Evening view of Pittsburgh from the top of the Duquesne Incline in Mount Washington, Pittsburgh, Pennsylvania.
(Photo: ESB Professional/shutterstock)

Law firms in Pennsylvania's biggest cities just about match the rest of the industry when it comes to billing rate increases, according to a recent report. And those rates are climbing faster than they have since the recession, despite weak demand for legal services.

The Real Rate Report, released jointly by Wolters Kluwer's ELM Solutions and CEB, showed that rates have increased by 5.4 percent industrywide, on average, from 2014 to 2015. The report is based on data from legal fees paid by 97 companies to more than 5,900 law firms.

In 2015, the report found, Philadelphia experienced an average rate increase of 4.5 percent among 156 firms included in the data, which billed a total of more than 300,500 hours.

In Pittsburgh, rates increased 5 percent among 47 firms that billed just over 72,000 hours.

Pittsburgh and Philadelphia are considered “stable” markets because their rates and rate increases were near the average, said David Moran, senior director of product management, legal analytics for Wolters Kluwer's ELM Solutions, in an email.

Paying a Premium

Moran said firm size and office location were two of the key indicators of rates. As was the case industrywide, rate increases were generally larger at firms with higher head counts.

For instance, in Philadelphia, firms with 50 or fewer lawyers increased rates by 2 percent on average, compared with 6 percent at firms with more than 500 lawyers.

In Pittsburgh, firms with 50 or fewer lawyers raised rates 4 percent, and those with 51 to 200 raised rates 2 percent on average. But at firms with 501 to 1,000 lawyers, which accounted for 1 percent of hours billed in Pittsburgh, rates increased by 9 percent. And at firms with more than 1,000 lawyers, which billed 71 percent of the Pittsburgh hours, rates grew by 6 percent on average.

Also in line with the national trend, rates for associates grew twice as much as partner rates in Philadelphia and Pittsburgh.

In Philadelphia, partner rates increased 3 percent to a mean real rate of $537, while associate rates rose 6 percent, to $333.

Partner rates in Pittsburgh also rose 3 percent, to a mean of $479, and associate rates increased by 7 percent, to $307.

One way Pittsburgh stood out was in paralegal rates, which increased 10 percent from 2014. That brought the mean real rate for Pittsburgh paralegals to $169, still lower than the rate of $175 in Philadelphia.

“It is possible that it has something to do with the growth of a particular type of matter—more standard 'operational' cases often have a higher percentage of hours worked by paralegals,” Moran said. “There is also some thought that we may see associate and paralegal rates go up as higher value-added work is pushed to less senior roles—the higher rates reflect the increased capacity of the timekeepers to do the work.”

In Philadelphia, despite the overall increase of 4.5 percent, rates in four of the five most billed practice areas increased by only 1 to 3 percent. In asbestos litigation, which accounted for 6 percent of hours billed, rates increased by just 1 percent. But in nonlitigation corporate work, the second most billed practice area, rates increased by 7 percent over 2014.

In Pittsburgh, the most billed areas also had higher-than-average rate increases for the market. Nonlitigation employment and labor practices increased rates by 8 percent, and nonlitigation merger and acquisition work increased rates by 9 percent. In contrast, nonlitigation commercial work had no rate increase over 2014.

Moran acknowledged that corporate clients have been seeking greater value from the law firms they work with. But that does not always keep firms from raising their rates, he said.

“Clients are willing to pay a premium for premium work, but will look to bring in-house or look for third-party alternatives for regular 'transactional work,'” he said. “Also, with increased technology, data and intelligence, corporate clients are driving more rigorous adherence to billing guidelines and disciplined billing practices.”