OUTSIDERS’ INFLUENCE INNOVATORS
Off the Clock
Under this GC, Pfizer went all out to embrace flat fees for its outside counsel.
MY SCHULMAN THRIVED in the traditional law firm–
client relationship. As cohead of the mass tort and class action practice at DLA Piper, she reportedly had a $60 million
book of business and was believed to be the firm’s highest-paid partner. But when Schulman left private practice to become Pfizer
Inc.’s general counsel in 2008, she set out to turn that relationship on its
head. Building on the work of her predecessor at Pfizer, who had significantly shrunk the company’s roster of outside counsel, Schulman created
the Pfizer Legal Alliance (PLA), hiring a select group of law firms that
would complete all of their work for Pfizer—from litigation to corporate
matters—for an annual flat fee.
Like earlier flat fee models established by a handful of top companies, one of the main goals of the PLA was to cut outside legal costs. But
Schulman saw the PLA as more than a way to save money. She viewed
it as an instrument for fostering cooperation among Pfizer’s outside law
firms. “In the traditional model, firms are competing with each other to
get the biggest dollar amount,” says Schulman. Predetermining firms’
compensation eliminates competition among firms and their incentive
to bill as many hours as possible, Schulman says. Remove those distrac-
tions, and firms can focus on working together to get the best outcome
for their client, she says.
Five years after its launch, the PLA has 15 firms whose membership is
reevaluated every year. The firms’ yearly compensation is based on a projection of the amount of work they’ll do. By sticking to those flat fees—
except for the occasional merit-based bonus—Pfizer has cut its total legal
spending by 20 percent. It has also met Schulman’s goal of having three-fourths of its legal spending done within the alliance.
Just as important to Schulman, the interfirm collaboration she envisioned at the PLA’s outset has come to fruition too. “Working for Pfizer is
like working in a virtual law office where you can collaborate very closely
with other firms,” says Leslie Smith, a product liability partner at Kirkland
& Ellis, one of the PLA’s newest members. In particular, Smith touted the
PLA’s litigation summits—regular brainstorming sessions of the company’s litigation counsel in which lawyers make suggestions on how to tackle
a tricky matter, even if they’re not assigned to it. The PLA works, says
Candace Beinecke, chair of member firm Hughes Hubbard & Reed, because Schulman “has really tried to shape the relationship between outside
and inside counsel to how it should be: mutually beneficial.”