With all the uncertainty the current economic crisis is bringing to the corporate marketplace, I am focused on how law firms are adapting.

Some firms are laying off staff and associates, some firms are holding off on welcoming new partners to the equity ranks, while others are closing down. In fact, this week’s trades are filled with reports that another AmLaw 200, #131 Thacher Proffitt & Wood, is in dire straits.

So perhaps someone out there can riddle me this: while laying off associates and staff, White & Case’s top partners have increased their billing rates to $1,260/hour. What?

I understand paying a premium fee for the expertise of marquee partners. But at what point does the client choke on the gall and close the purse strings?

The continued uptick in legal expenses means that law firms should expect clients, especially in a worsening economy, to hire more attorneys in-house and to rely more heavily on “flexible staffing,” said Pamela Woldow, general counsel and principal of Altman Weil Inc., a law firm consultancy. In addition, clients, such as pharmaceutical companies, that in the past did not demand alternative or varied fees will be “negotiating harder” for better deals on legal services, Woldow said.

So I started doing the math and came up with my own equation:

Legal Marketing Algebra

Higher rates = increase in legal expenses

Increase in legal expenses = bring more work in-house

Bring more work in house = less revenue for law firms

Less revenue for law firm = more lay offs

If your corporate clients are cutting back on expenses, laying off employees, shutting down offices or stores, closing down operations or preparing for bankruptcy, how do you justify $1,200 an hour for a lawyer?

But, then again, some people have no problem paying $5,000 for a hamburger.