There is a well-understood notion that the price of something might impact the perception people have of that good or service. For instance, studies have shown that people might perceive colleges that have high tuition costs as being more well-regarded than colleges that have lower tuition costs because it is apparently believed that the higher cost means that there is a higher quality associated with the expense.
Similarly, some clients may feel that, if they are paying higher hourly rates for their counsel, then they are getting better legal services than if they had selected attorneys who charged less. Accordingly, it seems that some clients might actually feel more comfortable hiring counsel who charge higher rates than equivalent counsel who has a lower billable-hour rate.
I first encountered this perception earlier in my career when I was speaking to a partner about how he originated a client whom we charged higher-than-usual rates. The partner discussed how he pitched our firm to the prospective client and then stated our hourly rates. The client seemed shocked at how low our rates were and seemed to suggest that we would be a good fit for this portfolio of work but that the lower rates conveyed that our firm might not be the type of shop that could handle the complex matter our future client had. The point person we spoke to said that he had to pitch our firm to other people at the business who might think he was cheaping out by hiring our firm which had lower rates.
The partner said that he thought on his feet quickly, and told the client that those “introductory” rates would only be charged for a certain period. Afterward, the client would be charged a higher rate for the work our firm performed on the client’s business. The client apparently seemed content with this arrangement and that is how our firm allegedly originated this client. Of course, I am unsure of the ethics of this all, and the story might have been embellished some by the partner (and misremembered by me nearly a decade after I heard the story) but this example is prime proof that some clients might feel more comfortable paying higher rates.
More recently, I was talking with a group of professionals at a party, and it quickly became known that I was an attorney. One of the people in the group mentioned that he had recently hired an attorney to look at a complex employment agreement his employer had asked him to sign. This person asked me the hourly rate that my firm charged, presumably to see if he got a good deal, and I told him my firm’s typical hourly rate.
This person related that his attorney charged him nearly double what my firm charged to perform his legal work. However, rather than sound outraged, it was almost like this person was bragging about this fact. This person I talked to sounded like he wanted others to know that he was the kind of guy who could afford a more expensive lawyer and that he was the kind of guy who would spend extra money to make sure he got top-notch services. It seems paying higher legal fees can sometimes project some kind of image to others, and for this reason, certain clients might not be too upset paying higher costs.
Sometimes clients may prefer to pay higher rates so that they can cover themselves or show someone that they are going out of their way to give them the most premium representation possible. One time, I was representing a client who was convinced to take a course of action that would be beneficial to the client and a third party, but which could result in litigation. This third party agreed to indemnify my client and set him up with extremely expensive counsel that the third party was going to pay for itself, subject to all the conflict-of-interest waivers being in order. I wondered why the third party had gone out of its way to hire an extremely expensive law firm that easily charged double or more than what my firm charged, but I think they did it just to give the client confidence that this party had his back. Although cheaper counsel likely could have done the trick, the optics of hiring an expensive law firm might have been important in this case.
All told, most clients loathe paying lawyers, and many clients are happy to pay attorneys the lowest fees possible. However, there may be certain situations in which clients might actually prefer paying higher legal fees.
Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at email@example.com.