Tensions erupted between the Toronto and Montreal offices and their two new managing partners, Robert Bonhomme in Montreal, and Kip Daechsel in Toronto: “Their relationship was perhaps not always the best,” Mr. Heenan said.
Mr. Bonhomme, who resigned as managing partner of Heenan in January, declined to be interviewed. Mr. Daechsel did not respond to requests for an interview.
With revenue declining and profit per partner shrinking in 2013, disputes arose over profit sharing, as lawyers in Calgary and Toronto billed higher rates than the ones in Montreal or Trois-Rivières, and labour and employment lawyers did better in a slow economy than lawyers whose billings depended on corporate deals. (Normally, labour and employment lawyers bill lower rates than corporate deal makers.)
“There were differences [of opinion] between some of the departments in Toronto and in Montreal. When I was chairman, I made sure that didn’t happen,” Mr. Heenan said.
“As a result, one group starts pointing at the other, and the other group starts pointing back,” he added. “It leads to squabbling within the offices. And once the offices view things differently, the reality is: Do you want to stay into a national partnership? And the answer is no.”
Reached Friday, Mr. Bacal – who had been in talks that could see a group of Heenan Blaikie lawyers from the Toronto office join the global U.S. law firm DLA Piper – said the reasons behind the firm’s demise were more complex than those outlined by Mr. Heenan. Mr. Bacal was on the front lines of the firm’s crisis, brought back into the management fold to advise Mr. Daechsel before taking on a major role in December in an effort to try to stop partners from jumping ship. (A spokesman for the group of former Heenan lawyers, Bob Richardson, said in an e-mail late Friday that the talks with DLA Piper had been suspended.)
“It’s accurate but out of context,” Mr. Bacal said. “The economy for every firm was such that I think everyone’s Toronto commercial practice was having a very bad first half of the year. We weren’t experiencing anything different than anyone else.”
He said Mr. Bonhomme and Mr. Daechsel were doing their best to find their feet: “Communication in any organization is the key to survival. We were dealing with two new guys who were trying to figure out how the new system was going to work. … It was just a bad time to be learning.”
The problem is that once a few partners in a law firm start leaving and pulling their invested capital – usually a year’s income – out of the firm, the financial pressures begin to mount. Remaining partners do not want to be left with nothing but the firm’s debts and empty offices. Partners began to trickle away in 2012, and continued to leave in 2013, with the pace quickening near the end of the year.
Some losses were bigger than others. In Montreal, Manon Thivierge, a renowned tax expert, left Heenan for Osler Hoskin & Harcourt LLP at the turn of the year, followed by star litigator Marie-Josée Hogue, who went to McCarthy Tétrault LLP. The departures of the two long-time partners, who brought in lucrative clients, created a panic among the Montreal office’s 175 legal staff.
“From that point, the dominoes started falling,” a former Heenan lawyer said.
In January, Mr. Bacal and other firm leaders held a meeting to tell Toronto partners that profit per partner was down 15 per cent.
Still, the firm brought in $225-million in 2013 and had a profit of $75-million to divide among its 200-odd partners. It was by no means bankrupt, or even losing money. But some partners were now facing a 15-per-cent pay cut and started getting richer offers from other firms.
Mark Power, a lawyer in Heenan Blaikie’s Ottawa office who is now part of a group launching a constitutional law boutique, said the firm used to have a culture that was not all about money. “The issue isn’t that Heenan was not profitable; the issue seems to be that it was not profitable enough for some,” Mr. Power said. “And that’s crazy.”