Rosy Outlook for Long Island Law Firms
From the Long Island Business News:
Lawyers throughout the Island say that for the next year and for many to come, they will be reacting to the new presidential administration, the national recession and how it locally impacts Long Island’s businesses and homeowners.
That means company reorganizations, real estate workouts and upticks in fraud and white collar crime.
Among the practice areas expected to be busiest: bankruptcies and foreclosures.
“When the economy gets tough, we get tougher,” said Jeff Wurst, head of the financial services practice group at Uniondale’s Ruskin Moscou Faltischek. “I think 2009 is going to be just the tip of the iceberg. 2010 is going to be even busier.”
The year 2008 certainly was busy as well for Long Island’s lawyers, especially in the second half when they started dealing with the fallout from the financial crisis on Wall Street. As foreclosures and bankruptcies rose, law firms started beefing up those practice areas to prepare for more business.
Firms now say they are working with clients on real estate workouts and how to avoid the typically expensive formal bankruptcy process. That should come as no surprise.
“Economic conditions always drive the legal business,” said Jerry Sloane, partner in charge of Berdon’s Jericho office. Berdon is an accounting firm that helps law firms deal with economic issues. “They are just reacting to the needs of their clients.”
One particular area in which Wurst said he expects to see more business is commercial foreclosures. When big-box retailers like Circuit City and Linens ‘N Things go out of business and close stores, the landlords of many Long Island strip malls can no longer collect those hefty rents. If those landlords default on their loans and banks foreclose on the properties, even more businesses could go out of business on Long Island, he said.
“If a landlord is smart, he shouldn’t hang up on a guy that needs to work out an accommodation on a lease,” Wurst said. “I think the landlords should be proactive and not as hostile.”
He said even if the landlords make less money than in the past, at least they and their tenants are still in business. They will make the money back when the economy turns around, Wurst said. “They need to be thinking down the road,” he added.
But there are also many companies that can’t pay their bills. When that happens, Bernard Hyman, managing partner with Certilman Balin Adler & Hyman, said he works with them to avoid traditional, expensive reorganizations.
He said he instead expects to see banks and other loan holders try to renegotiate loans rather than default on them and lose money.
“Guys like us lawyers don’t work for nothing,” Wurst added. “The administrative expenses make recovery cost-prohibitive. You can’t get in and out of a midlevel bankruptcy for less than $1 million or $2 million. If your company has a debt of $4 million, that doesn’t make much sense.”
And the doom and gloom will only continue.
Sloane said he expects to see an increase in white-collar crime because bad economic times are when company officers tend to misrepresent financial statements and companies take a harder look at their books to discover which employees have been stealing from them.
“The forensic stuff is going to be a very busy area,” he said. “Attorneys are going to get hired to do internal investigations, to interview management, staff, vendors.”
John Bauer, a shareholder in Littler Mendelson’s Melville office, said he also expects to assist more companies with layoffs in 2009. He said as the economy worsens, businesses are going to seek ways to cut costs, especially with personnel.
“The down economy leads to more work in the labor and employment area,” Bauer said.
He said labor and employment lawyers work with clients to analyze work-force data to determine who should be laid off and to create severance agreements. With layoffs also come more discrimination lawsuits, he added.
The Obama Effect
Plus, the election of Barack Obama and the Democratic Party majority in Congress is also expected to add more work for employment firms, he said.
For example, he said he expects Congress to pass some form of the Employee Free Choice Act, which could make it easier for employees to unionize. In addition, he said the Family Medical Leave Act could be modified to include businesses with as few as 25 employees.
“A lot of companies will need new policies and advice on how to implement that,” Bauer said.
Allan Cohen, a partner in Nixon Peabody’s Jericho office, said he also anticipates the new administration will eliminate capital gains rates.
“People aren’t rushing to get deals done in 2008,” he said. “And they will not get any deals done in 2009 because they will be taxed at much higher rates.”
Morris Sabbagh, a partner with Lake Success-based Capell Vishnick, said he expects the new Congress to pass a new estate tax law, which will affect many Long Islanders. The old law is set to sunset in 2010 and a new law should be on the books next year which is expected to raise the amount exempt from estate taxes.
In addition, he said with the economy the way it is, he plans to be busy helping clients move assets to keep them away from creditors. “I expect to be steady,” he said. “There’s still plenty of work out there for an estate planner.”
And there are still some people getting business loans on Long Island, Hyman said. “We represent a number of banks,” Hyman said. “While the terms are obviously stricter than they used to be, there is money available for lending. We will continue to represent banks for lending and refinancing. We are still very active in the lending area.”
