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Torys' New York IP team moves on

|Written By Julius Melnitzer

The self-anointed soothsayers who have been populating the legal profession since the days Cicero was defending Roman politicians in the Forum have much tocrow about with the recent announcement that the entirety of the IP department in Torys LLP's New York office - consisting of partner Louis Ederer and associates Alisa Cahan, John Maltbie, and Alan Veronick - have left to join Arnold & Porter, a 600-lawyer U.S. firm with 85 lawyers in its IP department.

The chorus of "I told you so" has been steady since Torys took the unprecedented step (for a Canadian firm) of expanding internationally by absorbing a foreign entity when it merged in 2000 with 75-member New York firm Haythe & Curley.

There's no need to revisit the litany of departures from Torys' Toronto and New York offices in recent years, or the particulars of the decimation of the New York office to some 60 lawyers.

What all of this ignores, however, is the fact that the firm has remained prosperous and prominent, and perhaps most importantly, has kept the New York office in place and achieved its main goals despite taking an expansion route that had the most downside of any Canadian law firm expansion - certainly any international one.

It's often forgotten that one of Torys' major aims was to build a seamless cross-border practice. This the firm has achieved. If there's any evidence to the contrary, nobody's come forward with it.

The original plan following the merger was to build both on Torys' cross-border practice and Haythe & Curley's vibrant domestic U.S. practice.

"What we thought six or seven years ago is obsolete now," Torys partner Peter Jewett told Canadian Lawyer last year. "But it turns out that the strength of the New York office is in the cross-border practice."

Torys had ventured afield in the 1980s, with representative offices in London and Hong Kong; Haythe had a small office in Beijing. All are now defunct. According to Jewett, the firm had no choice but to take the risk on the domestic practice if it was to achieve its cross-border goals.

 "Our experience was that small marketing offices didn't do much for our practice," Jewett said. "We wanted a presence in the U.S. that would allow us to deliver seamless Canadian and U.S. legal advice. To achieve that, we had to have a New York-based practice that was not just an outpost of the Canadian firm."

The existence of the New York office, for example, allowed Torys to keep work from Canadian clients that it might have lost entirely.

"For many years, we had been doing M&A and corporate finance work for Petro-Canada but three or four years ago, they decided to consolidate their Canadian work with one law firm and chose Fraser Milner [Casgrain LLP]," Jewett said. "However, at the same time we started to do their U.S. work, which has become substantial and a pure southbound referral to our New York office."

Although the domestic work in New York has not met expectations, there have been successes, particularly in the private equity practice.

"The challenge of competing for domestic work from a platform the size of our New York office was a greater challenge than we anticipated, all the more so because we didn't plan for the enormous increase in expenses in New York," Jewett said. "Revenue growth has been healthy, but treading water isn't enough to keep up with expenses in New York."

Jewett noted that Torys lost a number of lawyers when it became obvious that certain practices, like Haythe's successful municipal bond practice, didn't fit in the merged firm. Still, Torys hasn't been able to replace the losses with growth in its core practice strengths.

"Growth has to come through opportunistic lateral hires in our core areas, but we can't offer what a Skadden Arps [the leading U.S. mergers and acquisitions firm] does, so it's hard to attract the people that we need," Jewett said. "We'd like to grow but we won't do it just for the sake of getting bigger."

On its face, however, the difficulty with Ederer's departure is that IP is an essential part of many cross-border M&A transactions, a major ingredient in Torys' bread and butter. So some would have it that the loss of Ederer and his associates wounds to the core.

Closer examination, however, reveals a different story. Ederer's practice centred on trademarks and copyright. Given that Torys' Toronto practice is heavily weighted to patents, the fit wasn't there in the first place. Arguably, the fact that Ederer hung around for seven years is a tribute to Torys' consistent approach in treating both offices as one seamless firm.

"The cross-border fit wasn't there, and once [Ederer] left, it made sense for the associates to go because we wouldn't have been able to keep them busy," says a senior source at Torys. "Nobody's happy, but the departures don't really undermine our cross-border strategy."

What Torys is unhappy about is what the firm calls the "vague speculation" that Toronto partners are upset at the New York office and that New York partners are responding in kind.

Reliable sources at Torys say nothing could be further from the truth.

"It's all about strategy and everyone realizes that our strategy has focused primarily on growing the relationship we have with our Canadian clients who are doing more and more of their work in the United States," a source says.

"The strategy was simple. We feel we need to go where our clients went, and that hasn't changed."

Torys, firm members say, has never been interested in growing the New York office by "buying books of business." The emphasis, rather, has been on ensuring that the quality of the work, and particularly the cross-border work, remains on par with the first-rate reputation that has always attached to the Toronto office.

If there are internal problems arising from New York, Tory sources say, they come from the external speculation.

"We don't give our partners separate numbers for the New York office and the Toronto office because we are committed to taking a seamless one-firm approach," a senior source says. "Ironically, that builds on the largely inaccurate external speculation and engenders worry and speculation in-house."

If you listen closely to the speculation, you'd think that Torys just can't win. But you would be wrong. Take a look at the big picture.

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