A Team To Meet The Needs Of Clients In Crisis Mode

Monday, December 1, 2008 - 01:00

Kevin R. Boyle chairs the Stradley Ronon business department, where he is responsible for oversight and management of more than 60 attorneys in the firm's six offices. He also serves on the firm's board of directors. Mr. Boyle represents large and small companies, nonprofit and religious organizations, and individuals in business, real estate and banking matters. His practice concentration includes traditional corporate representation, mergers and acquisitions, public and private bond financing, real estate development, and nonprofit and insurance-related matters.

Keith R. Dutill is a trial lawyer focused on complex commercial disputes and financial fraud litigation and serves on the firm's board of directors. He has tried more than 50 cases to verdict or final award. Most recently, as lead counsel for a court-appointed receiver, Mr. Dutill recovered $75 million for defrauded institutional investors following the collapse of a Cayman Islands hedge fund. He is a fellow in the American College of Trial Lawyers and past co-chair of the American Bar Association Trial Practice Committee.

Editor: In the wake of the liquidity crisis and ensuing market decline, we have seen a number of large law firms, particularly in New York, announce new initiatives focused on the emerging needs of clients in this new environment. What prompted Stradley Ronon to form its Economic Crisis Response Team?

Dutill: A number of factors converged. First, the magnitude and severity of the market crisis and its the impact on the financial institutions at the core of our client base was unlike anything we had experienced. Second, once Congress became involved, it was obvious that our clients would need significant guidance in order to interpret the new laws and regulations governing their conduct. The regulatory landscape was changing almost as quickly and drastically as the market landscape, and no single lawyer or existing practice group anywhere could be sufficiently knowledgeable and prepared to meet all of the demands we anticipated from our clients. A new and coordinated approach focused on helping our clients through the current crisis became a necessity.

Boyle: It became apparent very quickly that our clients from multiple industries would be in the center of a new, highly unstable regulatory environment. Stradley Ronon has been focused on serving the needs of financial institutions since its inception more than 80 years ago. We formed the first mutual fund in 1928 and today represent major mutual funds, lending institutions, broker-dealers and insurers across the country. As a firm, we would have been hard-pressed to provide focused and current advice to our clients in this climate without the organization, coordination and leadership of this new team.

Editor: How is the current crisis different from past periods of volatility, so much so that you feel a different approach is needed?

Boyle: To put it in medical terms, it's like having a very short time period between when serious symptoms appear and when the patient becomes critically ill that prompted our approach. The combination of the mortgage mess and credit crisis, along with other factors, created a perfect storm for financial institutions. Even banks that remain financially sound, significantly curtailed, and in some cases completely halted, all borrowing and lending activity. The quickly developing and ever-changing governmental remedies further complicate the landscape for our clients and require our law firm to be able to respond quickly.

Dutill: I know from my own interaction with our clients that they see very little common ground between the current crisis and anything they have experienced. As Kevin pointed out, we have never seen the federal government buying preferred shares in major banks and exploring the option of buying so-called troubled assets from their balance sheets. Another distinguishing feature of the current reality is the enormous breadth of the legal challenges that in-house legal officers are now required to confront on an emergent basis. Our clients' law departments are being forced to react in real time to issues that simply do not fit into any category or box. And the issues run the gamut from corporate finance to tax to potential litigation. Our Economic Crisis Response Team was established to coordinate our resources across multiple disciplines so that, as our clients confronted critical challenges, we could respond and advise them immediately. Staying in front of these challenges enables our team to respond instantly and substantively to the issues our clients confront.

Editor: How did you identify the constituencies that should be represented on your team?

Boyle: It was a response to both the nature of the crisis and the client requests we received. On the corporate side, for instance, it was obvious that we needed to draw on our banking regulatory experience. We represented the Resolution Trust Corporation 20 years ago, and while the current Treasury plan is by no means an exact match, there clearly is some overlap, and our experience in that prior crisis will be very helpful during this one. Since subprime debt and the structured vehicles used to sell that debt were in the eye of the storm, we brought in partners from our structured finance team. Moreover, and by any measure, we have one of the leading mutual fund practices in the country. It became obvious very quickly that their expertise would be needed as our fund clients dealt with the issues associated with owning commercial paper as well as shares in financial institutions at the center of the bailout. We also realized that we needed to draw on our tax expertise and, in light of the focus on executive compensation, our employment and ERISA capabilities.

Dutill: On the litigation side, we first pulled together the leaders of several key practice groups to identify the new types of claims likely to be asserted. The reality is that everyone who touched these troubled assets - from issuers, underwriters and insurers, to buyers, sellers and brokers - needs to consider the implications of the recently initiated litigation. We are already actively representing clients in subprime litigation, and we have long represented many major broker-dealers with operations in our region. We have pooled all of these resources onto the team. We have also drawn on our experience representing our institutional clients as plaintiffs in securities litigation, including, most recently, a $75 million recovery following massive fraud in a Cayman Islands hedge fund.

Editor: Where is the team focusing its efforts currently?

Dutill: First and foremost, we are responding to the many issues confronting our clients. We are involved daily in working with our clients as they deal with the new legislation, the Treasury's implementation of its new authority and the market's response to Washington. We are representing mutual funds in litigation arising out of collateralized debt obligation failures, and investment advisors in the wake of the breaking of the buck at the Reserve Fund. At the same time, however, we are committed to providing resources to our clients to help them anticipate problems before they occur. Our partners are making customized presentations on a no-cost basis at our clients' offices to address the issues most critical to their business. This is an alternative to the generic, panel-type presentations we see other firms advertising.

Boyle: Our banking clients are facing significant and time-sensitive decisions as to whether to become involved in the Treasury programs. This requires an analysis of the risks and rewards associated with those programs and the potential consequences of not participating. We have also taken measures to provide our clients with unique insight into the current problems and solutions. For instance, our Economic Crisis Response Team recently hosted an open-forum guest presentation by Dr. Anthony Santomero, former president of the Federal Reserve in Philadelphia. His presentation, "A New Administration and an Old Problem: Dealing with the Effects of the Credit Crisis," was extremely insightful and provided an unfiltered analysis and answers to our clients' questions. While politicians and lawyers can offer a certain level of insight, experienced economists and decision makers provide an enlightening and educated perspective.

Editor: What's next in terms of the most immediate and critical challenges that financial institutions will confront as a result of both shifts in the market and the government's response?

Boyle: In my opinion, strategic planning for the ever-changing regulatory and economic climate will be crucial. Financial institutions will need to have several plans in place to manage different scenarios, with some designed to address catastrophic events in case things worsen. To survive, and ultimately thrive, in 2009, financial institutions need to do the proper planning and make the difficult but prudent decisions now to be in a position to excel in the economic and market rebound that we all know will ultimately occur. Just as important is the need for institutions to establish protocol for making decisions during these times. Again, to use a medical reference, the patient willing to take his or her medicine no matter how poor the taste, will be the one that survives.

Dutill: The litigation wave has yet to begin in earnest. The shareholder suits have begun and they will certainly continue, but the balance of the litigation that will unfold as this crisis sorts itself out is only in its infancy. Most financial institutions are still in crisis mode. Once that passes, the multiple tiers of institutions that have suffered enormous damage will complete the process of evaluating what happened and who is responsible.

Editor's Note: To keep clients and contacts abreast of the latest developments and changes, Stradley Ronon's Economic Crisis Response Team has created a blog with the latest educational programs, updates and publications. To sign up to receive these updates, visit http://economiccrisis-blog. stradley.com.

Please email the interviewees at kboyle@stradley.com or kdutill@stradley.com with questions about this interview.