Legally Speaking - Legal Recruiter Blog

Most corporate law firms rely on financial institutions as the bedrock clients on which they are built.  Lehman Brothers’ bankruptcy and the acquisition of Merrill Lynch by Bank of America have sent a wave of anxiety through New York’s top law firms.  This news, along with the earlier demise of Bear Stearns and probable imminent collapse of insurance giant American International Group, does not bode well for law firms who rely heavily on financial clients.

Unlike corporate clients, financial clients have usually been willing to pay full rate or premium fees to the firms they employ.  This is why New York law firms are so profitable.  Firms from other cities and even outside the U.S. have sunk a lot of money into New York offices in an effort to get a piece of the Wall Street pie.

Corporate firms fear forced consolidation and new government regulation will lead to a cost-cutting mentality on Wall Street.

The acquisition of Merrill Lynch by Bank of America spells trouble for firms like Shearman & Sterling and Skadden, Arps, Slate, Meagher & Flom who have relied heavily on Merrill Lynch.  What their roles, if any, will be after the takeover is unknown.

Cadwalader, Wickersham & Taft, which has already laid off 100 lawyers this year, did big business representing Lehman in its offerings of mortgage-backed securities, which proved to be the bank’s Achilles heel.  Lehman’s demise may be the nail in the coffin of Cadwalader’s core securitization practice.

 It’s clear that the only winners in the Lehman Brothers Holdings Inc.’s bankruptcy will be lawyers.  The bankruptcy will probably occupy over 100 lawyers working for Lehman and claims by the creditors will provide work for thousands of bankruptcy attorneys. 

Lehman’s Chapter 11 filing, the biggest one in history, names Harvey R. Miller and Shai Waisman of New York’s Weil, Gotshal & Manges as Lehman’s lawyers.  Only eight other lawyers are named so far in the filing for creditors and other parties, but bankruptcy lawyers are already fielding hundreds of calls from potential claimants.

The bankruptcy only involves Lehman’s holding company because businesses governed by securities regulators aren’t eligible for Chapter 11.

Lehman is looking to sell it’s broker-dealer operations and it’s investment management division, but it is unknown whether Lehman will try for a fast sale of it’s holding company or seek restructuring.

UPDATE:  Barclays and Lehman Brothers have apparently just reached a deal to purchase Lehman’s broker-dealer operations. Read about it here.

More on Lehman Brothers:

A Fight for a Piece of What’s Left

Lehman Bankruptcy Sees New Judge Face Veteran Lawyers

Lehman taps bankruptcy-expert Harvey Miller

Lehman Creditors, Shareholders May Lose Billions