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Heenan Blaikie has seen revenue drop and at least 40 partners leave, with more high-profile defections on Tuesday.SARAH DEA/The Globe and Mail

A core group of lawyers at Heenan Blaikie LLP is in talks to sign on as a branch of U.S.-based international law firm DLA Piper, as the embattled Canadian firm reels from a wave of departing partners.

Heenan Blaikie – a national law firm that is home to former prime minister Jean Chrétien – has seen revenue drop and at least 40 partners leave, with more high-profile defections on Tuesday.

In a drama that has shocked Canada's legal establishment, the 40-year-old law firm, one of the country's largest, launched a "major restructuring" on the weekend that has put its future in doubt. The process could result in the complete windup of the firm, or the shuttering or hiving off of its regional offices.

But sources say that a group of the firm's remaining lawyers could join an international law firm, and that talks are under way. One source familiar with the matter said the firm in question is U.S.-based DLA Piper, one of the largest law firms in the world, which has been rumoured for years to be looking for a foothold in Canada. The source said a deal could emerge in the next few days.

Former national co-managing partner Norman Bacal, who has taken on a leadership role during the crisis, could not be reached for comment on Tuesday.

Earlier this month, he denied that the firm or any of its lawyers were in talks with DLA Piper, but was quoted as saying that a number of firms had expressed interest. A spokesman for DLA Piper declined to comment.

The uncertainty around Heenan Blaikie's future is taking a human toll. One source said administrative staff were seen crying in the hallways of the firm's Toronto offices this week. An e-mail has warned staff their cellphone accounts will expire at the end of the month.

For now, Heenan Blaikie – which has more than 500 legal professionals in eight offices across the country and one in Paris – continues to lose partners.

Bay Street firm Osler Hoskin & Harcourt LLP announced on Tuesday that it had hired Toronto-based Heenan privacy lawyer Adam Kardash, calling him a "legal industry leader" who will head Osler's privacy and information management practice group in Toronto. The area is a growing one, as big companies grapple with privacy breaches and data security.

And Dentons LLP confirmed it had hired former Heenan partner Michael Ledgett, a 40-year veteran, who will co-chair his new firm's infrastructure and transportation practice groups. Meanwhile, rumours swirled about other possible defections from Heenan Blaikie's offices.

Few details are known about the firm's restructuring process, which it announced on the weekend after a meeting of the firm's partners in Montreal. Partners who could not make it to Montreal were told, for confidentiality reasons, to dial into the conference from Heenan Blaikie's offices, not from their homes.

The firm has been grappling with a newly competitive legal landscape, in which naturally conservative law firms need to find different, more efficient ways of doing business – a more complex problem than simply cutting costs.

Heenan Blaikie had previously entered into what the firm's leadership called a "right-sizing" process and a strategic review, which prompted some of the departures. But the weekend meeting was not dramatic or full of shouting, one source said, describing it as completely "civil and respectful."

Legal industry observers say the challenges facing Heenan Blaikie are also hitting other Canadian firms. Corporate deals have dried up and competition among law firms has intensified. Meanwhile, clients are demanding lower bills and abandoning the tradition of loyalty to one particular firm.

"The freight train that is headed towards big law slammed into our firm," said one Heenan Blaikie lawyer who spoke on condition of anonymity. "This is not about our firm."

Corporate lawyer Ralph Lean, a well-known Conservative political fundraiser who left Heenan Blaikie for Gowling Lafleur Henderson LLP this week, said the departures accelerated after a meeting in Heenan Blaikie's Toronto offices Jan. 20. Mr. Lean said in an interview that the Toronto partners were told the firm had seen a 15-per-cent drop in per-partner profit, but was still solvent.

He said that four days later, Mr. Bacal told him that the firm could be shrinking to 60 or 80 lawyers, with its employment law group splitting off, and that Mr. Lean – who had joined Heenan as counsel, and not as partner – might want to look for a larger law firm that would better suit his clients.

"It happened in two weeks. They kept losing one after another," Mr. Lean said, adding that he had nothing but praise for Heenan Blaikie and its lawyers.