The demise of Heenan Blaikie

Heenan Blaikie: The Making and Unmaking of a Great Canadian Law Firm
UBC Press
396 pages
$39.95

The dramatic collapse of Heenan Blaikie in early 2014 remains one of the worst law firm failures in Canadian history.

The firm was established in Montreal by three young lawyers in 1973 and quickly became one of the country’s fastest-growing firms. At its peak in 2010, it had 560 lawyers and 1,300 staff in nine offices across Canada, as well as Paris. At one point, it also boasted former prime ministers Jean Chrétien and Pierre Trudeau among its staff.

It all came apart, however, on Feb. 5, 2014, when Heenan Blaikie's partners voted to dissolve the firm. Much ink has been spilled about what caused the demise of this “kinder, gentler” firm, including a book by Norman Bacal, its managing partner at the time.  

In his new book Heenan Blaikie: The Making and Unmaking of a Great Canadian Law Firm, University of Ottawa law professor Adam Dodek has the benefit of a decade of hindsight, as well as interviews with more than 180 former Heenan lawyers and 40-plus legal industry insiders.

“Ultimately, Heenan Blaikie failed spectacularly,” Dodek writes in his preface, because it couldn’t sustain its values, and lacked professional management, succession planning, and strategic vision.

The book takes a deep dive into what made and broke Heenan, and offers one of the most illuminating and wide-ranging looks at how large law firms in Canada operate.

Want to know more? Read the book where Dodek provides an insightful birth-to-death overview of one of Canada’s premier firms while firmly placing what happened there in the context of other prominent national firms.

Prior to the book’s Oct. 15 release, Gail Cohen caught up with the author to discuss his book and what’s changed in the profession over the last 10 years. The conversation has been edited for space and clarity.

GJC: What were the main reasons that Heenan Blaikie failed?

AD:  I think its greatest strength was also its kryptonite. I interviewed over 180 lawyers who worked at Heenan Blaikie, and time and time again, they told me that working there was like a family. They were incredibly nostalgic for their time there — notwithstanding that some of them lost several hundred thousand dollars of their capital. It was run like a family business, and that was perhaps understandable when it was a small firm. But it had become a big $250-million-a-year business and never adapted to the necessary modern business structures. Ultimately, the lack of modern business structures, the lack of succession planning, and the lack of strategic vision for the firm is what led to its downfall.

GJC: In the decade you spent writing the book, what changes have you seen in the profession that might avoid a similar situation at a firm of a similar size.

AD: Even when Heenan Blaikie was still in existence, the profession was changing and becoming more professionalized in the sense of having professional business managers. In the decade since then, we’ve really seen that. So, bringing in non-lawyers as professional managers, sending lawyers for professional training in running a business or a professional advisory service, which is what a law firm is.

The other big change that I've seen is the decline of partnership. It was absolutely that the pot of gold at the end of the rainbow was to be a partner at a big firm. In the decade since, there’s been a huge change, with people opting out of becoming a partner. Now you're seeing youngish lawyers in their 30s saying, ‘I want to call my own shots. I don't want to be a partner. I don't want to have the stress and the responsibility that entails.’

GJC: The book mentions issues with Heenan’s partnership agreement. What about it was problematic?

AD: First of all, they didn't have a partnership agreement for their first 25 years of existence, which I think is reckless for any large business. It was romantic but naive. And when they did have a partnership agreement, it was very bare-bones, maybe 15 pages. Only three paragraphs dealt with governance, and when the firm was under stress, it didn't really help them. It didn't have restrictions on delaying the payout of capital for partners who were leaving. It’s not uncommon at major national law firms to have a 50, 60, or 70-page partnership agreement that deals with all sorts of contingencies and sets out the management for the firm.

GJC: You also talk about a lack of transparency, which is a common issue at law firms. What are your thoughts about transparency for everyone within a firm?

AD: The lack of transparency was a huge problem at Heenan Blaikie and certainly a contributing factor to its demise. There were some partners who I spoke to who took responsibility and said they had a right to this information as they were owners in the firm. They were lax. They didn't demand it strongly enough. Heenan Blaikie was run like a benign dictatorship, and as long as people were making money, they didn't ask too many questions.

We live in an age of analytics, where there’s data about everything. Many people I spoke to six or seven years ago said they were getting a lot more data about the profitability of their practice group and their clients at their new law firm than they ever did at Heenan. Heenan Blaikie started to give out more information in 2013, but it was just too late.

GJC: What was the most surprising thing someone said about being at Heenan Blaikie?

AD: The most surprising thing was how — notwithstanding the huge financial loss that individual partners took (upwards of $200,000, $300,000 and in some cases, $400,000); the fact many of those same partners were making significantly more money at their new law firms than they ever did at Heenan Blaikie; and complaints of harassment — lawyers who worked at Heenan Blaikie told me about how much they missed it and the people, how it was the highlight of their professional career, and how special it was.