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.