Skadden, Arps, Slate, Meagher & Flom LLP, traditionally known for its mergers and acquisitions work, has turned to prominent bankruptcy attorney Richard Levin to develop a bankruptcy group at its Los Angeles office.

The practice will focus both on providing advice to clients that are acquiring companies out of insolvency and providing debtor-side bankruptcy work to clients facing financial troubles.

“(Bringing in Levin) is a further step in Skadden’s efforts to create a national presence in corporate reorganization and bankruptcy work,” said Robert Sheehan, the firm’s executive partner.

As counsel to a congressional subcommittee, Levin (along with another Los Angeles attorney Kenneth Klee) spent from 1978 to 1981 writing the U.S. Bankruptcy Code.

During that time and extending through 1994, Levin was a principal at the L.A. bankruptcy boutique law firm of Stutman, Treister & Glatt PC, where Klee still practices. In 1994, Levin left Stutman, Treister “to gain some experience and try a hand at business,” working for Whittaker Corp. as general counsel and chief financial officer.

But after three years, Levin decided to go back to what he knows best. “I realized I was never as good as a businessman as I was as a lawyer,” said Levin. “I have an intimate and thorough knowledge of the bankruptcy law and practice. I don’t have that depth of experience in the business world.”

Like other large firms, New York-based Skadden has to worry about conflict-of-interest issues in handling debtor-side bankruptcy.

Large firms generally represent a number of institutional creditor clients, such as banks and insurance companies. Given that representation, the firms are often “conflicted out” of representing debtors in bankruptcy proceedings, said Dan Schechter, a professor at Loyola Law School.

In addition to running up against conflict rules, said Schechter, a firm may face political problems with its larger clients. “There are some large clients, such as banks, who may say that you should never advocate a viewpoint that’s harmful to the banking industry,” said Schechter.

Levin agrees that conflicts are always a concern, but said that firms the size of Skadden deal with the issue in all areas of law.

“Conflicts are something we’re always careful of,” he said. “Skadden is particularly sensitive to it because it has such a broad client base. We don’t expect it to be a major impediment. It’s just something that has to be dealt with.”

In addition, Levin said, “as a lawyer you’re allowed to take a position in one case and take another position in another case.”

Because large firms are faced with potential conflict of interest issues when handling debtor-side bankruptcy work, Schechter says a number of high-quality debtor-side bankruptcy firms have been able to flourish because of these conflict problems of the large firms.

One of those is Stutman, Treister & Glatt, Levin’s previous firm.

Jeffrey Krause, a principal at that firm, said that firms like his aren’t worried about losing too much business to firms like Skadden. Large firms, he said, have been moving into debtor-side bankruptcy law over the last 10 years, as they look for ways to expand their business.

“It’s a concern any time someone takes a case we could have had,” said Krause. “But there’s always a niche for firms like ours that don’t have large institutional creditor clients.”

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