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According to the National Law Journal, nearly 71 percent of law firms reported an increase in the amount that they charged clients compared with 2007, with White & Case reporting the highest billing rate – $1,260 an hour for its top lawyers.

The NLJ surveyed the nation’s top 250 law firms and received two years of rate information from 109 of them. Law firms responding to the survey increased billing rates for both partners and associates by an average 4.3 percent this year, compared to an average hike last year of 7.7 percent, the story says.

Why did law firms increase their rates during the recessionary economy of 2008? At a time of layoffs, bankruptcies, and economic decline, law firms were going against the grain and increasing their rates. Was it to accommodate growing associate salaries? Not likely, since associates salaries have remained flat since 2007. Were firms looking out for associate bonuses? That’s even more far-fetched, as bonuses are being rolled back to nearly half of what they were in 2007 (with a few exceptions from litigation firms that settled big matters in 2008 and still have plenty of cash to throw around – the likes of Boies, Schiller & Flexner and Quinn Emanuel.)

Could the raises in rates be a reflection of growing overhead? Again, that’s not likely either. Across the country, office lease rates followed a downward trend through the end of 2008; marketing costs in traditional advertising channels declined sharply in 2008; and prices for display ads on the internet have been trending downward since the beginning of this year, dropping 27% overall from last quarter. So what could be causing these billing rate increases? The answer is rather simple: partner compensation and company reliance on outside law firms.

A weakening economy might have been in the news for months now, but the results of the recession did not hit partners' pockets. In fact, on the whole, law firm partners are doing better than they did in 2007 – continuing demand for their skills and rising billable rates may keep that trend going. Law firms will cut just about everything they can before cutting partners' compensation, and companies – despite much publicized gripes about rising billable rates, attempts to negotiate fees, and overall consolidation and reduction of outside counsels being used – companies are still heavily reliant on outside law firm services, paying between $500 to $1200 per hour for partners, and $450 to $820 per hour for associates at the nation’s top 250 law firms.

Will law firms sustain these ongoing billable rate increases through 2009? According to a Wachovia survey, firms are expected to increase billing rates in 2009, but at a fraction of the increases instituted for 2008. Firms are increasing rates 5 percent on average. The median rate increase is 4 percent, lower than 2008, which saw increases of 6.5 to 7 percent, but still sizeable considering the economic climate.

Can anything be done to curtail these rising rates? That depends on the actions of companies across the country. Should the economy continue its current course, companies could be looking to hire more attorneys in-house, rely more heavily on "flexible staffing" such as contract attorneys, and attempt to negotiate better deals on legal services. Unless clients send a clear and cohesive message by undertaking these various actions, law firm rates will most likely continue to increase, despite a declining economy.