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Two days after the Sept. 11 terrorist attacks, the e-mails and faxes began to arrive at Kenneth McBroom’s attorney recruitment firm in Fort Lee, N.J. “We need associates with two to three years experience in handling bankruptcy and/or creditor rights work,” read a typical request. Within a week, more than a dozen job orders — just for openings at firms in New York, New Jersey, Pennsylvania and Washington — had been placed at his firm, Cooper Beckett & Associates. In some cases, law firms that never had substantial bankruptcy practices are looking to hire three and four lawyers, McBroom said. “I don’t ever recall seeing this volume of openings,” McBroom said. “If I had 50 qualified bankruptcy attorneys, I could place them all.” Even before the catastrophe in New York, the bankruptcy and insolvency practice was booming, with Chapter 11 bankruptcy filings during the second quarter of this year breaking all-time records, according to Ricardo I. Kilpatrick, president of the American Bankruptcy Institute and president of the bankruptcy practice at Kilpatrick & Associates in Auburn Hill, Mich. Filings during the first six months of the year increased 21 percent over the same period a year ago, according to figures compiled by the Administrative Office of the U.S. Courts. Now, with concerns the national crisis will further dampen the economy and push teetering consumers and companies over the edge, lawyers, recruiters and other legal experts predict that bankruptcy law is moving into an unprecedented era that could result in firms raiding other firms, higher salaries for partners and backbreaking work schedules. “Before, we were dealing with normal cyclical changes to the economy,” said Kilpatrick, who has gotten a number of calls in the past week from colleagues looking for bankruptcy attorneys. “This is very different. A lot of unknowns have been introduced.” Speculation is rampant that certain companies that were wavering before the attack — companies in the airline, travel, retail, and hotel and hospitality industries — will seek to reorganize in bankruptcy. Many others will attempt to restructure outside bankruptcy with the help of legal counsel, said J. Gregory Milmoe, co-head of the national restructuring group at Skadden, Arps, Slate, Meagher & Flom in New York. “We have had a flood of inquiries coming in at Skadden from companies you would not have thought of as struggling before the attack,” said Milmoe. “Now, they’re aware of their precarious financial situation, and they’re seeking advice. Up and down the line, manufacturing companies large and small are feeling the ripple effect. We have huge numbers of discussions going on with bank groups.” One early fatality was Midway Airlines. On Sept. 12, Midway, which filed for Chapter 11 in August, announced that it would shut down flight operations because “demand for air transportation is expected to decline sharply.” INSURANCE COMPANIES Another concern is that the total insurance bill to pay for property damage, workers’ compensation, loss of life and business-interruption claims could force some insurers into receivership. Standard & Poor’s said a week after the attacks that losses from 55 leading insurers and reinsurers totaled $14 billion and were “likely to rise significantly.” Once losses rise above $15 billion, it expects to see a “significant impact” on balance sheets of individual insurers, S&P said. In the United States, insurance and reinsurance companies — which are regulated at the state level — are prohibited from filing for Chapter 7 or 11 under the U.S. Bankruptcy Code. Instead, insurers and reinsurers go into rehabilitation or liquidation in the states where they are chartered, according to John Tinsley, special deputy for examinations at the Delaware Department of Insurance. A substantial number of big reinsurance companies are chartered in Delaware, including General Re Corp. (a subsidiary of Berkshire Hathaway), American Re Corp. (of the Munich Re Group) and Everest Re Group Ltd., he said. “We don’t see any problems with insolvency [for Delaware companies] from what we’re seeing so far, although they will take a significant hit,” said Tinsley. NO ‘PROFITEERING’ Bankruptcy lawyers throughout the country are far from celebrating the turn of events, but somberly agree they are in for an extremely busy 18 months to two years. James H.M. Sprayregen, of Kirkland & Ellis in Chicago — who earlier this year was the lead attorney in the TWA bankruptcy that resulted in the sale of assets to American Airlines — said, “Nobody wants to be profiteering from tragedy.” “But there’s no question that if the economic activity doesn’t pick up, there will be a lot more for us to do as a byproduct of the tragedy,” Sprayregen said. All this comes at the same time when there is a dearth of experienced associates and young partners in what is a complex and high-pressure area of insolvency law, bankruptcy experts say. Even before the attacks, most firms had already begun to ramp up their insolvency departments, said David Garber, president and owner of Princeton Legal Staffing in Princeton, N.J. In the past six to eight months, the increase in the demand for bankruptcy lawyers at his firm rose by 20 percent to 30 percent, he said. Jonathan Lindsey, managing partner of Major, Hagen & Africa in New York, a national legal recruiting firm, said his company has 56 different requests for bankruptcy lawyers in the New York area alone. NOT ENOUGH EXPERTS One problem is finding experienced candidates. Recent law school grads often steered clear of bankruptcy law and, in the late 1980s and early 1990s, bankruptcy experts often moved into other areas of the law as bankruptcy work dried up at the end of the last decade. Bankruptcy is also a complicated area of the law, and it takes at least two years to train lawyers to a point at which they can be fully functional members of a reorganization team. The result is that some partners could be making lateral moves, as has already happened. Weil, Gotshal & Manges lost several partners to other firms, with three going to Jones, Day, Reavis & Pogue. “A game of musical chairs has been going on in the bankruptcy bar,” Lindsey said. “Partners are very much in demand. Firms that don’t have sufficient capability are highly motivated to bring those people on board.” There could also be other ramifications for the practice. Delaware has long been the venue of choice for public companies filing large Chapter 11 cases. In 2000, 11 of the 15 biggest bankruptcies were filed in District of Delaware, according to BankruptcyData.Com in Boston. Some lawyers say that work could spread out to other districts because of concern over air travel, although Delaware is within driving and train distance for lenders and bondholders in New York and has a big bankruptcy bar to provide local counsel. More work could also be done by telephone and video-conferencing.

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