The front page of today's Wall Street Journal reports on how large law firms are being pressured into flat fee arrangements by companies that have the muscle to "lay down the law," so to speak, on law firm billing arrangements.
Most of this article is behind a subscription wall, but you can view the full video below, in which Amy Schulman, Pfizer's general counsel, describes the flat fee arrangements she requires from each of Pfizer's 16 law firms.
The scariest phrase used in this interview is not "flat fee" but "metrics." For those unfamiliar with metrics, it involves the measuring of the success of a particular program.
Ms. Schulman describes a system whereby each law firm rates the other law firms in the "Pfizer Legal Alliance" as to their ability to work collaboratively with the others. Can you imagine the partner meetings where a law firm decides how to rate the other law firms on their effectiveness in working with others?
Think of the conflicts inherent in such a process. Rate the other firms too high and you may comparatively lower your own firm's rating (Ms. Schulman says that to insure effectiveness, this system will "reward good behavior and punish bad behavior"). So the whole process is susceptible to becoming highly political.
I don't know all the details, so perhaps there are some safeguards, but I would think that it would be very difficult to eliminate all of the political aspects in such ratings.
The bottom line: big firm senior partners will have to get used to receiving annual incomes of less than $10,000,000.
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