Advocacy Matters - Spring 2024

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LAW FIRM DISSOLUTION Law Firm Dissolutions: Canary in the Coal Mine? Wade Poziomka, Ross & McBride LLP Over the past two decades, several well-known law firms suddenly shut their doors. These closures continue to cause a stir in the legal community and shake the stability and safety that lawyers, who are typically conservative by nature, crave. The first was Goodman and Carr LLP in 2007. Heenan Blaikie LLP was next in 2014. And only months ago, Minden Gross LLP – a firm with about 65 lawyers and over 100 staff, dissolved. All three were large, reputable firms with a long history in the Canadian legal landscape. To gain insight into these closures, I had the privilege of speaking with Enzo Sallese and Timothy 12
Dunn (two members of the three-person executive team leading the closure of Minden Gross LLP) and Norman Bacal (former managing partner of Heenan Blaikie LLP). We spoke about law firms and common trends more generally, as opposed to Minden Gross LLP and Heenan Blaikie LLP, in particular. Two common themes emerged in our discussions. First, without constant attention and focus, law firms can coast, losing a clear and common sense of direction over the years, especially when partners are making healthy money. “Ignorance is bliss,” says Sallese. “Nobody wants to have hard discussions when they are making money.” During a financial downturn, however, all the issues that could have, and should have, been proactively addressed previously can rear their ugly heads. Second, lawyers do not necessarily make the best leaders. In some law firms, the leaders are the highest billing partners. But excellence in attracting and providing legal services to clients does not necessarily translate into being an effective law firm manager. “How are managing partners chosen?” posited Bacal. “How many hold an MBA degree, or other leadership and management training? In what other company would you choose a CEO without leadership or management experience? Leadership doesn’t come naturally to everyone and in law schools, it isn’t taught.” Point taken. I suspect these themes are common for many other law firms who have yet to reach the breaking point. Sallese agrees, and wisely warns: “I genuinely believe that Minden Gross is the proverbial canary in the coal mine. If I could offer one piece of advice to law firms who may be in a similar situation, it is to look inward, get a hold of your finances and how each partner is compensated now while things are positive. Get your house in order.” What are some of the warning signs of a potential closure? “Partners having increased hushed meetings with one another behind closed doors,” notes Sallese. Another common theme is an unusual “quietness” in the firm. “Trust the staff,” says Bacal. If legal assistants and law clerks appear unusually stressed, there is a reason for it.” Another sign is unprecedented discussions or memos about “cost-cutting” measures, notes Dunn. Finally, with respect to advice to law firms who may find themselves on autopilot while still earning a healthy profit, Bacal stresses we need to revisit law firm culture. “The partnership needs to determine the culture they want. Is it ‘people over profits’, ‘teamwork over the individual’, a ‘churn and burn’ profit-maximizing model, or something else? Grapple with the overall philosophy and then start building your tactics. Everything you do should be consistent with that philosophy.” Sallese suggests that partners need to start “acting like owners. Understand what you own, understand the value you bring to the firm and the value of your other partners. Keep an eye on expenses and don’t sit back believing ‘other partners’ have it under control”. Dunn makes another important point. “Be transparent with one another and recognize that partners can contribute to the overall success of a firm in different ways. When times get tough, the value a partner brings tends to become their revenue exclusively. This can lead to divisions, resentment, and a lack of cohesion amongst partners.” All these points make good sense. Will law firms learn from these high-profile closures over the past decade, or continue the status quo while partners continue to be well compensated? Only time will tell. Sallese offered a final thought: “If you were sick, wouldn’t you want to know the diagnosis sooner rather than later so you could do something about it? I don’t understand why law firms would be any different.” As mid-career advocates, many of us are new partners and we bring fresh perspectives. We can help keep our firms on track by asking thought-provoking questions about culture and compensation, and challenging the status quo where warranted. 13
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