Amy 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 distractions, 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."