Bailout Boom: Law Firms Brace for Tidal Wave of Bankruptcies, Litigation, Regulation
Anticipating a surge in lawsuits and other legal work spurred by the economic crisis, law firms are staffing up and creating task forces to advise financial firms, investment funds and local governments on how to deal with the turmoil. Top law firms are also experiencing a boom in work advising banking clients in mergers and acquisitions, bankruptcies and lawsuits. The spate of work began in March with the collapse of Bear Stearns and its government-brokered sale to JPMorgan for about $2 billion, according to Bloomberg.
Executive search firm, A.E. Feldman, says legal jobs are opening up as law firms brace for a virtual onslaught of bankruptcies and litigation as well as new regulation. Top firms are taking action to help their clients make sense and survive one of the most significant events in the history of the U.S. economy, says A.E. Feldman’s President, Mitch Feldman. Feldman also notes, “The issues these task forces seek to address can dramatically impact their clients’ bottom lines. This is critically important in today’s business climate.” Among the experts in greatest demand will be litigation, bankruptcy, restructuring and white-collar criminal defense attorneys as companies grapple with an array of problems. Compliance attorneys are also in growing demand as financial institutions brace for a myriad of new regulations.
Firms Take Action
The international law firm of Chadbourne & Parke recently announced it has formed a financial crisis task force to provide interdisciplinary advice to clients working through the morass of problems associated with “global economic events affecting virtually all sectors of the economy.”
“The extraordinary financial events of recent weeks create enormous challenges for companies of every size and in every business,” said Charles K. O’Neill, Chadbourne’s Managing Partner. “Our senior partners are pooling their knowledge and experience in the key areas of litigation, bankruptcy and restructuring, corporate and securities, insurance and reinsurance, structured finance, real estate and tax to respond proactively to our clients’ needs.”
“The economic and legal consequences of the financial crisis in the United States and abroad will require comprehensive legal advice over the next several years,” said New York Partner Howard Seife. Chadbourne Partner, Thomas Hall, adds, “We expect a significant increase in actions on debt and other credit obligations, insolvencies, forced sales of secured assets, class action and securities litigation, restructurings in the financial and insurance sectors, as well as complications arising from increased regulation.”
Other law firms that have announced similar efforts in recent days include Mayer Brown, K&L Gates and Gibson Dunn & Crutcher.
Mayer Brown recently announced the establishment of a Global Financial Markets Initiative to “integrate and expand the firm’s activities to help clients deal with legal and business challenges resulting from the ongoing turbulence in worldwide financial markets.”
“We now are bringing together our efforts in the US, Europe and Asia to create a unified, firm-wide focus on these issues. We also are involving additional practice specialties to serve the full spectrum of needs that are emerging,” said Chairman James D. Holzhauer.
In October 2007, Mayer Brown became one of the first law firms to address the subprime lending crisis through creation of a Subprime Lending Response Team. As the credit crisis grew in scope and geographic reach, the group expanded its focus to encompass a wide range of credit-related legal issues and was renamed the Credit Market Distress Team.
“With events moving at breakneck speed and potential legal exposure increasing exponentially, we have enhanced Mayer Brown’s ability to provide clients with timely and knowledgeable counsel across practice and geographic boundaries,” said Holzhauer.
Another firm responding to the upheaval triggered by the credit crisis is law firm K&L Gates. The firm announced it has organized a Global Financial Markets Group aimed at advising clients on dealing with the complex issues stemming from the current global economic crisis. The new group consists of lawyers from a wide range of practices, including banking, Securities and Exchange Commission and securities regulation.
Gibson, Dunn & Crutcher has also announced it has formed a team to counsel clients on the government’s response to the financial crisis. The attorneys that have been assembled for Gibson Dunn’s Financial Markets Crisis Group have a broad range of experience in the areas of securities, finance, corporate, real estate, tax, bankruptcy, public policy and crisis management.
“The regulatory framework is changing rapidly,” said Michael Bopp, a Partner in Gibson Dunn’s D.C. office and Coordinator of the firm’s Financial Markets Crisis Group. “New programs are being created, and new authorities now regulate the marketplace. Oversight hearings have begun and Congressional investigations are likely to follow. And there is more to come; there will be more change that will create new challenges and opportunities,” says Bopp.
Bankruptcy, Litigation & Compliance
Moreover, as the financial crisis worsens, big law firms are creating teams of attorneys that now include experts in many more areas, including bankruptcy, litigation and financial regulation.
U.S. consumer bankruptcy filings surged 28.6% nationwide in September versus the same period in 2007, according to the American Bankruptcy Institute. Reuters quotes Lisa Donahue, Co-Head of the Turnaround and Restructuring Practice at business advisory firm AlixPartners, as saying a big uptick in litigation over bankrupt companies’ collapses could continue for years.
A recent Forbes report also contends we’re entering “the next great mega-litigation, likely to rival the more than $12 billion spent cleaning up the Enron and WorldCom debacles.”
The report quotes Jesse Finkelstein, a Partner at Wilmington, Del.-based law firm Richards, Layton & Finger, as saying, “There will likely be a significant amount of litigation that follows what’s been happening in the market. And it will probably have a similar flavor to previous waves of shareholder litigation. There will probably be accusations of some sort of mismanagement used as a hook to make claims about the board of directors being asleep at the switch.”
Law.com also quotes Julie Richard, a former Asset Management Attorney at Bear Stearns as saying financial institutions will be hiring more compliance lawyers. The report notes this is partly because Morgan Stanley and The Goldman Sachs Group Inc. are transforming themselves from investment banks into bank holding companies.
Are you working in bankruptcy, restructuring or litigation? If you want to grow your career or your company’s bottom line, contact Mitch Feldman, President, A.E. Feldman now. Find out more about financial jobs and legal opportunities today!
