Work boomed in recent years for lawyers specializing in real estate, finance, mergers and acquisitions, initial public offerings and other areas.
But like other service providers, some law firms are having a hard time generating business as the economic downturn, credit crunch and turmoil on Wall Street have squeezed deals.
The troubles seen have pushed some law firms to lay off lawyers and staff.
Two large San Francisco-based law firms, Heller Ehrman LLP and Thelen LLP, collapsed last year amid financial troubles.
But the hard times aren’t hurting everyone, lawyers say.
Some practice areas are holding, if not thriving, in the downturn.
Here’s a look at practice areas that continue to generate business in a weak economy.
Bankruptcy and Workouts
Loose credit and a thriving economy allowed companies to rack up a lot of debt in the past few years. But now the financial meltdown is pushing many to declare bankruptcy or restructure their businesses, according to Craig Barbarosh, a bankruptcy partner at San Francisco-based Pillsbury Winthrop Shaw & Pittman LLP’s Costa Mesa office.
Manufacturers, retailers and other companies that took out big loans will have to pay those back now that their debt is coming due, Barbarosh said.
As many companies deal with slowing sales and falling profits, paying off their debt could prove difficult, he said.
“Over the past several years the debt market was liquid and a lot of companies raised a lot of debt,” Barbarosh said. “When there were problems they would just refinance. But they can’t do that anymore.”
Bankruptcy lawyers such as Barbarosh are finding themselves busy helping their clients rework their business plans and debt.
“This is the busiest it has been in quite some time,” Barbarosh said. “A lot of companies are starting to see that in this market now is the time to start addressing problems down the road.”
Litigation
Historically, the biggest jumps in litigation occur during slowdowns.
Rather than settling lawsuits as companies often do when cash is plentiful, businesses become more aggressive about protecting their assets as the stakes become higher, according to John Cannon, a litigation and securities partner at Stradling Yocca Carlson & Rauth of Newport Beach.
“When you have an economic downturn, the reality is that individuals and businesses often turn to litigation as a panacea,” Cannon said. “When times are tough the alternatives for your business are limited and unfortunately people turn to litigation.”
Intellectual Property
Litigation related to patents, copyrights and trademarks is another area that tends to withstand downturns.
Companies often become more aggressive about protecting their intellectual property and trade secrets in a weak economy, according to Mark Wine, partner of the Irvine office of San Francisco-based Orrick Herrington & Sutcliffe LLP.
“They want to guard their market share,” Wine said.
Layoffs, which often push people to start their own businesses, can lead to new ideas and inventions. Patent lawyers are tapped to do the due diligence in protecting those ideas, lawyers say.
The increase in global business also is prompting more companies to protect their patents as they engage in business deals with others overseas, according to William Rooklidge, partner at Washington, D.C.-based Howrey LLP’s Irvine office.
A surge in intellectual property work has bolstered Irvine’s Knobbe Martens Olson & Bear LLP, which took over as the county’s largest law firm by lawyers in the past year. The firm, which specializes in patent work, has 159 local lawyers and 246 firmwide.
“When times are tight, companies tend to enforce their intellectual property more,” managing partner Steve Nataupsky said.
Labor and Employment
Companies tend to see a fair share of litigation related to labor and employment issues in a down economy, according to James McDonald, managing partner of Atlanta-based Fisher & Phillips LLP’s Irvine office.
“In a down economy there tends to be more employment disputes,” McDonald said. “When the economy is good and unemployment is low, someone loses their job and often just moves on and gets another job. But when jobs aren’t plentiful, people tend to sue their former employers.”
Class-action lawsuits brought on by former employees about various issues such as wage and break time disputes can often arise in a weak economy, according to John McKasson of Costa Mesa-based McKasson & Klein LLP.
“Every day we’re hearing about more class-action cases being filed,” McKasson said.
Labor and employment lawyers are keeping busy these days by counseling their clients on reducing expenses for their businesses by cutting staff along with other costs, McDonald said.
Amendments to the Americans with Disabilities Act and regulations under the Fair Employment and Housing Act are pushing companies to gear up for employment issues that could arise, McDonald said.
Securities
Weak economic conditions and turmoil on Wall Street could prompt an upswing of shareholder lawsuits.
Lawyers also could see more lawsuits related to mergers and acquisitions gone awry, according to Cannon of Stradling Yocca Carlson & Rauth.
The recent loose credit market and thriving economy helped foster an abundance of mergers and acquisitions and private equity deals.
But as many businesses struggle amid weak economic conditions, some could look back and find problems with past deals.
Companies could allege some kind of wrongdoing or problem associated with a transaction where stock was purchased and file lawsuits, Cannon said.
New regulations placed on public companies as a result of the financial crisis could provide a lot of work for securities lawyers in the future, Cannon said.
Lawyers also could see an uptick in work related to company investigations, he said.
“Since the fall of the investment banks on Wall Street, there’s been an increased amount of attention on regulatory schemes for funds that have previously not been regulated,” he said. “We might see increased power and funding to the Securities and Exchange Commission, which could mean increased enforcement and an increased number of enforcement related cases.”
The financial crisis also is pushing some law firms to form practice areas specifically aimed at companies that are hard hit by the meltdown on Wall Street.
Law firms such as Los Angeles-based Gibson Dunn & Crutcher LLP’s Irvine office and the Costa Mesa office of Arizona’s Snell & Wilmer LLP have formed task groups that help companies cope with the economic crisis.
In addition to bankruptcy and workouts, litigation and securities help, companies will also need help dealing with tax issues, raising capital in a tight credit market and federal investigations into white collar crime as regulators will likely look for culprits of the collapse.
“We formed the practice to respond to our clients’ needs,” said Jim Scheinkman, a partner at Snell & Wilmer. “You got a period of uncertainty and also one of opportunity. It’s about bringing all disciplines to bear to help these companies get the best result possible.”
