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June 18, 2009 11:46 AM

Bouncing Back: Former Lehman Lawyer Uses Company's Bankruptcy to Launch Practice

Posted by Ed Shanahan

By David Hechler from the July 2009 Issue of Corporate Counsel

Larry Borstein

Lehman Brothers Inc.'s bankruptcy last fall was a nightmare for Larry Bortstein, the company's global head of technology law. But it also presented him with the opportunity to realize a dream. First it spurred the 39-year-old attorney to consider his career options. Then, after he decided that he was ready to start his own law firm, it gave him his first client: the Lehman estate.

Lehman sold its primary North American business--its investment banking and trading divisions--to the British bank Barclays PLC. The hundreds of remaining Lehman entities compose the estate, and Bortstein is working for the management company charged with maximizing their value for creditors.

And what a sweet client it's been. Bortstein's new firm is doing some of the same things for the estate that his old in-house team did for the company before it collapsed. He and the other 11 lawyers at Bortstein & Irvine continue to work out of Lehman's midtown Manhattan offices. According to a bankruptcy court filing, the firm billed the estate $441,000 from December 15 through January 31, at a blended hourly rate of just under $360. Bortstein expects that the work will continue well into 2010.

More important to the future of Bortstein's firm is that it now has ten additional clients. He declined to name them, saying only that one is a media business, two are information technology companies, and the others are in the financial services industry. The work his lawyers are doing for them--and the Lehman estate--is mostly structuring, restructuring, and negotiating vendor contracts, customer-side software licensing deals, and outsourcing agreements.

Bortstein says he'd been thinking about opening his own practice for some time. But leaving Lehman, which he joined in 2005, wasn’t so easy. "I had a great job," he says. "I was making good money"--he declined to say how much--"and I had a great team." While he thought he'd eventually hang his own shingle, "the likelihood of my doing it soon was pretty low."

Then came Lehman's stunning collapse last September. The preceding months had an air of unreality, Bortstein says: "You're watching this great institution, and you're watching the ticker. And you're wondering not just what it means for the institution--everyone's wondering what it means for their careers."

Bortstein says he didn’t start a firm just to be his own boss. He wanted to provide the same services to other companies that he’d delivered to Lehman. But instead of hourly rates of $600-$700, his firm would bill $300-$400. While that had been his plan all along, the recession made the case even more compelling.

The Lehman estate is pleased with what it's getting. Bill Gordon--a senior director at Alvarez & Marsal Holdings, LLC, the professional services firm overseeing Lehman’s dissolution--says there was an advantage in hiring one of the company’s former lawyers: "Larry is familiar with the contracts and Lehman practices, so there was no learning curve." Gordon adds, "His firm's pricing was also cost-effective, which is consistent with our mission to maximize value for the creditors."

Bortstein cofounded his firm with Sol Irvine, a former Morgan, Lewis & Bockius partner. Irvine, the outside lawyer Bortstein used to call on to negotiate vendor relationships, has taken the lead in building an internal technology platform. The firm’s third partner, Rusty Yuson (another Morgan Lewis alum), has developed internal training materials.

There are aspects of the in-house world that Bortstein misses. "When you're in-house," he says, "you're able to build close relationships with the business team." And some clients associate the mere presence of an outside lawyer with a ticking meter. He hopes his firm can counter that by negotiating fixed-fee arrangements.

William Brennan, a legal consultant at Altman Weil, Inc., thinks the firm has a good chance of making it. "I've helped many start-ups, and it's an overwhelming process for the partners involved," Brennan says. "But the single most important driver of success is having a good source of business from the beginning--which this firm does." Bortstein says the hardest part of his new job involves something he never worried about when he was in-house: the financial aspects of running a business. It led to some sleepless nights, until he hit on a solution that entailed taking his own advice. He tells clients that hiring his lawyers will free theirs to do what’s most important. Bortstein has since adopted the same approach to handle his IT, accounting, and financial forecasting needs--he outsourced them.

--David Hechler

Photo courtesy of Lawrence Bortstein

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