NEW YORK/LOS ANGELES (Reuters) - Even as U.S. law firms see some of their steadiest clients go by the wayside in the financial crisis, a few star lawyers are hitting pay dirt as they sort through the mess.
Top bankruptcy attorneys, high-powered defense lawyers and regulatory law experts are big winners in the financial meltdown, while deal lawyers who enjoyed robust business in recent years are seeing a marked downturn.
Lawyers who represent shareholders in big class-actions could also do well, but only if they prevail against banks, lenders and others they blame for causing staggering investor losses. Most shareholder attorneys work on a contingency basis, meaning they do not collect anything unless their clients win damages at trial or negotiate a financial settlement.
“Everybody is going to be affected,” said Fred Krebs, president of the Association of Corporate Counsel, an organization of in-house legal departments at major companies. “To the extent there have been these meltdowns, there is going to be litigation.”
The disappearance of three banks -- Bear Stearns & Co, Lehman Brothers Holdings Inc and Merrill Lynch & Co Inc MER.N, which has agreed to merge with Bank of America Corp (BAC.N) -- is expected to curb business for law practices long accustomed to lucrative fees from advising Wall Street.
San Francisco-based law firm Heller Ehrman LLP recently shut its doors amid the malaise, and others such as Cadwalader Wickersham & Taft LLP of New York and Chicago-based Sonnenschein Nath & Rosenthal LLP have laid off attorneys.
Young lawyers hoping for entry-level jobs at elite firms also could be disappointed. Hiring of summer associates for 2009 is likely to be down 35 percent from last year, said Jerry Kowalski, co-founder of legal consultant Kowalski & Associates in New York.
A recent survey of corporate legal departments by Serengeti Law, a legal services company, and the Association of Corporate Counsel showed that spending on outside lawyers has slowed to its lowest level in eight years.
For a few high-powered lawyers, though, the coming years could break records in terms of the fees they command.
Among the winners is expected to be veteran bankruptcy attorney Harvey Miller of Weil Gotshal & Manges, who heads the team advising Lehman in its bankruptcy proceedings.
Miller and other senior lawyers at the New York-based firm charge as much as $950 an hour, according to a fee application filed with the U.S. bankruptcy court in Manhattan. Other lawyers at his firm bill at upward of $650 an hour, while more junior lawyers bill $355 to $595 -- not including expenses such as takeout sushi or taxis home when they work late.
Add it all together, and the Lehman meltdown is poised to churn out the biggest fees ever in a bankruptcy, said Lynn LoPucki, a law professor at UCLA and Harvard University.
He estimates that court-awarded fees from the Lehman case could total about $900 million, compared with about $757 million paid out following the bankruptcy of energy trader Enron Corp in late 2001. He said total fees in the Lehman case could ultimately climb to $1.4 billion, including payments that do not require court approval.
Other law firms poised for big fees in the case are Milbank Tweed Hadley & McCloy LLP in New York, adviser to the creditors’ committee, and Quinn Emanuel Urquhart Oliver & Hedges in Los Angeles, the creditors’ committee special counsel. These firms, too, have requested billing rates of up to $950 per hour for top partners.
With some criminal probes under way spurred by the financial crisis and many more expected, law firms with high-end white-collar criminal defense and litigation practices also stand to cash in on economic misery.
The top guns in the legal world include Wilmer Cutler Pickering Hale and Dorr LLP’s William McLucas, a former U.S. Securities and Exchange Commission enforcement chief who represents former Countrywide Financial Corp Chairman Angelo Mozilo in civil and criminal securities probes. Mozilo is the subject of an SEC investigation into his stock sales. He has not been charged with any crime.
Another big name is Brendan Sullivan of Williams & Connolly, a veteran white-collar lawyer in Washington who has joined the defense team of indicted ex-Bear Stearns hedge fund manager Ralph Cioffi.
The government bailout of financial firms and a changing regulatory environment is also likely to create work for specialists in regulatory and civil litigation.
“My expectation is that those (types of) firms will be seeing record years for 2008 and 2009,” Kowalski said.
He named Sullivan & Cromwell LLP’s H. Rodgin Cohen and David Boies of Boies Schiller & Flexner LLP, both in New York, as “go to” lawyers in that arena.
Cohen has advised a who’s who of banks on bailout-related issues and Boies, who led former Vice President Al Gore’s 2000 election litigation, has a roster of financial clients. He recently represented Wachovia Corp WB.N in a takeover battle for the bank.
Cohen said business has exploded.
“It’s been extremely busy. Probably over six, seven weeks of time, it’s the busiest time we’ve ever seen,” he said. “I don’t think it can stay this frantic over a long period of time. Just a lot of factors came together and those are not long-lived circumstances. No one could live through it if it continued anyway.”
Reporting by Martha Graybow and Gina Keating; Editing by Eddie Evans