Commentary

Monday, 06 February 2012 08:02

What was the point of that again?

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Corporate law is, I suppose, like a lot of specialized activities — users of corporate legal services seem generally to have little interest in, or understanding of, the ugly machinery of the industry (in this case, the vagaries of statutory requirements, the overlay of common law dictates, and the realities of common practice). And really, why should they? When someone comes to fix my hard drive, I don’t want to know details about the processor, the circuitry, or the history of the PC. I just want to know that there are either no problems, or that whatever problems there were have been fixed.
This dynamic creates interesting results when the service provider, like most corporate lawyers, charges by the hour. Client confusion is natural and predictable when presented with a large invoice for a corporate lawyer having (a) identified a problem the client never imagined (much less knew it had) and (b) invested significant time in crafting a solution for that problem.
Many “technical issues” raised by corporate lawyers are matters where a legitimate interest is served. But the law does tend to accumulate, and some requirements outlast the mischief they were originally designed to address. A good way to identify this legal baggage is the classic test of going back to “first principles,” to consider the original objective of the legal requirement. If a lawyer struggles to articulate the purpose of a given rule, that is a healthy clue that the requirement may have outlived its usefulness (I’m too polite to mention that it may also, however, be an indication that the question is being asked of the wrong lawyers). It is not difficult to understand how some of these things survive: it is much easier to leave the anachronisms alone, there is no easy way to calculate the societal costs of leaving them alone, and there are collective action problems in seeking to fix them. But there is a cost.
Three examples leap quickly to mind. The first is the “solvency test” that continues to apply under some provincial corporate statutes to dividends and other returns of capital. That requirement imported into corporate law an element of creditor protection that may have served a necessary purpose at inception. However, in a modern era, with evolutions in creditor protections and increased creditor awareness of their risks, the need for these provisions is debatable. More curious, the formula for assessing “solvency” under some corporate statutes continues to use the concept of “stated capital,” an anachronism that oddly enough can be varied by the shareholders themselves (interesting from a creditor protection perspective). This type of seemingly benign requirement can result in much corporate, tax, and tactical structuring that has little or nothing to do with the original intent of the requirement.
Another example is “corporate incest,” which describes a phenomenon less sensational than its label. Statutory “corporate incest” provisions prohibit corporations from owning shares in themselves, or in their parent corporations. When adopted, these provisions were targeted at potential distortions in voting or financial reporting that might result from “incestuous” share ownership, but those concerns have either been superseded by developments in reporting or can be easily better addressed directly. The hangover of the “corporate incest” provisions, however, often results in transactions being contorted into knots. Thinking around that type of legal obstacle can be a challenging mental exercise, but the social benefits of the required expenditure of effort are not all that apparent (that is my lawyerly way of describing a complete waste of time).
One last example is the prohibition, subject to limited exceptions, on share transfer restrictions for publicly traded corporations in some corporate statutes. The provision was presumably implemented to facilitate trading in securities of those corporations. The requirement, however, is not necessary to achieve that objective today, and the nature of the limited exceptions makes clear that the rule was developed a long time before the legislators envisaged international securities offerings and the use of highly detailed regulatory restrictions to achieve all manner of governmental objectives. Bottom line, the lingering requirement is an unjustifiable impediment to transaction structuring.
One effect of these anachronisms is jurisdiction shopping. Though that too imposes costs, it is in some ways a healthy process in that it should result in re-examination of local legal requirements. However, though clients may not be interested in discussing the technicalities, corporate law, like every other area of law, must keep abreast of the reality it regulates. Continuous re-examination to ensure the law remains relevant is the least the public, the ultimate client, deserves (even if it doesn’t understand the circuitry). And besides, I have enough trouble on most days explaining the stuff that actually makes sense.
b_150_0_16777215_00___images_stories_01-CANADIANLawyer_2012_February_neillmay.jpgCorporate law is, I suppose, like a lot of specialized activities — users of corporate legal services seem generally to have little interest in, or understanding of, the ugly machinery of the industry (in this case, the vagaries of statutory requirements, the overlay of common law dictates, and the realities of common practice). And really, why should they? When someone comes to fix my hard drive, I don’t want to know details about the processor, the circuitry, or the history of the PC. I just want to know that there are either no problems, or that whatever problems there were have been fixed.
Monday, 06 February 2012 08:01

Does your law firm have Klout?

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Does your law firm wield clout in the cloud? It’s a question law firm managers and marketers need to ask in the exploding world of social media, such as Facebook, LinkedIn, Twitter, and YouTube. These sites draw hundreds of millions of users and present law firms with an unprecedented opportunity to market their knowledge worldwide.
Klout.com is a web site that purports to measure your online influence in the social media world (think of it as the Nielsen ratings for online geeks). It does so using algorithms to gauge activity and influence in social networks, measuring things like “re-tweets,” “mentions,” “likes,” and “comments.” Klout uses a scale of 1 to 100. For simply existing, you get a 10 and build from there. An average Klout score is about 20, and those who achieve 50 or more sit in the 95th percentile, according to a recent tech podcast.
It’s interesting to look at the Klout scores of Canada’s 20 largest law firms (see them all at canadianlawyermag.com). Most law firms now at least have a Twitter feed, Facebook page, and LinkedIn group, and many have added a YouTube channel.
I looked at law firms by size, and how they are ranked according to their Klout score as of Dec. 26, 2011. The findings show that size doesn’t matter in the online world. In fact, one of the highest-ranked law firms is Atlantic Canada’s Stewart McKelvey. It’s tied with Norton Rose Canada for top score. As well, Miller Thomson scored well, as did Osler Hoskin & Harcourt LLP, neither of which is near the top of the heap when it comes to size. Despite having the greatest number of tweets, and the highest number of LinkedIn and Twitter followers, Gowling Lafleur Henderson LLP, one of the biggest law firms in the country, scored in the middle of the pack.
Interestingly, Stewart McKelvey and Miller Thomson both achieved their high scores despite having a low number of tweets and followers. Why is that? Because they both scored well in influencing other people who are active in the social media world. They are positioning themselves as thought leaders, which is where you want to be when it comes to influence on the Internet.
Take Miller Thomson’s Stuart Rudner, an employment lawyer who actively blogs. His personal Klout score is 48, which qualifies him as a Klout “specialist,” influencing 655 others. Those 655 others then influence others and so on.
In fact, social media can be the great equalizer when it comes to competing with larger firms. Lawyers in small and medium-sized firms can comment on legal developments, share information, and build profile and reputation just as easily as lawyers at brand-name firms. In his book, Social Media For Lawyers: Twitter Edition, Adrian Dayton documents instances where lawyers land files using social media and responding to chatter, including how he brought in one of his first clients using Twitter.
More interestingly, though, is the shift underway among in-house lawyers in their use of social media. A 2010 survey by InsideCounsel magazine reveals interesting trends. While in-house lawyers rely on traditional media as their go-to source of information, 43 per cent cite blogs and 26 per cent cite social media like Twitter and Facebook as their top go-to sources. More than half expect their consumption of news and information via new media platforms to grow — particularly so for lawyers under 40.
The survey suggests that in-house counsel are increasingly looking at lawyers’ bios on web sites and following blogs to stay abreast of legal developments. Half feel that in the future, high-profile blogs will play an important role in influencing law firm hiring decisions (but only 10 per cent feel a firm’s prominence on Twitter will influence hiring decisions).
It’s a new frontier. Digital communications matter more today than they ever have. Looking at how Canadian firms compare to their U.S. counterparts, Skadden Arps has a Klout score of 33, with 86 tweets and 1,657 Twitter followers and 3,929 LinkedIn followers. Weil Gotshal & Manges LLP has 1,214 tweets, 1,998 followers, and 2,209 LinkedIn followers. Its Klout score is 34. So Canadian firms are in the same league.
Interestingly, Clifford Chance LLP, that global legal giant, can only muster a Klout score of 13, the same as mine. But I haven’t tweeted, though I expect that will change by the time you read this.
The Internet has been the great equalizer in many industries, particularly retail, where small mom-and-pop stores can compete with global enterprises. It has also disrupted many more industries such as newspapers, books, music, and film. Legal services are not immune and social media is only starting to play a role in everything from how lawyers build profile to how they communicate and interact with clients. So you have to ask yourself, does your law firm have Klout?
Jim Middlemiss blogs about the legal profession at WebNewsManagement.com.
You can follow him on Twitter
b_150_0_16777215_00___images_stories_01-CANADIANLawyer_2012_February_chart2.jpgDoes your law firm wield clout in the cloud? It’s a question law firm managers and marketers need to ask in the exploding world of social media, such as Facebook, LinkedIn, Twitter, and YouTube. These sites draw hundreds of millions of users and present law firms with an unprecedented opportunity to market their knowledge worldwide.
Monday, 06 February 2012 08:00

A turning point

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A few years ago, one of the biggest issues law firms were dealing with was associate retention. Well, you won’t hear anyone talking about that anymore. Now, the topic on everyone’s lips is articling. There have been rumblings about it for years; in 2008 the Law Society of Upper Canada looked at the future of articling, reports were written, nothing much happened. The status quo continues to this day. However, in December the LSUC put out a 134-page consultation report again looking at the future of articling.
It offers up five ways to deal with the current crisis: maintaining the status quo; the status quo with quality assurance improvements; the replacement of a pre-licensing transition requirement with a post-licensing transition requirement; a choice of either articling or a practical legal training course; or only a practical legal training course.
The law society is in the midst of consultations with the profession on which option is the best to move forward (you have until March 15 to submit your thoughts to the LSUC or attend one of the consultation meetings). From attending a recent consultation, one would get the impression the society already has made up its mind on what’s best: the combo of articling and a practical legal training course. While on first glance that may seem like a good idea, I think in the long run, it probably won’t be.
Firstly, it will mean that in terms of bureaucracy, the LSUC will have to run two systems to monitor both streams. I think we can all agree that is not what the LSUC needs. Secondly, how will there be equality between a training course and articling? And even if that gets worked out, will a young lawyer who has taken the course instead of articling be treated the same by prospective employers? Will there be inherent biases creating roadblocks to success for lawyers who take the course? All I can foresee is problems and inequity in that approach. It apparently works in parts of Australia, but I say choose one or the other.
The reality is that there are articling position shortages, not just in Ontario but in other provinces as well. Although from what I hear, Saskatchewan firms are thriving and looking for articling students. It would seem that the option of maintaining articles as they are or with some extra checks and balances wouldn’t work. The idea of a course, likely costing prospective lawyers more money on top of their law school and other student loan debt, may work. But what you don’t see is the U.S.-style option of letting students write bar exams and then go out into the world as licensed lawyers to either find employment or start their own firms.
Personally, I think there is great value in articling but the system is broken. We’ll see in a few months, how the LSUC thinks it’s going to fix it. This is undoubtedly a turning point in the future of the profession.
A few years ago, one of the biggest issues law firms were dealing with was associate retention. Well, you won’t hear anyone talking about that anymore. Now, the topic on everyone’s lips is articling. There have been rumblings about it for years; in 2008 the Law Society of Upper Canada looked at the future of articling, reports were written, nothing much happened. The status quo continues to this day. However, in December the LSUC put out a 134-page consultation report again looking at the future of articling.
Tuesday, 03 January 2012 09:22

Conflict case a circus

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It took the U.S. legal system 15 weeks to convict Conrad Black of fraud charges, the majority of which were overturned by the U.S. Supreme Court. It will take the Law Society of Upper Canada almost two years to decide whether or not Black’s lawyers, Beth DeMerchant and Darren Sukonick of Torys LLP, were in a conflict of interest when they advised him and his companies on the non-compete agreements at the centre of his criminal charges.
It’s a sign of stunning ineptitude that the LSUC can’t prosecute lawyers in a timely fashion. It informed them in January 2006 that they were under investigation for actions dating back to 2000. A discipline hearing, which started as an important test of the law society’s conflict rules, has become a prosecutorial folly.
What many thought should have been a slam-dunk for outside prosecutor Paul Stern has turned into a shambles, which should leave benchers shaking their heads and asking hard questions.
Even Black in his book, A Matter of Principle, questions the law society. In a fascinating, inside look at the U.S. justice system through the eyes of an accused, he writes of the now-retired DeMerchant, a former Torys partner, and Sukonick, who was an associate at the time: “I was never overly impressed with their imagination, and some of their advice was incorrect, but I don’t think they were unethical or negligent. The singling out of them, as well as the Law Society’s rather banal allegations, seems to me to be shabby and tokenistic placation of opinion by the Toronto legal establishment, at the expense of two relatively defenceless scapegoats.” (Black’s book provides a candid opinion of lawyers and personalities he dealt with in his career and legal tribulations.)
The Torys lawyers are charged with six counts of failing to adequately disclose their conflicts of interest and obtain consent of their clients in breach of Rule 2.04 of the Rules of Professional Conduct. The discipline hearings started badly for the LSUC in 2009; 168 boxes of materials were unearthed that hadn’t been disclosed by Torys, prompting an adjournment.
It has been downhill since. A major law society witness about conflicts — lawyer Gar Emerson — was kicked off the case because of a conflict. Another witness withdrew after it was determined he was not qualified to provide expert testimony on the matters in question.
There was also an earlier attempt by LSUC counsel to take the hearing in camera, much to the chagrin of the discipline panel and defence lawyers Phil Campbell and Ian Smith. That turned into a needless sideshow over public access to the hearings and if companies involved had waived their privilege, even though much of the material had been publicly disclosed in court documents.
The panel sat for one day in 2009, 31 days in 2010, and 35 days in 2011 (at press time). Despite that, and 16 days of DeMerchant cross-examination, they are only through a couple of the charges. Another seven days of hearings were expected in 2011 and 24 days are set for 2012.
Compounding matters, one of the panelists hearing the complaint, Paul Henderson, was appointed to the bench.
LSUC spokeswoman Susan Tonkin says, “a number of factors can affect the length of a hearing, including the complexity of the proceeding, volume of materials, number of witnesses, number of motions, and, occasionally, unforeseen events.” Law society officials wouldn’t disclose the cost of the prosecution. A six-year case wouldn’t come cheap and if the LSUC loses, the fees will easily reach millions of dollars when defence costs are added in. Then there are the likely appeals.
Yet, if convicted, it’s unlikely the lawyers would be disbarred. They’re not accused of misappropriating funds. Rather, a suspension would likely be in order. Any victory at this stage would be Pyrrhic at best.
Sadly, Sukonick will almost spend more time fighting these charges than he has practising law and his career has been, if not destroyed, then certainly waylaid.
There’s a strong feeling on the street that DeMerchant, who earned as much as $900,000 annually, should have fallen on her sword and saved her junior by pleading guilty, taking her lumps, and moving on. The handling of this case, combined with the persecution of Joe Groia for his comments towards the prosecutor in the Bre-X/Felderhof case, has shaken the confidence of many lawyers when it comes to the law society’s judgment involving prosecutorial decisions affecting members.
The profession desperately needs guidance when it comes to matters of conflict of interest and commercial deals. The LSUC should draft new rules; there’s a good chance they would pass before this prosecution ends. This test case had the potential to clear the air. But it has become a circus — much like the Groia affair.
Jim Middlemiss is an Ontario lawyer and co-owner of WebNews Management Corp. You can reach him by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it.
It took the U.S. legal system 15 weeks to convict Conrad Black of fraud charges, the majority of which were overturned by the U.S. Supreme Court. It will take the Law Society of Upper Canada almost two years to decide whether or not Black’s lawyers, Beth DeMerchant and Darren Sukonick of Torys LLP, were in a conflict of interest when they advised him and his companies on the non-compete agreements at the centre of his criminal charges.
Tuesday, 03 January 2012 09:18

Good things ahead for 2012

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With this January 2012 issue of Canadian Lawyer, we kick off our 36th year of covering the issues and trends that matter to the legal profession in Canada. And we have seen a lot of changes, particularly in the last few years. One of the biggest shifts has been the arrival of global law practices on our shores. This month, Macleod Dixon LLP will be folded into the Norton Rose Group, which rocked the Canadian legal establishment last year when it merged with Ogilvy Renault LLP. The face of law practice is changing here and so this year, we have launched a new series on canadianlawyermag.com called the Managing Partner Forum, in which law firm leaders from across the country and all types of firms will discuss the hurdles, successes, and other travails of making it work in today’s market. We launch the series this month with a column from John Coleman, who helmed Ogilvy Renault through its initial merger as well as the marriage with Macleod Dixon to form the new Norton Rose Canada. I look forward to the columns creating some interesting discussions in the profession.
As well, we’ve got a host of new online columnists coming on board for 2012 at canadianlawyermag.com. We welcome Kirk Baert, who will be penning a monthly missive on the state of class action litigation — and not wanting to have it too plaintiff-side heavy, he will be bringing on some guest columnists from the defence side. And one of the things I’ve heard most in my travels is that newly minted lawyers feel a lot less sure of themselves and their futures than they once did and there’s not a lot of information out there to help them along in their careers. So we are launching two new online columns specifically aimed at young lawyers. One is The Accidental Mentor, in which Ontario Bar Association past president Lee Akazaki does his best Dear Abby impression and answers queries of all types from junior associates looking for some guidance. And from the trenches, we have first-year associate Lindsay Scott, who will be sharing the hard lessons she’s learned on the job.
I am also happy to be starting 2012 with our latest Top 10 lists of legal boutiques. Labour and employment and intellectual property boutiques are some of the most prominent in the legal field and it’s always a good competition. Check out this year’s list starting on page 33. As always, I look forward to hearing reader feedback on anything we are doing and anything you think we should be doing. Have a great year.
With this January 2012 issue of Canadian Lawyer, we kick off our 36th year of covering the issues and trends that matter to the legal profession in Canada. And we have seen a lot of changes, particularly in the last few years. One of the biggest shifts has been the arrival of global law practices on our shores. This month, Macleod Dixon LLP will be folded into the Norton Rose Group, which rocked the Canadian legal establishment last year when it merged with Ogilvy Renault LLP. The face of law practice is changing here and so this year, we have launched a new series on canadianlawyermag.com called the Managing Partner Forum, in which law firm leaders from across the country and all types of firms will discuss the hurdles, successes, and other travails of making it work in today’s market. We launch the series this month with a column from John Coleman, who helmed Ogilvy Renault through its initial merger as well as the marriage with Macleod Dixon to form the new Norton Rose Canada. I look forward to the columns creating some interesting discussions in the profession.
Monday, 14 November 2011 08:00

Expect a strong and growing law-and-order bias

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Illustration: Matt Daley
Illustration: Matt Daley
Michael Moldaver and Andromache Karakatsanis are our new Supreme Court judges. They replace justices Ian Binnie and Louise Charron, who in May both announced their resignation. (It sure takes a long time to fill a Supreme Court vacancy.) Will this change in the court’s composition have much effect on criminal law?
Monday, 14 November 2011 08:00

More work for in-house departments

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Once again in this issue, we share the results of the annual Canadian Lawyer corporate counsel survey, which gauges the relationship between in-house counsel and their outside legal service providers. It’s not surprising that one of our main findings is that the economy, and its current state of instability, is having an effect on corporate law departments.
Monday, 03 October 2011 09:00

My election wish list

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b_150_0_16777215_00___images_stories_01-CANADIANLawyer_2011_October_jim_middlemiss2011.jpgWith five provinces scheduled to go to the polls in 2011 and three more expected to go next year, it’s a good time for the legal community to be advancing its election wish list.
Sunday, 02 October 2011 08:45

Don't get left behind

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In September, the Competition Bureau released a post-study assessment to its 2007 report that looked at restrictions impeding competition in five professions, including the law. The profession had been on tenterhooks as to what the assessment would say and how it would affect the regulation, in particular, of the profession across the country.
Monday, 05 September 2011 09:00

Reflections on a changed world

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This month’s cover story, “A decade on,” examines the state of anti-terrorism laws in Canada over the decade since the Sept. 11, 2001 attacks in the United States. These efforts have two difficult issues to surmount, and they are the same ones faced by many countries, including the U.S.: how to heighten security while balancing individual rights and freedoms, and how to fight a “war” on terror that’s often beyond national borders and doesn’t involve a state player. Not an easy task for any government.
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