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Law Department Spending

No cuts yet in legal department expenses

The status quo still rules in most corporate law departments despite years of talks of cost controls and alternative billing arrangements, according to a national study.

“Law department expenditures and staffing remain largely unchanged,” notes Altman Weil principal Daniel J. DiLucchio, citing the “Law Department Management Benchmarks Survey” released by his firm. “And hourly rates remain the predominant law firm method of billing corporations, with the No. 1 alternative billing technique reported as ‘reduced hourly rates’, which ends up being no alternative at all in many cases.”

Total law department expenses in all companies surveyed averaged $847,599 per lawyer in fiscal year 2004, virtually unchanged from the previous year.

Other key expense findings include:

  • Internal expenses represented 50 percent of total expenses
  • Total legal expenses, measured as a percent of revenue, averaged 0.61 percent in 2004, which is virtually unchanged from the 0.59 percent in 2005
  • In-house law department operation costs rose an average of $324,547 per lawyer in 2004, up 2.5 percent from 2003
  • Outside expenditures accounted for 51 percent of total law department costsThe highest percentage of non-litigation outside counsel fees went to general corporate practice – 11 percent
  • In litigation practice areas, the greatest spending was on commercial/contracts – 9.4 percent – and labor/employment – 8.3 percent
  • Hourly billing by outside law firms continues to be the prevalent method of charging for legal services, as 43.1 percent of the fees paid to outside counsel are based on hours
  • Only 18 percent of in-house counsel evaluates outside counsel cost management, up 2 percent from 2003.

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