With the stock markets falling and credit markets tightening, law firms across the United States are dealing with panicky clients and scrambling to form new practice groups focused on the economic crisis.
Four more firms announced the formation of the new practice groups yesterday, bringing the total to at least 11.
Richmond, Va.-based LeClairRyan, Boston-based Foley Hoag, Tampa, Fla.-based Carlton Fields and Akron, Ohio-based Roetzel & Andress each announced creation of practice groups named with words like “crisis,” “restructuring” or “recovery.”
In just the past two weeks, Washington-based Patton Boggs, Houston-based Bracewell & Giuliani and several other firms have announced practice groups focused on the disruptions — and opportunities — of the credit paralysis.
“Clients are really looking to understand the terms of the Emergency Economic Stabilization Act,” the $700 billion bailout package signed into law last week, said Paul Merolla, head of the financial services practice group at LeClairRyan and of the firm’s New York office.
Whether clients understand the finer points of the bailout or not, most of them are relieved, he noted.
“We have clients who need to sell nonperforming assets and some who might perceive an opportunity [to buy],” Merolla said. “I don’t know if ‘hopeful’ is the word, but people are glad the legislative process is behind us. The focus is on implementation of the legislation and how it will all work out.”
Looking for bargains
Roetzel & Andress, based in Akron, but with offices in both Washington and Florida — an epicenter of mortgage foreclosures — announced the formation of a financial crisis advisory group. Jeffrey J. Casto, president of the firm and head of the new group, said many clients are eager for bargains once the Treasury Department implements rules for sale of distressed assets.
“The problems in real estate could be a bonanza for clients who have resources and are prepared to move” Casto said. “We needed a task force that cuts across all practice groups because there will be opportunities, down the road, when we get clarity on how soon they will dispose of assets.”
Carlton Fields, which as nearly 300 lawyers throughout Florida and Georgia, is forming a “recovery task force” comprised of 15 to 20 lawyers. The task force was first proposed to be called a “bailout task force.” It will focus on “what kinds of opportunities will be available with the congressional plan,” said Jay Steinman, chairman of the firm’s Miami real estate and finance group.
The firm has been asked by the American Bar Association to create a “white paper” on what the bailout plans means. The analysis will be completed this week by Carlton Fields partner Sandra Porter, and the firm will do weekly updates.
Coincidentally, the firm had its annual firmwide retreat last weekend at the Ritz Carlton in Naples, Fla., and all talk was about the economic crisis. “Usually, it’s just a socialization meeting — a chance for everyone to meet face to face. This time, the talk was all substantive.”
In Florida — among the states hardest hit by the market problems — it seems that law firms are in the credit crisis practice whether or not they name specific practice groups.
The panic button
Martin Press, a partner at Gunster Yoakley’s Fort Lauderdale, Fla., office who specializes in private wealth and estates, has been inundated with calls from worried clients. Many of his clients are Europeans with multimillion-dollar U.S. investment portfolios.
“No one wants to talk about anything else,” said Press. “People are calling their investment advisors and they’re calling us. Some people are panicking and other people just want to loosen up their stocks.”
Press said he took a meeting Monday with a European client who is buying up Florida real estate as the markets tank. However, the client wants to wait until the real estate market bottoms out.
“Real estate investors are looking at Florida as a tremendous opportunity,” Press said.
Another South Florida lawyer who did not want to be identified said he was called Monday by a large nonprofit foundation he represents that wanted to transfer all its liquid funds — several million dollars — into U.S. Treasury bills. “They wanted to review everything in their investment portfolio to make sure they were being conservative enough,” he said.
Bowman Brown, chairman of Miami-based Shutts & Bowen’s financial services practice group and a Miami partner, has been working 12-hour days since the financial crisis began.
He is fielding calls from his many banking clients that need help working out distressed loans and selling distressed assets. They are under regulatory pressure to raise capital and looking into potential mergers or acquisitions.
Brown said he was on the phone Monday with a large bank he represents as a customer was withdrawing $6 million from a teller window. “He wanted to take it to some secure place,” Brown said. “And this bank is a very, very triple A rated bank, somewhere I would put my money.”
Brown has also been working to save a deal involving a small community bank that was anticipating a third-quarter loss of $3.5 million and instead had an $8.5 million loss. “That deal is a lot less likely to go forward than it was several days ago,” Brown said.
“There’s a lot of stress out there,” Brown said. “The interbank has frozen up several times, which is the core of our financial market. If banks don’t lend to each other, liquidity dries up, and that flows through to the rest of the economy.”
Gary Carmen, a partner in the Miami office of Gray Robinson, said it’s a waiting game for clients now.
“I have clients who want to be bottom fishermen and buy distressed properties,” he said. “But no one knows how this is all going to work yet. Everyone is in a waiting game.”
Carmen said it’s unclear whether the new bailout plan will in any way resemble the Resolution Trust Corp. (RTC) of the 1980s, which the government formed to take over troubled savings and loans. That system worked quite well, he said. “But they’re not saying they’re creating an RTC this time,” he said.