When I was with the Federal Trade Commission, economic analysis suddenly became more important than legal analysis.  As a result, many of us attorneys started to become rather adept at economic analysis.  Ever since then, I’ve had a tendency to look at my business, my legal practice, and the business of law in general, in terms of microeconomics.

As I started to construct this website, and, particularly, the page having to do with services and fees, I began to wonder whether I could develop an economic analysis which explains the fees I’ve set for my services.  I wanted to have some assurance that my fees were neither too high nor too low.  The result of that intellectual exercise is this article and a few other related articles.  Although you certainly can’t say that this analysis (provided in a short series of articles) is academically rigorous, I believe it is cogent enough to make at least me comfortable with my fees, and with the economics of the legal practice of per diem appearances.

So, in this series of articles, I hope to provide assigning attorneys a rough means of determining when hiring an appearance or per diem attorney makes economic sense.  I also hope to provide appearance attorneys, including me, a rough means of determining if their fees can be considered to be competitive, yet profitable enough to provide an incentive to continue providing per diem services.

I’ll begin by stating two very important assumptions.  The first, which does not seem to require much explanation, is that the single largest input in providing legal services of any kind is the cost of attorney labor.  Every other cost, such as the cost of running an office, is secondary and, in some law offices at least, even minor in comparison.

The second assumption, which seems to merit some additional discussion, is that there is just one market for attorney labor.  It is, I admit, a rather lumpy market, where it would seem, for example, that the market for partners and associates at white shoe law firms is very much but not entirely divorced from the market that includes the newly admitted attorney practicing out of the basement of his parent’s house in the depths of Brooklyn.  But if there is a major shift in the overall economy, the shift will affect all attorneys, some more and some less, even to the point where big firms, which would seem to be at least somewhat insulated from market forces, might make rather large changes to the way they conduct their law practices to accommodate the economic changes.

If we assume that there is only one market for attorney labor, that fact may help explain some of the difficulties that appearance brokers seem to be experiencing lately.  I have been privy to a lot of discussions among attorneys that appearance brokers just don’t pay enough.  As a result, I have heard of many attorneys who once made themselves available for appearances through brokers say that they will no longer do so because of inadequate rates.  

With attorneys saying this, it should not be a surprise that appearance brokers seem to be always looking for new attorneys willing to accept appearances.  It explains why brokers seem increasingly concerned with attorneys failing to appear for the assignments they accept.  Concerns of this kind only tend to prove that brokers are having trouble attracting and keeping not just any attorney, but in particular reliable attorneys.  They are having this trouble because their rates are inadequate. 

However, lately, fees seem to be increasing.  I’ve seem more than a few examples in particular cases of fees initially offered doubling or almost tripling in an effort to just get an attorney to commit to an appearance.  The rates offered by appearance brokers seem to be increasing generally simply because market forces are having their way.

Appearance brokers are “gig” economy entrepreneurs seeing an opportunity in a growing market for per diem attorney services, and they do provide genuine benefits to both assigning and appearing attorneys.  But the problem with gig economy entrepreneurs is that they seem to think that they are exempt from market forces, and that they can get people to work for rates that are below market.  I have to admit that this tactic of offering below market rates might work, but it will work only in the short rum.  Sooner or later, market forces will cause those rates to move up to market rates.  If they don’t move up, gig entrepreneurs are bound to experience more and more difficulties finding people to provide the services they are marketing. 

So, to begin our analysis, the cost of attorney labor is the primary cost in providing legal services, and there is just one rather lumpy market for attorney labor which includes a submarket for per diem legal services.  What does that mean for assigning attorneys, and appearance attorneys?