About two years ago, in May 2012, Dewey & LeBoeuf filed for bankruptcy. It was the largest law firm bankruptcy in the history of the United States. Shortly thereafter, industry insiders began to speculate as to when the next big firm would fold. In June 2012, our own Mark Herrmann suggested that it was a “near certainty that a firm [would] collapse within the next two years.”
Lo and behold, he was correct, for it was just last night that another embattled Biglaw firm decided to close its doors. Perhaps the loyal employees clinging to this firm’s carcass should have been better prepared for something like this, since it was preceded by waves upon waves of partner defections and talks of a “major restructuring,” likely due to financial problems, among the firm’s leaders.
You’ll want to keep reading, because this is the largest law firm to ever fail….
… in Canada.
Heenan Blaikie, a firm once inhabited by 500 legal professionals, was a top-flight place of business where many former politicians went home to roost. Alas, Heenan, which had been in business for more than 40 years, has now flopped. The remaining partners of the “legal powerhouse” voted last night to begin an “orderly wind-up” of the firm’s affairs. For the past week, Heenan’s woes have made national headlines, but we’ve been receiving information on the firm’s unraveling from Canadian tipsters since September 2013:
There are lots of rumours swirling about firms teetering. Heenan Blaikie is the most likely to be in trouble with partners rumoured to have been asked for an equity infusion and last year’s profits still undistributed (which means there probably aren’t any).
Our tipster was telling the truth. Last year, the firm delayed partner payments “out of financial prudence,” but ultimately issued checks to those left wanting. Unfortunately, it wasn’t enough. A mass exodus began after a meeting on January 20, 2013, when firm leaders announced that while Heenan Blaikie was still “financially sound,” profits per partner were down by 10-15 percent across the board. Because cash is still king, even in the Great White North, more than 40 partners fled since that announcement was made.
We see here all of the classic stages of a Biglaw firm’s denial that it’s about to bite the dust. First came excuses from the firm that it was in control of the situation, and merely “right-sizing.” Then came word that the firm would be doing some “major restructuring” due to financial troubles. Heenan Blaikie then canceled its articling program, but at least the firm’s management was kind enough to ask other Canadian law firms to save its students from a fate worse than death, unemployment. Last, but not least, rumors were pushed out to the media about a larger law firm swooping in to save the day — in this case, DLA Piper, a global firm that has yet to conquer Canada. In an effort to keep up appearances until the bitter end, firm leadership denied that Heenan Blaikie was in talks to set up the DLA Lumberjacks in Flannel outpost.
On Tuesday, staff members received their walking papers, and by Wednesday, the partners voted to throw in the towel. The remaining partners issued a short and sweet statement after the firm’s fate was sealed:
Heenan Blaikie LLP announces that its partners have decided to proceed with an orderly wind-up of the Firm’s operations. This process will span a period of a few months.
This decision follows an in-depth analysis of the available restructuring options in the current context of Canada’s legal services market. An orderly wind-up will make it possible to continue serving the Firm’s clients without interrupting or disrupting service and to ensure a harmonious transfer of their files to other law firms. It should be noted that several practice groups and even entire offices will continue to operate under new names.
For over 40 years, Heenan Blaikie has been a leading player on the Canadian legal services scene. Heenan Blaikie would like to thank all the clients who put their trust in the Firm over the years, and all the lawyers, professionals and employees who served it well for more than four decades.
Canadian attorneys have said the effects of Heenan Blaikie’s failure will be felt in the market for quite some time. Perhaps the most relevant comment on the death of this firm was offered by Mitch Kowalski, a Toronto lawyer and author of Avoiding Extinction: Reimagining Legal Services for the 21st Century (affiliate link): “The hotshot partners making big money and carrying around their books of business, they’ll be fine, no need to shed a tear for them. The problem is the damage that’s left in the wake of this disaster.”
Which firm will be the next to fold, and will Heenan Blaikie’s survivors ever truly recover? Only time will tell.
Heenan Blaikie partners vote to wind up operations [Legal Post / Financial Post]
High-profile law firm Heenan Blaikie begins ‘orderly wind-up’ [Ottawa Citizen]
Storied law firm Heenan Blaikie sunk by a shifting legal landscape [Globe and Mail]
Major Canadian Law Firm Announces Plans to Unwind [WSJ Law Blog (sub. req.)]
Law firm Heenan Blaikie wobbles as more lawyers leave [Globe and Mail]
Storied Canadian firm to begin ‘orderly wind-up’ but some offices and practices will stay in place
New Vancouver law firm rises from ashes of Heenan Blaikie [Vancouver Sun]