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Exodus quickens at Heenan after announcing ‘major restructuring’

Inside the offices of Heenan Blaikie.

Fred Lum/The Globe and Mail

The rush for the exits appears to be speeding up at Heenan Blaikie LLP, after the troubled national law firm announced what it calls a "major restructuring" – a move that only heightened doubts about its future.

For weeks, the firm's lawyers have been leaving. But the pace quickened over the weekend as Heenan Blaikie partners met in Montreal, where the firm said it agreed to a restructuring process that could see Heenan close its regional offices or, sources say, dissolve completely.

At least 40 partners have now left and the number is expected to climb. Many have gone in just the last few days, in an exodus rarely seen from such a major Canadian law firm.

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On Monday, The Globe and Mail confirmed that at least five partners in Montreal, including labour and health-care lawyer Magali Cournoyer-Proulx, were leaving for the firm Lavery de Billy, with more expected to follow.

Three Montreal partners are also leaving for Fasken Martineau DuMoulin LLP, along with three from Heenan's Ottawa office, The Globe has learned.

In addition, Toronto real estate lawyer Marco Gammone has left Heenan for Aird & Berlis LLP, his new firm announced on Monday. Gowling Lafleur Henderson LLP confirmed on Monday that it had hired corporate lawyer and Tory fundraiser Ralph Lean, who had just joined Heenan Blaikie LLP last April as counsel.

The firm now has fewer than 140 partners, according to Heenan Blaikie's website.

The plight of the 40-year-old firm, which counts more than 500 legal professionals and former prime minister Jean Chrétien on its roster, is a warning sign for other Canadian law firms, industry observers say, many of which have been facing the same economic pressures.

Firms similar to Heenan Blaikie, large full-service outfits that still rank below the elite "Seven Sisters" firms on Bay Street, have been hit hard by the current drought of resource company deals. These mid-tier firms are facing competition from above as the top firms seek new business, and from below, where a new breed of smaller, cheaper law firms has cropped up.

Confronted with a wave of departures that dates back to 2012, Heenan Blaikie acknowledged last month that it had delayed certain payments to partners last year out of financial prudence.

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But national co-managing partner Kip Daechsel said at the time that much of that money had since been paid out, and that late-2013 billings were looking up. He said then that the firm was undertaking a "right-sizing" exercise and had brought in a consultant for a "strategic review."

Mr. Daechsel declined an interview request on Monday.

One source said there was still the possibility of a "white knight," in the form of an American or British international firm, which would come in and scoop up certain groups of Heenan Blaikie lawyers.

Vancouver management consultant Colin Cameron, who works with law firms, said the wave of partner departures makes it difficult for a firm like Heenan Blaikie to restructure and carry on.

Partners who leave a law firm are generally entitled to take their capital – an initial investment of one-year's income – with them, although some partnership agreements restrict those payouts or stagger them over a period of years. But the result can resemble a run on a bank, with partners eager to get their money out first as trouble mounts.

"It can certainly exacerbate financial difficulties," Mr. Cameron said, adding that he did not know how Heenan's partnership agreement is structured. "Once it starts happening, it's a real domino effect. Once you reach that kind of critical mass, it's like a black hole almost, or an exploding star."

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Editor's note: An earlier version of this story gave an incorrect name for labour and health-care lawyer Magali Cournoyer-Proulx. This version has been corrected.

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About the Author
Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More

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