U.S. law firms, anticipating a huge rise in lawsuits and other legal work spurred by the economic crisis, are creating task forces to advise financial firms, investment funds and local governments to deal with the turmoil.
The financial market woes could help boost business for big corporate law firms whose mergers and acquisitions practices, which boomed when credit flowed freely and deal activity flourished, have been hard hit by the economic crisis.
The $700 billion government bailout of financial firms is expected to create legal work as law firms advise companies on how to participate in the rescue and navigate any long-term regulatory changes expected to result, attorneys say.
Bankruptcy, restructuring and white-collar criminal defense experts also are likely to be in demand as companies grapple with an array of problems.
“The legal issues flowing from the financial crisis are staggering and multidimensional,” Thomas Hall, a partner at law firm Chadbourne & Parke LLP in New York, said. “We are clearly in the midst of a legal tsunami.”
Chadbourne formed a financial crisis task force this week. Other law firms that have announced similar efforts in recent days include Mayer Brown LLP, K&L Gates and Gibson Dunn & Crutcher LLP.
Many firms had formed subprime lending teams last year to help clients handle legal issues triggered by the mortgage crisis, such as shareholder lawsuits against lenders and banks and various litigation over securitization of mortgages.
The deepening financial crisis has led to the creation of new teams of attorneys by big firms that now include experts in many more areas, including bankruptcy, litigation and financial regulation.
Mayer Brown partner Charles Horn in Washington, D.C., said his firm’s task force expands on the subprime group the law practice created last year.
The new team includes more than two dozen attorneys and many more lawyers who will work with the group. It was created in part because the rapid developments in the credit and finance markets are leading to many queries and needs from financial institutions, he said.
“We have a lot of clients who are nervous,” he said. “Often they need things done very very quickly. We have to be in a position to respond to them.”
Hall said Chadbourne & Parke’s task force includes white-collar defense experts who are focused on helping companies conduct internal investigations in anticipation of potential litigation they may face. He said it’s widely anticipated that government probes could result in some criminal charges against financial executives.
Hall said his firm is also examining potential legal issues for state and local governments that have been stressed by the financial crisis. California Gov. Arnold Schwarzenegger, for instance, has said his state could be pressed to seek financing from the U.S. government amid a lack of liquidity in credit markets.
Overall, Hall said, “September was our busiest month in a long time” in terms of the number of hours worked by its attorneys.
Besides brisk business for its bankruptcy group, he said the firm has several departments unaffected by the slowdown, such as its products liability practice group.
(Editing by Brian Moss)
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