Minden Gross has taken more than half a dozen former clients to court over unpaid bills, which collectively total more than half a million dollars.Christopher Katsarov/The Globe and Mail
The lawyer in charge of chasing down millions in unpaid bills owed to the now shuttered Minden Gross LLP says a small number of the firm’s former partners are hindering the collection efforts, by continuing to work with the delinquent clients at their new jobs without helping to get outstanding invoices paid.
“There are still several millions of dollars in receivables to be collected and we will be commencing more proceedings,” Irvin Schein, a member of the defunct firm’s executive committee, told The Globe and Mail in an e-mail.
“Most of the receivables are owed by a handful of clients who were serviced by a small number of partners who continue to work for those clients at their new firms,” Mr. Schein said. “While the vast majority of partners have been helpful in our collection efforts, these particular partners have been less helpful, notwithstanding that they have a fiduciary obligation to assist.”
Since January, Minden Gross has taken more than half a dozen former clients to court over unpaid bills, which collectively total more than half a million dollars. The bills range from $14,748.35 to $162,252.51 and about half have settled so far.
The executive committee is trying to negotiate with the clients who owe the largest sums, but Mr. Schein – who moved to Blaney McMurtry LLP after spending more than four decades at Minden Gross – said that these cases may also soon be heading to court.
“It may well be that former clients believe that they are under no obligation to pay for the services that had been rendered to them simply because the firm no longer operates,” he said. “Some clients have said as much to us. Any former clients holding this view are mistaken, as they have found or will shortly find out.”
Minden Gross, a mid-sized business law firm in downtown Toronto that had been in business for nearly 75 years, shut its doors earlier this year, but it isn’t entirely closed. It will likely take years for the firm to wind down, which means the business continues to shoulder operating expenses and liabilities. Minden Gross also hopes to recoup money to repay its former partners some of the equity that they had put into the firm.
Last December, departed partners were notified that the firm was “no longer financially viable,” and that, as a result, they would no longer be receiving their capital repayments. In a letter viewed by The Globe, the former partners were told that Minden Gross was having financial problems because of an “inordinate” number of recent departures.
More than a dozen partners had left the 65-lawyer firm in the three years prior to its collapse, but the tipping point came in mid-October, when two of the three members of the then-executive committee – managing partner Brian Temins and Samantha Prasad – shocked colleagues by announcing they were moving to Cassels Brock & Blackwell LLP.
From the outside, it looked as though a death spiral of departures had led to Minden Gross’s collapse. But according to multiple former partners within the firm, who cannot be named as they were not authorized to speak by the partnership, another central issue related to the firm’s invoicing practices.
The partners said that, for years, a handful of lawyers were being compensated based on their billable hours, without always invoicing clients in a timely manner and without the funds actually being received. For a select few, it was routine to bill well over a year after the work was done, sometimes taking clients by surprise, who then asked for discounts.
In the instance of at least one former client who was taken to court by Minden Gross recently, this seems to have been the case.
The client, who spoke on the condition of anonymity because of the conditions of a settlement, said that shortly before news of Minden Gross’s collapse broke, he received a large bill from the firm for work “claimed to have been done” many months earlier – in the case of some work, well over a year earlier. He also noted that with Minden Gross closing, his company would need to move to a new firm, which carries significant expenses. He felt this too should have been given some consideration.
In response to questions about the invoice practices at Minden Gross – as well as the client’s criticism – Timothy Dunn, another member of Minden Gross’s executive committee, said the firm can’t comment on specific matters.
“But we can confirm that the remuneration for all partners at Minden Gross was based on billings and not on collections,” Mr. Dunn, who is now also with Blaney McMurtry, said in an e-mail. “Some partners were certainly better than others at billing and collecting on a timely basis and, as with any business, cash flow requirements are never optimized when billing and collections are not timely.”