Canadian media has been in a feeding frenzy the past few weeks over the swift demise of Heenan Blaikie from the Canadian legal scene.
Heenan Blaikie was, at its height, the sixth biggest law firm in Canada with more than 500 lawyers in Toronto, Montreal, Vancouver, Calgary and other parts of the country. It also had a presence in Paris and Singapore.
Founded in 1973, it became the professional home-after-politics for Pierre Trudeau, Jean Chrétien, Donald Johnson, and Pierre Marc Johnson, as well as some members who had served as judges in Ontario and Quebec, and on the Supreme Court of Canada.
Some media reports suggest the firm had too many “star lawyers” who could move their large, blue-chip client base anywhere, and who apparently did when the going got tough. Another report blames the lack of massive corporate and securities deals in Canada over the past few years – deals that either didn’t happen, or didn’t happen at Heenan Blaikie.
Yet another report suggests the firm’s demise began with an African arms deal gone wrong, begging the question: Is there such a thing as an African arms deal gone right? And if true, what did the rest of the firm think about getting embroiled in an African arms deal?
Whatever the reason or reasons, many partners and associates have moved on to large firms such as Fasken Martineau, Dentons, Baker & McKenzie, Oslers, and BLG. Much of the Vancouver office decided to form its own firm without the benefit – or the drawback – of a Toronto, Montreal or international “brand.”
Let’s hope departing Heenan Blaikie lawyers were able to bring their associates and staff with them to their new shops, or at least find them other jobs.
So what does Heenan Blaikie’s demise mean for the business community in Canada?
Absolutely nothing. Arguably, businesses come and go. Eatons. Woodwards. Zellers. Pan Am. Blockbuster. The market selects winners and losers, and many would say that the more a law firm is run as a business – as opposed to a calling – the more vulnerable that firm will be to the vagaries of the legal marketplace.
On the other hand, over and above partner draws, law firms have associate lawyers’ salaries to pay every two weeks, in addition to staff salaries, and considerable overhead in terms of rent, insurance, marketing, taxes and other costs of doing business. If a firm doesn’t have enough paying clients or it is otherwise not profitable enough, it won’t be in business for long. Lawyers who can go elsewhere because they have expertise or a loyal client base will vote with their feet.
The demise of Heenan Blaikie will mean little to the business community because those business clients who used Lawyer X or Lawyer Y for their mergers and acquisition work, their labour work, their entertainment law work, or for litigation, will continue to use the same lawyers. It's just that those lawyers will be working for different firms.
And unless those lawyers have gone to smaller firms with lower overhead, I’d expect billing rates and practices to be more or less the same as when they were at Heenan Blaikie.
As for small or start-up businesses, it may well be that few could afford the hourly rates charged by the sixth largest law firm in Canada, and those clients will continue to use lawyers at smaller firms, boutique firms or suburban firms with a fee structure more suited to their budgets.
So, what does the demise of Heenan Blaikie mean for the legal industry as a whole? Probably a lot.
Multimillion-dollar securities offerings and mergers-and-acquisitions deals don't fall from the sky the way they might have years ago. In addition to less of this kind of lucrative work to go around, there's more competition out there. Large national and international law firms are regularly competing with each other to get these huge deals.
Some firms may well decide they can’t compete in particular markets occupied by the big national firms any more, so they’ll stick to smaller corporate transactions on the basis that there's more of them to go around. Other firms, overdependent on large multimillion-dollar corporate transactions, may end up in the same unfortunate place as Heenan Blaikie in the foreseeable future.
If Heenan Blaikie is the canary in the coal mine, the elephant in the room is that the legal industry is facing enormous challenges in Canada. Richard Suskind’s The End of Lawyers? Rethinking the Nature of Legal Services, published in 2008, suggests that increasing technology, commoditization of legal services, outsourcing of legal services to India, client resistance to the hourly rate model of billing and a host of other factors means the industry “has to change its ways or suffer the consequences of being left behind in a world where people can get the legal services they need much cheaper through other sources.”
To paraphrase Mr. Susskind, law firms must commoditize and repackage their services to lower costs, or their services will become an unaffordable luxury. Moreover, shrinking corporate budgets will force in-house counsel to “document-share” among competitors to avoid sending work to more expensive out-house counsel.
And finally, because the Internet has made it possible for clients to buy an imperfect contract for $50 that a lawyer might perfectly draft but charge $7,000 for, some lawyers may find they are the 21st-century equivalent of buggy-whip manufacturers.
Having been at three medium-sized Vancouver law firms over the past 28 years that “blew up” (to be clear, two of them blew up many years after I left), and having seen other legal stalwarts disappear from the Vancouver and Toronto landscapes over that time, I can say this: Law firms come and go. Lawyers move around.
Unfortunate as it is, the demise of one national law firm is not the end of the world.
The bigger story is that many Canadians still can’t get easy access to legal services. Clients, particularly – but not exclusively – those embroiled in family law disputes, can’t afford the services they need. And many aren't able to obtain legal aid, with funding having been drastically cut across Canada.
So they attend court without counsel. They aren’t familiar with legal procedure, precedent, and a host of other issues that disadvantage them. Courtrooms are filled with unrepresented litigants, making matters worse by slowing down the justice system. And there aren't enough judges to deal with the backlog.
So the demise of Heenan Blaikie isn't the big story. Access to justice and the high cost of legal services is the big story that deserves media frenzy.
Tony Wilson is a franchising, licensing and intellectual property lawyer at Boughton Law Corp. in Vancouver, he is an adjunct professor at Simon Fraser University (SFU), and he is the author of two books: Manage Your Online Reputation, and Buying a Franchise in Canada. His opinions do not reflect those of the Law Society of British Columbia, SFU or any other organization.