Monday, 01 October 2012 09:02

Ain't no mountain high enough

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Ain't no mountain high enoughImagine, if you will, Leo Leduc passing time in an airport bookstore in 1990 when he sees Dr. Seuss’ last book Oh, The Places You Will Go, just after it is published. The Canadian diplomat spies it on the shelf with the other new releases and smiles to himself as he thinks of his children, Kevin and Sandra. The Leducs, you see, lived the book in the 1970s and 80s. Long before it came to be in print, Leo made it a real-life movie and the kids got to star as themselves.
Monday, 01 October 2012 09:00

Moving away from the judicious-parent test

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Illustration:Peter Mitchell
Illustration:Peter Mitchell
The fifth and final will prepared by Patricia Luz Holvenstot divided nearly all of her assets among her three adult daughters. To her son, she left one cent. It was a decision with a detailed explanation. In the will, drafted in British Columbia three years before her death in 2000, she referred to another document in which she outlined a long list of complaints about the behaviour of her only son, dating back to when he was a teenager more than three decades earlier.
Monday, 03 September 2012 09:01

Changes and challenges

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Changes and challengesEconomic changes over the last few years have had a dramatic impact on the practice of law in Canada and abroad. Old ways of doing business do not work anymore and the industry is being forced to make substantial structural changes. Canada still lags behind many countries in reassessing the way the legal profession is regulated, continuing, some may argue, to be a self-regulated monopoly that enriches practitioners while acting as a barrier to access to justice. That is perhaps a bit harsh but there’s no doubt that Canada — specifically the provincial regulators — is well behind the United Kingdom and even Australia in adapting to new realities. Alternative business structures are barely on the radar in this country, despite rules that allow multidisciplinary practices in many jurisdictions, but the world is changing and Canada will have to catch up.
Monday, 03 September 2012 09:00

Plotting a course for prosperity

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Haligonians cheer after finding out Irving Shipyards had won the bid for a $25-billion federal shipbuilding contract. Photo: Sandor Fizli / Reuters
Haligonians cheer after finding out Irving Shipyards had won the bid for a $25-billion federal shipbuilding contract. Photo: Sandor Fizli / Reuters
Business ahoy! That is the call resonating throughout Nova Scotia in the wake of the federal government’s announcement that Halifax-based Irving Shipbuilding Inc., has won the $25-billion contract to build this country’s next fleet of war vessels. Law firms are listening — and they are getting ready for a new wave of business. “It is a very significant agreement. It’s a lot of money, and it’s going to have a great impact on the region,” says Danny Gallivan, CEO and managing partner of Cox & Palmer in Halifax. Indeed, notes John Young, chairman of Boyne Clarke in Dartmouth, “I think we will be richer over time.”
Monday, 06 August 2012 09:00

Helping or hindering?

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Shutterstock image
Shutterstock image
Judicial independence is one of the cornerstones of Canada’s justice system, but some observers warn it could also be among the biggest obstacles to reforming the way it works.
Monday, 06 August 2012 09:00

The Top 25 Most Influential

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The Top 25 Most InfluentialThe popular Canadian Lawyer Top 25 Most Influential in the justice system and legal profession in Canada is back for the third year. The Top 25 was one of our most-read, and most commented-on, features in both 2010 and 2011. As expected, not everyone agrees with our choices, but it is always worthwhile to get our readers into a debate on such matters. This year, we used the same format as in 2011 asking for nominations from legal groups and associations representing a variety of memberships and locations; winners on last year’s Top 25 list; our general readership; and our internal panel of writers and editors. We received about 75 nominations, which the internal panel then whittled down to just over 50 candidates. We then posted the list online and once again asked our readers to participate, with just under 700 people voting in the poll. The final list is based on that poll with input and the last word from the internal panel.
Monday, 02 July 2012 09:06

The new subclass?

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“We. Are. The 99 per cent,” went the refrain echoing around Wall Street and Bay Street at the height of the Occupy movement in late 2011. But the same cries could soon be coming from within the glass towers that line the streets at the world’s financial centres if big law firms face the backlash some analysts are predicting from marginalized lawyers chasing an increasingly elusive seat at the equity partnership table.
“Somebody needs to start Occupy Big Law,” says Steven J. Harper, a retired partner formerly with U.S.-based international giant Kirkland & Ellis LLP. According to Harper, the increasing ranks of non-equity partners chasing the mirage of full partnership, or recovering from de-equitization, risks creating a “permanent subclass” in law firms. Even within equity partnerships, he says the widening gulf between the lowest- and highest-paid members is a recipe for disaster.
At the recently collapsed Dewey & LeBoeuf LLP, some have estimated that spread at between 20: and 30:1. In more conservative Canada, where ratios are firmly in the single digits, and rarely higher than 5:1, it still hurts to be the “one” getting multiples less than your so-called partner, says Harper. “The gap at some of these firms is staggering, in a way that was not true 10 years ago,” he says. “What it means is you wind up with an even smaller group at the top that really controls things, and they can embed themselves there.”
Edmonton-based law firm strategist Patrick McKenna says law firms have moved to shrink their equity partnership ranks because they’ve exhausted all other options to increase, or simply maintain, partner profitability. He says there are four factors that play a role in its calculation: margin (revenue minus expenses), billable hours, rates, and leverage (associate-to-partner ratio).
In the 1980s and 1990s, McKenna says law firms basically worked lawyers harder, pushing billable hour targets to their limits. From about 1995 to 2008, firms simply raised rates, which worked just fine until the global economic downturn hit. Since then, margins have shrunk because expenses continue to rise, while revenue has flatlined or fallen thanks to reduced demand for legal services. Leverage, traditionally low in Canada anyway, has not been an option elsewhere as corporate clients balked at high rates for inexperienced and allegedly unproductive associates. “Well, there’s only one other mechanism to increase partner profitability, and that’s to have less partners sharing in pie,” says McKenna.
Pulling up the drawbridge
One way firms reduce the number of equity partners is by delaying entry. In the last couple of decades, young lawyers have found the path to partnership follows a longer and more convoluted route than it did for their predecessors. “I had one lawyer tell me the chances of being hit by lightning are higher than being made an equity partner,” says McKenna.
Last year, a Robert Half Legal survey of lawyers at large Canadian law firms found associates will wait an average of seven years to make partner. “Competition for partner positions has intensified,” said John Ohnjec, division director of Robert Half Legal in Canada, at the time. “In fact, some firms have been thinning the ranks of partners by promoting fewer associates.”
An increasingly common stop on the partnership track is non-equity partnership. According to Harper, firms are attracted to two-tier partnership by the ability to generate an extra couple of years of leverage out of associates who would otherwise have been promoted. For lawyers, they get the prestige of the partner title, and a billing rate to match, which also suits firms. “The underlying driver is non-equity partners are extremely lucrative. You don’t have to pay them anything near what they generate,” points out Harper.
According to Adam Pekarsky, who runs the Pekarsky Stein recruitment firm in Calgary, non-equity partner positions have been a useful tool for some local firms that are reluctant to dilute the profit pool but want to retain talented lawyers. “There’s lots of examples of firms who have gone two, three, four, five years with no new equity partners. The problem is those people you are passing over,” he says. “Non-equity partnership is supposed to be temporary, but the cynic would say that’s only because firms can’t get away with extending it.”
The danger, according to Harper, comes when firms have some success evolving the position from a transitory state to a permanent one, something he notes is happening more frequently. “Once it becomes clear that you’re staying there, these lawyers become second-class citizens. They know it, and everyone at the firm knows it. They’re delegated the work nobody else wants to do, and it gets very demoralizing.”
Pekarsky says a generational shift, combined with more exacting requirements from law firms, has made their search for potential equity partners more difficult. If a firm hires 10 articling students, he says they’ll do well for one of them to end up as an equity partner a decade later. “Organic, homegrown partners are a rare breed. It’s no longer the brass ring for the vast majority of young lawyers entering the profession,” he says. “There’s so much more pressure on lawyers to do more, that partnership becomes a less appealing prospect. The personal sacrifice is too much for many in a time when both spouses work.”
One Bay Street non-equity partner finds himself torn in exactly that way. In a position to apply for equity partnership, he’s not so sure it’s the right option. “There’s always that sense that I’m perhaps not getting as much as I might, but I’m comfortable where I am with the certainty of income. It makes sense so long as they continue to pay me well,” he says.
And a six-figure buy-in is not an overly attractive proposition at a time when equity partner draws are limited. “They want you to pony up, and for what exactly? The market is constricting, if anything, and everyone thinks they’re [McCarthy Tétrault],” he says. “There’s a great deal of risk putting up that amount to ensure firm does well.”
Simon Margolis, the managing partner at Bull Housser & Tupper LLP, says there’s a five- to seven-year window for income partnership, the non-equity version at his Vancouver firm. He views it very much as a temporary station for equity partner candidates, who have a few years to move up or move on. “The big step to me is entry to income partnership. Some don’t develop quite as you expected, but if you’re not sure about someone, then they shouldn’t become income partners, because the plan is that within a reasonable amount of time they’re going to make it to equity,” Margolis says. “You don’t want to end up with a bunch of people stuck there.”
At the London, Ont., office of Lerners LLP, managing partner Ian Dantzer seems aware of the potential underclass described by Harper, bristling at the term “two-tier” to describe the firm’s partnership structure. “Two-tier is a tough word because it implies one is better than the other. We have a path to equity partnership,” he says. “Non-equity partnership is a testing ground, an intermediate stage between associate and equity partnership. It gives them greater tools and status to go out and market themselves, generate work, and build a practice.”
Even lawyers who have finally arrived at the promised land of equity partnership must constantly look over their shoulder to make sure they stay there. “You don’t allow partners in unless they have their own book of business, and you kick them out if they can’t keep it. We eat our own if they can’t sustain themselves and pay for some others,” says McKenna.
The most vulnerable to de-equitization are lawyers whose promotions were well timed, gaining admission to the partnership in better economic times, when firms were a little less stringent with entry requirements. “We went through a period in the 1980s and 1990s, where if you put in your six to eight years, it didn’t matter, you were just made a partner. Later on, we assessed those partners, and decided maybe they weren’t the right material for us,” says McKenna. “Some partners have retired on the job, but haven’t informed the firm.”
Ed Wesemann, a consultant at Edge International, says de-equitization is particularly popular in the U.S. and U.K., where law firm finances and partner profitability rates are much more public than in Canada. By shifting an equity partner into the non-equity ranks, law firms are able to give a boost to their profit-per-equity-partner rate, a key indicator of law firm performance. “It’s very hard to fire an equity partner, but it’s a little easier to make them into non-equity partners. The biggest problem with equity partners is when they don’t have their own supply of business. So this is a good place to park them, and you can usually give them a little cut in pay,” he says. “You’ve done something and helped the statistical base. Nobody makes any more money, but the math looks a little better.”
According to an American Lawyer report on the top 200 firms in the country released in December, 39 per cent of managing partners said their firms de-equitized partners in 2011, and 38 per cent planned to de-equitize more in 2012. In the U.K., Magic Circle firm Clifford Chance LLP began consulting partners in April on a new termination policy that will allow them to ship out under-performing partners more quickly. That came on the heels of a partnership restructuring by Clifford Chance’s rivals Linklaters, which resulted in the departure of 25 partners and the demotion of 16 more.
De-equitization also comes into play for partners reaching retirement age. In addition to a training ground for lawyers on their way up, Margolis says non-equity partnership is also a “good spot for people to rest in on their way down.” “We have some senior people who are still valuable for us, but not in the position to, or not wanting to, devote themselves in quite the same way as we expect of an equity partner,” he says. “It’s a way of keeping them in the fold, but just compensating them appropriate to their contribution.”
Colin Cameron, the president of Vancouver-based Profits for Partners Management Consulting Inc., says Canadian firms are pushing mandatory retirement ages earlier, with the phase-down process beginning as soon as the partner’s 60th birthday in some shops. “To maintain their profit levels, the business model requires partners to move out of the equity partnership ranks in the 60- to 65-year range. The move down to non-equity status is the most common first step,” he says. “In large Canadian firms especially, they have to be financially as strong and capable as they can to defend themselves against much other bigger, and international players, like Norton Rose. There’s more parties going for a smaller group of clients, who are also pushing for alternative fees, so firms will be pushing retirement as much as they can legally in order to survive.”
The continuing case of Mitch McCormick, the B.C. lawyer who launched a discrimination suit against Fasken Martineau DuMoulin LLP over its mandatory retirement policy, has cast some doubt over just how far law firms can go. The B.C. Court of Appeal heard arguments in April on whether the B.C. Human Rights Tribunal has jurisdiction to hear the merits of the case. The situation is equally unclear south of the border, where law firms were denied a precedent-setting decision when 1,700-lawyer Sidley Austin LLP settled a discrimination case with 32 de-equitized partners in 2007. However, the $27.5-million cost of the settlement is enough for firms there to proceed with caution.
Whether they arrived there by virtue of age or substandard performance, de-equitized partners have boosted the ranks of non-equity partners even further. Edge’s Wesemann says the short-term focus on profitability that has driven the increase could spell trouble in the long run. “We’ve created this monster. They’re not real partners, but they bill like partners, and they have no natural predator,” he says.
According to Wesemann, the lack of genuine partner-level work at law firms means non-equity partners, particularly long-standing ones, end up doing work that is more appropriate for fourth- or fifth-year associates. “We have a rebellion coming. The recession has given us more empowered clients who are actually reading the bills we send them, and they are saying, ‘why on earth are we paying a partner rate for this?’”
He notes the non-equity trend is more fully developed in the U.S., where firms are now taking an axe to their non-equity partner ranks, as well as the equity partnership. A May 2012 report by Altman Weil Inc., “Law Firms in Transition,” found that with the exception of support staff, non-equity partners were the most likely
position American firms will cut in the next
year. Equity partners followed closely behind in third place.
Star power
As Dewey & LeBoeuf stumbles through bankruptcy, Canadian law firms should see the firm — created less than five years ago — as a beacon to the dangers of partnership inequity, advises Harper. Just before the firm imploded, some partners reportedly earned at least 20 times what the lowest-paid partners were drawing from the firm. The problem was exacerbated by guaranteed incomes promised to some lateral stars as part of the big-money deals that brought them to the firm over the last two years. Existing equity partners found their earnings squeezed in order to subsidize guaranteed incomes the firm could not afford, of which there were about 100 such agreements according to bankruptcy filings in Manhattan. “What does partnership actually mean if you have a ratio of 20:1? It’s incredibly de-stabilizing,” says Harper.
He says the firm bought into a star culture that overvalued rainmaking lawyers, and that compensation packages spiralled out of control. “The notion a top lawyer is worth 10 times more than another partner makes no sense at all. You get into a vicious circle, where you panic about losing somebody and get into a truly irrational bidding war.”
While Dewey may be an extreme example, McKenna says partner compensation is increasingly skewed at large American firms towards partners at the top end. Ratios routinely hit 10:1 for partner income at opposite ends of the scale, he says. “You’ve got partners with a smaller book of business who, if you look at the economics very carefully, are actually supporting the stars. When you get a spread that gets too great, you end up with a partnership within a partnership,” says McKenna. “And if people come for money, they leave for money. There’s no loyalty.”
Guaranteed incomes or joining bonuses are not unusual in Canada where rainmakers are concerned, according to Cameron, who says that most “would be quite hesitant to pass on clients without some sort of guarantees.” But in conservative Canada, where partner income ratios rarely top 5:1, the impact is reduced. But Christopher Sweeney, CEO of ZSA Legal Recruitment, says rainmakers have increasing influence at a time when corporate clients are placing their faith in a smaller group of trusted advisers. “Firms like to think clients come to them because of the brand and overall service. That is true, but increasingly, sophisticated corporate clients have specific relationships because of individual lawyers,” he says. “That makes it critical that firms adequately reward their top lawyers.”
At Bull Housser, Margolis says the spread of equity partner earnings from top to bottom is 3:1, but that he’s open to widening the gap. “Three-to-one is where we’re currently at, but it doesn’t mean it always has to be. We would have the capacity to get bigger than that, and if it’s done correctly, I don’t think it’s a problem. If someone’s doing all the right stuff, we all do better by that,” he says.
Margolis says the firm tries to avoid fine distinctions between individual partners by creating clear bands of partner pay with distinct entry qualifications, and that the firm’s size makes it easier. “We don’t have hundreds of partners, so you can get a good feel for what people are doing,” he says. “There aren’t too many raised eyebrows.”
Shekhar Parmar, director of the Calgary office at legal recruiter The Counsel Network, says Canadian firms may be particularly wary of overpaid rainmaking because of this country’s own cautionary tale in the 2007 dissolution of Goodman and Carr LLP. “That was a scenario in which some partners were cut pretty large cheques compared to their book size,” he says. The firm abandoned its lockstep partner compensation scheme, which rewarded lawyers based on their seniority, in the 1990s, and recruited a clutch of star performers, including some with high-paid special deals outside the equity partnership. “That kind of thinking can work out well, but you’re taking a gamble. Sometimes things don’t work out and you have to pay the house,” says Parmar.
A string of missed budgets and a failed merger sparked an exodus of equity partners at Goodman and Carr, and the firm’s management decided closure was the only option.
Parmar says he helps Canadian firms evaluate the risk of bringing on new partners laterally, and he finds that most are thinking longer term since the demise of Goodman and Carr. “We help them work out whether they’re bringing real value or if it’s more smoke and mirrors,” he says.
At Lerners, Dantzer says his firm won’t break the bank to land a star performer. “We’re very cautious about lateral hires. We won’t do it just for the sake of bringing someone on. Any merger is very difficult. I think it’s very divisive if you give special treatment to someone new. Unless a significant group recognizes the long-term importance of that practice or person, you’re just creating problems for yourself, resentment, and maybe desertions, so you sort of work against yourself.”
Dantzer says Lerners will resist the temptation to go after star-free agents, and focus instead on its own prospects. “I think more and more we are becoming convinced we have to build from within and develop a sense of loyalty. It takes much longer to do, but it’s much more stable and profitable long term,” he says. “The idea of going out like the Toronto Maple Leafs and buying a few stars sounds good in theory, but it doesn’t deal with chemistry, long-term cost, and the chance that they could move on again.”
But Sweeney says that approach may not work for all Canadian firms if the market sees further incursions from abroad. Norton Rose Group landed in Canada with the wholesale takeover of Ogilvy Renault LLP, before adding Macleod Dixon LLP. Another global giant, Allen & Overy, which has been linked in the past with Canadian law firms, elected for a more organic growth strategy when it entered the Australian market, by poaching leading partners from top firm Clayton Utz to establish a presence in the country. A similar move in Canada could force large Canadian firms to shell out extra cash for their star performers in order to hold on to them and the clients they bring with them. “If a big international firm came in and started building up with just the cream of the crop, that could mean 60- or 70-per-cent increases, which would be a game-changer,” says Sweeney. “It’s not going to happen with the existing major players.”
The last time something similar happened in Canada, says Sweeney, was when Osler Hoskin & Harcourt LLP opened its Montreal office in 2001, recruiting partners by offering them considerably more money. To cover the increased cost of holding on to their stars, firms city-wide bumped rates by around $100 per hour. “There was some flexibility because Montreal was underpriced at the time, so it was able to absorb that shock,” he says.
Increased rates are not an option this time around, with corporate clients looking to save, and that means Canadian law firms will have to absorb the shock themselves. “There’s always a marketplace for stars, and I foresee their value to law firms climbing. We’re almost bordering on free market agency for the top talent in law. These lawyers will spend three to five years at a firm, and if the firm isn’t able to increase what they’re earning, they’ll see what kind of bids are coming in from another team,” he says. “Using the one-per-cent analogy from Occupy Wall Street, even in law firms, there will be those rewarded on a different scale from everyone else. That’s going to cause internal problems from people, and firms have to deal with that. It’s just part of running a law firm in the modern era.”
Cover: Carl Wiens
Cover: Carl Wiens
“We. Are. The 99 per cent,” went the refrain echoing around Wall Street and Bay Street at the height of the Occupy movement in late 2011. But the same cries could soon be coming from within the glass towers that line the streets at the world’s financial centres if big law firms face the backlash some analysts are predicting from marginalized lawyers chasing an increasingly elusive seat at the equity partnership table.
The difficult economic environment of the last few years is being reflected in the salaries of Canadian lawyers, both in-house and in private practice. According to the results of Canadian Lawyer’s 2012 Compensation Survey, the median salaries of newly called lawyers are lower than last year. For example, the median salary of a first-year associate is $72,500, down by approximately $3,500 from last year. It’s the same case for newly called in-house counsel, who are showing a median salary of $77,500, a steep decline of $7,500 from last year.
Indicative, too, of the somewhat mercurial state of the profession, the survey shows only 45 per cent of law firm respondents plan to increase their associates’ salaries in 2013, whereas 77 per cent of corporate legal departments say they will bump up their lawyers’ earnings.
Making decisions on how to compensate various members of the team is no easy feat in the current environment either. In setting compensation rates for lawyers, respondents reported that determining the market value, trying to compete with other firms’ rates, crediting non-billable work, and meeting lawyers’ expectations were the areas of greatest dispute.
The response to the Compensation Survey from law firms this year was substantially up from the last few with 161 managing partners and sole practitioners from across Canada sharing their compensation information with Canadian Lawyer. As well, 74 chief legal officers and corporate legal department heads offered insight on the in-house side. The survey, which looked at earnings, salaries, bonuses, perks, and other compensation for lawyers working at law firms and in-house legal departments across Canada, provides law firm and law department leaders with insight into current trends as they look to manage their teams.
It may provide some relief to newly called lawyers to hear that 45 per cent of firms that responded to the Compensation Survey plan to hire more lawyers in the coming year, 53 per cent plan to keep the same number of lawyers, and just two per cent plan to downsize. This year’s hireback numbers for articling students are also better than last year’s, another indication that while salaries are not growing rapidly, there is work out there.
The survey shows merit is still the most common compensation method for equity partners, at 44 per cent; 17 per cent said they use equal partnership; four per cent said lockstep; and 35 per cent use a different method altogether. Fifteen per cent of law firm respondents recorded having partners who get paid more than $450,000, whereas last year it was 10 per cent.
In terms of targets for lawyers, only 30 per cent of respondents set an annual billable hour target for partners; 10 per cent pay a bonus to partners who reach it, and four per cent enforce a penalty for failing to reach it. It’s a bit of a different story for associates with 44 per cent of law firms setting an annual billable hour target for them; 33 per cent pay a bonus to associates who achieve it, and five per cent enforce a penalty to those who come up short.
Thirty-eight per cent of firms have an annual monetary billing target for associates with the greatest number, 45 per cent, falling in the range of $200,000 to $300,000. “We do not live by the almighty billable hour, we try to value bill as many of our services as possible,” one law firm managing partner commented.
In terms of bonuses, 49 per cent of law firms handed them out to associates in 2011, which is down from 67 per cent in 2010. Of those who handed out bonuses, 55 per cent reported they were discretionary.
While at many firms partnership agreements, forms of compensation, as well as the bottom line are not necessarily common knowledge, one survey respondent said the firm shares its financial information with associates so they can gain a better understanding of their compensation rates. “It’s a very different market at smaller firms and junior lawyers need to understand the business aspect of it and get an accurate picture of what they will get paid at smaller firms,” the managing partner said.
And it appears compensation systems are working well for most organizations with only nine per cent of law firms completing the survey saying they plan to alter their compensation methods next year. See charts on opposite page for more on salaries and earnings for associates and partners in law firms.
Responses to this year’s survey indicate that corporate legal departments are also functioning under restricted budgets. For average legal spend budgets in 2012, 30 per cent were under $500,000 with the same percentage falling in the range of $500,000 to $1 million. The remaining 40 per cent were upwards of $1 million.
When it comes to in-house counsel’s salaries, there seems to be a bit more wiggle room with the majority of respondents reporting that salaries will increase in 2013. Corporate legal departments also generally offer greater benefits and perks than law firm respondents, although that may be a reflection more of the size of an organization than of anything else as smaller law firms don’t tend to offer many perks or extensive benefits. More than 95 per cent of law department respondents reported their company provides benefits and 65 per cent offer perks such as professional development and health club memberships. A fair number, 70 per cent, also have a pension plan for lawyers.
You’re also more likely to receive a bonus working in-house than at a smaller law firm: 62 per cent paid bonuses to lawyers in 2011, with 53 per cent basing it on a percentage of salary.
See the accompanying charts for compensation data for in-house lawyers.
Photo: Shutterstock
Photo: Shutterstock
The difficult economic environment of the last few years is being reflected in the salaries of Canadian lawyers, both in-house and in private practice. According to the results of Canadian Lawyer’s 2012 Compensation Survey, the median salaries of newly called lawyers are lower than last year. For example, the median salary of a first-year associate is $72,500, down by approximately $3,500 from last year. It’s the same case for newly called in-house counsel, who are showing a median salary of $77,500, a steep decline of $7,500 from last year.
Monday, 04 June 2012 10:34

What's hot, hot, hot

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What's hot, hot, hotMoney isn’t everything when it comes to the law. Much like possession, it’s about nine-tenths of it. For the Money Issue, Michael McKiernan looks at the most potentially lucrative practice areas for individual lawyers, as well as the hottest fields where every law firm is scrambling for a piece of the action.
Monday, 07 May 2012 09:05

Legal lag in medical advances

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decade or two ago you would have been hard-pressed to come up with an area of scientific advance that seemed potentially more legally fraught than medical genetics. Indeed it was so disturbing that three British law professors glumly forecast in the September 1998 issue of The Modern Law Review that “on the face of it the legal community with its tendency toward gentle incrementalism is not particularly well equipped to handle any kind of revolution, let alone a revolution of the proportion indicated by medical genetics” and then went on to quote a newspaper article saying medical genetic advances “will tie the lawyers up in . . . knots.”
The fear was based on the prevalent belief that knowledge of how genes worked was going to radically reconfigure medical practice. John Bell, Nuffield professor of clinical medicine at Oxford University, optimistically opined that same year in the British Medical Journal, that “within the next decade genetic medicine will be used widely for predictive testing in healthy people and for diagnosis and management of patients.” And knowing what the genes said was going to require doctors to daily make unprecedented and instant decisions about what should and shouldn’t be revealed about genetic information and genetic risks not just to patients, but to patients’ families, to insurance companies, to governments, and to employers.
Today it is highly unlikely any lawyer reading this article is feeling particularly knotted up by genetics-based lawsuits. This is because in 2012 the once exhilarating promise of clinical genetics (now frequently called clinical genomics) is being viewed by many people — including some in the legal profession – as a scientific hype existing somewhere between a fairyland and a fraud.
For example, last year Science magazine published an article entitled “Deflating the Genomic Bubble” where the authors, one of whom was Timothy Caulfield, Canada research chair in health law and policy at the University of Alberta, wrote: “If we fail to evaluate the considerable promise of genomics through a realistic lens, exaggerated expectations will undermine its legitimacy, threaten its sustainability, and result in misallocation of resources [and] . . . fuel unrealistic expectations for predictive genetic testing and uncritical translation of discoveries.”
The reason for what might be called a genetic counter-revolution is that genetics has proven to be complication incarnate. Cancers can have one kind of genetic makeup if situated in one place in the body, and quite another if they have metastasized to a different locale. Hundreds of genes have been associated with common diseases, each of which add or decrease by a few percentage points your risk of getting the disease, but are so common — some found in upwards of 50 per cent of people — that they must also be doing something very health positive in the body. The complications are so intrinsic and so knotted that in 2010, Harold Varmus, director of the U.S. National Cancer Institute, dismissively told the New York Times, “Genomics is a way to do science, not medicine.”
All true and all disappointing for those hoping for genetically revolutionized medicine, except — and that is the point of this article — if one is looking at the gene-based diagnosis and personalized treatment of certain rare kinds of heart conditions known as arrhythmias. In that arena not only has medicine experienced a tsunami of change, but as you will see the social/legal/ethical quandaries which doomsayers in the past believed would bedevil lawyers and regulators are beginning to surge into view.
And this potentially legal and ethically fraught rare heart genetics revolution is of particular import in Canada. In this country, for a number of reasons — close kin marriages in some areas, active genetics research, and world-class heart institutes — we have become among the planet’s leaders in both generating arrhythmia genetic advances and in generating the extremely knotted sociology a genetics’ revolution was supposed to bring forth.
I will lead you through this but to give context as to what has been occurring you need some medical background.
Arrhythmias are the electrical misfirings of the heart made famous by athletes trotting off playing fields, keeling over, and suddenly dying — often without any previous signs of illnesses. While physical heart changes are seen in some conditions, often an ECG or other imaging reveals nothing structurally wrong with the heart either before or after an attack. Effectively the heart battery just went dead.
While the condition can be very rare in the world population as a whole, striking one in 2,000 to one in 10,000 people, they can be very much more common in certain areas of this country. A Newfoundland variety of arrhythmogenic right ventricular cardiomyopathy (ARVC) has been diagnosed in about one in 500 people. Among the 5,400 Gitxsan aboriginals of northern British Columbia, the occurrence of people with the tribe’s special mutation of a long QT syndrome gene is one in 90.
Unlike diseases such as Huntington’s where a genetic test told carriers they would come down with a condition that medicine could do nothing to either forestall or cure, quite the reverse situation has occurred in many arrhythmias. For example, a heart attack is triggered in a genetically distinct version of long QT syndrome by exercise; in another the heart-stopping agent is a loud noise; in a third it is the restlessness of early morning sleeping patterns. Their specific genetic fingerprint says that person A should take beta blockers to ward off an attack and person B should have a defibrillator installed.
Preventative measures can be taken in some instances even before the condition manifests itself. Doctors in Newfoundland are so confident they can associate disease appearance with genetics that they now routinely recommend that the boys in their late teens and girls in their late 20s who carry the gene for a local variant of ARVC have heart-restarting defibrillators implanted in their bodies. Even — the rest of the sentence must be written in boldface — if they have no symptoms of the disease whatsoever.
With this as a background let’s look at what I believe is the only actual judgment in the area, a 2006 decision by the Supreme Court of Newfoundland in the case B.D. v. Eastern Regional Health Integrated Authority, a St. John’s Hospital complex.
It pitted a 30-year-old ARVC-gene-carrying man, who had had a defibrillator implanted in him, against his mother. The man wanted the defibrillator removed because, according to the judgment, “it adversely affects his life in other ways which makes its presence unacceptable to him.” His mother panicked at what she saw as her son’s reckless action and sought to have the removal blocked by the courts. She feared that without the defibrillator her son would die young and thus removal violated a primal dictum of medicine: First do no harm.
Here’s some additional background to justify her fears. Aided by family bibles, Newfoundland geneticists have determined that half the men who carried the gene were dead by the age of 40 and 80 per cent by 50. And, at the time that decision went to court, not a single man who had had a defibrillator implanted had died from subsequent heart attacks.
With this in mind, the Eastern Health heart surgeons themselves were completely uncertain how to respond to the man’s request, says Kathy Hodgkinson, an assistant professor of medicine at Memorial University whose doctoral thesis is on the Newfoundland ARVC gene. “If it was a drug he was taking, he could have quite happily made the decision to stop taking it any time he wanted. But in this case the doctors themselves had to act,” she says. “And there were no rules and precedents for them taking things out.”
Nonetheless, the case was decided on what were narrow grounds. While the mother’s feelings were noble — “She is doing what any loving mother might do if she is convinced her son is not thinking rationally and is putting his life at risk,” —  Newfoundland and Labrador Supreme Court Justice James Adams noted the man was not a child and was competent to make his own decisions. With that in mind, the doctrine of informed consent was invoked, and the Canadian Health Care Practice manual was quoted: “a competent can refuse any medical treatment regardless of treatment and regardless of whether it was necessary to preserve life.” Ergo, the mother didn’t have standing to sue and the man had a right to ask doctors to take out the defibrillator.
Narrow and precedented, except a few months later the man’s body made a different judgment. He had the heart attack his genetics said was almost bound to happen. By good fortune, he was near a place where resuscitation equipment was available and he was saved. What did he do then? He decided that the defibrillator was worth it and had it reinstalled.
All of this leads to the knotty question of what will doctors do the next time a person who carries the fatal gene comes forward and asks to have the defibrillator removed? Will any of them refuse to do it because there is now overwhelming evidence of ICD’s effectiveness — death rates in men with defibrillators are today a tenth of those without — and so removal is patently harmful? Nobody is entirely sure because the correct genetic heart arrhythmias balance between the principles of “first do no harm” and “informed consent” is cloudy.
“Doctors could exercise the conscience clause, which says I can’t in conscience do that,” is how Bartha Knoppers, a McGill University law professor who is also director of the Centre of Genomics and Policy, suggests one scenario might play out. “I am increasingly interested in the clash between what we might call common sense and what the legal system tells doctors to do. I think there is an emphasis, some would say overemphasis, on individual autonomy,” says Trudo Lemmens, Dr. William M. Scholl chair in health law & policy at the University of Toronto. However, he also points out that doctors have to respect the fact that “people make many unwise choices.”
But what if the unwise removal resulted in a person having a heart attack while driving and killing others? Should you not be allowed to drive if you carry the gene and haven’t had a defibrillator implanted or had it removed? It is not an idle question but one that may be looming. But because of the prevalence of ARVC in Newfoundland and the sharp decline in the cost of genetic testing, there is a discussion of whether the province should test all babies for the disease at birth. And if they did shouldn’t that information be forwarded on to Newfoundland’s driver examination centres? Or conversely should there be a law in place that says if you carry the “Newfoundland curse” gene you can’t get a driver’s licence if you haven’t been tested and had a defibrillator installed?
Again clouds. Knoppers leans toward yes, pointing to existing laws related to denying licences to people with conditions like epilepsy. “If I am a third generation of epileptic and have decided not to get tested, yes, I think you shouldn’t be able to get a driver’s licence.” Erin Nelson, who teaches tort law and health care ethics and the law at the University of Alberta, is more skeptical. “I think it would be extraordinary if the province had access to health records. You would need rules to do that. I don’t think that there would be very many people in favour of that kind of legislation.”
But at the least should there be genetic tests for the condition before you can get a driving-related job? The Newfoundland cardiologists and geneticists have already had to deal with a case related not to driving but flying. A man without symptoms — again that must be emphasized — was first told he didn’t carry the ARVC gene and then, while studying to achieve his lifelong ambition of becoming a pilot, he was told he did have it. He was quite angry and didn’t want to change his life’s dreams based on what might be in the future or something not presently wrong with him. After much discussion, the doctors were able to convince him to drop out of flight school.
But what if reasoning hadn’t worked, and even more to the point, what if the connection between a gene defect and a subsequent heart attack was more diffuse? The Gitxsan’s version of long QT is much more predicatively problematic than Newfoundland’s ARVC. In 15 per cent of long QT carriers the first sign of the disease is a heart attack. In 35 per cent of people, carrying the disease has no apparent heart disease effect. In the rest, there are a variety of heart-related symptoms. Can Gitxsan long QT mutation carriers become truck drivers? Can they become pilots?
Lemmens points out what decides these issues today is a proportionality test. “You compare the magnitude of the risk and the likelihood of occurrence of risk happening — something can have a small likelihood of happening, but a big effect if it does. And because of that the court may say it is appropriate to impose restrictions.” But what isn’t clear, he admits, is exactly where that line is when it applies to arrhythmias’ variety of risks and consequences.
Then there is the question of a parents’ right to know about their child’s genetic predisposition. In Newfoundland, parents are beginning to demand that ARVC screening tests be conducted on infants or very young children. The problem is that there are no clinical manifestations of the disease before the age of 17 or 18 and as such no need to do anything either in terms of lifestyle changes or defibrillator implants. “The question is that if there is no manifestation of the disease, shouldn’t you wait until the child is old enough to decide for him or herself when and whether to be tested?” asks Christina Templeton, a paediatric cardiologist in St. John’s.
What is the doctor’s legal responsibility?
U of A’s Caulfield believes parents’ rights will win out. “You can’t withhold information about a child from a parent or a legal guardian because they are substitutes for those individuals in a legal sense.” Lemmens disagrees. “There is a tendency in the law to say that when there is no benefit to the child, they should have the right to make a decision for themselves at 18 or so,” he says.
Again the situation seems ripe for both a lawsuit and a subsequent Solomaic judgment.
However Newfoundland’s legal/moral quandaries are nothing in comparison to what has arisen at Partners HealthCare Center for Personalized Genetic Medicine at Harvard University in Boston, a facility designed both to test for heart-disease-causing genes and to translate genetic research results into medical practice.
Consider the sperm donor who at the time of donation was asymptomatic but later learned he both carried a gene for and had symptoms of another arrhythmia known as hypertrophic cardiomyopathy (HCM). Partners contacted all the families involved in the donation offering to test the children for the disease. One was a lesbian couple who had wanted their offspring to be half-biological siblings and so there was a risk both carried the gene. The couple came back and said they didn’t want their children to be tested. When asked why, they said there had been intense sibling rivalry between the two children and that if one tested negative and one positive that rivalry would likely be intensified.
What should the lab do, especially when signs of the disease were being seen in three of nine HCM-positive children born of the donor’s sperm, when symptoms don’t always precede an attack, and when defibrillators have been shown to prevent early deaths in many HCM carriers? More muddiness. “Somebody has to interpret whether this is a significant risk or is this the kind of decision-making we can leave up to parents,” says Lemmens. And because it is so fraught, he adds, “Maybe we will have to create a decision-making body to decide in these instances.”
And even more problematic — if possible — was the young boy with symptoms of heart disease who came to Partners for testing. He, too, tested positive for one of the HCM genes and then his mother was tested. She didn’t carry the gene. Mendel’s laws of dominant genetic inheritance tell us absolutely the father and his side of the family carried the gene. Samantha Baxter, a genetic counsellor at Partners, told the mother to tell the father and his brothers and sisters about the test results so they could test themselves and their children. However, “The mother was going through a rough divorce,” says Baxter, “and as she put it, ‘the dad’s side of the family no longer are her relatives, no longer are somebodies she needed to care about.’” As a consequence she said she wasn’t going to tell them and neither should the lab.
What would the law say was Partners’ “duty to warn” responsibility in the face of an explicit demand by the legal guardian of the child who was their formal patient to say nothing?
Knoppers points out that in France doctors can give letters with test results to patients and the patients in turn are supposed to send the letters to potentially affected family members. “If a person refuses the letter, the doctor sends information to the public health officer and the public health officer is mandated to then contact family members without revealing the identity of the patient,” she says. Such a system does not presently exist in this country.
So what did happen? In the instance of the lesbian mothers, Partners accepted that the women as legal guardians had the right not to test their children, but encouraged them to monitor the children regularly for any signs of heart disease. In the bitter divorce case, Baxter says the mother “somehow had told her sister the testing results and the sister said these results aren’t about us and she relayed them to everybody on the father’s side.”
So the nieces and nephews were tested, but when the mother learned, “I got this ugly phone call from her,” says Baxter, “where she threatened to sue me because how did they find out these variants when she told us not to tell them. And we said we never said anything, but she was still livid.”
And what does all the above portend for the future of rare heart diseases cases and the knots its application threatens to tie the law, lawyers, and regulators in? “This was the story that everyone thought was going to play out, and in this little universe it has,” the hyper-skeptical Caulfield tells me when I describe to him what has been happening with arrhythmias. “All of these old-school concerns are arising.”
Some of the research for this article was funded by a Canadian Institutes of Health Research Journalism grant.
Legal lag in medical advancesA decade or two ago you would have been hard-pressed to come up with an area of scientific advance that seemed potentially more legally fraught than medical genetics. Indeed it was so disturbing that three British law professors glumly forecast in the September 1998 issue of The Modern Law Review that “on the face of it the legal community with its tendency toward gentle incrementalism is not particularly well equipped to handle any kind of revolution, let alone a revolution of the proportion indicated by medical genetics” and then went on to quote a newspaper article saying medical genetic advances “will tie the lawyers up in . . . knots.”
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