In Calgary Bennett Jones LLP is the firm to beat. As Canada’s energy capital and home to the second largest number of corporate head offices, Calgary generates the economic power base necessary to sustain heavyweight corporate practices. Bennett Jones, Macleod Dixon LLP and Burnet, Duckworth & Palmer LLP are generally regarded as the premier corporate law firms, with Bennett Jones primus inter pares.
“Bennett Jones has a much more dominant place in the Calgary economy than any other law firm in Canada has in its local market,” says Rob Collins of Blake, Cassels & Graydon LLP in Toronto. Collins moved to Calgary in the mid-1980s when Blakes first entered Calgary. Although he has since moved back to Toronto, he maintains close contacts. “When we go looking for work,” Collins notes with grudging respect, “Bennett Jones is always there.”
While Bennett Jones may be the front-runner in Calgary, it has been a different story in Toronto. The firm opened in Toronto in 1989. From 1989 to early 1999 (the first shot at cracking the Toronto market) the progress of the new office can best be described as “falling short” of the success Bennett Jones customarily enjoys in Calgary.
All this changed, dramatically, in mid-1999 (the firm’s second shot at Bay Street). That summer rumours ran rampant regarding a three-way merger between top-tier Tory, Tory, DesLauriers & Binnington (now Torys LLP) in Toronto, Calgary-based Bennett Jones, and a mystery New York City-based firm (Haythe & Curley). The market significance of such a merger was obvious to all. On September 9, for undisclosed reasons Bennett Jones and Torys discontinued negotiations. And on October 4, Torys and Haythe & Curley announced their merger.
Shortly after the announcement of the Torys and Haythe merger, both Torys and Bennett Jones were struck by bombshells. For Torys it was the scandal of the alleged sexual misconduct of Thomas Haythe of Haythe & Curley. For Bennett Jones it was what appeared to be the imminent collapse of their Toronto office. Both firms would have to take decisive steps to regain control of events. Both did. For Bennett Jones it meant a fundamental rethinking of how, for its third shot at Bay Street, it would approach the Toronto market.
Successfully entering a major new market like Toronto is difficult, even for a firm as powerful as Bennett Jones. A top-ranked position in Calgary does not necessarily open doors in Toronto. There are formidable competitors with deep roots in the Toronto corporate and financial communities. In many ways it is like sitting down to play a complex, multi-dimensional chess game. New corridors of power, the need for partners with credibility on the street, and the need for leadership and vision. A chess game with high stakes.
In the fall of 1999, still sorting out the blowback from the merger that was not, Bennett Jones parachuted Hugh MacKinnon from Calgary to Toronto. His mandate was “first to stabilize and then to grow” the disintegrating operation. “It was ugly,” MacKinnon admits. “Brutal. This office was being raided by every firm in town.”
In one respect at least, MacKinnon’s task was easy. Things were so bad they really could not get worse. Lawyers and staff used office hours mostly to work on their résumés and field telephone calls from headhunters. The angry departure of former managing partner John Sabine and virtually all of the office’s key corporate lawyers, including Michael Melanson and Grant Haynen, left associates and junior partners stranded. Donahue LLP, Ernst & Young’s ill-fated multidisciplinary practice venture (which imploded in late 2002), had been busy culling the firm’s Toronto tax group. The loss of energy partner Peter Budd, which had not mattered so much when the pending merger with Torys was still in place, did not help anyone feel good.
Add to all of this the bad karma the merger discussions—which had made many Toronto lawyers feel alienated, if not outright unwanted—left in the air and the really surprising thing is not that people left, but that anyone stayed.
Nine did. Now, in 2004, they comprise a minority of the 62-lawyer Toronto office. Under MacKinnon’s leadership, with a number of marquee lateral hires on board, a solid deal list and financial results that please even the “hypochondriac management” in Calgary, Bennett Jones-Toronto appears to be in the game again. But they have been in the game since 1989. So the real question is not whether the firm is playing, but does it know how to play to win?
Kings and Queens
To Bay Street at least one part of the firm’s new Toronto strategy is obvious. For the first time, Bennett Jones is putting real money on the table and recruiting stars. Its 2004 roster includes top-rated Bruce Barker (banking/structured finance), a former McMillan Binch LLP managing partner; competition litigator John Rook, who spent 12 years with Osler, Hoskin & Harcourt LLP; leading commercial real estate practitioner Paul Mantini, former managing partner of Smith Lyons (now merged with Gowling Lafleur Henderson LLP); insolvency star Rick Orzy, formerly with McCarthy Tétrault LLP; fraud litigator James Patterson and his team, formerly with Borden Ladner Gervais LLP; deregulation and energy specialist Martine Band from Power Budd LLP; and well-known corporate tax lawyers Stephen Bowman and John Owen from Thorsteinssons.
For MacKinnon, the advantages of cherry-picking “hard-working, talented and happy” stars is obvious. “The lowest risk hire is the top-notch lawyer,” he says. “Such people are proven, they have a following, they’re talented and ambitious.” For firm management in Calgary, it makes financial sense, despite the high price tags. “The strong performers have put the office on a strong financial footing and that has comforted the partnership as a whole,” says William S. Rice, the firm’s Calgary-based managing partner.
Characteristically, MacKinnon is more enthusiastic. “For a relatively small office, the business in this place is phenomenal,” he enthuses. “We went out and cherry-picked a bunch of smart lawyers. There is no office of this size in this town that’s doing these kinds of deals.”
Perception on Bay Street has been that the recruitment has been haphazard. Bennett Jones chooses different words. “We have been somewhat opportunistic,” says Rice. “We have chosen to build around the right, strong people.” Adds MacKinnon, “We’ve gone out to get the very best people in their class. If we can’t get them, we don’t have that practice area.”
That approach means the office continues to have some sizeable holes in the all-important areas of corporate finance and mergers and acquisitions. Ironically, the firm’s first run at Toronto, prior to the merger negotiations, consisted of recruiting a corporate finance group, which it then lost.
The First Pawns
Montreal-based Verchère, Noël & Eddy had three partners and four associates in Toronto when it merged with Bennett Jones in 1989. The tax boutique’s clientele included a number of high-profile international pharmaceutical clients. Through the merger, Bennett Jones hoped to attract their corporate work, as well as to gain a platform from which it could service its Western clients doing business in Toronto. The long-standing personal and professional relationship between then firm managing partner Bill Britton, QC, and Verchère also played into the equation.
The synergies did not materialize. The few Calgary partners who went to Toronto were unsuited for management or rainmaking roles. By the mid-1990s it was clear that being in Toronto was not enough. You actually had to do something. “When they first came out here, they were so successful in Alberta, they thought they’d just hang out their shingle and clients would come knocking on their door,” says one former Toronto partner.
The amended first version of Bennett Jones-Toronto, launched in 1995, focused on recruiting people “who were of the community.” Among those key recruits were John Sabine, Michael Melanson and Benjamin Hutzel, corporate partners from the then newly merged Fasken Campbell Godfrey.
Hutzel, a corporate lawyer who remains with the firm, brought to the table connections to the Liberal party. Sabine and Melanson, both corporate, the first in the position of managing partner, the second as his right-hand man, brought leadership and stepped up recruitment efforts, bringing on board corporate lawyer Grant Haynen and litigator Robert Staley.
“They delivered a certain degree of excitement and dynamism to the office,” says Peter Budd, now chairman of Power Budd, a rapidly growing Toronto-based energy boutique. A Toronto native who articled and practised with Bennett Jones in Calgary, Budd headed back to Toronto in 1991 and spent eight years building the firm’s eastern energy practice.
Sabine, says a Calgary partner, “inspired a great deal of loyalty in the people he brought with him, as well as many of the people he recruited.” Several of the people he “inherited” also built strong and positive relationships with him. Says Budd, “He’s a magnanimous individual and he remains a mentor for me. He’s larger than life and he consistently adds a human dimension to everything he does.”
“It was a very open office,” recalls Alan Gahtan who, along with technology guru Fraser Mann, crossed over to Bennett Jones in 1998 from Borden & Elliott (now Borden Ladner Gervais). Against a backdrop of “the usual Calgary-Toronto issues,” Sabine was seen as a strong advocate of the Toronto lawyers and the Toronto office.
But there were issues. “There are always East-West tensions,” Budd says diplomatically. Another former partner is more direct. “There were frequent tussles between Sabine and firm management in Calgary.” Adds a Calgary partner, “Some of it was inevitable, some of it was Sabine fighting for control of his fiefdom.”
Playing into the situation was a sudden change in the power structure in Calgary. Managing partner John Richels, who had been instrumental in the recruitment of the new Toronto power clique, left the firm to join Northstar Energy, a career move that has since taken him to the presidency of US giant Devon Energy Corp. He was replaced by a power triad consisting of Clifton O’Brien, QC, chairman; Martin Lambert, CEO; and Donald MacDiarmid, COO, none of whom had previous ties with the Sabine group.
Still, the tensions did not unduly interfere with growth. In 1998, the beginning of several record M&A years for Calgary, the Toronto lawyers grabbed a number of big deals and business press headlines, representing the controlling shareholders of the Oshawa Group in the $1.4 billion takeover by Empire Company Ltd. and WIC Western International Communications Ltd. in the competing bids for the company by CanWest Communications and Shaw Communications.
By the spring of 1999 the Toronto office of Bennett Jones hit 37 lawyers. At that year’s partners’ meeting, recalls a former Toronto partner, the achievements of the Toronto office were praised. The main pressure from Calgary was to grow aggressively. There were the inevitable comparisons to Ogilvy Renault, which had entered the Toronto market in 1995 and, approaching one hundred lawyers by 1999, was thought to be pulling ahead of Bennett Jones.
The office was not profitable yet, but it was close. In the last two years, says a former partner, after partner draws Calgary was contributing “only between a quarter to half a million” to the operation. Rice is not as specific but agrees the office was doing well. “In the last while, it had been quite solid,” he says. “It was certainly better than it had been,” says another Calgary partner. But apparently not good enough.
Phase Two: Frontal Attack
The firm’s short-lived strategic plan stressed continued commitment to and aggressive expansion in Toronto. It also stated that while “we will not at this time actively pursue a significant national or international merger strategy…. We will nevertheless continue to evaluate merger options and will consider opportunities as they arise.” In the face of unprecedented law firm consolidation and to “develop threshold criteria for an acceptable merger and merger candidates,” the firm struck a merger criteria committee that engaged in exploratory discussions with a number of leading Canadian firms.
Meanwhile, one of the most attractive leading firms, Toronto-based Torys with two hundred-plus lawyers, was actively engaged in merger discussions of its own, albeit in a completely different direction. “We were never particularly interested in an East-West merger,” says a Torys partner. “We had looked at it, briefly, but quickly decided North-South was much more important to us. That meant New York.” And that meant 65-lawyer New York-based Haythe & Curley.
Torys’ New York strategy had been carefully formulated. “We thought, and continue to think, that the cross-border advice and service you can provide on US/Canadian legal matters is the service most underprovided and most needed by clients,” explains managing partner Les Viner. “It’s as simple as that. It’s what clients want and need.”
The firm had offices in London and Hong Kong. It has since closed them. “The client need was not there,” says Viner. “It was never in London and Hong Kong. It was always in New York. It’s almost blindingly obvious, but it took us 10 years to figure it out.”
The challenge for Torys was how to make an office of 65, a practical non-entity in the massive New York market, meaningful. The international energy practice at Bennett Jones, with its unparalleled US client relationships, provided the third point of a “triangle” through which both Calgary and Toronto would feed deal work into New York, elevating that platform into the league in which Torys wanted to play.
Both Torys and Bennett Jones are certain the other made the first overture. Regardless, once they started talking both got excited and the merger criteria committee at Bennett Jones morphed into a deal team.
“I thought the proposed merger was a good idea,” says Peter Budd. “It would give Bennett Jones immediate bench strength in Toronto and a greater international reach.” He and the firm parted ways in the middle of the negotiations when the interests of Budd’s client Transalta Utilities and long-time Bennett Jones-Calgary client ATCO Ltd. came into conflict. (For the remaining Toronto lawyers, already agitated by the merger process, his conflict was just another example of how Calgary interests always trumped Toronto.)
So, as Budd puts it, “When the shit hit the fan, I was reading about it.”
Deadlock
The merger tanked on September 8, 1999, during a New York meeting addressing corporate governance. Both sides are reluctant to discuss the specifics that derailed the deal, but they do not deny the obvious assumption that corporate governance issues were paramount. “Who would be chairman, how many people from each office would be on the executive committee—we never solved any of those issues,” says one partner.
But it was not the details they clashed over, it was principles and cultural issues that acerbated every difference of opinion. Initially, there was a tendency to downplay inter-firm dissimilarities and focus on what they shared: first-tier work, first-tier lawyers and strong reputations. By September it was clear to both parties they were different—perhaps irreconcilably so. Says William Rice, “We both had very strong cultures. But they were very different. That came out through the negotiations and in how each firm dealt with its partners.”
And how each firm perceived the other. At one point, Torys felt the Bennett Jones deal team was approaching the deal “too much like a normal M&A,” admits one partner, “driving too hard.” Bennett Jones, direct to a fault, was periodically frustrated by the perceived “passive-aggressive” Torys negotiation strategy. Ultimately, it was neither corporate governance nor incompatibility of culture that brought down the deal. It was incompatibility of vision.
“We, as a firm, were very clear on what we wanted to achieve with this merger, and how the New York piece and the Bennett Jones piece fit into that,” explains a Torys partner. “I don’t think that was necessarily true at Bennett Jones. Even with the deal team, we got the impression that Martin Lambert spoke for some people, Bill Rice spoke for some people, Hugh MacKinnon spoke for some people, and Doug Foster spoke for yet another group. I don’t think the firm as a whole knew why it wanted to merge with us.”
The Torys partner goes on to note: “There was a group of people who understood and agreed with our vision, others who just wanted to merge because they’d be big in Toronto, and others who didn’t want to merge at all, or didn’t care, because it wouldn’t impact their practice.” “That might be fair to some degree,” concedes Rice. “We have a very democratic partnership…naturally, people expressed various views. Torys had a different style of working with its partners.”
Five years later partners from both firms say “it’s amazing we got as far along as we did.” And, just as they are uncertain who first asked whom to dance, they prefer not to specify who was first to walk away. It was, suggests one partner, “mutual disagreement.”
“There were certain deal requirements they were unwilling to move on, and we said that on that basis we cannot proceed,” says Martin Lambert. “But who walked away first—the person who drew a line in the sand or the person who refuses to cross it?” A source at Torys recalls that when the decision was made, no one tried to convince the others to give the deal one more try. If there was one common feeling it was probably “relief…. It was clear to everyone, at that point, this just wasn’t going to work.”
Blowback
With Bennett Jones out of the picture, Torys pursued its merger with Haythe & Curley, grateful, when the Haythe scandal hit the newspapers, that it had only two offices of appalled lawyers to deal with. “We were able to respond to the Haythe situation as we did only because we were all together, we were all able to move together,” says a Torys partner. “If Bennett Jones had merged with us, I don’t know if that would have been possible.”
In Calgary, they too were relieved—and laughing. A skit modelled on CBC’s This Hour Has 22 Minutes and presented by the 1999 newly admitted partners included a slide, “This firm has 22 reasons to be glad it’s not Tory Bennett Haythe.” With Calgary aplomb, they laughed equally hard when the skit hit them where it (should have) hurt: “This firm has 22…19…17…lawyers in Toronto.”
“It was typical” of the “lack of sensitivity, understanding and consideration” of “those redneck Calgary bastards,” says one former Toronto Bennett Jones partner as he recalls his feelings when he first learned of the skit. These, after all, were the same people who had first “disrespected” and then “trashed” the Toronto office, “sold us out” while they were chasing the Torys merger, then “didn’t even say ‘sorry’” when it was all over and had the “nerve” to be “pissed off” at the subsequent lack of loyalty exhibited by Toronto partners and associates. (And, he adds, the numbers at the office never fell below 22.)
“To justify the merger, Calgary had to trash the Toronto office,” another former partner says. “At the partnership meeting in the spring we were great, we were all doing a good job. Suddenly, in the summer, we’re a failure, we’re not going anywhere, we’re a write-off.”
For Torys, Bennett Jones-Toronto was, if anything, a disadvantage. “It had some practice lines in which, frankly, we weren’t interested,” says a Torys partner. More important, “It had some people in whom we were not interested. If we had been able to ink a deal, if we had something to bring to the partnership, and if part of that was bringing all of the Bennett Jones-Toronto people over, we would have had partners resigning. We would have had partners saying I will not work here with so-and-so down the hall as my partner.”
These issues surfaced early enough that Bennett Jones decided, effectively, to shut out its Toronto partners from the merger discussions. “The Toronto people were excluded from the discussions. The process alienated a lot of people,” confirms Alan Gahtan. “Fraser Mann and I were fortunate because [Calgary partner and head of the IT/IP group] Martin Kratz brought us in and we felt we would have been welcome at Torys.”
That was not the case for everyone in Toronto and it was certainly not the case for people like Sabine, Melanson and Haynen. “The top people in the Toronto office were the corporate finance/M&A people and they were the type of lawyers Torys had a lot of. Probably, some of them were not welcome at Torys,” says a former Bennett Jones Toronto partner. Adds a current partner, “They were running the show here. Even if they went over to Torys, who’d be running the show there? I don’t think there was a way of doing it that would have made them happy.”
Nobody, it seemed, was happy. When Calgary sent firm veterans Walter O’Donoghue, QC, and Donnel Sabey, QC, to Toronto to assess the situation, says a former partner, “they found a lot of unhappy, unsettled people.” The confusion was in no way aided by the firm’s own uncertainty as to what the next step would be.
Having experienced first-hand the difficulties posed by a Toronto office in the event of a merger, should Bennett Jones even have a Toronto office? A former partner recounts an analogy, attributed to Michael Melanson, that illustrated the situation. “It was as if a husband had said to a wife who had been with him for, whatever, five or 25 years, ‘Hey, I’m interested in getting into a relationship with someone new, and by the way, you’re a bad cook, a lousy lover, a terrible housekeeper, and I never liked you.’ And then, he comes back and says, ‘So, it didn’t work out with this other woman and I’m not sure I want to come back to you, but if I did, would you stay?’ How do you react to that?”
Angry, hurt or disillusioned, many of the Toronto lawyers left.
At the Brink
“There were lots of people leaving and lots of firms calling. It was a turbulent environment, with some people obviously unhappy and some people making it clear they were leaving no matter what,” recalls Mark Bain. In 1999 Bain, now a Bennett Jones partner, was a senior associate. “From an associate’s perspective at the time, I thought we were treated quite fairly and I saw the Torys people as quite welcoming. If I had been sitting in a partner’s chair, maybe my perception would have been different. But, after the termination of the talks, I was one of the people making calls to Calgary to say this is a good office with a lot of potential. I thought Bennett Jones was a good firm and I wanted to stay here if it was strategically committed to Toronto.”
Bennett Jones did not immediately demonstrate that commitment. Says Alan Gahtan, “It took a while for the firm to make the decision whether to turn it around or to shut it down. Once the firm had made the decision, I couldn’t trust it because it was such a long commitment. It turned out the firm stood behind it, but at the time it was hard to trust if that commitment would be there for the long haul. My fear was, did the firm really realize the level of resources required to make the office work in the long term?”
For Jacques Bernier, the decision was also difficult. Currently the only remaining Verchère lawyer at Bennett Jones, Bernier had elected to stay with the firm when it closed its Montreal office in 1998. “It was a tough time. I lost friends. Those were very difficult years. I wanted to stay if the firm wanted to stay but I said, let’s do it right. Bring over solid practitioners from Calgary and recruit solid laterals here. My preference was for two partners from Calgary to move here. Instead, we got Hugh MacKinnon.”
Phase Three: Rethinking Toronto
MacKinnon was almost “completely untainted by experience or education” for the role the firm thrust upon him. “At the time of the move my only significant experience on an important firm committee was on the merger criteria committee and the merger deal team,” he says. So, it was a bit of a surprise, to MacKinnon, as well as to some of his partners when, at the firm’s annual partners’ retreat in Phoenix in October 1999, Clifton O’Brien took MacKinnon aside and asked if he would move to Toronto to manage the office. More than one Calgary partner was highly skeptical. In the words of one, “no executive committee experience, hardly any committee experience, no demonstrated management experience, and all of a sudden he’s the saviour of the Toronto office?”
The saviour-elect himself was not sure he was right casting for the role. “It certainly wasn’t his idea,” confirms Rice. “But he quickly got enthused about it. We didn’t have to go at him with bats to get him to go.” There were, of course, a number of volunteers for the task. But the firm had sent out volunteers before. In its third crack at Toronto it was taking a different approach—one similar to that used by Stikeman Elliott LLP when it followed its clients down the 401.
“Heward Stikeman once told me the secret is to send your best people,” says Bruce Barker. “It seems impossible—they don’t want to go, they have a practice, clients, family obligations. But you have to make them go. And in sending Hugh to Toronto Bennett Jones followed that model.”
Rice elaborates: “Our past experience had taught us that first, you need very good people, and second, we needed someone with a strong understanding of, and commitment to, Calgary to keep the Toronto office attached and properly aligned with Calgary. Through the years of significant growth and success with people like John Sabine, Michael Melanson and Grant Haynen, it was apparent there were significant tensions between the offices and between practice groups. They were all strong, productive people, but there were cultural differences.”
In MacKinnon Bennett Jones had a blend of the two cultures—a native Torontonian who had spent 17 years with the firm in Calgary. Or, as MacKinnon puts it, “An interpreter with a foot in each culture or, as is more commonly known, the official monkey in the middle.”
Personally and professionally, the timing was not great. Although both MacKinnon and his wife Laura came from Toronto, Laura MacKinnon’s parents had just moved to Calgary to be closer to their four grandchildren. Professionally, MacKinnon had an established and loyal client base that was not particularly portable.
But he went because, as O’Brien knew when the executive committee made its choice, he was a “firm man”—someone who would approach the problems in Toronto with perseverance, imagination and humour. In MacKinnnon’s own words: “During the course of the merger discussions, I had spent a fair bit of time in Toronto and the people in our Toronto office had become even better friends. I had even begun to fully understand the North Toronto/Lawrence Park dialects. I knew there was a huge reservoir of goodwill among the Alberta partners and a great deal of determination among the Toronto lawyers. And, after 17 years in Calgary, I figured it was only a matter of time before I would wear out my welcome.”
Turnaround
“The turning point was Hugh MacKinnon. That’s it. It’s not more complicated than that,” says Bernier. Bain agrees, “Hugh’s very arrival, no doubt, was a stabilizing influence. It was an indication of the executive committee’s commitment to the office.” It meant Bennett Jones was in Toronto for good and this allowed the lawyers who stayed, says Bain, to ask themselves: “What do we want to be when we grow up?” Their answer, “to create a kick-ass Toronto firm.”
The personnel turnover continued throughout 2000. “We went from over 30 lawyers to about 20 and with those we had to sort out who the keepers were, who fitted the game plan. It took about a year to do so,” says Bruce Barker.
Barker was one of MacKinnon’s earliest accomplices in the housecleaning and rebuilding that followed. For the Calgary partners the recruitment of Barker was an “early confidence builder.” If someone of Barker’s calibre and reputation was willing to cast his lot with Bennett Jones in Toronto, “that gave us some confidence,” says Rice.
For Barker, “Coming to Bennett Jones the way I did was one of the more questionable decisions I ever made.” After a stint as McMillan Binch’s managing partner, he had several options, including an accounting firm and Osler, Hoskin & Harcourt—“a firm that has appealed to me for years”—when he got a call from Martin Lambert. “He said we’d like to talk to you. I said, I don’t know why I’d be interested, but sure.”
Barker met with Lambert and Rice in December 1999 and by February he was at Bennett Jones. “I realize, in retrospect, it was a leap in the dark,” he says. “I didn’t realize just how much trouble the office was in. I did not do my due diligence on Hugh and I would not have been able to build this office up myself. To have made that jump without ensuring they had sent their best person.… It could have been a disaster.”
The situation was still shaky when Paul Mantini, another former managing partner, came over from Smith Lyons in late 2000. “I didn’t know for a fact whether the firm had the stated support from Calgary. It’s easy to say we will support you—it’s harder to write cheques,” he says. “The turning point for me was the recruitment of Rook and Orzy. It showed the firm was prepared to do what it had to. They were huge commitments.” As Mantini puts it, “None of us come cheap.”
Mantini himself significantly contributed to a faster than anticipated profitability. “I stopped worrying about money towards the end of 2001,” says MacKinnon, “and by 2002, after partner draws, we were profitable. Now, we’re very profitable.” But, of course, it’s not just about the money—it’s also about the calibre of work.
“With the people who have joined us now, clearly marquee lawyers with marquee practices, the calibre of work has gone up in the office,” says Bain. Bain is becoming one of Ontario’s go-to lawyers on public-private partnerships, representing both the William Osler Hospital and the Royal Ottawa Hospital consortiums. With Mantini came deals like the development of the Niagara Falls Casino Complex and Oak Ridges Morraine—the first file from the new Ontario Liberals. Martine Band brought electricity market restructuring work in Ontario, New Brunswick and Singapore. Rook delivered clients like Hollinger, Cadbury, and Sherritt (giving Bennett Jones play on the Fording coal drama—by most standards Western Canada’s most interesting deal of 2003—via its Toronto office). Rick Orzy and Kevin Zych brought involvement on practically every insolvency/restructuring file of note (eg, Laidlaw, Ivaco, Doman, AT&T and Pioneer).
The work and the stars have made recruitment—the key priority for MacKinnon and the senior partners—easier. “When I left for Ottawa in June 2001, I wouldn’t have thought of Bennett Jones,” says Melanie Aitken, who came to the firm from Davies Ward Phillips & Vineberg LLP via two years at the Competition Bureau. “When I was coming back to Toronto in 2003, I had to at least think of Bennett Jones and that’s because of John Rook.” Or, as another lateral puts it, “If they could convince a hard-ass like Rick Orzy that they have something going for them, what better evidence do I need?”
Jim Patterson and Lincoln Caylor joined Bennett Jones in June 2003 (four associates from their fraud litigation group at Borden Ladner Gervais subsequently followed), by which time, says Patterson, “Bennett Jones was on my list when I was doing my homework.” Joining “an all-star team of laterals” had a lot of appeal. The collegiality among the stars pleasantly surprised him.
The new partners clearly attribute the office’s success to their managing partner. “Hugh has done a magnificent job of his mandate—to promote and grow this office. Attracting senior people is not easy, neither is achieving the sense of unity and vision we have in this office,” says Mantini. “And you can never overestimate how much time is required to keep all these egos organized and focused.” “Hugh is an irrepressible, energetic, enthusiastic character,” concurs Rook. “He’s the type of guy who can sell bobby pins to a bald man.” Sums up Bernier: “He’s intelligent, considerate of his partners and colleagues, and has fire in his belly. He’s a leader. He has vision.”
What Vision?
Bennett Jones, says Peter Budd, “was one of the early parties to see how important the Toronto market was.” But its first efforts, to be charitable, were unfocused. “The firm was committed to Toronto, but perhaps there was not a well-defined commitment—not a strategy, at least not one of which I was aware.”
For the third crack at Bay Street the firm has a Toronto business plan developed in the months following the merger meltdown and MacKinnon’s arrival as managing partner. It has also articulated why it needs to be in Toronto. Sort of.
“From a strategic standpoint we were hitting up against constraints on growth due to conflicts resulting from our significant presence in the Alberta market,” explains MacKinnon. “Given the strong similarities in the business culture and the net economics of the practices in Calgary and Toronto, Toronto was the logical place for aggressive growth. It was also the place where most of the flights ended up.” In other words, there was no other place to grow.
Is that enough? Stikeman Elliott’s breakthrough into Toronto’s top-tier legal market was driven by recognition that the power base of Corporate Canada was or had in fact already shifted from Montreal to Toronto. Ogilvy Renault’s opening in Toronto was for the same reason. Similarly, the entry of Torys into New York followed client need. All three firms had extensive buy-in from the partners at their main terminus of power (granted, the size of the Stikes partnership in 1967 made that exercise easier than it would be today), and, importantly, the moves were accompanied by a sense of urgency, ie, a shifting client base.
Bennett Jones lacks that urgency. “There has been a feeling among the partnership for the last 10 or 15 years that soon, very soon, in the next couple of years, Toronto will become very important,” says one Calgary partner. “That feeling has been constant.” In the meantime, the performance of the Calgary office has been phenomenal and, despite the entry of the Toronto-based firms into the Calgary market, the position of the firm in Calgary remains secure.
As a result Toronto has been important, but never crucial. That attitude allowed the firm to seriously consider exiting Toronto during the 1999 meltdown. “One of the views expressed was if we’re an international energy firm, what are we doing in Toronto? We should be looking south,” says one partner. (Ironically, it was that international energy platform that attracted Torys, and continues to attract Toronto lawyers. It was a key factor in Bruce Barker’s decision to join the firm. “Bennett Jones has an energy practice that’s globally relevant,” he says. “Other Canadian firms would be hard pressed to describe any of their practice areas as globally relevant.”)
So, has Bennett Jones really rethought Toronto? The Toronto lawyers think it has. “There’s true buy in from the Calgary partners,” says Aiken. “My sense is it’s not just commitment on part of the Calgary partners to a person, but to a person they share the view this is the future. They’ve done everything they can possibly do in the Calgary market and if they want to grow, they have to grow through us. We are made to feel by our Calgary partners that we are the future.” Paul Mantini is of the same mind. “Calgary accepts and acknowledges that for the firm to continue to succeed its Toronto profile has to grow. This is not meant to be a branch office.”
Jacques Bernier, the only witness to all three Toronto versions of Bennett Jones, is more emphatic. “We want to have a viable and vibrant business here. There has been a realization by the firm that Toronto is the largest market and if you want to be meaningful on the Canadian scene, you have to be meaningful here. A large number of partners in Calgary realize that eventually the Toronto office will be larger than the Calgary office.”
Is Calgary really ready for that? It was not ready in 1999 when it walked away from a merger with Torys, which would have seen the power centre of the firm’s inevitable shift eastward. At its core, “national firm” rhetoric notwithstanding, Bennett Jones still sees itself as a western Canadian firm. There is, among firm management, a reluctance to overemphasize Toronto, because that may de-emphasize Calgary and Edmonton.
“We’re not trying to create a separate law firm in Toronto to compete with other firms in Toronto,” says Rice. “We want the Toronto office, with the Calgary and Edmonton offices, to be able to sustain Bennett Jones as one of the leading firms in Canada. We need a certain level of bulk and a competitive presence in Toronto to put us in that position. I don’t think we’d like to put it that way, that Toronto is the future, because that would be pejorative to the rest of the firm. But in terms of numerical expansion, Toronto is obviously a significant piece of how the firm is going to grow.”
Co-terminus Power?
Being “a significant piece” is not sufficient to attract the Barkers, Mantinis, Rooks and Orzys. They are there to build a “kick-ass Toronto law firm” and it’s this enthusiasm that is the secret ingredient in the firm’s third crack at Bay Street. The people Bennett Jones is recruiting are not content to be at a “branch office.” Under MacKinnon they believe they are working to build a new power centre—or at least a co-terminus power centre. Most expect Bennett Jones-Toronto to pass one hundred lawyers in the next couple of years and to stabilize somewhere between 125 and 150. Bennett Jones-Calgary has hovered around the 180 mark for several years.
This possibility, that in the not-so-distant future Toronto may be a co-terminus power centre with Calgary, adds a level of energy and ambition to Bennett Jones-Toronto that the Toronto-based firms in Calgary cannot have. The Calgary offices of Oslers, McCarthy Tétrault or Blakes will never rival the home offices in Toronto. It is not in the cards. That limitation perforce affects their ambition and their growth in that, and other markets.
But the reverse is possible. Indeed, it has been done by Stikeman Elliott. At 168 lawyers, Stikeman’s Toronto office is now larger than its Montreal home office at 142 lawyers. The firm’s current chairman is from Toronto. Ogilvy Renault, at 120 lawyers in Toronto and 179 in Montreal, will have to address this issue. The recognition that one day Toronto may have more clout than Montreal has informed Ogilvy’s steps to share power with the “new guys in Toronto” from day one.
At another level Torys, at 246 lawyers in Toronto and 80 lawyers in New York—looking to ramp up to 125 “in the next two to three years”—puts New York ahead of Toronto on its letterhead and business cards and has had three New York and three Toronto partners on its executive committee (plus a Toronto-based managing partner). In the UK legal powerhouses such as Freshfields Bruckhaus Deringer and Linklaters, which merged throughout the 1990s with European firms to better position themselves against US firms entering the UK and European market, are experiencing similar, and frequently turbulent, power sharing confrontations.
Through its Toronto office, and through the failed merger negotiations with Torys, Bennett Jones is under no illusions as to how difficult and divisive proposed re-alignments of power structures can be. This is a fundamental issue that all ambitious firms, in Canada and elsewhere, must address when they enter new markets that rival or surpass in importance their home market.
To avoid an implosion and to recruit top-tier laterals, power must be shared—intelligently. Has the rethinking of the Toronto market by Bennett Jones progressed this far? Perhaps. If so, will they do it? Probably—if they want to be a significant power in the Toronto market. The real question is will they have the judgment to do it before they have to?
“Bennett Jones has a much more dominant place in the Calgary economy than any other law firm in Canada has in its local market,” says Rob Collins of Blake, Cassels & Graydon LLP in Toronto. Collins moved to Calgary in the mid-1980s when Blakes first entered Calgary. Although he has since moved back to Toronto, he maintains close contacts. “When we go looking for work,” Collins notes with grudging respect, “Bennett Jones is always there.”
While Bennett Jones may be the front-runner in Calgary, it has been a different story in Toronto. The firm opened in Toronto in 1989. From 1989 to early 1999 (the first shot at cracking the Toronto market) the progress of the new office can best be described as “falling short” of the success Bennett Jones customarily enjoys in Calgary.
All this changed, dramatically, in mid-1999 (the firm’s second shot at Bay Street). That summer rumours ran rampant regarding a three-way merger between top-tier Tory, Tory, DesLauriers & Binnington (now Torys LLP) in Toronto, Calgary-based Bennett Jones, and a mystery New York City-based firm (Haythe & Curley). The market significance of such a merger was obvious to all. On September 9, for undisclosed reasons Bennett Jones and Torys discontinued negotiations. And on October 4, Torys and Haythe & Curley announced their merger.
Shortly after the announcement of the Torys and Haythe merger, both Torys and Bennett Jones were struck by bombshells. For Torys it was the scandal of the alleged sexual misconduct of Thomas Haythe of Haythe & Curley. For Bennett Jones it was what appeared to be the imminent collapse of their Toronto office. Both firms would have to take decisive steps to regain control of events. Both did. For Bennett Jones it meant a fundamental rethinking of how, for its third shot at Bay Street, it would approach the Toronto market.
Successfully entering a major new market like Toronto is difficult, even for a firm as powerful as Bennett Jones. A top-ranked position in Calgary does not necessarily open doors in Toronto. There are formidable competitors with deep roots in the Toronto corporate and financial communities. In many ways it is like sitting down to play a complex, multi-dimensional chess game. New corridors of power, the need for partners with credibility on the street, and the need for leadership and vision. A chess game with high stakes.
In the fall of 1999, still sorting out the blowback from the merger that was not, Bennett Jones parachuted Hugh MacKinnon from Calgary to Toronto. His mandate was “first to stabilize and then to grow” the disintegrating operation. “It was ugly,” MacKinnon admits. “Brutal. This office was being raided by every firm in town.”
In one respect at least, MacKinnon’s task was easy. Things were so bad they really could not get worse. Lawyers and staff used office hours mostly to work on their résumés and field telephone calls from headhunters. The angry departure of former managing partner John Sabine and virtually all of the office’s key corporate lawyers, including Michael Melanson and Grant Haynen, left associates and junior partners stranded. Donahue LLP, Ernst & Young’s ill-fated multidisciplinary practice venture (which imploded in late 2002), had been busy culling the firm’s Toronto tax group. The loss of energy partner Peter Budd, which had not mattered so much when the pending merger with Torys was still in place, did not help anyone feel good.
Add to all of this the bad karma the merger discussions—which had made many Toronto lawyers feel alienated, if not outright unwanted—left in the air and the really surprising thing is not that people left, but that anyone stayed.
Nine did. Now, in 2004, they comprise a minority of the 62-lawyer Toronto office. Under MacKinnon’s leadership, with a number of marquee lateral hires on board, a solid deal list and financial results that please even the “hypochondriac management” in Calgary, Bennett Jones-Toronto appears to be in the game again. But they have been in the game since 1989. So the real question is not whether the firm is playing, but does it know how to play to win?
To Bay Street at least one part of the firm’s new Toronto strategy is obvious. For the first time, Bennett Jones is putting real money on the table and recruiting stars. Its 2004 roster includes top-rated Bruce Barker (banking/structured finance), a former McMillan Binch LLP managing partner; competition litigator John Rook, who spent 12 years with Osler, Hoskin & Harcourt LLP; leading commercial real estate practitioner Paul Mantini, former managing partner of Smith Lyons (now merged with Gowling Lafleur Henderson LLP); insolvency star Rick Orzy, formerly with McCarthy Tétrault LLP; fraud litigator James Patterson and his team, formerly with Borden Ladner Gervais LLP; deregulation and energy specialist Martine Band from Power Budd LLP; and well-known corporate tax lawyers Stephen Bowman and John Owen from Thorsteinssons.
For MacKinnon, the advantages of cherry-picking “hard-working, talented and happy” stars is obvious. “The lowest risk hire is the top-notch lawyer,” he says. “Such people are proven, they have a following, they’re talented and ambitious.” For firm management in Calgary, it makes financial sense, despite the high price tags. “The strong performers have put the office on a strong financial footing and that has comforted the partnership as a whole,” says William S. Rice, the firm’s Calgary-based managing partner.
Characteristically, MacKinnon is more enthusiastic. “For a relatively small office, the business in this place is phenomenal,” he enthuses. “We went out and cherry-picked a bunch of smart lawyers. There is no office of this size in this town that’s doing these kinds of deals.”
Perception on Bay Street has been that the recruitment has been haphazard. Bennett Jones chooses different words. “We have been somewhat opportunistic,” says Rice. “We have chosen to build around the right, strong people.” Adds MacKinnon, “We’ve gone out to get the very best people in their class. If we can’t get them, we don’t have that practice area.”
That approach means the office continues to have some sizeable holes in the all-important areas of corporate finance and mergers and acquisitions. Ironically, the firm’s first run at Toronto, prior to the merger negotiations, consisted of recruiting a corporate finance group, which it then lost.
Montreal-based Verchère, Noël & Eddy had three partners and four associates in Toronto when it merged with Bennett Jones in 1989. The tax boutique’s clientele included a number of high-profile international pharmaceutical clients. Through the merger, Bennett Jones hoped to attract their corporate work, as well as to gain a platform from which it could service its Western clients doing business in Toronto. The long-standing personal and professional relationship between then firm managing partner Bill Britton, QC, and Verchère also played into the equation.
The synergies did not materialize. The few Calgary partners who went to Toronto were unsuited for management or rainmaking roles. By the mid-1990s it was clear that being in Toronto was not enough. You actually had to do something. “When they first came out here, they were so successful in Alberta, they thought they’d just hang out their shingle and clients would come knocking on their door,” says one former Toronto partner.
The amended first version of Bennett Jones-Toronto, launched in 1995, focused on recruiting people “who were of the community.” Among those key recruits were John Sabine, Michael Melanson and Benjamin Hutzel, corporate partners from the then newly merged Fasken Campbell Godfrey.
Hutzel, a corporate lawyer who remains with the firm, brought to the table connections to the Liberal party. Sabine and Melanson, both corporate, the first in the position of managing partner, the second as his right-hand man, brought leadership and stepped up recruitment efforts, bringing on board corporate lawyer Grant Haynen and litigator Robert Staley.
“They delivered a certain degree of excitement and dynamism to the office,” says Peter Budd, now chairman of Power Budd, a rapidly growing Toronto-based energy boutique. A Toronto native who articled and practised with Bennett Jones in Calgary, Budd headed back to Toronto in 1991 and spent eight years building the firm’s eastern energy practice.
Sabine, says a Calgary partner, “inspired a great deal of loyalty in the people he brought with him, as well as many of the people he recruited.” Several of the people he “inherited” also built strong and positive relationships with him. Says Budd, “He’s a magnanimous individual and he remains a mentor for me. He’s larger than life and he consistently adds a human dimension to everything he does.”
“It was a very open office,” recalls Alan Gahtan who, along with technology guru Fraser Mann, crossed over to Bennett Jones in 1998 from Borden & Elliott (now Borden Ladner Gervais). Against a backdrop of “the usual Calgary-Toronto issues,” Sabine was seen as a strong advocate of the Toronto lawyers and the Toronto office.
But there were issues. “There are always East-West tensions,” Budd says diplomatically. Another former partner is more direct. “There were frequent tussles between Sabine and firm management in Calgary.” Adds a Calgary partner, “Some of it was inevitable, some of it was Sabine fighting for control of his fiefdom.”
Playing into the situation was a sudden change in the power structure in Calgary. Managing partner John Richels, who had been instrumental in the recruitment of the new Toronto power clique, left the firm to join Northstar Energy, a career move that has since taken him to the presidency of US giant Devon Energy Corp. He was replaced by a power triad consisting of Clifton O’Brien, QC, chairman; Martin Lambert, CEO; and Donald MacDiarmid, COO, none of whom had previous ties with the Sabine group.
Still, the tensions did not unduly interfere with growth. In 1998, the beginning of several record M&A years for Calgary, the Toronto lawyers grabbed a number of big deals and business press headlines, representing the controlling shareholders of the Oshawa Group in the $1.4 billion takeover by Empire Company Ltd. and WIC Western International Communications Ltd. in the competing bids for the company by CanWest Communications and Shaw Communications.
By the spring of 1999 the Toronto office of Bennett Jones hit 37 lawyers. At that year’s partners’ meeting, recalls a former Toronto partner, the achievements of the Toronto office were praised. The main pressure from Calgary was to grow aggressively. There were the inevitable comparisons to Ogilvy Renault, which had entered the Toronto market in 1995 and, approaching one hundred lawyers by 1999, was thought to be pulling ahead of Bennett Jones.
The office was not profitable yet, but it was close. In the last two years, says a former partner, after partner draws Calgary was contributing “only between a quarter to half a million” to the operation. Rice is not as specific but agrees the office was doing well. “In the last while, it had been quite solid,” he says. “It was certainly better than it had been,” says another Calgary partner. But apparently not good enough.
The firm’s short-lived strategic plan stressed continued commitment to and aggressive expansion in Toronto. It also stated that while “we will not at this time actively pursue a significant national or international merger strategy…. We will nevertheless continue to evaluate merger options and will consider opportunities as they arise.” In the face of unprecedented law firm consolidation and to “develop threshold criteria for an acceptable merger and merger candidates,” the firm struck a merger criteria committee that engaged in exploratory discussions with a number of leading Canadian firms.
Meanwhile, one of the most attractive leading firms, Toronto-based Torys with two hundred-plus lawyers, was actively engaged in merger discussions of its own, albeit in a completely different direction. “We were never particularly interested in an East-West merger,” says a Torys partner. “We had looked at it, briefly, but quickly decided North-South was much more important to us. That meant New York.” And that meant 65-lawyer New York-based Haythe & Curley.
Torys’ New York strategy had been carefully formulated. “We thought, and continue to think, that the cross-border advice and service you can provide on US/Canadian legal matters is the service most underprovided and most needed by clients,” explains managing partner Les Viner. “It’s as simple as that. It’s what clients want and need.”
The firm had offices in London and Hong Kong. It has since closed them. “The client need was not there,” says Viner. “It was never in London and Hong Kong. It was always in New York. It’s almost blindingly obvious, but it took us 10 years to figure it out.”
The challenge for Torys was how to make an office of 65, a practical non-entity in the massive New York market, meaningful. The international energy practice at Bennett Jones, with its unparalleled US client relationships, provided the third point of a “triangle” through which both Calgary and Toronto would feed deal work into New York, elevating that platform into the league in which Torys wanted to play.
Both Torys and Bennett Jones are certain the other made the first overture. Regardless, once they started talking both got excited and the merger criteria committee at Bennett Jones morphed into a deal team.
“I thought the proposed merger was a good idea,” says Peter Budd. “It would give Bennett Jones immediate bench strength in Toronto and a greater international reach.” He and the firm parted ways in the middle of the negotiations when the interests of Budd’s client Transalta Utilities and long-time Bennett Jones-Calgary client ATCO Ltd. came into conflict. (For the remaining Toronto lawyers, already agitated by the merger process, his conflict was just another example of how Calgary interests always trumped Toronto.)
So, as Budd puts it, “When the shit hit the fan, I was reading about it.”
The merger tanked on September 8, 1999, during a New York meeting addressing corporate governance. Both sides are reluctant to discuss the specifics that derailed the deal, but they do not deny the obvious assumption that corporate governance issues were paramount. “Who would be chairman, how many people from each office would be on the executive committee—we never solved any of those issues,” says one partner.
But it was not the details they clashed over, it was principles and cultural issues that acerbated every difference of opinion. Initially, there was a tendency to downplay inter-firm dissimilarities and focus on what they shared: first-tier work, first-tier lawyers and strong reputations. By September it was clear to both parties they were different—perhaps irreconcilably so. Says William Rice, “We both had very strong cultures. But they were very different. That came out through the negotiations and in how each firm dealt with its partners.”
And how each firm perceived the other. At one point, Torys felt the Bennett Jones deal team was approaching the deal “too much like a normal M&A,” admits one partner, “driving too hard.” Bennett Jones, direct to a fault, was periodically frustrated by the perceived “passive-aggressive” Torys negotiation strategy. Ultimately, it was neither corporate governance nor incompatibility of culture that brought down the deal. It was incompatibility of vision.
“We, as a firm, were very clear on what we wanted to achieve with this merger, and how the New York piece and the Bennett Jones piece fit into that,” explains a Torys partner. “I don’t think that was necessarily true at Bennett Jones. Even with the deal team, we got the impression that Martin Lambert spoke for some people, Bill Rice spoke for some people, Hugh MacKinnon spoke for some people, and Doug Foster spoke for yet another group. I don’t think the firm as a whole knew why it wanted to merge with us.”
The Torys partner goes on to note: “There was a group of people who understood and agreed with our vision, others who just wanted to merge because they’d be big in Toronto, and others who didn’t want to merge at all, or didn’t care, because it wouldn’t impact their practice.” “That might be fair to some degree,” concedes Rice. “We have a very democratic partnership…naturally, people expressed various views. Torys had a different style of working with its partners.”
Five years later partners from both firms say “it’s amazing we got as far along as we did.” And, just as they are uncertain who first asked whom to dance, they prefer not to specify who was first to walk away. It was, suggests one partner, “mutual disagreement.”
“There were certain deal requirements they were unwilling to move on, and we said that on that basis we cannot proceed,” says Martin Lambert. “But who walked away first—the person who drew a line in the sand or the person who refuses to cross it?” A source at Torys recalls that when the decision was made, no one tried to convince the others to give the deal one more try. If there was one common feeling it was probably “relief…. It was clear to everyone, at that point, this just wasn’t going to work.”
With Bennett Jones out of the picture, Torys pursued its merger with Haythe & Curley, grateful, when the Haythe scandal hit the newspapers, that it had only two offices of appalled lawyers to deal with. “We were able to respond to the Haythe situation as we did only because we were all together, we were all able to move together,” says a Torys partner. “If Bennett Jones had merged with us, I don’t know if that would have been possible.”
In Calgary, they too were relieved—and laughing. A skit modelled on CBC’s This Hour Has 22 Minutes and presented by the 1999 newly admitted partners included a slide, “This firm has 22 reasons to be glad it’s not Tory Bennett Haythe.” With Calgary aplomb, they laughed equally hard when the skit hit them where it (should have) hurt: “This firm has 22…19…17…lawyers in Toronto.”
“It was typical” of the “lack of sensitivity, understanding and consideration” of “those redneck Calgary bastards,” says one former Toronto Bennett Jones partner as he recalls his feelings when he first learned of the skit. These, after all, were the same people who had first “disrespected” and then “trashed” the Toronto office, “sold us out” while they were chasing the Torys merger, then “didn’t even say ‘sorry’” when it was all over and had the “nerve” to be “pissed off” at the subsequent lack of loyalty exhibited by Toronto partners and associates. (And, he adds, the numbers at the office never fell below 22.)
“To justify the merger, Calgary had to trash the Toronto office,” another former partner says. “At the partnership meeting in the spring we were great, we were all doing a good job. Suddenly, in the summer, we’re a failure, we’re not going anywhere, we’re a write-off.”
For Torys, Bennett Jones-Toronto was, if anything, a disadvantage. “It had some practice lines in which, frankly, we weren’t interested,” says a Torys partner. More important, “It had some people in whom we were not interested. If we had been able to ink a deal, if we had something to bring to the partnership, and if part of that was bringing all of the Bennett Jones-Toronto people over, we would have had partners resigning. We would have had partners saying I will not work here with so-and-so down the hall as my partner.”
These issues surfaced early enough that Bennett Jones decided, effectively, to shut out its Toronto partners from the merger discussions. “The Toronto people were excluded from the discussions. The process alienated a lot of people,” confirms Alan Gahtan. “Fraser Mann and I were fortunate because [Calgary partner and head of the IT/IP group] Martin Kratz brought us in and we felt we would have been welcome at Torys.”
That was not the case for everyone in Toronto and it was certainly not the case for people like Sabine, Melanson and Haynen. “The top people in the Toronto office were the corporate finance/M&A people and they were the type of lawyers Torys had a lot of. Probably, some of them were not welcome at Torys,” says a former Bennett Jones Toronto partner. Adds a current partner, “They were running the show here. Even if they went over to Torys, who’d be running the show there? I don’t think there was a way of doing it that would have made them happy.”
Nobody, it seemed, was happy. When Calgary sent firm veterans Walter O’Donoghue, QC, and Donnel Sabey, QC, to Toronto to assess the situation, says a former partner, “they found a lot of unhappy, unsettled people.” The confusion was in no way aided by the firm’s own uncertainty as to what the next step would be.
Having experienced first-hand the difficulties posed by a Toronto office in the event of a merger, should Bennett Jones even have a Toronto office? A former partner recounts an analogy, attributed to Michael Melanson, that illustrated the situation. “It was as if a husband had said to a wife who had been with him for, whatever, five or 25 years, ‘Hey, I’m interested in getting into a relationship with someone new, and by the way, you’re a bad cook, a lousy lover, a terrible housekeeper, and I never liked you.’ And then, he comes back and says, ‘So, it didn’t work out with this other woman and I’m not sure I want to come back to you, but if I did, would you stay?’ How do you react to that?”
Angry, hurt or disillusioned, many of the Toronto lawyers left.
“There were lots of people leaving and lots of firms calling. It was a turbulent environment, with some people obviously unhappy and some people making it clear they were leaving no matter what,” recalls Mark Bain. In 1999 Bain, now a Bennett Jones partner, was a senior associate. “From an associate’s perspective at the time, I thought we were treated quite fairly and I saw the Torys people as quite welcoming. If I had been sitting in a partner’s chair, maybe my perception would have been different. But, after the termination of the talks, I was one of the people making calls to Calgary to say this is a good office with a lot of potential. I thought Bennett Jones was a good firm and I wanted to stay here if it was strategically committed to Toronto.”
Bennett Jones did not immediately demonstrate that commitment. Says Alan Gahtan, “It took a while for the firm to make the decision whether to turn it around or to shut it down. Once the firm had made the decision, I couldn’t trust it because it was such a long commitment. It turned out the firm stood behind it, but at the time it was hard to trust if that commitment would be there for the long haul. My fear was, did the firm really realize the level of resources required to make the office work in the long term?”
For Jacques Bernier, the decision was also difficult. Currently the only remaining Verchère lawyer at Bennett Jones, Bernier had elected to stay with the firm when it closed its Montreal office in 1998. “It was a tough time. I lost friends. Those were very difficult years. I wanted to stay if the firm wanted to stay but I said, let’s do it right. Bring over solid practitioners from Calgary and recruit solid laterals here. My preference was for two partners from Calgary to move here. Instead, we got Hugh MacKinnon.”
MacKinnon was almost “completely untainted by experience or education” for the role the firm thrust upon him. “At the time of the move my only significant experience on an important firm committee was on the merger criteria committee and the merger deal team,” he says. So, it was a bit of a surprise, to MacKinnon, as well as to some of his partners when, at the firm’s annual partners’ retreat in Phoenix in October 1999, Clifton O’Brien took MacKinnon aside and asked if he would move to Toronto to manage the office. More than one Calgary partner was highly skeptical. In the words of one, “no executive committee experience, hardly any committee experience, no demonstrated management experience, and all of a sudden he’s the saviour of the Toronto office?”
The saviour-elect himself was not sure he was right casting for the role. “It certainly wasn’t his idea,” confirms Rice. “But he quickly got enthused about it. We didn’t have to go at him with bats to get him to go.” There were, of course, a number of volunteers for the task. But the firm had sent out volunteers before. In its third crack at Toronto it was taking a different approach—one similar to that used by Stikeman Elliott LLP when it followed its clients down the 401.
“Heward Stikeman once told me the secret is to send your best people,” says Bruce Barker. “It seems impossible—they don’t want to go, they have a practice, clients, family obligations. But you have to make them go. And in sending Hugh to Toronto Bennett Jones followed that model.”
Rice elaborates: “Our past experience had taught us that first, you need very good people, and second, we needed someone with a strong understanding of, and commitment to, Calgary to keep the Toronto office attached and properly aligned with Calgary. Through the years of significant growth and success with people like John Sabine, Michael Melanson and Grant Haynen, it was apparent there were significant tensions between the offices and between practice groups. They were all strong, productive people, but there were cultural differences.”
In MacKinnon Bennett Jones had a blend of the two cultures—a native Torontonian who had spent 17 years with the firm in Calgary. Or, as MacKinnon puts it, “An interpreter with a foot in each culture or, as is more commonly known, the official monkey in the middle.”
Personally and professionally, the timing was not great. Although both MacKinnon and his wife Laura came from Toronto, Laura MacKinnon’s parents had just moved to Calgary to be closer to their four grandchildren. Professionally, MacKinnon had an established and loyal client base that was not particularly portable.
But he went because, as O’Brien knew when the executive committee made its choice, he was a “firm man”—someone who would approach the problems in Toronto with perseverance, imagination and humour. In MacKinnnon’s own words: “During the course of the merger discussions, I had spent a fair bit of time in Toronto and the people in our Toronto office had become even better friends. I had even begun to fully understand the North Toronto/Lawrence Park dialects. I knew there was a huge reservoir of goodwill among the Alberta partners and a great deal of determination among the Toronto lawyers. And, after 17 years in Calgary, I figured it was only a matter of time before I would wear out my welcome.”
“The turning point was Hugh MacKinnon. That’s it. It’s not more complicated than that,” says Bernier. Bain agrees, “Hugh’s very arrival, no doubt, was a stabilizing influence. It was an indication of the executive committee’s commitment to the office.” It meant Bennett Jones was in Toronto for good and this allowed the lawyers who stayed, says Bain, to ask themselves: “What do we want to be when we grow up?” Their answer, “to create a kick-ass Toronto firm.”
The personnel turnover continued throughout 2000. “We went from over 30 lawyers to about 20 and with those we had to sort out who the keepers were, who fitted the game plan. It took about a year to do so,” says Bruce Barker.
Barker was one of MacKinnon’s earliest accomplices in the housecleaning and rebuilding that followed. For the Calgary partners the recruitment of Barker was an “early confidence builder.” If someone of Barker’s calibre and reputation was willing to cast his lot with Bennett Jones in Toronto, “that gave us some confidence,” says Rice.
For Barker, “Coming to Bennett Jones the way I did was one of the more questionable decisions I ever made.” After a stint as McMillan Binch’s managing partner, he had several options, including an accounting firm and Osler, Hoskin & Harcourt—“a firm that has appealed to me for years”—when he got a call from Martin Lambert. “He said we’d like to talk to you. I said, I don’t know why I’d be interested, but sure.”
Barker met with Lambert and Rice in December 1999 and by February he was at Bennett Jones. “I realize, in retrospect, it was a leap in the dark,” he says. “I didn’t realize just how much trouble the office was in. I did not do my due diligence on Hugh and I would not have been able to build this office up myself. To have made that jump without ensuring they had sent their best person.… It could have been a disaster.”
The situation was still shaky when Paul Mantini, another former managing partner, came over from Smith Lyons in late 2000. “I didn’t know for a fact whether the firm had the stated support from Calgary. It’s easy to say we will support you—it’s harder to write cheques,” he says. “The turning point for me was the recruitment of Rook and Orzy. It showed the firm was prepared to do what it had to. They were huge commitments.” As Mantini puts it, “None of us come cheap.”
Mantini himself significantly contributed to a faster than anticipated profitability. “I stopped worrying about money towards the end of 2001,” says MacKinnon, “and by 2002, after partner draws, we were profitable. Now, we’re very profitable.” But, of course, it’s not just about the money—it’s also about the calibre of work.
“With the people who have joined us now, clearly marquee lawyers with marquee practices, the calibre of work has gone up in the office,” says Bain. Bain is becoming one of Ontario’s go-to lawyers on public-private partnerships, representing both the William Osler Hospital and the Royal Ottawa Hospital consortiums. With Mantini came deals like the development of the Niagara Falls Casino Complex and Oak Ridges Morraine—the first file from the new Ontario Liberals. Martine Band brought electricity market restructuring work in Ontario, New Brunswick and Singapore. Rook delivered clients like Hollinger, Cadbury, and Sherritt (giving Bennett Jones play on the Fording coal drama—by most standards Western Canada’s most interesting deal of 2003—via its Toronto office). Rick Orzy and Kevin Zych brought involvement on practically every insolvency/restructuring file of note (eg, Laidlaw, Ivaco, Doman, AT&T and Pioneer).
The work and the stars have made recruitment—the key priority for MacKinnon and the senior partners—easier. “When I left for Ottawa in June 2001, I wouldn’t have thought of Bennett Jones,” says Melanie Aitken, who came to the firm from Davies Ward Phillips & Vineberg LLP via two years at the Competition Bureau. “When I was coming back to Toronto in 2003, I had to at least think of Bennett Jones and that’s because of John Rook.” Or, as another lateral puts it, “If they could convince a hard-ass like Rick Orzy that they have something going for them, what better evidence do I need?”
Jim Patterson and Lincoln Caylor joined Bennett Jones in June 2003 (four associates from their fraud litigation group at Borden Ladner Gervais subsequently followed), by which time, says Patterson, “Bennett Jones was on my list when I was doing my homework.” Joining “an all-star team of laterals” had a lot of appeal. The collegiality among the stars pleasantly surprised him.
The new partners clearly attribute the office’s success to their managing partner. “Hugh has done a magnificent job of his mandate—to promote and grow this office. Attracting senior people is not easy, neither is achieving the sense of unity and vision we have in this office,” says Mantini. “And you can never overestimate how much time is required to keep all these egos organized and focused.” “Hugh is an irrepressible, energetic, enthusiastic character,” concurs Rook. “He’s the type of guy who can sell bobby pins to a bald man.” Sums up Bernier: “He’s intelligent, considerate of his partners and colleagues, and has fire in his belly. He’s a leader. He has vision.”
Bennett Jones, says Peter Budd, “was one of the early parties to see how important the Toronto market was.” But its first efforts, to be charitable, were unfocused. “The firm was committed to Toronto, but perhaps there was not a well-defined commitment—not a strategy, at least not one of which I was aware.”
For the third crack at Bay Street the firm has a Toronto business plan developed in the months following the merger meltdown and MacKinnon’s arrival as managing partner. It has also articulated why it needs to be in Toronto. Sort of.
“From a strategic standpoint we were hitting up against constraints on growth due to conflicts resulting from our significant presence in the Alberta market,” explains MacKinnon. “Given the strong similarities in the business culture and the net economics of the practices in Calgary and Toronto, Toronto was the logical place for aggressive growth. It was also the place where most of the flights ended up.” In other words, there was no other place to grow.
Is that enough? Stikeman Elliott’s breakthrough into Toronto’s top-tier legal market was driven by recognition that the power base of Corporate Canada was or had in fact already shifted from Montreal to Toronto. Ogilvy Renault’s opening in Toronto was for the same reason. Similarly, the entry of Torys into New York followed client need. All three firms had extensive buy-in from the partners at their main terminus of power (granted, the size of the Stikes partnership in 1967 made that exercise easier than it would be today), and, importantly, the moves were accompanied by a sense of urgency, ie, a shifting client base.
Bennett Jones lacks that urgency. “There has been a feeling among the partnership for the last 10 or 15 years that soon, very soon, in the next couple of years, Toronto will become very important,” says one Calgary partner. “That feeling has been constant.” In the meantime, the performance of the Calgary office has been phenomenal and, despite the entry of the Toronto-based firms into the Calgary market, the position of the firm in Calgary remains secure.
As a result Toronto has been important, but never crucial. That attitude allowed the firm to seriously consider exiting Toronto during the 1999 meltdown. “One of the views expressed was if we’re an international energy firm, what are we doing in Toronto? We should be looking south,” says one partner. (Ironically, it was that international energy platform that attracted Torys, and continues to attract Toronto lawyers. It was a key factor in Bruce Barker’s decision to join the firm. “Bennett Jones has an energy practice that’s globally relevant,” he says. “Other Canadian firms would be hard pressed to describe any of their practice areas as globally relevant.”)
So, has Bennett Jones really rethought Toronto? The Toronto lawyers think it has. “There’s true buy in from the Calgary partners,” says Aiken. “My sense is it’s not just commitment on part of the Calgary partners to a person, but to a person they share the view this is the future. They’ve done everything they can possibly do in the Calgary market and if they want to grow, they have to grow through us. We are made to feel by our Calgary partners that we are the future.” Paul Mantini is of the same mind. “Calgary accepts and acknowledges that for the firm to continue to succeed its Toronto profile has to grow. This is not meant to be a branch office.”
Jacques Bernier, the only witness to all three Toronto versions of Bennett Jones, is more emphatic. “We want to have a viable and vibrant business here. There has been a realization by the firm that Toronto is the largest market and if you want to be meaningful on the Canadian scene, you have to be meaningful here. A large number of partners in Calgary realize that eventually the Toronto office will be larger than the Calgary office.”
Is Calgary really ready for that? It was not ready in 1999 when it walked away from a merger with Torys, which would have seen the power centre of the firm’s inevitable shift eastward. At its core, “national firm” rhetoric notwithstanding, Bennett Jones still sees itself as a western Canadian firm. There is, among firm management, a reluctance to overemphasize Toronto, because that may de-emphasize Calgary and Edmonton.
“We’re not trying to create a separate law firm in Toronto to compete with other firms in Toronto,” says Rice. “We want the Toronto office, with the Calgary and Edmonton offices, to be able to sustain Bennett Jones as one of the leading firms in Canada. We need a certain level of bulk and a competitive presence in Toronto to put us in that position. I don’t think we’d like to put it that way, that Toronto is the future, because that would be pejorative to the rest of the firm. But in terms of numerical expansion, Toronto is obviously a significant piece of how the firm is going to grow.”
Being “a significant piece” is not sufficient to attract the Barkers, Mantinis, Rooks and Orzys. They are there to build a “kick-ass Toronto law firm” and it’s this enthusiasm that is the secret ingredient in the firm’s third crack at Bay Street. The people Bennett Jones is recruiting are not content to be at a “branch office.” Under MacKinnon they believe they are working to build a new power centre—or at least a co-terminus power centre. Most expect Bennett Jones-Toronto to pass one hundred lawyers in the next couple of years and to stabilize somewhere between 125 and 150. Bennett Jones-Calgary has hovered around the 180 mark for several years.
This possibility, that in the not-so-distant future Toronto may be a co-terminus power centre with Calgary, adds a level of energy and ambition to Bennett Jones-Toronto that the Toronto-based firms in Calgary cannot have. The Calgary offices of Oslers, McCarthy Tétrault or Blakes will never rival the home offices in Toronto. It is not in the cards. That limitation perforce affects their ambition and their growth in that, and other markets.
But the reverse is possible. Indeed, it has been done by Stikeman Elliott. At 168 lawyers, Stikeman’s Toronto office is now larger than its Montreal home office at 142 lawyers. The firm’s current chairman is from Toronto. Ogilvy Renault, at 120 lawyers in Toronto and 179 in Montreal, will have to address this issue. The recognition that one day Toronto may have more clout than Montreal has informed Ogilvy’s steps to share power with the “new guys in Toronto” from day one.
At another level Torys, at 246 lawyers in Toronto and 80 lawyers in New York—looking to ramp up to 125 “in the next two to three years”—puts New York ahead of Toronto on its letterhead and business cards and has had three New York and three Toronto partners on its executive committee (plus a Toronto-based managing partner). In the UK legal powerhouses such as Freshfields Bruckhaus Deringer and Linklaters, which merged throughout the 1990s with European firms to better position themselves against US firms entering the UK and European market, are experiencing similar, and frequently turbulent, power sharing confrontations.
Through its Toronto office, and through the failed merger negotiations with Torys, Bennett Jones is under no illusions as to how difficult and divisive proposed re-alignments of power structures can be. This is a fundamental issue that all ambitious firms, in Canada and elsewhere, must address when they enter new markets that rival or surpass in importance their home market.
To avoid an implosion and to recruit top-tier laterals, power must be shared—intelligently. Has the rethinking of the Toronto market by Bennett Jones progressed this far? Perhaps. If so, will they do it? Probably—if they want to be a significant power in the Toronto market. The real question is will they have the judgment to do it before they have to?
Lawyer(s)
Hugh L. MacKinnon
Michael N. Melanson
Grant R.M. Haynen
John F. Rook
S. Paul Mantini
S. Richard Orzy
Martine M.N. Band
John R. Owen
William S. Rice
William L. Britton
John W. Sabine
Benjamin J. Hutzel
Robert W. Staley
Alan M. Gahtan
John Richels
Clifton D. O'Brien
Donald G. MacDiarmid
Les M. Viner
Martin P.J. Kratz
Jacques Bernier
Kevin J. Zych
Melanie L. Aitken
Lincoln Caylor
Firm(s)
Bennett Jones LLP
Norton Rose Fulbright Canada LLP
Burnet, Duckworth & Palmer LLP
Blake, Cassels & Graydon LLP
Torys LLP
Ernst & Young Orenda Corporate Finance Inc.
McMillan LLP
Osler, Hoskin & Harcourt LLP
McCarthy Tétrault LLP
Borden Ladner Gervais LLP (BLG)
Thorsteinssons LLP
Verchere, Noel, Eddy
Northstar Energy Corporation
Devon Canada Corporation
Oshawa Group Ltd. (The)
Empire Company Ltd.
Rogers Communications
TransAlta Utilities Corp.
ATCO Ltd.
CBC
Stikeman Elliott LLP
William Osler Health Centre - Etobicoke Hospital Campus
Royal Ottawa Health Care Group
Casino Niagara
Oak Ridges Moraine (The)
Liberal Party of Canada
Hollinger Inc.
Cadbury Beverages Canada Inc.
Sherritt International Corporation
Laidlaw Inc.
Ivaco Inc.
Alcatel-Lucent
AT&T Canada
Pioneer Canada
Davies Ward Phillips & Vineberg LLP
Innovation, Science and Economic Development Canada - Competition Bureau
Torys LLP
Stikeman Elliott LLP
Norton Rose Fulbright Canada LLP
Freshfields Bruckhaus Deringer LLP
Linklaters LLP