Are Lawyers too Expensive?

Michael CarabashThere’s no doubt that lawyers, as a group, charge a lot per hour (just check out our recent report on legal fees in Toronto, where we telephone interviewed 500 solo and small firm Toronto lawyers and asked them about their legal fees). This makes them inaccessible to the average middle-class Torontonian for legal matters which they should be consulting a lawyer for (e.g. litigation, reviewing contracts, etc.). So now that we know that lawyers are generally expensive, we move on to addressing the question: why is that so, and from there – what can be done about it?

In attempting to answer the question, “Are Lawyers too Expensive”, one should look at both sides: lawyers’ and their clients’ (both actual and prospective). In this blog, I’ll be looking at this question from a lawyer’s perspective (which, as an Ontario lawyer, I can do).

As a lawyer, and in their defence, I guess we as a group charge so much has to do with (1) our unique education, knowledge, skill-set, and experiences, (2) the cost of our education, and (3) the cost of operating a law practice. I’ll deal with each of these briefly in turn.

To begin, lawyers spend years developing a form of legal reasoning that the layperson lacks (and may never acquire). Lawyers read all the time, and it’s not easy-reading either! They have to comprehend vast quantities of legalese written throughout the century or longer. They research cases and legislation, transcripts and documents, and even delve into the legislative debates to figure out the rationale behind a certain piece of legislation. Apart from having done their due diligence, they have to present their case in a concise and compelling manner. They have to briefly review the facts, identify the issues, and make arguments based on precedent or appeals to fairness/justice/efficiency and the like. In doing all of this, lawyers are held to a high standard of professionalism and legal ethics and are a heavily regulated group. They have to learn the legal process and the substance of the law and be able to explain both in a simple manner to their clients and others (e.g. opposing parties, judges, etc.). The life of a lawyer is perhaps the most intellectually stimulating and challenging profession that anyone could ever aspire towards. No two lawyers are alike and, while some lawyers can provide the same basic services as other lawyers (e.g. wills, incorporation, real estate transactions), people often need specialized lawyers to deal with their particular situation. Hence, the cost of lawyers’ specialized education, knowledge, skill-set, and experiences are reflected in their seemingly high hourly rates or fixed fees.

The cost of a legal education is also worth mentioning. I met a person who wanted to own part of my law practice. I was a bit curious about the request. Having never met the man, I musingly asked him whether he was a lawyer (since only lawyers can ‘own’ law practices). “No”, he responded. “Do I have to go to school for that? And If so, how much would it cost?” he asked me. “Sure you do”, I responded: “You need an undergraduate degree with killer marks, great references, and a high LSAT score. It cost me roughly $25,000 for my undergraduate degree (with books and all) at U of T, then another $75,000 for my combined 4 year LL.B. and M.B.A. degrees at Osgoode Hall Law School and the Schulich School of Business (with books, residence and all). So by the time I was finished school, I had spent over $100,000 on my legal education. When students become lawyers, they are typically in significant debt and will look to the highest paying jobs to get them out the quickest (these ‘high paying’ jobs are typically at big bay street law firms which charge the highest fees to their clients).

Finally comes the issue of the costs of setting up and maintaining a law practice. I can only speak for myself here. Looking back, I must have spent between $15,000 to $25,0000 to establish Carabash Law. The biggest expenses were technology purchases (e.g. laptop, website, PC Law, cell phone, printer/scanner/copier, keyboard/mouse, etc.), licensing and insurance fees (almost $3,000), stationary, traveling, bookkeepers, and new suits. After these initial expenses, the only recurring expenses will typically be office supplies, employees, and rent. I didn’t pay rent or salaries (perhaps the biggest ongoing expenses) because I was a sole practitioner working from home. Adding these things to the equation, however, means that lawyers need to generate substantial revenue (particularly because legal staff have specialized knowledge and are more expensive than normal business admin staff). When a professional service business must rely on the time spent by its rainmakers to bring in the revenue, the higher the overhead and variable costs, the greater the rate must invariably be. So if lawyers could make the same or more money without depending on their time to do it, I’m sure that their hourly rate would subside.

So there you have it: it takes a lot of time and money to become a lawyer and, while we do our best to give back to the community that supported us and allowed us to be in our special positions as empowers and protectors of legal rights, our fees often appear front and centre in the common person’s mind. In any event, the next time someone complains that lawyers charge way too much for their services, please remember to keep in mind that their services are unique, their education was expensive, and that they have capital and operating expenses to pay for. I’m not saying that this justifies lawyers charging astronomical amounts, but these factors should be kept in mind before the insults and derogatory statements begin…

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Consumed Consumer January 4, 2010 at 3:56 am

Could there be a fourth factor accounting for the high fees, namely the professional monopoly further strengthened by former AG’s Michael Bryant regulation of paralegals? Also, isn’t the over-reliance on persuasive precedent (Trotter) another one?

John Wilshire February 3, 2010 at 10:58 pm

This is the biggest bunch of hogwash I’ve ever read. EVERY businessman has to pay for college, computers, services, rent, insurance, etc. This is the cost of doing business. To use this as a justification for such high rates is ridiculous. And even if it was more expensive for lawyers, the difference between $250 and hour and $25 an hour (most people’s earnings) is extraordinary. There is no justification for their rates. It’s criminal.

Abe February 24, 2010 at 5:43 pm

As someone pointed out, everyone pays to get their education. Costs of starting a business bothering you? Don’t start one then, work for someone else.

The other reason you mentioned: years of education. This one is valid, but in no way justifies the ridiculously high rates lawyers charge.

My advice to anyone: do as much legal stuff as you can on your own, only use a lawyer when absolutely no other solution exists (a lawsuit perhaps).

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