Posted Dec 03, 2009 07:11 pm CST
Pfizer Inc.’s general counsel Amy Schulman has a theory about the way to force changes in law firm billing, and she’s putting it into practice.
“I really believe that if you are going to try to do something that is fundamentally not based on the billable hour, you can’t do it in baby steps,” Schulman told the American Lawyer. “You can’t be half pregnant on this one.”
Schulman’s legal department is paying 19 law firms a flat fee for all of their legal work, the story says, “from phone calls to closing arguments, from product liability suits to government investigations.” A firm that does more work than anticipated will get extra money, and all the firms will be eligible for a bonus that is based on a year-end performance review.
Pzifer expects to save 15 percent to 20 percent on domestic legal costs under the arrangement. But Schulman says saving money isn’t the only goal. She wants to build better relationships with outside counsel by eliminating the billable hour.
“If I can liberate us from the apparatus of billing, and have the actual conversation about what matters, then that’s a tremendous gift to the lawyer-client relationship,” she told the American Lawyer.
Lawyers told the publication that the arrangement has lessened the incentive to hoard work, eliminated worries about explaining allocation of resources, and increased cooperation. In a trial targeting Pzifer’s epilepsy drug Neurontin, product liability lawyers from three separate law firms all worked together, and all were part of the flat-fee arrangement.
One of the lawyers was Mark Cheffo at Skadden, Arps, Slate, Meagher & Flom, who delegated work for the trial. “We knew we would all be judged about whether we would rise above what might be traditional law firm rivalries,” he told the American Lawyer. “Plus, there was a fair amount of work at hand.”
ABAJournal.com: “How GCs are Cutting Costs—and Possibly Law Firm Profits”