Norman Bacal - Breakdown: The Inside Story of the Rise and Fall of Heenan Blaikie

Norman Bacal founded the Toronto office of Heenan Blaikie in 1989, and within the next 25 years grew it to an office of over 200 lawyers. In 1997 Bacal became the national co-managing partner of Heenan Blaikie and helped it become one of Canadas best-known law firms.

As one of Canadas leading tax attorneys in the entertainment business, Bacal helped to finance countless Canadian films and television shows and many Hollywood studio pictures filmed in Canada. He also advised studios such as Warner Bros. and MGM, and was a member of the board of directors of Lions Gate Entertainment for almost 10 years. At the end of 2012, Bacal retired as Heenan Blaikies managing partner.

HEENAN BLAIKIE was one of Canadas leading law firms, a legal empire built from the ground up over 40 years. At its pinnacle it boasted 1,100 employees, including two former prime ministersPierre Trudeau and Jean Chrtien. When it collapsed in February 2014, lawyers across Canada and the business community were stunned. What went wrong? Why did so many lawyers run for the exit? How did it implode?

In Breakdown, the ultimate insider, Norman Bacalmanaging partner until a year before the firms demisedetails the rise and fall of this great company. Bacal takes readers into the boardroom to reveal how the seeds of trouble were planted and how tensions erupted not only between the Toronto and Montreal offi ces, but between the hard-driving lawyers themselves.

This is more than a story about the extraordinary fragility of a professional services partnership. Its also a cautionary tale about managing a change of leadership in an organization and the perils of ignoring a fi rms culture and vision.

Jacket design by Paul Hodgson
Printed in Canada

BREAKDOWN

BREAKDOWN

AN INSIDER ACCOUNT
OF THE RISE AND FALL
OF HEENAN BLAIKIE

NORMAN BACAL

Copyright Norman Bacal, 2017

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, without prior written consent of the publisher.

Library and Archives Canada Cataloguing in Publication data available upon request.

ISBN 978-1-988025-15-5 (hard cover)
ISBN 978-1-988025-20-9 (ebook)

Printed in Canada

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For Sharon,
the partner I can always count on for
support, inspiration, and guidance

FOREWORD

JONATHAN KAY
EDITOR-IN-CHIEF, THE WALRUS MAGAZINE

Blue-chip law firms present themselves to the world as calm, collegial white-collar workplaces. But under the surface, the reality can be very differentespecially at the highest levels of law-firm governance.

The most powerful lawyers in a firm often tend to be the most successful and well paid. They are used to being the smartest and most influential person in every room. Put a dozen of these high-ego specimens into the same space (say, for a Compensation Committee meeting), and professional courtesies can quickly give way to bickering, recriminations, and ultimatums. Unlike in most other high-value businesses, which tend to be run by a specialized managerial class, lawyers manage themselves. And its not something most of them are good at.

Even so, the dissolution of Heenan Blaikie in 2014 was, by the standards of Canadian business, an extraordinary event. Large, full-service law firms are not in the habit of just going away. Sometimes, they merge with one another, or change the names at the top of the letterhead, or subsume themselves to foreign behemoths. There is no modern Canadian precedent for a firm of Heenan Blaikies size simply falling apart.

What makes this story more unusual still is that it does not involve the elements that typically spark the sudden and spectacular collapse of name-brand business entities: there was no large-scale scandal, no allegation of criminal conduct by Heenan Blaikie partners, no scheme to cook the books. Journalists who came looking for a quick and simple self-destruction narrative to the story came away disappointed. Yes, there was an unsuccessful African gambit, a general sagging of revenues, one or two lapses among senior partnersbut nothing that the firm couldnt have easily survived if its management team had retained the trust of the firms rank-and-file lawyers. It was their exit at first, lawyer by lawyer and then, team by teamthat truly caused Heenan Blaikie to go under.

The story that Norman Bacal tells in this book is essentially the human equivalent of a classic bank run: just as account holders at a financial institution become more likely to demand their funds when they see neighbours lined up outside the local branch, so too did Heenan Blaikies lawyers scuttle to the exits when they saw their officemates make the first move.

In some cases, these moves were quite profitable. Many second-tier law firms seek to vault themselves to the status of full service by filling out their missing practice areas. But developing these departments from scratch can take years, or even decades. With the demise of Heenan Blaikie, firms suddenly had a chance to go lawyer shopping at the wholesale level, taking on whole departments at one stroke. Better yet, these lawyers already knew one anothercoming on board with established internal hierarchy, esprit de corps, and, most importantly, client lists.

The question is: Why did any significant number of lawyers begin to leave Heenan Blaikie in the first place? Moreover, once the exodus began, why wasnt the firms management able to reassure those still on board? When the lawyer-exodus bank run was at an early stage, the Heenan Blaikie client base was still largely intact. A decisive intervention by a competent leadership team could have saved this law firm.

And here we get to the real business lessons of Bacals bookall of which extend far beyond the legal realm.

First, the experience of Heenan Blaikie shows that while an informal, egalitarian command structure may be appropriate for a small start-up entity, it can cause serious problems once the organization grows large. In the early days of Heenan Blaikie, Bacal and his colleagues were able to make important decisions on the basis of trust, consensus, and goodwill. But eventually, that became impossible, because larger firms must be organized into subunits, each of which inevitably will lobby management to advance its own interests.