Our firm is a six attorney insurance defense firm in Kansas City. For the last few years our associate attorney costs have gotten out of control and in some cases revenues generated by particular attorneys are not even close to where they should be considering their costs. We have one associate attorney that we are paying a base salary that only does appellate brief work. He does not like litigation and does a poor job doing our bread and butter litigation work. We simply don’t have enough appeals to keep him busy. We are paying him a base salary of $100,000 a year. Last year his working attorney fees collected were $110,000. I welcome your thoughts.
Obviously, you are losing money on him. An associate being paid $100,000 per year should be generating $300,000+ if you are looking to make any margin from him. Overall you should be making 25%-30% profit from your associates. Margin from associates is critical in an insurance defense firm. You are not even covering his direct cost alone any indirect overhead cost.
I believe you cannot justify this position and should consider eliminating this position and outsourcing your appellate work . Many insurance defense and other litigation firms that I work with are outsourcing appellate work to other law firms that provide this service for other law firms. There are also solo practitioners and freelance attorneys with appellate expertise that are working as contract lawyers for law firms doing appellate work. Another option is a legal process outsourcing firm.
It is imperative that you conduct proper due diligence and really check out the background, experience, and appellate track record of the firm or individual attorney that you are considering. Your short list should only include firms or attorneys that have a proven track record of appellate wins. Talk with some other law firms that are doing this.
John W. Olmstead, MBA, Ph.D, CMC