 102, which is less because there's no sun. Yeah.

Well, you know, that's, that's gonna be interesting.

77. I'll need a jacket.

Yeah, for sure. Well, we kinda have a hot topic today. Anyone can guess?

You can't guess. You can just look at the, the notes. The show notes.

It has something to do with pricing. Attorney fees.

Yeah, understanding attorney fees is how we have it listed here. However, I think understanding attorney fees in the current market right now is a big— we, uh, prior to starting this podcast, we said, well, what are the trends right now? Just curious. And I dropped in the information and Gemini spit back some interesting pieces.

Um, and we all went, wow.

Yeah, yeah, there was an average trend, an increase year over year in '25, an increase of 9.6% per year. Now, this article that I'm looking at, Tira is going to include in the show notes, but I think what kind of brought to our attention is understanding the structure. Every practice area has a structure, and we see blended what we call blended types of billing practices, right? But, but now—

Hybrid.

Hybrid. Hybrid. Yeah, thank you. That's the word. Thanks, Linda. But now we're— this kind of flipped it upside down a little bit as far as what it is that people are looking for as far as clients go and what firms are doing. And I don't know, what do you guys think about this?

Well, when you think about it, When you think about it, Sarah, you've got, you've got AI, right, which can do some of the heavy lifting now. And it's kind of like when we went from desktop to online. I remember like, wow, the work's so much easier because you have the bank feed and it saved us time. But then you're sitting there, well, if it's saving us time, the client's going to turn around and go, where's the value? And you have to figure out how to price. Whereas how we started really going into fixed fee billing was because of that, because we didn't want to lose out on what we were going to get paid. Just because automation helped us. And I think that you're going to see some of that because automation is going to help law firms, especially like research and all of that. It's going to be faster than trying to search for things. It's going to give it to them pretty easily, I would think. I don't know.

Yeah.

Steve, what do you think? I mean, that's a really good valid point that Linda brought up.

Well, you know, the part that's blowing me away is Looking at this article, at the top of the market, rates have reached unprecedented levels with senior partners at some of the biggest firms charging up to $4,000 per hour in 2026. And early indicators confirm that the 2026 rate changes are greater for those than the same firms in 2025. But I think if you break that down, you know, like outside counsel, I see that Perhaps if you can negotiate more with outside counsel and what those rates would be and what the outcome will be and timing. You know, there's a lot of things that can go into this. What was the word that we came up with? I'm not remembering it right away.

Oh, this alternative— are you talking about this alternative fee arrangement?

Yeah.

What's called AFA, which is—

Yes, yes, yes.

An interesting thing about instead of traditional billable hour, firms increase—

Predictability.

relying on fixed fee retainers, phased fee structures, which we've seen, um, and sort of like a value-based, which is what Linda was referring to for us. Because it's like that old adage of like my knowledge and my experience and my tinkering with something might be a 5-minute fix where it takes you 20.

Yeah.

So, so there's that balance. But I, off, off camera, what I was saying to you all, which I think is we've seen a little bit of this in this day and age right now, Is, um, in a particular style of billing to insurance carriers, there's this whole underlying thing happening where, you know, benchmark rates are X, so why are you billing me X? Which makes me nervous because it doesn't value the individual and their tenure and experience. So it's— I think we're in a weird conundrum going forward.

Yeah.

But I It's predictability. I mean, yeah.

And we're seeing the law firm.

We're seeing—

we see the attorneys, their rates are going up. We see that from our side of things. But we also see the clients feel like they're being overcharged a lot. So that all comes down to what they think they should be paying. Right. Which is hard when you work with a—

I'm sorry. Are you thinking that's across the board?

Yeah, I think so. I think I've seen rates go up quite a bit.

Mhmm.

On, on all different types of law practices.

All different types of law practices. I've seen the hourly rates have been going up, especially in the partners and the, the higher-ups.

Mhmm. Well, it's being pulled right through. That's for sure. Yeah.

And I think too, with, with attorneys, you know, if they can get away from— I mean, hey, we see some of these bills that go out. There's so much information on it. You know, I licked the stamp and they charge you a $5 for that. And it's like, you get— you can see where people get a little bit aggravated, because if you start to do line item everything, just go into the admin costs when you do— when you work with a law firm, and you know how many little costs can be on there, and that can irritate a client too. So I think they want to have a good relationship with their client. They want to keep their referral business going. So sometimes I think— but when you start to transition attorneys into that fixed fee billing, they're always afraid, what if I don't charge enough?

Mm-hmm.

How do I figure this out? Because sometimes it is hard to figure out. Divorce is a great example. So you get an attorney that's family law doing divorce cases. A divorce case can be walk in, everybody agrees, all the parties agree, and it's simple. Um, that's usually not the case. And then it becomes big, full-on, and they don't— if there's a lot of time involved, they don't want to package it and then lose money on it because they're putting more time and effort into it.

But with that said, when they do, when they do perform a service And it wasn't included in that original consideration of rates for that divorce. I really believe— I'm a firm believer in go ahead and post it on the bill and show that you did that work, even though it's zero value.

Yes.

You know, zero dollar value.

We see them write down a lot. They write down a lot too.

So there's that. Yeah, there's such a hybrid. But you know what's going to— what my mind is thinking as you two were talking was it's going to really rely on what practice management software you're in to realize the realization of what's happening. I understand there's fear around it. We've met a firm owner, Steve, that you know, where he flipped it the other way. He went back to hourly. I think prior to this adoption of AI in this way, I feel like now it's probably going to be, to Linda's point, the research is you've got a different lift, basically. Right. So in some areas you're more efficient, but then it's also like, how much knowledge do you have at this depth? It's hard. Like what you said, Linda, with regards to divorce, family law, which Steve, I know you know about well because that's one of the areas you've serviced a lot. It is hard to know which way the case will go.

Absolutely. Yeah.

And you don't. So how do you change the model at the front end and then have to— you're going to have to get really good with your numbers, and you're going to have to be really good with timing and understanding utilizations a little bit better. Are you tapping into the right staff to manage this? So it'll— and I think, Steve, you were talking about co-counsel or, you know, specialized—

You know, the cost of co-counsel. Sure. And, you know, really being very clear on the type of work they're going to perform for this particular case, as an example. And what does that look like? And what is the value of that? Instead of the approach of, hey, can you help me work on this case? You know, you'll make $300 an hour or whatever. Kind of identifying, breaking it down a little bit more granular, if you will.

Mm-hmm.

Or let's look at the Go ahead.

Oh, I was gonna say, I think where it's stemming from, if you think about why the trend is getting so— it's going to be so polarized, it's got to be coming from the clientele. Like Linda, you would think her own experience. Yeah, well, I mean, her own experience recently having a case that's lasted forever, have to fly up to a different state to— and you've got to beg the question in the back of your mind is What's the process? Why, why would it cost this much? Why is it drug on this long? What are the costs behind it? And you just don't know. You honestly don't know.

And why is it so antiquated still? That was my biggest question. Like, why are we still doing the things we're doing in such an old-fashioned way? But that's just the way the court is sometimes. So the attorneys have to factor that in too. We've seen it where they can't pay a fee, they have to pay with a check or something like that. It's like, really? That's the only way they'll accept certain fees? And yep, that's how they do it. And like, wow. It's amazing how not forward-thinking. And I really think the pandemic helped push the legal industry more forward. And whether they liked it or not, they had to, you know.

Yeah.

You know, this reminds me, Sarah, when back in the days when you and I were in the hotel business during that era of time, do you remember when the reservation manager position changed to revenue manager?

Yes.

Okay.

Doesn't— yeah. Do you remember that? And I was just amazed back then. I was like, what are we doing?

What—

this reminds me of this.

Mm-hmm.

That, you know, some of these law firms could bring in or share, or there could be expert revenue manager people out there that could offer their services and really, really granularly— I can't say that word— break down what a case, what's going to happen. And when you do it that way, I think that you really can hone in on reducing loss, increasing revenue, increasing trust with the clients. Um, boy, I just, I just had a big aha moment on— because that reminds me totally of that.

So if you're an established firm and you have all this data that you can analyze and take it in chunks where you can look at, you know, pre— if you have practice area in there correctly, if you're multifaceted, right, and you have your service offerings or what type of billing— like, I think you need to analyze it subgroup first, then analyze the next one, then analyze—

Go from the end backwards. Yeah.

And figure out, which is to me sometimes my preferred method. I prefer to work backwards. I like to know what's the start, but just go the opposite direction for myself. But if you were able to take all this and, you know, to be honest with you, I am amazed at in our current day and age We can put a lot of data in, have it build us out some pretty amazing pieces. But if you don't really fully understand or able to see the backend raw data to know, does this actually— is this coming out the way I need to see it, or told to be in a storyline that makes sense to me? It's, it's not a lot of value, right? You have to—

Mm-hmm.

We're really kind of coming into a day and age where even ourselves, we really have to— if we're going to use tools like the AI tools of something, we just really have to learn how to ask it or use what's in our software systems and really ask it to make sure we're fully understanding what is behind the actual numbers. Because you can see it very easily. You'll get— you'll pull some billing reports and you'll see, oops, a paralegal put time in. incorrectly as themselves on a case never should have time in, right? Let's say this particular— because they're helping a senior partner get their time in. But if you're really not utilizing the tool inside the system to capture what true time was, you're doing yourself a disservice. And I include ourselves, the 3 of us. I don't know how good we are sometimes at tracking our own time. On dedicated special projects, for sure, we really are. But just, we're running multiple areas, we're running many things, we're answering emails, answering staff questions, clients, we're doing a lot. So it— we need to have tools in our tool belt to help us manage our own stuff to make sure where is the value coming in at. Whereas staff, they're just really concentrated a lot of times on certain pieces, which is beautiful. You can analyze it.

So Yeah.

Well, in this scenario, what, what is this going to do for personal injury law practices? You know, when the standard for, the standard for so many years was 33 and 1/3% goes to the firm or 40% or whatever it is right now, you know, and how—

Do you think that's gonna change?

Well, you know, I mean, isn't that the— are they gonna get— are they gonna settle quicker with AI helping them?

Oh, I have no idea. That, that would be a hard thing to say. I, I don't—

I mean, there was a movie There was a movie on, um, and the premise— I didn't get to watch it, but the premise was it's AI court. So AI court, you have 24 hours to put your case together, you go in front of it, they have the ability to get all the information really quickly because they can pull all the records because that's what the world has turned into. And you stand in front of the AI judge and then they were, they were like killing you if you didn't, you know, if you committed a crime, that was it, that was the end of you. It's an interesting— I can't remember the name of the movie though.

Oh, I'd like to see that one.

Yeah, it was interesting because they showed the guy stand. I'll find it because it was, it was like, oh, that's an interesting premise. It's obviously in the future, but, um, you didn't have a lot of time to prepare your case and you went in front by yourself. There was no lawyers.

So yeah, that's very interesting.

Scary.

Yeah, I think maybe Mirage. I think it might have been Mirage.

Well, there's also, uh, like, like many of us in our professions, professional services, we have a state-by-state variation too.

Yes.

So I don't know, Steve, how much of the contingency would change because isn't it deemed this way? That's contingency billing if you fall into these categories. I feel like if you're inside this other hybrid model or you offer another subset of services, deciding on hourly rate versus hybrid, which I called it something else, where you take the, you know, the Uh, flat rate and hourly rate, or phased billing. We see sometimes what's called phased billing, or there's the, um, evergreen retainers where you establish, okay, you're just always— because maybe I'll just use a business. A business owner constantly has recurring legal fees come up for this, that, and the other. Or, you know, if you're in an HOA, and you run an HOA and you always need legal counsel, you want some predictability.

Oh, yeah.

I mean, there's like a myriad of things where I can see why there's pushback to not understanding predictability. But I can see where a law firm struggles because sometimes it's not predictable. You don't know how a judge is going to go. You don't know how a case— like, Linda, your case, I mean, you'd never thought in this endeavor, 13 years later, you'd still be handling a case like this.

We should have an answer by the end of August. And the judge didn't want to hear closing arguments. She told the lawyers to write up what they had to say. She's done with the case.

So we'll see.

Didn't even want to hear closing arguments, huh?

Nope. They said write them up. They told the, uh, told the attorneys to write up their final memorandums. She didn't want to go into court for that one more day to do that part. That's interesting.

But it's also hard when you have things like that against you or for you, depends on how you look at it. You've got, um, you know, sort of all the legal things that go on, like certain witnesses that you, you know, you've procured, you've got ready to go, and then they back out. They're still— the attorney incurs time to, to prep them, to—

Yeah.

Who knows, right? There's like a myriad of things that could go wrong. Um, and I wonder if To your point, Steve, certain types, straight business, you know, you've got business write-ups, meaning an operating agreement. You've got, you know, certain pieces, pillars of things that make sense to have predictability behind of what the cost would be to help people understand that.

It—

I get you. If you put a range right now out to someone, they're going to hear the bottom number. They're never hearing the top number.

Yeah.

Right? So then you have to effectively figure out what's your hourly rate that you're comfortable charging, or that the market will bear. Push that in and kind of mix up the soup to come up with whatever that flat fee would be based on the work, and then constantly look at it. That's a whole bunch of work, but that's where we're at because it looks like people are pushing back. Yeah, based on what I'm reading here. So I guess this alternative fee arrangement might be a new hourly or new fee structure.

Not—

I don't want to say hour— of how to shape what's to be in the legal world going forward. Who knows?

It's so much work to be an attorney and then to have to have all these changes going on with the business side. Yeah.

You know.

Yep.

Well.

Makes me weak.

Kind of. To me, it's somewhat interesting for sure.

It is.

My mind is just tick tick tick tick tick.

Oh yeah, yeah, yeah.

Or I feel worse is if you were in the medical profession. No thank you. You guys do that. I don't want to do that.

Well, you know what I was going to say a second ago now that you bring up medical? I was going to say this almost sounds Like a surgical approach to me in so many ways because they really have to be precise and confident and show that confidence and—

Yeah.

Look, to your point, go backwards and work forward, you know, to the opening end of it. It's almost a surgical sort of thing. Or like we were talking about a while ago, all of a sudden there were revenue managers in the hotel business, you know, same sort of thing. I could see attorneys reaching a point where they're like, We need experts just to break down everything. And, you know, Clio's doing that with one of their new products. I was in a seminar with them a couple weeks ago. One of their new products, how they break down a case. I can't think of what it, what it was called, but how they break down a case and, and, you know, the documents and how they're produced. And, you know, how the documents can be customized to your style of work and to your tone of voice, how you present to the client. Did you see that?

No, no, you better take a look at that.

You better take a look at that because this really makes me think about that. It they it can customize the documents to the way that you speak to your clients. They're working on that now.

Well, that makes sense to me that they should.

It does. They bought this big AI tool, but then what does that do to the rates? You know. That's just one example.

Well, you think about the money we're spending on AI, they're probably doing the same thing. So they have to recoup money somehow. So AI, yes, is helping, helping to get through a lot of data fast, but they have to be able to recoup to pay for it because— Sure.

It's a tool in the tool belt. People need to remember it's a tool in the tool belt. It's not a replacement of people.

It's not a replacement. We gotta get over that.

Yeah. But we keep seeing all these people that are like, I run an accounting firm. I don't have any employees. I got rid of them all and I'm using AI. I call BS on that. I can't imagine that you're able to do that. I mean, maybe I can only think of a certain kind of firm with certain kind of write-up clients that you really don't have to talk to the client much, and it's just an annual thing. That's, that's what I think that is. Or maybe you're a tax person and you just do the tax stuff every year and you're not really going up to the level, right? Because I just can't see how it's going to be able— right now, as AI is, how do you eliminate everybody? Yes, agents can do things in the background, but I just can't imagine taking all the people out of the equation. It doesn't make sense to me.

Well, and if you think about the work it takes to do— like, when I think of a merger acquisition and the work it takes for an attorney to do, regardless of the research, you've got the human beings involved, the emotions involved. There is no tool in your tool belt, whatever that tool is, workflow product, anything, brand writing, whatever it is, doesn't digestibly sit when you're dealing with emotions or feelings or outcomes that you have to think through and participate in. Yeah. And you're— they're stewards, right, of these types of things. And they looking through this lens of legal jargon and all these— I mean, half the time you look up terms and conditions, honestly, am I reading through every single one? I can't— I can spend all day reading through every single one. You know, and I don't know what you're signing up for. Sometimes you get no choice sometimes. So, I mean, let's be honest, it's, it's very hard, and I don't see any of that leaving the eyes or brainpower of a human.

Mm-hmm.

So, yeah, I, I feel like this whole what you're going to charge in the future is definitely being disrupted. It has been, but then also what we face too, and we've heard this before several years ago, what is allowed to be charged and how to do it and what states are going to be okay with because of the trust account.

Oh yeah, yeah, yeah.

And we've heard this conversation go in a circle over and over and over, and I think it's still, no matter what, will have some complexity behind it, some guidance behind it, whether they've caught up or not. Just like our lovely interview that we had with the judge and how she sees things in court. I feel like that's going to be a precedent with an overarching bar rule from the ABA, but as well as individual states and jurisdictional things. So for us accounting professionals that service this, we have to tighten our tool belts ourselves and sharpen our pencils so we're paying attention a little bit more closely.

Yeah.

Yeah, it— I, I do see a disruptor coming for sure. It's going to happen. We'll see how it shakes out. But well, there you go. Tiara, take us away.

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Well, my brain hurts.

I was just going to say, on a Monday, that's not a good thing. Curiosity. Now we're in the curious zone of things, right?

Keep an eye on this.

Yeah.

Yeah. Definitely.

Definitely.

Well, thanks all.

Yeah, it's definitely— it's in flux for sure. Bye, everybody.

Bye.