LEGAL
‘Bankruptcy is going to be a popular field of study’ Are there enough lawyers to handle the expected wave of cases? BY STEPHEN ELLIOTT
arc McNamee of Neal & Harwell has seen a lot in his 40-year career in bankruptcy law. First came the fall of the Butcher banks in 1983 and 1984. Then there was the Tax Reform Act of 1986 and the savings and loan crisis of the late ‘80s and early ‘90s. The dot-com boom and bust and the 2008 financial market collapse followed. Each wave could be traced back to human activity, unlike the crescendo of bankruptcy filings McNamee expects to see as a result of COVID-19. “There is no way that we can have this level of unemployment and disruption in the service economies and not have fallout,” he says. Bankruptcy courts will be full of coronavirus fallout, experts believe, but attorneys haven’t yet seen much of an increase in cases. That will come late summer or early fall, predicts Nancy King of EmergeLaw. The lull in new filings can be traced to extreme uncertainty around the state of the econo-
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my, the timetable for recovery and the status of relief programs. Bankruptcy filings — unlike, say, unemployment rates — are a lagging economic indicator. “Most companies right now are either in the stunned phase, or they’re in the ‘I want to work it out with my bank’ phase, or possibly the ‘I’ve gotten a PPP loan, I think I might make it’ phase,” King says. “When all that comes to an end, I think Chapter 11 is going to end up being an option for a lot of those companies.” King left her longtime job as a clerk in federal bankruptcy court to enter private practice late last year. It may end up being auspicious timing: As bankruptcy filings rise and fall with the economy, so too do the number of local attorneys specializing in bankruptcy. The supply problem could be exacerbated in Nashville, where a decade of recovery and rapid development has seen more and more lawyers specializing on the front end of business deals. “That’s all we do, so we’re ready,” King says of EmergeLaw. “But other firms aren’t fully staffed for it. It’s almost like there’s a — not a whole generation but a long period of time where young lawyers haven’t been trained in the bankruptcy field because there was nothing to train them with. Bankruptcy is going to be a popular field of study for people in law school.” McNamee sees the same issue. He’s looking at younger attorneys at his firm who need “a little more seasoning” — that is, real-life bankruptcy experience. “When there’s no bankruptcy work to be done, good commercial lawyers have to find a way to get paid,” he says. “They go off and they do front-end work. The same thing happens when the real estate market dries up. When there weren’t any real estate loans being made, when there weren’t any big business deals being done driven by real estate, those lawyers had to go and find something else to do. So at that time, they became bankruptcy lawyers.” The flow of those skills was massively one-directional during Nashville’s 2010s boom, which saw the area economy add 288,000 jobs from the beginning of 2011 through the end of last year. Debtors filed 48 Chapter 11 cases in U.S. Bankruptcy Court for the Middle District of Tennessee in 2019, down from an annual peak of 158 during the Great Recession. That number is sure to rise dramatically and will call for many lawyers to dust off their restructuring skills.
Nancy King
‘The early filers will be the ones that jump rather than being pushed.’ MARK MCNAMEE, NEAL & HARWELL
