All in the Family

I remember going to the offices of Heenan Blaikie in 2001, when I was an associate at another Bay Street law firm in Toronto. Heenan’s offices were not like those dour, wood-panelled offices of other law firms. They were bright, light filled—different because Heenan tried to be different. For four decades, the firm attracted a marquee list of counsel including former prime ministers Pierre Trudeau and Jean Chrétien, a former Quebec premier, and former and future Supreme Court justices. It was also home to several controversial figures: Marcel Aubut, the larger-than-life former president of the Quebec Nordiques who resigned as head of the Canadian Olympic Committee two years ago in the face of allegations of sexual harassment and, most notoriously, Jacques Bouchard, who was embroiled with a former Israeli Mossad operative in Russian arms deals with African dictators.

Heenan Blaikie began as a boutique Montreal law firm, formed in 1973 by lawyers Roy Heenan, Peter Blaikie and Donald Johnston, with a handshake. In a quaint but reckless move, the firm did not have a written partnership agreement until the beginning of this century. By the end of the first decade of the 21st century, Heenan Blaikie had grown to become one of the largest law firms in Canada. (Johnston’s name was dropped when he left the firm to join Pierre Trudeau’s cabinet in 1980.) It had more than 500 lawyers in offices in eight Canadian cities, plus an office in Paris. In Montreal, it occupied prime space on the edge of Old Montreal. In Toronto, Heenan moved into the brand-new Bay Adelaide Centre in August 2009. That move epitomized the firm’s confidence.

But within just a few years the firm was in crisis, and in February 2014 the partners from Heenan’s nine offices gathered at Montreal’s Queen Elizabeth Hotel and voted to dissolve the firm. The Heenan dream had come to an abrupt end. How could this happen?

Probably no one has thought more about the rise and fall of Heenan Blaikie than its former co-managing partner Norman Bacal. Bacal literally grew up with Heenan Blaikie, starting at the firm’s Montreal office as a student from McGill’s law school, coming of age there as a young lawyer, making partner, moving to Toronto to start the firm’s second office in 1989 and serving as Heenan’s co-managing partner from 1997 until 2012.

Breakdown: The Inside Story of the Rise and Fall of Heenan Blaikie weaves together Bacal’s personal narrative with Heenan Blaikie’s dramatic story. For Bacal, the two were inescapably interwoven. He invested his considerable talents and energy in expanding Heenan nationally and internationally. He pioneered the lucrative field of film financing in Canada, working with the likes of Robert Lantos, Warner Brothers and MGM. By the end of his second year as a partner in Montreal, he tells us, only one other lawyer generated more revenue for the firm: Roy Heenan himself. Bacal could have left Heenan and started his own boutique firm. Instead, he devoted his energies to building and managing Heenan Blaikie. Thus, by the time we get to Bacal almost literally turning the lights off at the firm in 2014, the last words of the chapter hardly come as a surprise: “and then I cried.”

The story of Heenan’s changing fortunes is in some ways the story of the tremendous shifts in the Canadian legal market over the past four decades. When the firm was formed, almost all Canadian law firms were local. Most law societies prohibited partnerships with out-of-province lawyers until the Supreme Court held that such restrictions violated the Charter of Rights and Freedoms in 1989. As their clients’ businesses became more national, law firms realized that in order to avoid losing legal work, they would need to expand into other provinces. In other areas, there has not been nearly enough change. Most law firms were and still are partnerships where individual lawyers share in the profits of the firm and have the right, if not the responsibility, to share in the management and decision making of the firm. While this model may work well for a firm with 20 or perhaps even 50 lawyers, it is not well suited for a law firm with more than 500 lawyers in offices scattered across Canada and internationally. The modern Canadian law firm looks much more like its corporate clients but does not necessarily operate as such. Many large firms still resemble groups of individual lawyers rather than being a single, focused enterprise with an identifiable strategy and brand.

As viewers of legal dramas on television know well, law firms expand either through mergers with other firms or by opening a new office in another location. Heenan Blaikie, along with competitors Stikeman Elliott and Blake Cassells & Graydon, chose the second option. The firm had another decision to make: to choose a “greenfield,” a brand-new office, or a “brownfield,” which usually involves taking over an existing firm—more of a takeover than a merger of equals. There are challenges for both approaches. A brownfield brings a local team with local contacts, but those lawyers might not share the same values as the firm they are joining. When Norm Bacal instead opened a new office in Toronto in 1989, he was able to bring Heenan’s unusual corporate culture from Montreal with him and transmit it effectively, at least for a while. (“He had seats from the old Montreal Forum in his office!” one Toronto Heenan lawyer told me.)

It is clear this was important to the firm. There was no “eat what you kill” culture at Heenan, with partners remunerated in accordance with the revenue that they generated. Quite the opposite: as Bacal describes it, there was a “Heenan tax”; partners received less in remuneration than they would have likely gotten at other firms. This was part of what Bacal labels Heenan’s “social contract,” wherein the firm’s lawyers agreed to earn less in exchange for greater freedom to practise law as they wanted, in a more convivial atmosphere. This was a key element to Heenan’s distinct culture, of which Bacal was a chief propagator. I have spoken to many former Heenan lawyers and over and over again, the same phrases come up: “It was a nice place to work”; “I enjoyed the people”; “there were no assholes at Heenan.” The last claim is a rather difficult one to make about any law firm.

In many ways, Heenan operated like a family business. (In Breakdown, Bacal frequently describes the “Heenan family,” as do many of his former colleagues with whom I have spoken.) And the firm enjoyed the successes, and faced the challenges, associated with such operations. The firm suffered a leadership void after its much-revered founder Roy Heenan stepped down as chair in 2012. (Heenan passed away in February of this year.) No one ever replaced him in that position, or in his ability to bring unity to divergent interests within the firm. Since 1997, Heenan had employed a co-managing partner structure with Guy Tremblay in Montreal and Bacal in Toronto. This may have worked for the firm at the time, but it was hardly a recipe for effective management of an organization that had grown to revenues exceeding a quarter of a billion dollars and employing more than 1,100 people. And when Tremblay and Bacal retreated from firm management between 2011 and 2012, the troubles escalated rapidly.

The last third of the book is a pacey description of the firm’s decline and ultimate collapse. Bacal is rightly proud of Heenan’s culture. This sense of a common culture unites individuals in a firm, and when it falters, the firm can fail. (The title of a Harvard Law School case study on Heenan Blaikie is called “The Glue Dissolves.”) It also explains Bacal’s frustration and anger as cracks appeared at Heenan after he and Tremblay stepped back.

Bacal is slow to cast blame, which limits both the dramatic storytelling and the ability of the reader to judge the reasons for the firm’s demise. To the extent that Bacal points fingers, it is more collective than individual. The firm did not plan well for succession after Bacal and Tremblay. The partners did not consider whether the dual partnership that had worked so well for Bacal and Tremblay would work with other, different personalities. (It did not.) It did not help that the firm failed to provide its new leaders with the training necessary to lead a firm of more than 500 lawyers. Indeed, there is a real question, for many law firms, as to why lawyers with no business or management training would be running a large professional services firm in any case. This is a question not just about Heenan Blaikie but about many large law firms.

Lawyers are notoriously arrogant in asserting that no one but lawyers can provide legal services, but they have no problem believing that they are perfectly capable of management, marketing, lobbying, human resources, etc., with absolutely no training in the subject. Lawyers are not natural managers, although they think they are. Bacal candidly acknowledges some of these flaws, but he did not take steps to professionalize Heenan’s management. In the early 2000s, many large law firms turned to professional non-legal managers as chief executive officers or chief operating officers to run their firms. Heenan did not realize it needed to do this until the firm was already collapsing. By the time Bacal came back from management exile in the summer of 2013 and began to actively engage in trying to save the firm, Heenan was hemorrhaging lawyers. Bacal thought he could have righted the ship, but he did not have the time or the necessary support to do so. Whether he could have remains unclear.

Many issues challenged the firm in its final years: an unproductive Paris office that seemed to hang like an albatross around the firm’s neck; a rogue partner in Jacques Bouchard, who unbeknownst to almost anyone in the firm was working to broker sales of Russian helicopters to African dictators; convoluted and unclear lines of authority; lateral partners who never really gelled with the Heenan culture. Warren Buffett said that “you only find out who is swimming naked when the tide goes out.” A former Heenan partner recently repeated this to me, offering it as an explanation for the firm’s demise.

I have spoken with many other Bay Street lawyers and managing partners and asked them whether they were affected by Heenan’s collapse. Partners who took no interest in the management of their firms suddenly started asking questions. Managing partners became even more vigilant in watching the numbers. “We pulled up our britches,” one told me.

Law has always been a business as well as a profession, although many lament this fact. But one lesson from Heenan’s demise is clear: paying attention to the business of law is essential to the practice of law.