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The Ottawa office of McCarthy Tétrault LLP is the envy of the federal bar.

Senior litigators Barbara McIsaac, Colin Baxter and Thomas Conway represent the federal government on high-profile cases such as the Maher Arar inquiry. Corporate partner Robert Chapman is the go-to lawyer for Ottawa business deals. Former Liberal deputy prime minister John Manley commutes to the office regularly as counsel to the firm.

Last month, the Ottawa branch earned another distinction: an uncertain future.

The Toronto-based firm's senior executives advised its seven Ottawa partners, two associates and Mr. Manley in early March that their office is under review for potential closing. Since then, sources say, a number of partners in the office have hired an employment lawyer and others are casting about for new jobs. Four weeks after the bad news, they are still in the dark about the firm's plans.

“There isn't much I can tell you to clarify this,” Ms. McIsaac said when contacted by telephone. Other partners referred calls to firm executives. Mr. Manley said the potential closing would have “no effect at all” on his practice as he currently spends most of his time in the firm's Toronto office.

Barbara Boake, a member of McCarthy's senior leadership team, confirmed that the Ottawa office is under review, but said “no decision has been made.” Last week, McCarthys quietly issued pink slips to more than a dozen associates, mostly from its corporate group. The cuts accounted for less than 3 per cent of its total 650 lawyers and follows a sharp, industry-wide drop in corporate takeovers, financings and other transactions.

If the firm opts to close its Ottawa office, it will rank as the severest and potentially messiest legal casualty of a global economic downturn that has so far left most of Canada's law firms unscathed. About a half-dozen Canadian firms have wielded the axe in recent months, cutting an estimated 150 lawyers and support staff, the vast majority of whom were associates. If McCarthys' Ottawa branch is shuttered or downsized, it would mark one of the few times in recent history that a Canadian law firm has ejected such a large team of partners, a tangled divorce process that could trigger disputes over claims to law firm capital.

Industry officials, who declined to be identified, said it is rare to lay off groups of partners because, as part-owners, they could resist layoffs or garner support to oppose the firings in a firm vote. In a worst-case scenario, such internal battles could fray the bonds that tie partners together in a law firm.

Another headache is allocation of the firm's capital. Although each law firm is different, most are bound by a preset partnership formula to pay partners their share of the firm's capital when they leave. In difficult economic times, such a payout can stretch a firm's resources.

So far, most firms, including McCarthys, have cut staff with delicate incisions, trimming lawyers and support staff almost imperceptibly in a variety of practices that have been hit by the financial crisis. Reductions of similar magnitude have been made at Cassels Brock & Blackwell LLP, Fraser Milner Casgrain LLP and Bennett Jones LLP in recent months. The Canadian job losses pale in comparison to massive cuts in New York and London, where firms with much higher ratios of associates to partners have been devastated by turmoil among their core banking, financial and real estate clients.

According to the U.S. Bureau of Labor Statistics, more than 5,500 American lawyers and paralegals have been dismissed in the first two months of 2009. Media reports document a similar wave of losses in the United Kingdom, where law firms have seen assignments shrink dramatically in the wake of banking failures and bailouts.

Brock Gibson, chairman of one of Canada's largest law firms, Blake Cassels & Graydon LLP, said this country's firms have been less affected by the turmoil because their largest corporate customers, the top six banks, are weathering the economic storms.

Although the flow of new business is “lumpy and constantly shifting,” Blakes has no immediate plans to lay off staff or lawyers.

David Corbett, managing partner of Fasken Martineau DuMoulin LLP, said that although the firm is braced for tougher year, it is not planning any layoffs and is sticking to its plans to expand in London and Africa. “The Canadian market is not an expanding one and we have to look outside to new markets to grow,” Mr. Corbett said.

Bill Tuer, managing partner of Macleod Dixon LLP, said that apart from the layoffs of a handful of associates last fall, the Calgary-based firm has no plans to cut staff. “We're nervously looking out at the horizon. We have things to do today, but the pipeline is not as full as we are used to,” Mr. Tuer said.