Law firm Torys LLP yesterday snatched a team of top intellectual property lawyers from rival Donahue LLP, the latest in a series of setbacks for the legal arm of professional services firm Ernst & Young.
Torys, a corporate law firm with Toronto and New York offices, added an 11-person team led by Conor McCourt and Eileen McMahon to an intellectual property group it began building last year.
The incoming lawyers have clients such as pharmaceutical companies, which have high-stakes patent and trademark issues. At many drug and biotech companies, intangibles such as intellectual property account for the bulk of assets. Torys managing partner Les Viner said the newcomers' "strength in life sciences complements our expertise in health care and biotechnology."
Losing this team from its 90-lawyer stable is a blow to Donahue.
The firm's strategy is seen by some as being out of step with the new regulatory environment.
Donahue was set up by Ernst & Young in 1997 as the firm tried to aggressively expand from its accounting roots into new, potentially lucrative fields as a so-called multidisciplinary practice, known as MDP.
The large accounting firms have already absorbed European law firms as they build such practices. North America was viewed as behind the trend.
Many experts said the one-stop shopping concept couldn't miss, and Ernst & Young was at the front of the trend in Canada.
A lawyer who heads up one Bay Street firm said: "As recently as a year ago, we all expected one of the major Canadian law firms to merge with Donahue. It just seemed the way the world was going."
Then U.S. regulators such as the Securities and Exchange Commission took a dim view of the potential for conflicts of interest between consultants, lawyers and auditors who worked under the same roof. Enron's fall, and auditor Arthur Andersen's role in the collapse crystallized these concerns. Multidisciplinary practices are now out of fashion and being unbundled, with consulting arms already spun out.
"It seems inevitable, in this climate, that Donahue will go," said a senior lawyer at a law firm who works with many Donahue partners.
"It's already happened with consulting," At Donahue, the lawyers are already walking. The partnership, with offices in Montreal, Calgary and Toronto, lost an energy specialist to a rival law firm a few weeks prior to yesterday's departure of the intellectual property team.
Ernst & Young chairman and chief executive officer David Leslie said the firm remains committed to providing legal services to clients. He said: "There are bumps on the road, but we expected that. Remember, we're among the top 10 law firms globally."
Mr. Leslie said U.S. rules that prohibit a multidisciplinary firm's lawyers working for companies that it also audits may be extended into Canada, "but that would still leave us with plenty of opportunities."
Andrew Willis