Black in Back - Bankruptcy Lawyers Regain Glory, Demand

According to Nathan Koppel of the WSJ, Corporate law firms are facing a boom in bankruptcy work but the rising demand in services has the firms fighting to hold on to their bankruptcy attorneys.

To claim a share of the lucrative bankruptcy market, firms need a stable of restructuring partners with loyal client followings and big-case experience. It costs more for firms to both retain that kind of talent or to hire such lawyers on the open market.

Paul, Hastings, Janofsky & Walker LLP last year offered more than $5 million a year to land Luc Despins, a New York lawyer who has represented creditors in many high-profile bankruptcies, including those of Enron Corp. and Lehman Bros. Holdings Inc. Paul Hastings, according to a partner at the firm, also guaranteed Mr. Despins that he would maintain his pay level for three years -- a rarity in the legal industry, where partner compensation typically fluctuates along with a firm's overall profit.

Mr. Despins declines to discuss his compensation. He says he joined Paul Hastings because it has a broad corporate client base, both domestically and abroad.
"When you see headhunters descending like locusts on any bankruptcy professional who can fog a mirror, then you know the market is a little frothy," says New York bankruptcy attorney John Bicks, who says his phone "rings constantly" from headhunters.

Corporate restructurings in court can be particularly lucrative for firms, often requiring a small army of lawyers to toil years before a matter is resolved. In the past two years, Kirkland & Ellis LLP has earned at least $225 million in fees in completed corporate bankruptcy cases, while Sidley Austin LLP and Willkie Farr & Gallagher LLP have each earned more than $100 million in completed corporate bankruptcies during that time, according to BankruptcyProfessional.com, which tracks fees in bankruptcies involving public companies.

Many law firms are looking to either add lawyers to their existing bankruptcy practices or to start a department from scratch, leading to a surge in hiring that is enabling some lawyers to increase their compensation by 20% or more if they are willing to jump ship to a competitor, New York recruiter Alisa Levin says. "Bankruptcy lawyers had their heyday years ago, and they have waited a long time to get back," she says.

Andrews Kurth LLP, a Houston-based firm with more than 400 lawyers, would like to deepen its bankruptcy bench, but it has been put off by many lawyers' salary demands, says Hugh Ray, head of restructuring at the firm. "Most lawyers want 20% to 30% over the firm's market [salary] rate," he says. "They feel they have been making less than their colleagues for years, and they think it's payback time."

New York bankruptcy attorney Raniero D'Aversa Jr. says that when he started searching for another job in 2007 he drew up a wish list of 20 law firms. Most of the firms agreed to meet with him, he says, and many offered attractive compensation packages.

"There were so many options," says Mr. D'Aversa. "There are a lot of firms eagerly looking to build in this space." He ended up taking a job last year at Orrick, Herrington & Sutcliffe LLP, which is paying him about $2.5 million in annual compensation, a pay raise of about 25%, according to people familiar with the compensation package.

Hiring activity is particularly frenzied in New York City and Wilmington, Del., the primary venues for corporate bankruptcy filings.

Where Did All the Jobs Go?

These days it seems like every lawyer has been touched by this economic downturn. Either you’ve been laid off from your law job or someone you know has been laid off from their law firm. And the layoffs have now finally reached the Texas market. Well, you’re not alone. It’s been reported that in 2008, around 1800 legal jobs were lost (including lawyers and legal staff). It’s also been reported that in just January and so far in February around 3000 legal jobs have been lost nationally, a number of those jobs here in the Texas market. Those numbers don’t include unreported layoffs or secret layoffs from big law firms that so many of you have been telling us about. Faced with losing a job, the obvious question is what do I do next.

Nationally, lawyers are retooling themselves. They’re retooling their legal resumes to show a broader depth of law practice experience, which is particularly a great idea for the transactional lawyers out there with corporate, finance and real estate experience. While litigation and bankruptcy practices are busy, it’s best to show that you have some legal experience in these busier practices. Lawyers are considering law jobs that pay less, and in some instances a lot less than their previous law firm job. They are thinking about geographic moves to locations with no connection other than a good legal job. And they’re even thinking about non-legal jobs until the economy improves. In these times, it pays to be creative and think outside the box about how to best market your legal skills and distinguish yourself from every other lawyer or candidate out there.

And the hits keep on coming...

According to the Daily Journal, the pace of law firm layoffs accelerated drastically nationwide in January, but Atlanta's largest firms do not yet appear to be caught up in large-scale terminations of attorneys and staff.

Of the seven large Atlanta-based firms contacted for this story, four confirmed layoffs of attorneys or staff, with varying degrees of detail. Two firms said they haven't had layoffs and another declined to comment. Recruiters at six firms contacted by the Daily Report, however, said they're seeing résumés from lawyers at all the large firms.

Since the beginning of the year, about 30 firms nationwide have announced layoffs totaling 1,528 staff and lawyers--compared to 1,762 layoffs announced by firms for all of 2008, according to Lawshucks.com. The Web site has meticulously compiled national layoff figures from confirmed reports in the legal press in a feature called Layoff Tracker.

In the last week of January alone, a whopping 858 lawyers and staff lost their jobs at big law firms nationwide, according to Layoff Tracker.

The figures compiled by the Layoff Tracker do not include so-called “stealth layoffs” that have not been confirmed, where firms lay off personnel in small increments in order not to attract attention.

Atlanta has not seen the large-scale layoffs that have hit firms in New York and California that invested heavily in structured finance practices. San Francisco's Orrick, Herrington and Sutcliffe, for example, announced in November it was laying off 75 associates, counsel and staff.

Firms in other cities that publicly are announcing cuts are shedding eye-popping numbers of lawyers and staff. Just last week, San Francisco's Morrison and Foerster announced it was laying off 201 people: 53 lawyers and 148 staff.

Other announcements last week that sent shockwaves through the national legal community came from Palo Alto, Calif.'s Wilson Sonsini, which cut 113 people (45 lawyers and 68 staff) and Boston's Ropes and Gray, which let go of 106 staff. The British firm Linklaters terminated 270 people: 120 lawyers and 150 staff.
Atlanta's legal recruiters say that most of the city's big firms are laying off lawyers, but they agree that the numbers, so far, are smaller than those seen in California, Chicago and New York.

“We're seeing firms very quietly trying to trim the fat, I think, at all levels from equity partner on down,” said Ilene Rosh, a recruiter at Hughes Consultants.
“We're seeing résumés from a lot of large firms that we don't normally see,” said Richard Rice, the head of attorney recruiting at firstPRO.