Tables Turn for Bankruptcy Boutiques Awash in Business
By AMANDA BRONSTAD
When Michael Tuchin and two other partners left Stutman Treister & Glatt PC three years ago, the odds were stacked against them.
Bankruptcy attorneys, the three were starting a boutique firm at an economic boom time when other bankruptcy boutiques were dissolving.
"People said to us, 'Boy, you're brave. What a horrible time to start a bankruptcy firm,'" said Tuchin.
The tables have turned.
Tuchin, co-managing partner of Klee Tuchin Bogdanoff & Stern LLP, is turning away cases even as the firm looks to double its office space. The 16-attorney firm, like many other bankruptcy boutiques in L.A., is thriving at a time when many law firms are struggling.
There are fewer bankruptcy practices in L.A. than ever before, as a decade of fragmentation has cleared the way for Klee Tuchin and the handful of others remaining.
Many have dissolved, dispersing their partners throughout the city. One, Wynne Spiegel & Itkin, merged about two years ago with Chicago-based Kirkland & Ellis.
Those that remain are soaking up a rising tide of work, as a staggering economy drags more businesses and individuals into bankruptcy.
There were 88,195 total bankruptcy filings last year in the Central District of California, which includes Los Angeles, Riverside and Orange counties, up from 80,782 in 2000. The figures include Chapter 7 liquidation, Chapter 11 reorganization and Chapter 13 personal filings. Business filings last year totaled 2,553, up from 2,232 a year earlier.
Of the hundreds of law firms in L.A. County, Martindale-Hubbell, the publisher of legal guides, lists only 30 that specialize in bankruptcy work.
The volume of filings has allowed specialist firms to expand.
Sulmeyer Kupetz Baumann & Rothman PC has added 10 attorneys over the last two yeas, bringing its total to 30. The firm looking to expand its office space by more than 20 percent, to 27,000 square feet, said Alan Tippie, its president and managing member.
Pachulski Stang Ziehl Young & Jones PC opened its third office on Jan. 1, 2000, in Bloomington, Del. Since then, the L.A.-based firm has grown from 35 to 72 attorneys, largely because of its Delaware connection, where several major businesses are incorporated and file for bankruptcy, said Andrew Caine, a firm shareholder and president of the American Bankruptcy Institute.
The bankruptcy bonanza is not limited to boutiques. Daniel Minteer, a bankruptcy partner at Pillsbury Winthrop LLP, said his business is up 15 percent this year.
The big firms, as might be expected, grab the bankruptcy business when large corporations like WorldCom Inc. and Adelphia Communications Corp. file for protection.
"In a larger case, they want the larger firm because they get the range of services," Minteer said. "And you need a lot of horse power."
Still, big filings offer opportunities for boutiques. Because of broad client bases, large firms often find themselves in conflicts that keep them from representing one of the parties in the bankruptcy, usually the debtor.
Pillsbury Winthrop, for instance, represents several banks. "You couldn't file a bankruptcy for someone if your client was a major creditor on the other side," Minteer said.
As a result, boutiques pick up a lot of business that large law firms must turn down. Tuchin said his No. 1 source of referrals is other law firms.
Bigger bankruptcy filings also have more moving parts larger asset bases, more creditors and all the parties need legal assistance.
Bankruptcy work also can be less lucrative for large firms as well, Tuchin said. Eighty percent of a law firms' total revenues come in monthly payments from the client. Every four months, the court rules how much of the remaining 20 percent firms can receive.
"Large firms are often scared of the practice," Tuchin said. "There is the possibility that the judge could cut your fees or could delay payment."
Boutiques often specialize in particular aspects of a bankruptcy: creditors committees, providing trustees or receivers.
This month, for instance, a bankruptcy court judge appointed an attorney from Sulmeyer Kupetz to be a trustee in the bankruptcy of Power Lift LLC, a Pico Rivera-based forklift company. Jon Huntley, chief operating officer and chief financial officer of Power Lift, said the boutique offers more strategic services than that of Jeffer Mangels Butler & Marmaro LLP, which Power Lift retained to file its bankruptcy earlier this year.
"The trustee is giving us a lot more attention," Huntley said. "I think both firms have the same interest, the best for the client, but my understanding is a boutique firm may be more focused in terms of strategy."
Boutiques also specialize in the bankruptcies of smaller businesses and individuals, often neglected by large firms. Stuart Price, founder of Encino-based Price Law Group PC specializes in Chapter 7 liquidation filings and Chapter 13, personal, bankruptcies. The firm, he said, will file 5,000 bankruptcies this year, compared to 200 cases the firm opened in 1991.
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