Norm Bacal has seen it all // Cover Story
On Tuesday March 2nd, 2021Print
On Tuesday March 2nd, 2021Print
“I HAD THIS NIGHTMARE,” Norm Bacal, the former Bay Street titan, told me with a laugh. By the time he made this comment, we’d spent close to five hours together over three marathon sessions on Zoom. He told me how he transformed Heenan Blaikie LLP into a national powerhouse, only to watch it collapse in astonishing fashion. And he patiently walked me through some of the most mysterious aspects of life on Bay Street. We’d covered a lot of ground. “I thought, Gee whiz, if his goal is to write a hatchet job, then boy, I’ve been way too open,” said Bacal. “But then I thought, He can’t ruin me. I’m done already!”
This is not a hatchet job. But Bacal’s joke hinted at a broader truth: in a tight-lipped profession, he is a uniquely frank voice — which is precisely why I sought out his perspective.
Bacal is no longer a practising lawyer on Bay Street, but he’s carved out a second career as an author and public speaker. After the dissolution of Heenan Blaikie, he wrote Breakdown, an insider account of the firm’s rise and fall. He then went on to publish Odell’s Fall, a murder-mystery set in the Manhattan legal world. And he’s just released a second non-fiction work, called Take Charge. Aimed at students and junior lawyers, the book covers the soft skills that professionals need to master if they want to advance in their careers. Bacal also speaks at legal events and works as a law-firm consultant. In each role, he shares his hard-won knowledge of the legal profession, defying the industry-wide norm of discretion.
That candour has been a boon to this legal journalist. In my seven years as an editor at Precedent, one overarching challenge has been finding lawyers who are willing to speak freely about the profession. By nature, Bacal is downright chatty. Over the past few years, I’ve often called him when reporting on difficult subjects. He was an instrumental source for a piece I wrote on compensation committees. (He told me the following blunt truth: “It doesn’t really matter if you’re a great mentor or you care about teamwork. If you dig into the numbers, you’ll find that most of the money goes to the partners who bring in the most business or who have the highest collections.”) During the first coronavirus lockdown, he shed light on the real cost of downtown office space. No matter the story, he was eager to help.
This past winter, I had an idea. Rather than asking Bacal to comment on the occasional one-off story, why not interview him at length on a range of topics that would otherwise go unreported? We could talk about his new life as an author, his career path and the downfall of Heenan Blaikie — capturing an unvarnished look at how Bay Street firms actually work. Bacal was game from the start. And he didn’t disappoint. He answered each question without hesitation.
Before I ended our last Zoom meeting, I wanted him to have the closing word. “Final thoughts?” I asked.
He replied with a question of his own: “I haven’t spoken enough?”
ON OUR FIRST ZOOM CALL, Bacal, who is 64, wore a casual green sweater. He sat inside his home office. As he spoke, he peered through rimless eyeglasses that framed his cleanly shaven face. He never appeared strained, and he seldom second-guessed an answer.
I couldn’t say the same for myself. Whenever I noticed my own image staring back at me on my laptop screen, I saw someone who tended to hesitate, scrunch his face, readjust in his chair and fidget with his fingers.
Bacal’s demeanor was no fluke. As I soon learned, it was central to his professional identity. “The key to being successful,” he told me at one point, flashing a broad smile, “is to present your ideas with confidence, as if you know exactly what you’re talking about.”
That doesn’t mean Bacal took shortcuts. He has always been a workhorse. As a high-school student, in Montreal, he maintained a consistent study regimen so that, by exam season, he was ready. “I never even knew what cramming meant,” he said. “I was the person who, the night before the exam, would be watching television.” Throughout his undergraduate coursework and law school, both at McGill University, he earned top grades without feeling much pressure. “Not because I was the smartest kid, but because I was the one who figured out how to prepare.”
His road to professional success began when he landed an articling position at Heenan Blaikie. The year was 1980. The 16-lawyer Montreal firm boasted strong commercial and litigation practices, alongside one of the best labour departments in Quebec. Bacal, however, was thrilled to join the tax group. The first time he studied tax in law school, he thought, “Math meets law — what could be better?”
Bacal was soon hired back as an associate and, over the next decade, he pioneered a unique tax practice within the entertainment industry. As a fifth-year associate, he designed a ground-breaking tax scheme that laid the foundation for the rest of his career. The details are a bit arcane, but, in the simplest terms, he devised a way for film investors to receive a tax credit that exceeded the amount of real cash they put into a project. This allowed them to turn a profit no matter how badly a movie bombed at the box office. To be clear, this was not the intent of the law. Bacal had found a loophole. And throughout his career, he continued to mine the tax code for vulnerabilities that his clients could exploit.
Ultimately, he would become one of the top tax lawyers in the country. His work ethic played a central role in that achievement. “I could spend eight hours on a weekend trying to figure out a new way to do something,” he said. But his ability to project total confidence to the outside world was just as crucial. There were times, he told me, when a client asked him to explain how a particular aspect of one of his tax schemes worked. Bacal was honest if he was unsure about something, but he always delivered his message with conviction. “As I’ve said 100 times in my career, you just have to say it with authority.”
As Bacal talked about his career-long campaign to uncover tax loopholes, I wanted to ask if he ever felt, well, ethically icky about his line of work. After all, he had used his legal talent to help moneyed interests game the system. But this is a delicate subject, so I wanted to broach it with care. What I ended up saying, however, was less tactful than vague.
“There’s a little bit of a stigma, perhaps, in a career that’s built around making sure people can avoid paying taxes,” I began. “Did you ever think about that?”
Bacal immediately cut through my tortured language. “You mean the morality of it?” he asked.
“Yeah,” I said, relieved that he understood.
“It’s like being a criminal lawyer,” he told me, not offended in the least at my question. “As long as I don’t break the rules, this is just a game I’m playing. Let’s not get moral about it.”
IN 1989, Heenan Blaikie was well respected in Montreal, but it lacked a national footprint. Bacal was about to change that fact. As a 33-year-old partner, he moved to Toronto to open a four-lawyer operation in the TD North Tower. He planned to turn that outpost into one of the premier law offices in the city — not a simple task. To compete at the highest level, he needed to persuade a team of senior counsel to join his untested, unproven and virtually unknown upstart. He also lacked the budget to offer top-tier compensation.
So how did he lure talent? In meetings with potential recruits, Bacal told the same inspirational narrative. “The reason you’re coming to this meeting is that there’s something missing in your professional life,” he would begin. “Otherwise, you wouldn’t even be at this table. So let me be the first to tell you: I can give that to you. If you want to have fun and build this department the way you want to build it, this is the place for you.” On the topic of compensation, he was blunt. “I’m not paying top dollar. I can’t. And I won’t. If you’re in it for the money, go to Cassels Brock. They’ll pay you more.”
The strategy worked. Talented lawyers were willing to accept a diminished paycheque in exchange for a collegial, autonomous atmosphere. That bargain came to be known as the Heenan Tax. Not every new hire worked out, but Bacal was able to enlist lawyers who bought into his vision. The firm started to grow.
So, too, did Bacal’s stature as a leader. In 1997, Dean Potvin, the managing partner at Heenan Blaikie, stepped down in the wake of a cancer diagnosis, and the partnership had to choose a successor. (Potvin died in 1998.) Because the firm had two centres of power — its home base in Montreal and the rising office in Toronto — it named two managing partners. In Montreal, Guy Tremblay took charge. And in Toronto, the top job went to Bacal.
From that perch, Bacal helped turn Heenan Blaikie into a national institution. Over the next 15 years, the Toronto office mushroomed to 200 lawyers, while new offices sprung up across the country (in Calgary and Vancouver) and around the world (in L.A. and Paris). At its peak, the business had more than 1,100 employees and took home more than $250 million in annual billings. Bacal had willed his Bay Street dream into reality.
Because he promised a workplace that valued culture over money, his leadership style had to match that lofty ideal. He couldn’t, for instance, oversee a ruthless compensation process that punished partners the moment their performance started to slide. Instead, he would meet with struggling partners to help them with their career plans. On firm retreats, he made sure that 75 per-cent of the itinerary was focused on social events. That’s how the firm he described to his colleagues would operate.
Deep down, Bacal knew that no workplace could offer uninterrupted job satisfaction.“We all have days when we don’t want to come to work,” he said. “When we’re depressed. When we can’t stand the son of a bitch sitting in the office down the hall. When we can’t figure out why our compensation is $25,000 less than some other partner.”
If Bacal noticed that a partner seemed unhappy or disconnected, he saw that as a potential warning sign: the person might be thinking of leaving the firm. Quite often, he told me, these partners were feeling unloved. “I would go talk to them. My job was to show them that love and to be a role model to others to increase our emotional connections to one another.”
MY CONVERSATIONS with Bacal presented an opportunity to ask about the profession’s least-understood rituals. In particular, I wanted to know how the largest law firms oust members of the partnership. I already knew what doesn’t happen: the top lawyer at a large firm can’t slap a termination letter on a fellow partner’s desk. Partners are owners of the business, which makes it impossible to fire them like a typical employee. Yet I also understood that Big Law has mastered the subtle art of pushing out partners, quietly and with discretion. How, exactly, does that happen?
The moment I posed that question, Bacal took a quick breath and, without delay, painted a vivid picture of his tried-and-tested method for shedding unwanted partners. He’d walk over to the target partner’s office, knock on the door and step inside. “I know you think you had a great year,” he would begin, “but you’re going to be disappointed with your compensation.” Leaving no room for debate, Bacal would offer two choices. “You can stay and continue to be unhappy or you can look around and see if there might be something better for you out there. I’m not forcing you to go. I’m not firing you. I can’t fire you. But you have to decide whether you want to keep living in these conditions.”
Once Bacal left the office, he knew that the partner would pick up the phone and call a headhunter. Within a few months, the partner would be gone. Mission accomplished. “In the industry,” he told me, “we called it the tap on the shoulder.”
There are some downsides to this practice. In the associate ranks, for instance, it creates the impression that partners are faultless professionals who never suffer a career setback. But it’s also respectful. The departing partner can leave without the shame that typically accompanies a termination. That, in turn, can make it easier to start over at a new firm. As Bacal put it: “We don’t want anybody to lose their dignity on the way out the door.”
IN FEBRUARY 2014, I joined Precedent as the magazine’s news editor. In my first week, I started to work into the role by introducing myself to key press contacts, familiarizing myself with the Toronto legal community and coming up with fresh story ideas. But a major news event soon upended that orientation plan. On my third day into the job, Heenan Blaikie announced that it would dissolve. In short order, I published a news piece on the Precedent website and prepared to cover the fallout.
The next morning, the dissolution of Heenan Blaikie was the top business story in the country. In the coming weeks, much of the coverage advanced the same theory: that the firm’s collapse was a sign of looming disaster throughout the profession.
The legal commentariat argued that deep cracks had formed in the Big Law business model. Increased competition from accounting firms and legal outsourcers, this line of thinking went, was eating into billable hours. So was the cost of fancy office space. And unless the largest firms implemented sweeping reforms, they sat on the knife-edge of catastrophe. In March 2014, the Financial Post reported that, according to an unreleased Deloitte study, “at least one more mid-to-large Canadian law firm will be wound up in the next 12 months.”
As a newcomer to the legal community, I lacked the insider knowledge to counter this forecast. So I largely bought it.
Then nothing happened. Seven years removed from the downfall of Heenan Blaikie, none of the largest firms in Toronto have fallen. Nor have they overhauled their business models. Bay Street law firms continue to occupy gleaming office space in the downtown core. Accounting firms might have increased their market share in the high-volume, lower-skilled field of document review, but when a corporate client has a high-stakes legal problem, it still hires the Stikemans and McCarthys of the world. Not much has changed.
When I spoke to Bacal, it became clear that the theories that sprang up in the wake of Heenan Blaikie’s collapse failed to reflect what truly brought the firm down. So what did happen? And what does it mean to the broader profession?
In Breakdown, it takes Bacal close to 100 pages to chronicle the firm’s downfall. The condensed version of the story, in my view, begins at the end of 2012. By this point, Bacal and Tremblay had stepped down as co-managing partners. (The timing of these resignations had been pre-determined, five years prior, when the firm finalized its succession plan.) In Toronto and Montreal, two new leaders were at the wheel. And they were staring down a crisis.
At the start of 2013, the economy took a nosedive. Across Bay Street, lawyers struggled to stay busy and maintain profitability. The fresh-faced leadership team at Heenan Blaikie lacked a shared vision on how to confront this problem. But one managing partner wanted to adopt a new compensation system that punished poor performers and showered rewards on partners who had best weathered the economic storm. That position won the day.
After I asked Bacal about this pivotal management decision, he reminded me that many firms operate under a cold-hearted compensation regime. This model can work. But the partners at Heenan Blaikie had joined a firm that was supposed to care more about collegiality than money. “When they stopped getting what they signed up for, they scratched their heads and said, Okay, so why am I here?” Bacal told me. “If you don’t respect me, how can I walk down the halls and hold my head up?”
In the end, they couldn’t. Over the coming year, this brutal approach to compensation drove partners out of the firm. By November, Heenan Blaikie had lost 10 percent of its lawyers, while it suffered an 18-percent decline in profitability. One month later, the Toronto office lost both its top litigator and its top securities partner. In Breakdown, Bacal describes this moment as the “anvil” dropping.
At the year end, Heenan Blaikie was on the verge of destruction. Bacal, unwilling to let the firm die before his eyes, stepped back into a leadership role in a last-ditch effort to save a sinking ship. He had one reason to be optimistic: the economy had started to rebound, pushing revenue back to normal levels throughout the legal profession, including at Heenan Blaikie. A recovery seemed possible.
In January 2014, Bacal pitched a rescue plan to the executive committee. First, he told them, he would have to deal with a massive overhead problem. Because of cuts and departures, Heenan Blaikie was spending the equivalent of $7 million a year on empty office space in Toronto and Montreal. Bacal planned to ask the landlords for a sizable break on rent. Next, he would need to speak to the bank that held the firm’s line of credit, putting it at ease. To keep the firm’s finances in check, he would place a six-month freeze on all capital distributions to partners who’d left.
The upcoming partner compensation process, Bacal told his colleagues, could not move ahead as planned. Instead of taking three months to pore over the data, the compensation committee would make its decisions in seven days. “The bottom line was: we were all getting cut,” Bacal told me. The top-earning partners would take the largest hit. And, to help people who’d had a truly terrible year, Bacal planned to create a $1-million bonus pool. Applications to receive a portion of this fund would have to take place in that seven-day period.
When Bacal presented these ideas to the committee, there was widespread agreement. This was a positive sign. But then he embarked on the final plank in his plan. Bacal asked the executive committee in that meeting, and the entire partnership later that week, to promise that, over the next year, no one else would leave. The bloodletting had to stop. “If we have a continual drain on partners,” he said, “there’s nothing we can say or do that will stop the loss of morale.”
On this point, his plan failed. “I couldn’t get enough of them to say yes,” said Bacal. There were some partners who refused to make such a commitment under the intense stress of the moment. One partner told Bacal point-blank: “I’m not saying no, but I can’t say yes. My life’s upside down. I can’t make any decisions right now.” And there were other partners who, according to Bacal, “just weren’t convinced they wanted to be there anymore. There was nothing I could say or do about it.”
On a Friday morning in late January, Bacal arrived at the office to learn a piece of devastating news. Two more labour partners had decided to leave. Bacal had to accept the heartbreaking truth: he could not halt the exodus. Which meant the firm could not survive. In February, the firm announced it would close down.
At which point the legal community, myself included, waited for the next giant to tumble. This was misguided. Heenan Blaikie did not implode because Big Law writ large was under assault. The reason was much simpler: in a short period, the firm abandoned its ideals. “We tried very quickly to turn ourselves into something else,” Bacal told me. “That’s what the real problem was.”
WHEN BACAL AND I turned our attention to the aftermath of the collapse, we dug deep into an often-overlooked aspect of Big Law: the capital contribution. To start, let’s review what is common knowledge. When large-firm associates make partner, they must buy a literal stake in the business. As Bacal explained, the amount is typically half of what the new partner earned in the previous year. If that was, say, $250,000, the contribution would be $125,000. This is no bombshell.
What’s less well known is that, with few exceptions, partners make those contributions with borrowed money. When Bacal met with a new partner, he outlined the process this way: “Go to RBC. We’ve already got a facility set up for you. All you have to do is walk in and sign a couple pieces of paper. They’ll advance the money directly to the firm. No muss. No fuss.” From that point forward, the firm makes the interest payments on the loan and, once the partner leaves or retires, it pays back the bank. As a result, partners have no reason to think, let alone worry, about that debt. That is, unless the firm goes out of business — but that would be unthinkable.
At Heenan Blaikie, of course, the unthinkable happened. The moment it went under, hundreds of partners were on the hook for the capital contributions they’d made with borrowed cash. Because the firm was no longer there to bail them out, they had to pay back the bank out of their own pocket. “It’s the nightmare scenario that nobody ever worries about,” said Bacal. “And the whole industry is based on this.”
BACAL HAD LOST HIS LIFE’S WORK. So what could he do next? In the near term, he moved to Dentons, as counsel, alongside 32 colleagues. (Within two months of the implosion, 135 of the nearly 170 lawyers at the Toronto office had landed new positions, according to an investigation that Precedent conducted at the time.) Two years later, Bacal left. “It was an interim step to get through the trauma,” he told me. “I will be eternally grateful to Dentons for allowing me to do that.”
At Dentons, Bacal explored what post-lawyer life might look like. He began work on his first novel. And he started to write Breakdown. Not because he wanted to publish an insider tell-all. The idea came from his wife, Sharon, who handed him a notebook and said, “Write. You’re an angry man. You need to process your anger somehow. Do this or go see a therapist.”
Once Bacal started writing, he couldn’t stop. He documented the story of his career in painstaking detail, thinking that the final product would serve as a personal memoir for his four children. Once the text was complete, though, he wondered if it might have some broad appeal. So he shopped it around to a few publishing houses. At first there wasn’t much interest, but it eventually found a home at Barlow Books, a publisher in Toronto.
When the book launched, in 2017, it thrust Bacal into the limelight. He appeared on CTV News and The Agenda to discuss the untold story of his firm’s demise.
The book also provoked a strong reaction within the Heenan Blaikie diaspora. According to Bacal, one cohort of erstwhile colleagues uniformly welcomed the book: everyone who was out of the loop at the end. This includes associates, staff and partners who’d left the firm. Finally, this group understood what happened.
Among partners who were present at the firm during its implosion, the response was mixed. Some enjoyed the book. Others refused to read it because, as Bacal told me, “they moved on with their lives.” Another subsection of partners was outraged. “They thought it was treasonous,” said Bacal. “They believe that what happens behind closed doors stays behind closed doors.”
Had someone else written the Heenan Blaikie story, I wondered, would Bacal have read the book? “I have no idea,” he said, shaking his head. Then he reconsidered. For one of the only times in our conversations, he revised his answer. “I suspect I would have been one of those people saying, ‘I can’t.’ It would just be too painful.” He went on, “And do I really want to read somebody else’s criticisms of me in the end? Nah, I don’t think so.”
These days, as the coronavirus pandemic rages outside, Bacal spends most of his time at home in his study. After he left the practice of law, he and his wife moved out of their large home on Poplar Plains Road and into a downtown condo. Around 6:30 a.m., Bacal walks with his wife, a full-time painter of 25 years, and their dog, Lexy, to her studio. After finishing Lexy’s morning walk, Bacal heads home to work.
He might log on to Zoom to deliver a talk at a virtual legal event. He also sits on the board of Elevation Pictures, a Canadian film-distribution company. Mostly, though, he writes. At the moment, he’s in the early stages of two more non-fiction books, which will cover the core tenets of law-firm leadership and high-level practice development. His aim is to pass on his hard-won knowledge to a wide audience. In other words, he’s doing the very thing that makes him a candid interview subject on a larger scale.
One hour into our last interview, Bacal told me he had to take another call in 15 minutes. I remarked that I might need to book one more meeting to deal with a few final questions. He burst out laughing, baffled that, after nearly five hours, I would need more time. “I think I’m giving you enough for a book!” he said.
Fifteen minutes later, we concluded the call. In the end, Bacal was right. I didn’t need to speak to him again. He’d answered every question on my list.
This is a story from our Spring 2021 Issue.