When is it profitable to hire a lawyer with no bankruptcy experience to handle local government bankruptcy finances? Harrisburg, Pennsylvania, the capital city of the US state, shows that it is worth doing. When complex political issues are involved in a city bankruptcy case, it is best to hire a lawyer who is experienced in regional politics rather than the intricacies of bankruptcy law. Politicians are tough when it comes to saving their necks for the next election and as such, there is no point in asking them to sacrifice their future just to settle the ongoing city bankruptcy case. Politicians are as results-oriented as any business person and it is therefore important to show them possible achievements rather than devising actions that will antagonize voters.
The Harrisburg City Council hired Cravath, one of America’s largest law firms, to represent them in the bankruptcy proceedings. Soon after the City Council dropped Cravath and switched to Atty instead. Mark Schwartz, a one-man law firm in Bryn Mawr, Pennsylvania. Atty. Mark Schwartz works as a legislative assistant in the Pennsylvania House of Representatives, which is part of the House Rules Committee. There, he gained a wealth of experience in the legislative horse trade and maneuvering on sensitive issues such as city restructuring.
A number of large law firms hire lawyers with experience in city restructuring. Atty. Levin, who worked at Cravath, was a former member of the House Judiciary Committee staff member and was involved in drafting the 1978 Pennsylvania Bankruptcy Code. He represented the city of Gardena in California and the New York City Off-Track Betting Corp., and a number of smaller cities in financial restructuring. However, there are large law firms that specialize in municipal bankruptcy. One of them is Klee Tuchin Bogdanoff & Stern led by Atty. Kenneth Klee. The law firm successfully represented Jefferson County, Alabama, to address the financial crisis that began in January this year. Another firm is Chapman and Cutler and Associates led by Atty. James Spitto. He successfully negotiated a bankruptcy case involving bondholders in the 2009 city restructuring case of the Sierra Kings Health Care District in the bustling state of California.
Chapter 9 of the 1978 Pennsylvania Bankruptcy Code is an example too rare for classification as a separate specialty for attorneys. Atty. Bruce Bennett, who is an associate of the law firm Dewey & LeBoeuf, said that there are too few cases involving urban structuring and bankruptcy covered in Chapter 9. Only 630 cases are covered by Chapter 9 bankruptcy laws compared to 13,000 cases filed in under Chapter 11.
There are many jobs available for financial advisors and bankruptcy consultants when the municipality is in serious financial trouble. Novak Consulting Group, founded in 2009, is organized for this purpose. This helped in forming a rescue plan for Harrisburg which was unfortunately rejected by the City Council. Another is the law firm Alvarez & Marsal which was involved in the infamous 2008 Lehman Brothers Bankruptcy case. The Municipality of Harrisburg knocked this law firm out after the City Council rejected a proposed bankruptcy and restructuring proposal.
Many cities facing bankruptcy procedures are hesitant to seek professional help from legal consultants who can help them. This is always the case with private companies dealing with government offices. Perhaps political issues are too complex for private companies to handle. While many felt that it was time for more competent private bankruptcy law firms to take over government agencies, resistance came from within government agencies. Maybe they don’t want to get involved in a boring controversy or conflict of interest case.