Law firms cope with economy

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Like most businesses, law firms are navigating through the current economic turmoil.

Several larger firms have established task forces or new practice groups to address client questions related to the $700 billion bailout plan passed by the federal government.

“We want to centralize client concerns, instead of having five different attorneys trying to address the same issue from five different clients,” said attorney James D. Friedman, who is in charge of the newly-created Financial Service Task Force at Quarles & Brady, LLP, in Milwaukee.

The 17-member task force at Quarles drew experienced attorneys from different practice areas and is an atypical, but necessary approach for keeping clients calm, Friedman said.

Similarly, Michael Best & Friedrich, LLP, and Reinhart Boerner Van Deuren S.C., have instituted teams of attorneys to collectively handle clients’ economic queries.

Credit Questions

Reinhart CEO Jerome M. Janzer said in October, the firm established a new practice group of half a dozen attorneys with expertise in banking, real estate and business law.

One of the primary concerns for clients, according to Janzer, has to do with how fiscally sound their investments are in the wake of institutions like Lehman Brothers Holdings Inc. filing for Chapter 11 bankruptcy protection.

“When they went under, we got a lot of questions with respect to [stock] swap agreements and letters of credit,” said Janzer. “As well as concerns about getting credit in a market that is so frozen.”

The same is true for Friedman, who said clients want to know whether or not they should “redeploy” their assets.

“Large business clients may have some financing from Lehman, and say, ‘Gee, what about my line of credit?’” Friedman said. “There are a lot of what ifs.”

The U.S. Treasury Department recently announced that it will use a portion of the approved bailout money to pay for taking partial ownership stakes in banks, instead of using it to absorb debt from financial institutions.

President Bush announced that approximately $250 billion will be used to purchase stock in at least nine large banks, in an effort to loosen credit.

Despite the measures taken by the government, Friedman said clients have asked him if the country is on the cusp of another depression.

“We’re telling them what the correct answer is, depending on their situation,” Friedman said. “If people have a deposit with a bank, we tell them what their insurance coverage limitations are or what happens when a broker deal fails.”

Property Value

In mid-October, Michael Best formed a Distressed Real Estate Group to include attorneys from the bankruptcy, real estate, land use, transactional finance and litigation practice areas.

Managing partner David A. Krutz said the group was formed to specifically address the continued financial fallout in the real estate market, and what it means for clients.

“We are helping clients craft cost effective and practical solutions for stressed real estate throughout the country,” Krutz said.

Last year, Reinhart formed a Securitized Mortgage and Loan Fraud Team to combat the impact the subprime lending crisis was having on business clients.

While the group is still working to untangle clients from subprime scams, Janzer said the sustained real estate slump prompted the formation of the new practice group.

“I suspect this is going to last for awhile and we’re not yet in late innings of this economic challenge,” said Janzer.

But it is not potentially all bad news for clients.

Friedman said the government’s decision to invest in the banking industry could result in assets being sold off at bargain prices.

“I expect we’ll get questions from clients asking how they can gain a business advantage,” said Friedman.

Internal Adjustments

Within the walls of the Quarles office in Milwaukee, which houses almost 200 attorneys, Friedman said it is business as usual.

The firm has remained stable in terms of its workforce and workload, although Friedman admitted that the firm may take a more conservative approach to hiring new attorneys if the economy continues to slide into next year.

“We’ve never laid-off lawyers or staff,” Friedman said. “But as you get into tough economic times you often have people retire and we may be more conservative about how we replace them.”

Janzer, who oversees a firm of 210 attorneys, shared the sentiment in that Reinhart will be cautious as to where and how they allocate resources.

But he also does not expect to take any “drastic steps” with regards to the firm’s employment or business strategy.

“I think it might be different if we were a bigger firm in a bigger city,” Janzer said. “They may not be hiring as much as they have in the past.”

At Michael Best, which has 230 attorneys, Krutz said like any business, the firm is taking measures to ensure stability.

“We have always taken a conservative approach to managing our business, and that is proving to be the best course as we face the same challenges many businesses are facing,” Krutz said.