Fat Fees

More is--well, lots more

Chief Justice Walter McLaughlin retired in 1977 to join his sons' Boston law firm. After ten years on the Massachusetts Superior Court, he was asked what he found most striking about returning to private practice. "The fees," he snapped. "They are outrageous. With the cost of litigation these days, I think clients would often be better off if they just met in the halls and threw dice. Certainly it would be cheaper."

In 1977, legal fees totaled some $18.6 billion. According to the Commerce Department, that figure was up to $23.4 billion last year, nearly 1% of the gross national product. Top big-city law firms like Chicago's Reuben & Proctor currently bill clients as much as $200 an hour, up from a high of $150 in 1975. Superstar trial lawyers like Boston's F. Lee Bailey and San Francisco's Melvin Belli regularly command flat fees that work out to as much as $300 an hour. New York's Louis Nizer, whose clients have included Blacklist Victim John Henry Faulk and major corporations in the film industry, commands a phenomenal $350 an hour, thus earning the equivalent of the nation's median annual income in approximately 44 hours. Admits former Watergate Special Prosecutor James F. Neal, now practicing law in Nashville: "Frankly, I don't want to disclose my hourly rate. I'm embarrassed by hourly rates--not just mine, but everybody's."

In personal injury cases, where large awards are common, attorneys' contingency fees are often determined by state rules or common practice. These fees often amount to huge lump sums, but require greater risk of time and effort on the lawyer's part. Last May, for example, three attorneys and their firms were awarded $10.6 million in fees in the Black Hills, S. Dak., Indian Lands case after 24 years of work.

Rates for most criminal and civil litigation--from complex tax and regulatory cases to child custody and contested divorce--are wholly unregulated. In fact, in 1975 the U.S. Supreme Court struck down an advisory minimum-fee schedule published by a local Virginia bar association as illegal price fixing. As a consequence, legal fees for both corporate and individual clients are determined by such factors as the relative prestige and size of a law firm, the complexity of the case and, of course, time. As Manhattan Attorney Norman Roy Grutman concedes, such calculations, "while not made of smoke, are somewhat amorphous and elastic."

In their own defense, lawyers insist that most legal consumers, while expecting topflight legal expertise, have no idea what it costs to maintain a first-rate law firm. An up-to-date law library can cost upwards of $25,000 annually. First-year associates from the best law schools are now expecting salaries from $30,000 to $40,000 a year from large firms in New York, Chicago and Los Angeles. What is more, telephone bills, rents, messenger services, copying equipment and supplies, plus new computerized billing and information systems, can push a law firm's overhead to 60% of its annual income. Attorneys' fees, lawyers argue, have only kept pace with inflation. One result: clients of such firms tend to be those who can pay the price. "It's like going to the doctor," says Alan Petrillo of the New York State Bar Association. "If I go to see a specialist, I expect to pay more." Adds Grutman: "The pressures are colossal. I say to my clients that I give them slices of my life for which they can never repay me."

Corporate clients, who may spend as much as 30% of their after-tax earnings for legal services, have begun to balk at the rising costs and volume (up 7% to 8% annually) of litigation. In May some 70 corporations sent representatives to a Washington conference held by Consumer Advocate Ralph Nader for advice on paring legal fees. Nader's prescriptions: hire in-house legal staffs to handle simple cases and to monitor billing for outside legal work; diversify legal services by hiring a number of firms, including smaller ones; and settle more disputes through mediation or out-of-court settlements. Though initially met by some skepticism, Nader's ideas are taking hold. In-house legal staffs, in particular, are becoming increasingly common in larger companies. Even corporate lawyers seem to share a growing conviction that, as one Washington attorney puts it, "people are spending too much money on too many lawyers."

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