Law Firms Expect Rise In Bankruptcy Business

As the credit crisis deepens, law firms across the country are betting that bankruptcy work will be their most-promising avenue of growth, and are accelerating their recruitment of restructuring specialists. A survey of more than 300 attorneys from the country's largest law firms found that a plurality -- one out of every four -- expects bankruptcy law to be the fastest area of growth in the next 12 months. That number exceeds the tally of attorneys who think litigation or corporate governance will be hot growth areas.

"The number of bankruptcy proceedings is expected to increase in reaction to continued economic uncertainty," said Charles Volkert, executive director of Robert Half Legal, which conducted the survey.

The slump in U.S. housing prices over the past year triggered a financial crisis that some economists say is the country's worst in at least 50 years.

To ease the crisis, the Federal Reserve has cut interest rates and lent hundreds of billions of dollars to financial institutions on Wall Street. But the credit crunch persists, making it especially difficult for troubled companies to obtain loans.

Last year, Chapter 11 bankruptcy filings hit a two-year high of 6,236, according to Jupiter eSources, an Oklahoma company that tracks the data. The pace of Chapter 11 filings has accelerated further this year.

"We've just stayed extremely busy," said Laura Davis Jones, managing partner of boutique bankruptcy firm Pachulski Stang Ziehl & Jones LLP's Delaware office. "The way the market looks now, it doesn't look like that will be changing anytime in the near future."

Skadden, Arps, Slate Meagher & Flom LLP added 17 attorneys to its corporate restructuring team last year and expects to add three more to the ranks over the next two months, according to J. Gregory Milmoe, the team's co-leader in New York.

Mr. Milmoe said the group's attorneys billed 45% more hours in January and February of this year than they did in the same months a year earlier, thanks to a demand for the their services that "emphatically" increased.

At Davis Polk & Wardwell, the firm's "extremely busy" bankruptcy practice has looked internally to meet its need for more staff, according to Marshall Huebner, partner and co-head of the practice. The firm cross-trains attorneys in related practices, such as banking or litigation, so it may redistribute them based on demand.

He said there are between 30 and 40 attorneys who are "actively working on restructuring," whether or not that is their full-time focus. Of those, 15 are attorneys who wouldn't have been working in the area a year ago but may have been focusing on banking or litigation.

Mr. Volkert of Robert Half said the complex and fast-paced nature of bankruptcy leads most firms to seek attorneys who have at least three to five years of experience in the practice so they can hit the ground running.

"Hands-on experience really matters. Legal professionals who are able to demonstrate a proven track record in that area are in demand," he said.

Article Featured in:Breaking Legal News