August 24, 2009
Replacement of Defense Billable Hour with Flat Fee
The Wall Street Journal has an article today discussing the trend, accelerated by the recession, of replacing billable hours with flat fees. Amy Schulman, general counsel for Pfizer, is quoted in the article, and the Journal also provides a video of Amy Schulman discussing Pfizer's new flat-fee approach with their law firms. Prior to joining Pfizer, Schulman lead the mass tort/class action practice at DLA Piper. (For more on Schulman, see my prior post.)
Neither the article nor video specifically mention whether Pfizer will use flat fees to pay defense lawyers in mass torts, though it is suggested since Schulman says all of the Pfizer Legal Alliance firms (all 16 of them) will be paid by flat fees. Are mass torts sufficiently predictable that flat-fee arrangements can be negotiated? If so, it supports the notion that the initial Wild West mass torts era has settled into a more orderly approach. One way to make flat fees more viable for mass torts would be to peg flat fees to each procedural stage of a mass tort, with an additional exit price attached to negotiating a far-reaching settlement; of course, given the many variables of a mass tort, flat fees for any procedural stage would likely need to be separately negotiated for each mass tort -- which would also have the benefit of forcing client and lawyer to think early about their overarching mass tort strategy.
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