Counsels of perfection

Philip Slayton
A Law Society of Upper Canada disciplinary panel recently held hearings into the conduct of Dorothy DeMerchant and Darren Sukonick. The two lawyers are accused of having acted in a conflict of interest without disclosing the conflict and without getting the informed consent of each affected client. At the time of writing, the panel’s decision had not been handed down. A lot of people are nervously waiting for it.

This affair is not the usual garden-variety disciplinary matter. DeMerchant and Sukonick both worked at Torys LLP, the powerful and prestigious Bay Street law firm (Sukonick is still there; DeMerchant left to spend more time with her family). The conduct being investigated was part of the infamous Conrad Black saga, which destroyed careers, companies, and lives. Big issues are at stake, not just concerning the behaviour of two lawyers, but also about conflicts of interest, the conduct and policies of law firms, and the willingness of the law society to police its members effectively.

DeMerchant was a Torys partner. Sukonick was an associate who worked for DeMerchant and who has since become a partner. In 2000-02, they acted for Hollinger International and various of its affiliates and subsidiaries in the sale of newspapers, primarily to Canwest Global Communications Corp. (an ill-starred transaction if ever there was one). As part of those transactions, other clients of DeMerchant and Sukonick — notably Black — received substantial payments for non-competition covenants. In roughly the same period, DeMerchant and Sukonick also acted in additional matters for the same constellation of clients, involving, according to the law society, further conflicts of interest. One was Black’s renunciation of his Canadian citizenship, which may have had adverse tax and other consequences for Hollinger International.

The nub of the complaint is that the lawyers, and thus by extension Torys itself, helped one client, Black, to the detriment of another, Hollinger International (a public company). If that’s true, they all made a big and obvious ethical mistake. We should be appalled. We shouldn’t be surprised.

Black is a powerful presence. When this drama was unfolding, he ran Hollinger with an iron fist. It would be a very unusual lawyer who tried to stop Black acting to the possible detriment of what was seen to be his own company. Success would be unlikely, and the price of trying could be losing an important firm client and seriously damaging your career. Faced with these proposed transactions, with Black glowering on the other side of the desk, who could blame a lawyer, for simply saying, “Yes, Conrad.” Torys has stoutly maintained that DeMerchant and Sukonick did nothing wrong.

What is surprising is that Torys was apparently content to represent parties with competing interests in the same transactions. It is startling that the firm didn’t, at the very least, insist that different lawyers in the firm act for the different parties; as artificial as that might have been, it would have offered some cover from a conflict-of-interest accusation. No, it looks as if Torys walked naked into the maelstrom. Presumably all concerned were motivated by business rather than ethical considerations. As every Bay Street hand knows, this happens all the time. The most significant part of this story may not be the sins of individual lawyers, but the deeply rooted economic dynamics of big law firms.

Some secondary questions seem to have been overlooked in the hubbub. Sukonick was an associate at the time. What were the supervisory responsibilities of DeMerchant, the partner he reported to, and of Torys itself? Should Sukonick be considered less culpable than his then superiors (if the LSUC allegations are upheld)? How acceptable is it to hang an underling out to dry? (It was Black himself who at one point blamed “errors by underlings” for all of his troubles.)

And it would be interesting to know if, and when, the management of Torys reported the possible breach of the professional conduct rules to the law society. Old-timers will remember the infamous Lang Michener LLP affair of some 20 years ago. Members of that firm’s executive committee were disciplined for failing to make timely disclosure to the law society of a partner’s malfeasance.

It’s not just DeMerchant and Sukonick, and their firm, who are on trial. The law society has a lot at stake. Many regard its disciplinary activities, and those of other Canadian law societies, as suspect in principle (putting the fox in charge of the henhouse), and dubious in practice (the disciplinary historical record is unimpressive to say the least).

Most of the time, law societies operate under the radar. No one pays any attention if the regulator disciplines a solo practitioner who failed to maintain proper records and then ignored letters from the law society asking that something be done about it. But a lot of people are watching the DeMerchant/Sukonick affair closely. A major law firm is involved. The cast of characters includes Black. The press is assiduously on the job. The Ontario law society needs to get this right to enhance its credibility.

The hearings didn’t get off to a good start with revelations of boxes of undisclosed documents. “It was an oversight,” said a spokesman for the law firm. The hearing was delayed while document disclosure was sorted out. Then, there was considerable discussion about whether the proceedings should be in camera to preserve solicitor-client privilege; an attempt was made to solve that problem by seeking waivers from the clients involved. None of this inspired confidence.

Getting back to DeMerchant and Sukonick, what, realistically, could have been expected of them? Were they supposed to defy an imperious and unforgiving Black? Should they have stood up to the management and partners of Torys, jeopardizing the firm’s relationship with a major client and thus their own careers? These, I think, are counsels of perfection.

Philip Slayton has been dean of a law school and senior partner of a major Canadian law firm. Visit him online at philipslayton.com.

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