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It is over breakfast at The New York Palace that Les Viner, the managing partner of Toronto’s Torys, pulls out a hardcover copy of “Star-Spangled Canadians: Canadians Living the American Dream.” The book is based on Toronto Globe and Mailcolumnist Jeffrey Simpson’s interviews with Canadian expatriates in the United States. But to Viner, who is overseeing his firm’s merger with a smaller U.S. firm, the book is also a primer on cultural differences between the two countries. He has already recommended it to at least one of his new American partners. Particularly relevant, Viner asserts, is the book’s characterization of a “one-way mirror,” the unrequited fixation that Canadians have on the U.S. This isn’t just a matter of pride, but of practicality. “If Canadian law firms don’t have an American presence, they will be increasingly marginalized in a globalized world,” Viner says. “There’s a parochialism that comes from being a big fish in a small pond, and there comes a time when you have to step onto the world stage.” For Viner, that time came in January 2000, when, tired of watching clients and talent migrate across the border, his 225-lawyer firm — then known as Tory Tory DesLauriers & Binnington — stepped through the looking glass to combine with New York’s 75-lawyer Haythe & Curley. But the New York office’s transition from a midsize firm into a component of the now-280-lawyer Torys has been far from smooth. It was the first merger of a top-tier Canadian firm with an American one, and it was met with skepticism on both sides of the border. Competitors sniped that prestigious Torys had married down by selecting a merger partner with little name recognition. And just a month after the merger was announced, Thomas Haythe, then Torys’ New York-based presiding partner, was accused of sexual harassment at a firm party in Toronto; the rainmaker left the firm after it conducted an internal investigation. Now, 15 months into the merger, Viner cites the more than $10 million of U.S. work that Torys has done for Canadian clients since the merger as evidence that his cross-border gamble is paying off. But those low-profile matters have hardly made a splash in New York, and even some of Torys’ Canadian clients still say they have no plan to drop their American counsel in favor of Torys’ new U.S. office. Viner says he’s not worried. Lateral hires and new associates should increase the New York head count by next fall, and, for now, he is content to fly under the radar of the big Wall Street firms. Torys’ Toronto office receives referrals from New York firms, and doesn’t want those firms to suddenly regard it as a competitor. Besides, Viner says that he’s only halfway through the first part of an ambitious three-phase plan for the merger — a plan that he hopes will eventually have Torys not only doing work for U.S. clients from its New York office, but also sending Canadian matters for those American clients back to Torys’ Toronto office. Meanwhile, Torys’ bold move has its Canadian counterparts reviewing their options in the U.S. market. Edward Waitzer, managing partner of Toronto’s Stikeman Elliott, says that when a major competitor like Torys shifts its weight to straddle the border, “it forces you to reconsider what you’re doing in New York.” The genesis of Torys’ American move was a strategic review that the firm began in early 1998, shortly before Viner was named managing partner. At that time, Tory Tory DesLauriers & Binnington’s operations were concentrated in Toronto; it had recently closed a tiny office in Hong Kong and was phasing out a small outpost in London. Within Canada, it had never expanded beyond Toronto, except for an affiliation in the late ’80s with Vancouver’s Lawson Lundell Lawson & McIntosh and Montreal’s Desjardins Ducharme Stein Monast. By the time of the review, all that remained of that venture was the liaison with Desjardins, which handles Quebec civil matters for Torys. But globalization had already become a fact of life for the firm’s signature clients — media heavyweights such as The Thomson Corporation and Hollinger International Inc., financial institutions TD Bank and CIBC World Markets, insurers Manulife Financial Corporation and Sun Life Financial Services, conglomerates Brascan Corp. and Cameco Corporation, and technology firms Bracknell Corporation and JDS Uniphase Corporation. Fueled by the booming American economy, the declining Canadian dollar, and the North American Free Trade Agreements, Canada was conducting 80 percent of its trade with the United States. Trade between the neighboring nations was worth more than $500 billion in 1998, a 49 percent increase from $337 billion four years earlier. The Multijurisdictional Disclosure System had been instituted in 1991 to streamline the review process for U.S.-Canadian securities offerings, providing preferential access that has since helped Canadian companies raise more than $50 billion. The result was that Torys lawyers increasingly found themselves either working in New York or losing work to New York firms. Between 1996 and 1998, the firm referred more than 200 significant matters, in such areas as corporate finance, M&A, employment, and tax, to U.S. firms. “It seemed to us there was a tremendous opportunity to capture outgoing work from our existing client base,” recalls Philip Symmonds, coordinator of Torys’ corporate practice in Toronto. Torys wasn’t the first Canadian firm to look longingly at the United States. Several Canadian firms have had New York offices since the ’80s, but they are primarily representative — up to a dozen partners drumming up business and servicing Canadian clients with help from the lawyers back home. Prior to the Torys merger, the only outpost that practiced U.S. law was one established in 1984 by the Montreal firm Phillips & Vineberg, now Davies Ward Phillips & Vineberg. Torys quickly ruled out a small office or affiliation as too limited to provide the cross-border capability it wanted. “We thought about what the alternatives might be — including ones that might not be available,” says Viner. “Should we be national in Canada? Should we be more regional in the U.S. — a big business center that’s not immediately obvious?” But eventually the firm concluded it needed a merger in New York. Says Viner: “Where did we do most of our work? New York. All of the other models led us to something that was unnatural.” But finding a merger partner wouldn’t be easy. “I just don’t think Canada is a gateway for U.S. aspirations; it’s not a huge growth market,” says Lewis Steinberg, who co-manages Cravath, Swaine & Moore’s dealings with foreign law firms, including three Toronto firms with which it has best-friends relationships. (Torys is not one of the three.) Cravath has long represented Canadian clients such as Hollinger and Rogers Communications Inc., but Steinberg says that it has “no plans whatsoever” to open an office in Toronto. “That Canada is as close as anywhere in the U.S. makes it a very, very easy market to serve,” Steinberg says. There were other roadblocks, to Leverage at Canadian firms is much lower than at U.S. firms, with nearly as many partners as associates, if not more. Torys now has 122 partners and 158 associates, a ratio boosted in part by the 21 partners and 44 associates in its New York office. And average profits per partner at Toronto firms, which tend to be around $500,000 (Canadian), fall far short of those at top Wall Street firms. Torys’ executive committee approached a smattering of U.S. firms with a presence in New York, but soon zeroed in on smaller New York-based firms. Having worked with Haythe & Curley lawyers since the ’80s on M&A, corporate finance, and tax matters for Canadian clients, the firm was “a natural option,” Symmonds says. Established by corporate finance and M&A lawyer Thomas Haythe and tax specialist Stephen Curley as a transactions firm in 1982, Haythe & Curley had added a litigation department along with health care, labor and employment, and real estate practices, and in 1991 it became one of the first U.S. firms to open an office in Beijing. While current and former partners say the firm was profitable, Haythe & Curley was not immune to the pressures facing midsize firms in an era of consolidation. Litigation partner Charles “Trip” Dorkey III, who sat on the three-member management committee with Haythe and Curley, estimates that the partnership had been approached by several dozen suitors — firms in New York, Chicago, Washington, D.C., and major cities in California and Texas. But he says that Haythe & Curley turned those suitors away: “We never had serious discussions with anyone else.” The merger offered Haythe & Curley the resources of a larger firm, while Torys received the U.S. presence it wanted — and both parties avoided being subsumed by a big American firm. “Torys’ larger size in a smaller market balanced Haythe & Curley’s smaller stature in a larger market,” says Bradley Cost, a Haythe & Curley veteran who now coordinates the combined firm’s New York corporate department. “It was important to us to maintain our weight with respect to Toronto.” Merger talks began in early 1999, and for a while included a third party, Calgary’s Bennett Jones. Known for energy-sector work, Bennett Jones was not as focused on financial services or the New York market as Torys, says Bennett Jones managing partner William Rice. “I think we weren’t quite as close in the fundamental aspects of the [combined] firm as we had envisioned,” he says. Bennett Jones dropped out, and Torys and Haythe & Curley ironed out the major issues within 10 months. The executive committee of the combined firm, which was renamed Tory Haythe, would consist of Viner and three partners each from New York and Toronto, with another partner from each office added to form the compensation committee. “Translation of money was a big issue at the beginning,” Cost notes. “What, philosophically, people decided to do was let marketplaces be marketplaces.” Though drawn from a single-profit pool, fees and salaries would be set at competitive rates in each market. In 2000, the firm’s first full year of operation, Toronto associates started at $88,000 (Canadian) — about $60,000 in U.S. currency — while their New York counterparts received a base pay of $125,000. Viner acknowledges that it was difficult for Toronto lawyers to accept the disparity at first, although he notes that associates in the Toronto office are expected to work 2,000 hours a year, while those in the New York office are expected to put in 2,200. (The firm says that about 10 to 15 Toronto associates asked about transfers, but only five have made the move.) Mostly, though, the new firm’s lawyers focused on the benefits they anticipated from the merger. “The New York spirit and hard-nosed, nonapologetic approach has probably benefited Toronto,” says John Burton, a former associate in the New York office who is now general counsel of Toronto-based startup Webhelp.com Inc., a client of both Torys offices. “And Toronto’s experience and knowledge in training associates is probably benefiting the New York office.” Like Burton, current and former Torys lawyers are unrelentingly chipper about the firm; even defectors spout platitudes about the firm’s strong culture and the broad consensus for the merger. But in the first months after the combination was announced in October 1999, the new firm was known for just one thing — Thomas Haythe’s alleged sexual harassment of his new colleagues during a celebration of the union in Toronto a month later. The scandal made the front pages of Toronto newspapers and was picked up by foreign media in New York and London, transforming a hopeful beginning into an international embarrassment. The firm launched an internal investigation and within days determined that Haythe, who attributed his actions to a possible health problem, had to go. “Tory Haythe” was scrapped as the name of the new firm and replaced with “Torys.” (Haythe, who is now of counsel at New York’s Bachelder Law Firm, declined to discuss the matter.) Although lawyers in the New York office seemed to accept Haythe’s exile, former Haythe & Curley tax partner Kimberly Blanchard, who jumped to New York’s Weil, Gotshal & Manges last October, recalls concern, particularly among associates, about the loss of his leadership and rainmaking abilities. Co-founder Curley took on the title of presiding partner and responsibility for the firm’s tax and China practices, and litigation partner Trip Dorkey emerged as the new head of the New York office. “Trip’s a litigator, but he’s a dealmaker, very well connected in law and politics,” says Gary Litke, a former Haythe & Curley associate who rejoined Torys as a real estate partner in January 2000. Richard Willoughby, one of two partners and five associates from Toronto who moved to the New York office and are preparing to take the New York State bar exam, says that Dorkey “takes it upon himself to integrate new people, to introduce me to what it’s like to be in the U.S.” Willoughby says that at first, much of his role was “putting a face to the merger. I helped people figure out Toronto, who they should talk to.” Willoughby, an M&A and corporate finance specialist, was soon pulled into transactions for LeBlanc & Royle Enterprises and MMC Capital Inc. — among more than 50 clients who Viner says have used the New York office for cross-border work since the merger. For a group of investors led by MMC, Torys handled a $5 million investment in Cambridge, Mass.-based Peoplestreet Inc., an electronic customer management company. MMC principal Robi Blumenstein, who worked at Torys from 1978 to 1982, says he was satisfied with the firm’s performance. “The work was good, it was reasonably valued, it was done quickly — all the things I would look for in a law firm that’s working for me,” he says. “I’ve always wished I could have Torys’ kind of work done for me, but it wasn’t practical since they weren’t here in the U.S.” Other institutional clients are more measured in their response to Torys’ expanded capability. Rogers Communications, one of Canada’s largest media and telecommunications companies, has used Torys’ New York office for some technology investments and software licenses. But general counsel David Miller says that “at this point, for the cross-border financings we do, we would maintain our relationship with Cravath.” “People will continue to go to Torys because it’s a great Canadian firm … but I don’t know that they’ll see Torys New York in the same light,” says Cravath’s Steinberg. “We have seen some of that with the U.K. firms that have some top-notch U.S. lawyers but are not seen as one of the top five firms in the U.S.” He characterizes the Torys merger not as an assault on the U.S. legal market, but as a defensive move to stave off competition for Canadian clients. Christopher Morgan, head of Skadden, Arps, Slate, Meagher & Flom’s Toronto office, predicts that Torys may keep a low profile in the U.S. to protect its reputation north of the border. “If things don’t go well in New York, it’s not just going to be the New York office that wears it,” he says. “And that may well mean they won’t take on the top-flight work that [requires] a big New York firm with a more steady deal flow.” But Torys partners say it’s all a matter of perspective. “A $40 million financing is significant to our firm and it may not be significant to a major Wall Street firm,” says Toronto corporate partner David Chaikof. “But it’s work that’s important to our clients. I wouldn’t characterize it as so-called commodity work … . It’s still valuable work. It helps build an office. Those multibillion-dollar deals don’t walk in the door without [your] proving yourself first.” Indeed, Viner has a three-year plan for the New York office, and he says the firm is still concentrating on the first half of phase one — letting existing clients know about the firm’s new cross-border capability; later the firm will seek to attract new Canadian clients who have work in the U.S. Phase two involves bolstering Torys’ name-brand presence in the U.S., thereby helping the New York office generate its own business, which currently accounts for roughly two-thirds of its work. Then the firm will move to phase three, in which it will seek Canadian work from U.S. clients to refer to Toronto. That incremental approach is the Canadian way, says Christopher Sweeney, president of ZSA Legal Recruitment Ltd., which has offices in Toronto and New York. “The American approach is: If you come to the big town, you have to go big or go home, and if you think that by merging with Haythe & Curley you’re going to impress us, you’ve got another think coming. Whereas the Canadian approach is: We’re approaching this with caution because it’s a very big step for us. And if we don’t make a big splash by doing this, then so be it. That’s not our intention. Let’s keep things pretty low-profile. We’re gunning for the clients in Canada. If the New York firms aren’t aware that we’re operating in their backyard, then all the better because they may keep referring us work.” So for now, Torys is betting that some of its Canadian clients with U.S. work feel snubbed by American legal behemoths — and the firm may be right. “It depends on how sexy the work is, but generally the Skadden Arpses of the world would kind of look at us as second-rate,” says Lloyd Fiorini, general counsel of Mississauga, Ontario-based TLC Laser Eye Centers Inc., a steady client of Torys’ Toronto office that has used the New York office on acquisitions and an employment matter. Adds Webhelp chief operations officer Laura Hanth “Often you’ll go to a top firm and they’ll give you the B or C team. We’re a young company, and [Torys] gives us the A team.” But is Torys’ A team good enough to make it in New York? In Les Viner’s American dream, it is. “What we got into was a really excellent group of lawyers with no brand name,” he says. “We’re trying to transfer our brand to New York. What we have to do is deliver.” For now, at least, Viner’s nose isn’t pressed against the one-way mirror. He’s on the other side, in the game at last. Who Gets the Big M&A Business?

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