Tips and Trends

Many firms are consolidating their use of staff and using less secretarial support.  Instead, they are asking paralegals, whose work firms can bill for, to perform more administrative tasks.

Pensions and Bankrupty

Briefing Papers Categories: Author: Mitch Frazer Torys - March 02, 2007

In its recent decision in Ivaco Inc., Re [2006] O.J. No. 4152, the Ontario Court of Appeal dealt with the challenging interplay between pension law and insolvency law. The decision deals with a restructuring in which one of the dominant issues is the treatment of a debtor's unfunded pension liabilities. Ivaco highlights the importance of dealing with pension issues early in the restructuring process.

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• In-House Counsel

Law.com - Thelen Looks to Parcel Out Sections, Core Group May Stick Together

Law.com - Thelen Looks to Parcel Out Sections, Core Group May Stick Together: "Thelen would not be the first San Francisco law firm to suffer this year. The partnership at Heller Ehrman voted to dissolve that firm on Sept. 26 after a string of departures in recent years led to the firm's banks -- Bank of America and Citibank -- forcing the firm to shut down.

More generally, recruiters, consultants and firms are not optimistic about how 2008 will end for law firms, with most saying that the best a firm could hope for is flat revenues."

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Fulbright & Jaworski Study

AmLaw: In-House Counsel Brace for More Litigation: "In tough economic times, law firms have always counted on countercyclical practices like bankruptcy and litigation to pull them through. We've heard endless talk about an increase in litigation activity this year, but will it be enough to offset what's expected to be a dramatic downturn in corporate work? If you don't work at one of the handful of firms hired by the government and the financial institutions trying to avert disaster, you are likely hoping--nay, praying--for a monster year in litigation.

A study of litigation trends released today by Fulbright & Jaworski gives reason for cautious optimism. Fulbright surveyed 358 lawyers working in-house at corporations; 251 of them in the U.S. The in-house lawyers reported that for the first six months of this year, new case filings dropped--but few believe that decline will last. Only 8 percent of the lawyers at U.S. corporations predicted a drop in legal disputes involving their company into 2009. Among the in-house counsel with companies of more than $1 billion in revenue, only 3 percent foresaw a drop in litigation next year, while 43 percent predicted a jump in activity"

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• Legal News - LexBlogosphere: 10/14/08

The Rise of the Law Firm

We are witnessing the rise of the law firm as the most desired office tenant. A few years ago, building owners who wanted to reduce credit risk looked to the financial institutions and would not consider a law firm as a lead tenant. With the changing world we live in, those roles are now flipped. A building with big name law firms has a higher value than a comparable building occupied by big name financial institutions.

The change is, in fact, part of a bigger evolution. Lenders will increasingly look at the underlying credit worthiness of the tenants of a building, rather than the creditworthiness of the owner. While building value has always been tied to the credit risk of the tenants, this will become even more pronounced in the foreseeable future. In fact, an owner’s ability to obtain new financing and the interest rate for the loan will be determined in large part by the credit of the underlying tenant.

To take advantage of this “tenant credit” opportunity, it is essential to have an understanding of how commercial loans are structured.

Good credit tenants of all types will be in a strong position to dictate lease terms. However, the degree to which they can do this will depend in large part on the professionals representing them. Skilled tenant brokers who can understand the complex commercial lending process will be able to deliver much more significant savings than a typical office leasing specialist. To get to the best deal for a client, the tenant’s broker must be able to think like a building owner, a banker, and a developer.

Only a full service real estate firm can bring together the resources necessary to weave together the expertise of tenant, landlord, and credit specialists into one team. It is an example of why the recent Staubach/Jones Lang LaSalle merger brings so much value to their clients.

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• [Business] More On The Credit Crisis

An expert opionion on the credit crisis

Amid a deepening international credit crisis and a rapidly decelerating global economy, global real estate markets are feeling the real-time effects of a tightly interlinked world that remains increasingly vulnerable. The markets have shifted from a virtuous cycle to a vicious cycle. The dramatically changing environment began with the U.S. subprime mortgage meltdown 18 months ago and then spread rapidly through the global financial system and now into all aspects of the economy.

Jones Lang LaSalle's industry leading experts share their insights and predictions on the current state of the global economy. Click here for a full report.

How to come out on top in a tough market

The world is much different today than it was in the economic downturn of 2001/2002. While most companies have been aggressive on delivering cost savings over the years, the unprecedented events in the credit markets make it clear that success goes beyond the ability to reduce costs. The team that is responsible for the commercial real estate of an organization must be prepared to respond quickly to extraordinary events - everything from overnight acquisitions to divestitures.

The commercial real estate advisory company, Jones Lang LaSalle, has identified five critical strategies for managing commercial real estate in times of uncertainty.

1. Do whatever it takes to get your data in order

If you haven’t done so already, you must get your data in order - the cost, condition, occupancy, vacancy, exit and expansion options for the owned and leased space in your portfolio. Accurate decision making information is absolutely critical to identifying and realizing cost savings in the current environment. Ensure that your data are of the highest quality and as current as possible, data you can stand behind and act on with confidence.

2. Target the sacred cows and lead the business

Now is the time to identify the inefficiencies and unnecessary costs that you have known about for years, develop alternatives to them (with estimated savings) and bring them to the table. If your plans to create or expand a workplace program have been met with fierce resistance in the past, reintroduce your proposals. You may never have a better opportunity than now.
What sacred cows? The dedicated offices for executives at every facility they visit. Cost allocation methodologies that create no incentive to free up vacant space. Decision-making processes that consistently result in your company losing out on prime opportunities. Business units that still find a way to execute their own deals or create their own space standards. Service levels that are far higher than industry standard. None should be sacred in times like these.

3. Engage in scenario planning

A look at newspaper headlines over the past couple of weeks provides plenty of real-life scenarios to consider. Even if you do not have direct access to information about precisely where your business is heading, you can begin to identify likely business scenarios and plan corresponding real estate responses. For example, if any downsizing appears likely, anticipate which business units will be affected most and address the relevant portfolios first, screening for opportunities to:

• Dispose of vacant buildings
• Renegotiate and restructure leases, taking advantage of real estate markets to blend and extend
• Consolidate offices and reconfigure space for greater efficiency
• Consolidate vacant space for disposition of the most marketable space
• Consolidate like functions across geographies
• Monetize assets via sale-leasebacks

To find such opportunities, you can adapt or develop screening tools such as the disposability scorecard shown in Figure 1.

This example plots “financial impact” against “operational, property, and market disposability factors” to assign a disposal priority to each property. In this way you can evaluate all your options at the same time and set strategic priorities with greater confidence.

4. Evaluate labor demographics and match them to business needs

Whether you’re looking to attract and retain labor in a growth mode or scouting for optimal labor markets in a downsizing mode, evaluating labor demographics and matching them to business needs can create a huge opportunity for cost savings.

Offshoring as a location strategy is an obvious choice, but difficult to execute in the very near term - 2008 timeframe - unless your company already has significant offshore operations. However, finding the optimal domestic labor markets for specific functional areas - inbound call center, for example - and then consolidating those functions in the best markets might be realistic for 2008.

Here’s a case where vacant or underutilized space in the portfolio might enable a faster solution. This is where a close relationship with the HR and IT experts can prove especially valuable.

Another opportunity, especially for companies that have grown up in some of the larger Midwestern cities, relates to contractors. Over time, because many such companies have had trouble attracting labor, their number of contractors has grown dramatically compared to their own employees. Assuming contractors cost more - often twice as much in fact – commercial real estate executives who can identify more favorable labor markets may realize big savings by enabling the business to replace contractors with employees.

5. Think of every transaction as eligible for economic incentives

Think of every transaction in an existing or new market as eligible for economic incentives. At Jones Lang LaSalle, we continually surprise - and delight - our clients by unearthing incentives, when none were anticipated. But make sure the incentives are collected. Many companies do not track the economic incentives they previously negotiated and consequently do not file for the benefits. Commercial real estate executives should partner with the business to track any and all negotiated incentives to ensure that the appropriate documentation is completed and filed.

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Heller alumni. Where are they now?

From Amlaw: Heller: Going, Going, Gone
Since Heller announced its dissolution on September 26, their lawyers have been moving on. Orrick, Herrington & Sutcliffe is the latest beneficiary, picking up 27 partners, one senior counsel, and an undetermined number of associates, as announced today. Most of the lawyers had formed Heller's antitrust group, including former Heller chair Bob Rosenfeld and Larry Popofsky, a Heller cochair from 1988 to 1993. Another former Heller chair Barry Levin joins Orrick's Insurance Recovery practice.

The American Lawyer has been keeping track of these departures:

• Cooley Godward Kronish picked up 35 lawyers from Heller's Venture Law Group on October 6. The Recorder reported that the group will finally lose the distinct brand it retained even after being acquired by Heller in 2003.
• Arnold & Porter added five litigators to its business litigation and antitrust group this week, including Kenneth Chernoff, who was cochair of Heller's complex commercial litigation practice.
• Covington & Burling took on 50 lawyers October 1 to expand its IP litigation practice. Robert Haslam will spearhead the launch of the Valley office and Alan Blankenheimer, Laura Muschamp, and Jo Dale Carothers will get the San Diego office up and running. They also landed Heller insurance partners David Goodwin and Lawrence Hobel back in July.
• Eversheds scooped up Nick Seddon in late September to head the firm's new Hong Kong office, which is slated to open this month.
  
  Proskauer Rose in September launched two new Asia offices, in Hong Kong and Beijing, with former Heller partners Ying Li, who led the China Business practice, and Joseph Cha, who led Heller's Beijing office.
• Jones Day also took on a few Heller defectors in the days leading up to the dissolution. Martin Myers and Brent Cohen, who headed Heller's real estate practice, joined Jones Day's San Francisco office.
• Sheppard Mullin tapped Blaine Templeman in August to start the firm's new Biotech Clinical Contracting team.
• Bingham McCutchen landed Heller bigwig Geoffrey Aronow in August. Aranow was the managing parter of Heller's Washington, D.C., office and joined Bingham's securities practice.
• Howrey got in the game early, taking on veteran Heller litigator Paul Alexander back in May.

Help! What is Currency Carry Trade

50 yenCurrency Carry Trade: "A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates - which can often be substantial, depending on the amount of leverage the investor chooses to use.

Investopedia Says... Here's an example of a 'yen carry trade': a trader borrows 1,000 yen from a Japanese bank, converts the funds into U.S. dollars and buys a bond for the equivalent amount. Let's assume that the bond pays 4.5% and the Japanese interest rate is set at 0%. The trader stands to make a profit of 4.5% (4.5% - 0%), as long as the exchange rate between the countries does not change. Many professional traders use this trade because the gains can become very large when leverage is taken into consideration. If the trader in our example uses a common leverage factor of 10:1, then she can stand to make a profit of 45%.

The big risk in a carry trade is the uncertainty of exchange rates. Using the example above, if the U.S. dollar was to fall in value relative to the Japanese yen, then the trader would run the risk of losing money. Also, these transactions are generally done with a lot of leverage, so a small movement in exchange rates can result in huge losses unless he"

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Spin-Off from Fowler White

Spin-Off from Major Florida Law Firm to be Called Banker Lopez Gassler, Change Becomes Effective Nov. 1 - CoStar Group: "Spin-Off from Major Florida Law Firm to be Called Banker Lopez Gassler.

Three insurance defense practice groups operating within Fowler White Boggs Banker, one of Florida's biggest and best-known law firms, will formally organize as a separate entity called Banker Lopez Gassler. The original 65-year-old Florida firm will continue with its business and commercial litigation practice including litigation, tax, business, regulatory and appellate work.

The spin-off, which involves approximately 150 attorneys and staff members, does not signal any financial concerns, nor is it expected to result in any layoffs, according to Rhea Law, Fowler White Boggs’ chief executive and board chair, noting that Fowler White has added 15 attorneys to its ranks over the past several months.

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European Banks

TOPWRAP 4-Germany insures savings amid bank rescue talks

European banks have been hit hard by the fallout from a crisis which began in the United States when the housing market collapsed and bad mortgage debts multiplied. In Berlin, the fate of German lender Hypo Real Estate (HRXG.DE: Quote, Profile, Research, Stock Buzz) hung on the outcome of a showdown in continuing talks between the government and banks over the bill for a bailout.

Banks and insurers withdrew their support for a government-led 35 billion euro ($48.50 billion) rescue deal after problems came to light at the Munich-based lender. German officials and bankers were at work to hammer out a new deal before markets open. HRE is relatively small when compared with other firms in Frankfurt's blue-chip DAX .GDAXI index, but its role as a lender for commercial property, infrastructure and government financing makes it a major financial player.

Belgium and Luxembourg, meanwhile, were seeking a buyer for what remained of bank and insurance group Fortis (FOR.AS: Quote, Profile, Research, Stock Buzz) (FOR.BR: Quote, Profile, Research, Stock Buzz) after the Dutch nationalized the rest. An industry source said BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) was negotiating for control. The bank had"

Help! What is LIBOR?

Bloomberg.com: Exclusive: From "Libor Mystifies Americans as Mayor Reads `Doomsday' By Peter Robison

Libor, set every morning in London, is what banks pay to borrow money from each other. That in turn determines prices for financial contracts valued at $393 trillion as of Dec. 31, 2007, or $60,000 for every person in the world, and helps set consumer interest rates on everything"
In the past week, as governments in Europe rescued five banks and the U.S. debated a bailout, the cost of one-month bank loans in euros and overnight dollar loans soared to records. In practice, that means banks are hoarding cash, raising borrowing costs and slowing economies worldwide. Today's three-month Libor for loans in dollars jumped to 4.33 percent. Overnight dollar loans rose 168 percent on Sept. 30, to a record 6.8 percent from 2.6 percent. '

Libor is actually a set of rates, calculated for several currencies on periods ranging from overnight to 12 months. The British Bankers' Association compiles the dollar rate every day from data submitted by 16 banks, including Deutsche Bank AG and Royal Bank of Scotland Group Plc. There are also rates for the euro, Japanese yen, British pound, Swiss franc, and Australian and Canadian dollars.

Corporate bank loans are often linked to three-month Libor rates. Libor also affects interest costs on credit cards, student loans and adjustable-rate mortgages. From 2004 to 2006, more than half of the U.S. subprime mortgages at the root of the financial crisis, or those issued to the least creditworthy borrowers, had adjustable rates linked to Libor, said Guy Cecala, publisher of Inside Mortgage Finance in Bethesda, Maryland.

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Bold Statements of Big Law's Near Future

Paul Lippe says:

"A law firm friend of mine told me many of his peers were "shocked" at the demise of Heller and its failure to find a merger partner. . . . So let me make a prediction: More Am Law 200 firms will Heller-ize over the next 18 months than will merge. Why?"

For more, read the article at Welcome to the Future: Heller Shock?

Help! What is a Credit Default Swap?

From Am Law - Is Credit Default Swap Litigation the Next Big Thing?

"A credit default swap is a credit derivative contract in which the buyer makes regular payments to the seller in exchange for the right to a payoff if there is a default or "credit event." Basically, these are insurance contracts, which were widely sold as a hedge against declines in the markets for complex securities."

What does that mean? If the litigation takes off, big Wall Street law firms may not be able to particiapte due to conflicts. Banks don't generally like to sue other banks. And they particularly don't like the law firms that get in the middle of such disputes. Therefore, firms outside of New York that don't ordinarily represent the big banks will have real entrée here, just as they have in signing up the hedge fund clients that are already active plaintiffs against banks.

What is at stake? A piece of the $43 trillion market in these unregulated instruments.

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The Cost of Suing Banks (Law Firm View)

From AmLaw - J.P. Morgan Drops Linklaters

Many New York law firms have long believed that suing banks is risky business, even if the defendant is not one of their clients. Now we know why. J.P. Morgan has dropped Linklaters as one its preferred outside firms, and according to The Lawyer, the drastic move was a response to Linklaters' representation of Barclays in a suit against Bear Stearns and its two recently indicted former hedge fund managers. (We told you about the suit last week, noting that it provided some pertinent facts for the Bear Stearns prosecutors.)

Back when Linklaters and its New York litigation trophy hire, Larry Byrne, filed the Barclays suit late last year, Bear Stearns was an independent investment house with a nasty problem. Neither the firm nor Byrne could have foreseen Bear's subsequent death spiral and shotgun wedding to J.P. Morgan. And then Linklaters was stuck, unable to drop Barclays but on the wrong side of litigation against Morgan, one of its top 10 clients worldwide.

But we could argue that however surprised Linklaters was by J.P. Morgan's acquisition of Bear Stearns, the law firm should have known the Barclays suit was a dicey proposition. Unlike the giant insurance companies, big banks rarely sue each other. And they're quite often codefendants. So even if Bear had remained independent, when Linklaters filed the Barclays suit, it was walking away from future assignments in which Bear and J.P. Morgan were both defendants. Linklaters, which isn't commenting on the severed J.P. Morgan relationship, appears to have learned a tough lesson about building a New
York-based litigation practice.

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