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Hourly Billing Still King Among In-House Departments

Kevin Penton LAW360.COM

Law360 (June 25, 2019, 10:05 PM EDT) -- Hourly rates are by far the most common type of fee structure used by corporate legal departments when employing law firms, according to 2019-global-legal-department-benchmarking-report released Tuesday by the Association of Corporate Counsel and legal research firm Major Lindsey & Africa.

Just over two-thirds of the legal departments surveyed hire law firms using either standard hourly rates or discounted hourly rates, followed by nearly 45% that use flat fees and 31% that cap the fees, according to the Global Legal Department Benchmarking Report.

Legal departments sought to hire law firms most frequently for matters involving commercial law, with contracts, data privacy, commercial litigation, trademarks, and mergers and acquisitions also leading the departments to seek assistance more relatively frequently, according to the report prepared by Major Lindsey & Africa and the ACC — a global legal organization that represents more than 45,000 in-house counsel.

The report also analyzed what members of legal departments consider important and whether they think their own sectors are meeting those standards. On a scale of 1 to 5, with 5 being the most important and satisfied, the report found that legal department initiatives and activities being aligned with the strategic priorities of clients was most important, at 4.6, followed by legal departments clearly demonstrating their value to company leaders and others, at 4.4.

Yet those who took the survey found their departments lacking for both performance attributes, as the report refers to them. Aligning department initiatives with client priorities netted a score of 4.0, while demonstrating the departments' values to key stakeholders returned a score of 3.8, according to the report.

On average, lawyers comprise 68.2% of the staffs of legal departments, followed by 12% for paralegals and case managers, 8.2% for secretaries and administrative staff, and 6.8% for various nonlegal professionals, according to the report.

Legal departments went over budget in 2018, setting aside an average of $12.4 million while actually spending nearly $16.7 million, according to the report. The average cost per hour for attorneys was $114 and for nonlawyers was $63, according to the report's findings.

ACC and Major Lindsey & Africa officials could not be reached for comment late on Tuesday.

"The ability to compare your law department to more than 500 others in such detail is incredibly significant for performance-focused general counsel worldwide," Greg Richter, Major Lindsey & Africa's vice president of retained search and advisory services, said in a statement.

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