Since Bill Simonitsch began at K&L Gates a decade ago, the Miami partner listed his primary practice as bankruptcy and his secondary as commercial litigation on the firm’s website.
About a year ago, he flipped that to list litigation first. He also changed his “elevator pitch”—the pitch he gives to prospective clients he may meet in the elevator.
The changes reflect Simonitsch’s response to a dramatic decrease in bankruptcy filings since their peak in 2010 as the economy recovered and interest rates remained low.
“I used to do 70 percent bankruptcy or insolvency and 30 percent commercial litigation,” he said. “Now I shifted to 15 percent bankruptcy and 85 percent litigation. For anyone who has practiced in the bankruptcy area, it’s been pretty clear that things have slowed down. You have to ride the wave.”
Data from the Administrative Office of the U.S. Courts show nearly 1.6 million bankruptcy filings nationally in 2010 compared with 1.1 million this year for a 31 percent drop in three years.
Law firms with bankruptcy practices have been forced to adjust their practice areas as a result. For some, that adjustment has been more painful than for others.
New York-based Weil, Gotshal & Manges stunned the legal industry in June by laying off 60 associates and 110 staffers and slashing compensation for some 30 of the firm’s 300 partners.
Weil Gotshal’s bankruptcy practice made millions of dollars in legal fees advising General Motors and Lehman Brothers and from spinoff litigation. But when those bankruptcies wound down and the firm was unable to make up the difference in transactional work, leadership said it was forced to reduce staff.
But legal experts say Weil Gotschal is a rarity and don’t expect to see widespread layoffs at law firms as a result of the bankruptcy slowdown.
“Weil Gotshal was the ultimate power player in the bankruptcy area,” said Joe Altonji, a law firm consultant with Chicago-based LawVision Group. “They are the exception. Really, only 3 percent of lawyers nationally are classified as bankruptcy specialists.”
While no layoffs have been reported, some firms in South Florida are not replacing lawyers who leave, not hiring new lawyers or repositioning people in other practice areas. Others are looking for new opportunities internationally.
“The discussion in the bankruptcy community is it’s pretty dead right now,” said Michael Goldberg, head of Akerman’s bankruptcy and reorganization practice. “Certainly we’re not burning the midnight oil like we did in previous years. I’m getting home at 7:30 when I used to get home at 10:30.”
While Akerman was hiring bankruptcy lawyers at the height of the recession, the firm is not taking on any more unless they have “substantial books of business,” he said.
Still, with Goldberg serving as receiver in three of South Florida’s largest bankruptcy cases—Rothstein Rosenfeldt Adler, Fontainebleau Las Vegas and Tousa Inc.—Akerman has enough on its plate that it doesn’t have to reposition anyone out of the practice.
“We have a good mix,” he said. “We’re a little more diversified. Our practice tends to be fraud-driven, and frauds take place in good economies and bad economies.”
One of South Florida’s most bankruptcy-heavy law firms is Berger Singerman. A quarter of the firm’s 79 lawyers are in its bankruptcy and restructuring practice.
The firm made more than $20 million in legal fees as lead attorneys for the Rothstein Rosenfeldt Adler trustee. For four years, the firm assigned 10 lawyers to the case, filing litigation, holding depositions and unraveling the finances of the law firm run by Scott Rothstein, who is serving 50 years in prison for masterminding a $1.2 billion Ponzi scheme.
But the approval of a reorganization plan in July shut off a spigot that engaged dozens of bankruptcy lawyers.
Berger Singerman co-chair Paul Singerman insists his law firm is just fine with RRA’s case petering out along with Chapter 11 filings. For one thing, his firm is involved in an even bigger bankruptcy case, acting as counsel for the trustee of Ocala-based Taylor, Bean & Whitaker Mortgage Corp., which failed in 2009 The case involves more than $11 billion in claims from thousands of claimaints.
“Notwithstanding the slowdown in reorganization cases and notwithstanding the winddown of Rothstein, we remain involved in a number of cases involving substantial bankruptcy litigation matters,” Singerman said. “The majority of our bankruptcy-related work is on the company or fiduciary side, and we take great measures to ensure that we remain conflict free. We are still very much engaged and very busy with bankruptcy litigation.”
Another bankruptcy-heavy law firm is Genovese Joblove & Batista, which backed up Berger Singerman in the Rothstein case. With bankruptcy representing 60 percent to 70 percent of the firm’s business, “bankruptcy has always been a major profit center for us,” said firm co-founder John Genovese.
He said his firm took care not to staff up during the four-year Rothstein case, saying, “We’re not New York. We never staff up for a particular case.”
Still, Genovese is feeling the pinch.
“Most bankrupties are one-offs,” he said. “Given the uncertainty in the market and the current level of work, we don’t anticipate hiring additional people. I would prefer there be more predictability.”
Two departed Genovese Joblove bankruptcy attorneys won’t be replaced.
Scott Baena, restructuring and bankruptcy chair at Bilzin Sumberg Baena Price & Axelrod, acknowledges his firm misses the golden years of 2008, 2009 and 2010 when lawyers couldn’t keep up with the bankruptcy filings. However, his group is keeping busy.
“Obviously we lament not having true restructuring work going on, but our practice group has always distinguished itself as being able to do bankruptcy litigation,” he said. “This may be the new normal.”
Greenberg Traurig has no plans to reassign bankruptcy lawyers, according to Mark Bloom, co-chair, national business reorganization & financial restructuring practice chair for the firm’s 65-lawyer practice. Instead, the firm is scouting for new opportunities internationally—in Europe, Asia and Latin America. The firm sees potential opportunities in Chapter 11 cases filed by offshore companies, hedge funds in the Caribbean and Korean shipping companies.
“Bankruptcy laws in some of the countries are in the early development phase,” he said. “They are feeling their way around, how to handle workouts handling multiple creditors. We are looking at a number of cross-border opportunities of that type right now.”
With offices in London, Shanghai and Mexico City and relationship offices in other parts of the world, Greenberg is in a good position to have an international focus.
“One of the advantages of Greenberg is not only do we have a large geographical footprint, but we can adapt and change to the needs of the marketplace,” he said.
Jason Jones, immediate past president of the Bankruptcy Bar Association of the Southern District of Florida, recently left Bilzin Sumberg to open his own shop an said he may segue into litigation if things don’t improve.
“At this point, I don’t know whether to just stick with bankruptcy,” he said. “I’m fully capable of doing litigation. I think people are retooling and remarketing themselves a little different than they did a few years ago. They’re transactional and bankruptcy attorneys, or they’re commercial litigation and bankruptcy attorneys. Well-managed law firms make adjustments very quickly.”