Western Canada’s leading regional firms do not take their status for granted despite the easy prosperity of practising law during an unprecedented oil- and resources-fuelled economic boom. Many have recently revisited their firm’s strategic plan as they decide how best to grapple with the unique complications that boom times bring.

The so-called “talent war” is chief among the challenges facing these regional-only law firms as they fiercely compete with their national rivals and corporate employers for top-notch corporate and securities practitioners. It’s driving up finders’ fees — not to mention signing bonuses and associate salaries — to unheard-of levels.

“It’s getting crazy,” says David Garner, managing partner of Vancouver’s Alexander Holburn Beaudin & Lang LLP, a newcomer to this year’s rankings. “(Salary increases) have got to be 10, 15 per cent and in some areas, higher than that. What used to be an L.A. or New York phenomenon has gone right across the country. Everybody has had to pay more for first-year lawyers.”

McLennan Ross LLP managing partner Chuck Russell agrees. “It is brutally competitive for talent. Just filling the seats that are necessary to get the work done is an issue for every firm in Calgary and Edmonton.”

Some firms are paying corporate stars up to $50,000 as a signing bonus. Finders’ fees, even for a junior associate, start at about $5,000, say lawyers. Headhunters are also going after senior partners, with firms willing to overpay them in hopes of getting a prime book of business. “A senior corporate commercial lawyer in Calgary is going to be getting something north of half a million bucks. It could be way, way more depending on how productive the individual was. We’re talking about a 20-year lawyer with a portable practice,” observes one managing partner.

In order to retain partners and also senior associates — who are jumping around both to grab new opportunities and ratchet up their salaries — some Calgary firms are cleverly starting to defer a good chunk of their annual bonus, requiring them to stick around five years or so in order to collect the balance, he says.

While many of the regional firms are trying to stay out of the bidding wars, it has been difficult. Says McLennan Ross’s Russell: “It’s hard to balance looking at bringing people in laterally (at much higher salaries) without leaving your own people feeling like the poor cousins. I don’t know how the nationals do it — keep their existing lawyers from feeling taken advantage of.” As a result, several firms say they are now reviewing associate salary levels periodically throughout the year, rather than just annually.

Demand-supply imbalances in office space are also driving rents up four-fold as many firms are expanding office space to accommodate the increase in work. “It’s very busy times. I know there was a period of time where I couldn’t even find a boardroom. We had to go out of our offices to find a board room,” says Harry Campbell, chairman of number-one ranked firm Burnet Duckworth & Palmer LLP, which has recently taken over half of the 18th floor in Calgary’s 41-storey First Canadian Centre and will take over the balance when it becomes available in the spring, bringing its space to seven floors.

Field Law plans to double its 35-lawyer Calgary office to 70 lawyers over the next five to seven years, moving into bigger office space, albeit with smaller individual offices, in downtown Calgary in June 2007, says managing partner Robert Teskey. Their rent will quadruple, reflecting the overheated economy, he says, however the firm is fortunate to have benefited for reasonable rents for so long.

Despite the challenges, Vancouver-based Bull Housser & Tupper LLP hasn’t ruled out opening a Calgary office, says managing partner David Bain. Other firms are intent on building up their existing offices.

Campbell says that while the local legal market is tough to crack for outside firms, there’s lots of work to go around because of the prolific deal-making of many serial entrepreneurs. “That’s the thing about Calgary — the market is so large that it can support a lot of firms,” he says. “You just need to get a small percentage of a market that is transaction driven or very entrepreneurial.”

Structural change to the economy
And it’s a market that is expected to flourish for many years. According to the Conference Board of Canada, the Alberta boom — fueled by oil prices that the board forecasts will remain above $65 (U.S.) a barrel until at least 2011, fanning out into the other Western provinces, which are enjoying resources-based prosperity of their own –– reflects a “permanent structural change in the economy.”

Alberta, Canada’s fourth-largest province with a fast-growing population of 3.3 million, is expected to lead all other provinces and territories with 6.6 per cent growth this year, over a national average of 3.1 per cent, says the board. Not only are law firms thriving on the extra transactional work of a mergers and acquisitions wave that has hit resource producers across the west, but firms are being approached by offshore investors looking to acquire oil and gas companies, reports Russell.

Campbell says Calgary is an almost ideal market for the practising lawyer. “It’s just so dynamic. If you can get a relationship with those serial entrepreneurs then you can do deal after deal after deal.” As he puts it, only a little bit tongue-in-cheek, “If you’re a lawyer and you can’t make it here, you can’t make it anywhere.”

Calgary isn’t the only focus in Alberta, however. Saskatchewan-based MacPherson Leslie & Tyerman LLP — clearly the most aggressively expansionary regional firm of the day — opened an Edmonton office in June with the help of two defecting tax practitioners from Field Law. “We don’t think any other firm really has that Saskatchewan/Alberta on-the-ground representation in the way that we do,” says chairman Rob Pletch. Along with offices in Regina and Saskatoon, the 89-lawyer firm opened a Calgary office in 2002, and has a one-lawyer shop on a native reserve east of Calgary. Future plans include an office in Vancouver, after the firm has built on its Alberta platforms, says Pletch.

That may be a good move on the part of MLT, since B.C. is enjoying its own boom times. “There are close to $100 billion in major infrastructure projects, projects over $20 million,” says Bull Housser’s Bain. “And that’s generated a lot of work from all sorts of aspects — public-partnership work, financing work, whether it’s construction, environmental.”

At Vancouver’s Farris Vaughan Wills & Murphy LLP, Cameron Belsher, a leader in the firm’s securities and corporate practice group, agrees that B.C.’s economy is thriving.

“Vancouver differs from Calgary, it differs from Edmonton, it differs from Winnipeg and Regina, in terms of its vibrant technology and biotechnology industries,” says Belsher, who says the national firms that have set up local offices in recent years can’t compete with the firm’s 103-year community connection. “You can hang your shingle out as a national firm, but if you don’t have anyone to staff the office who knows anything about Vancouver or the people in Vancouver or what’s going on, you’re not going to get anywhere,” he says. “In Vancouver, the way we position ourselves, if it’s a local deal, they are going to know about [Farris Vaughan] because we are active in the community.”

Regional law firms also continue to profit from the narrowing conflicts squeeze on national firms, in light of the Supreme Court of Canada’s July 2006 ruling in Celanese Canada Inc. v. Murray Demolition Corp., says Brian Fulton, managing partner of number-two ranked Vancouver-based Lawson Lundell. That ruling unanimously held that a lawyer’s duties to protect solicitor-client privilege may in some circumstances extend even to cases in which there never was a formal lawyer-client relationship. “We know (conflicts) are on the minds of our clients and our new clients because it’s been raised to us as an issue,” says Fulton.

Is it any wonder that regional firms are emerging from their strategic planning sessions unwavering in their focus and breathing a sigh of relief they were never seduced into a merger with a national firm?

“Ultimately you have to decide what it is you want to be and what is your goal, because you can be a very successful law firm depending on how you measure success in lots of different models,” says Bain. “Do you want to be Canada’s national law firm? Do you want to be Canada’s boutique tax firm? Do you want to be the strongest regional firm? The options are fairly numerous and that’s a decision that the owners of the firm have to think hard about.” In western Canada, the leading mid-size firms’ managing partners are clearly in the regional firm corner on this one.