Detroit lawyers probably will see a lot of work but few of the leadership roles if the federal government calls for a bankruptcy reorganization of General Motors or Chrysler LLC.
An automotive bankruptcy petition likely would originate at U.S. Bankruptcy Court either in New York or Delaware, with possible tier-one supplier cases to follow, Detroit area attorneys said.
Complex bankruptcy cases frequently turn up at the Southern District of New York in Manhattan because of its proximity to the nation's largest financial law firms, or in Delaware, where many national businesses -- including GM -- are incorporated because of the state's flexible business laws.
For example, Delphi Corp. and Dana Corp. both filed in New York, while Dura Automotive Systems and Federal-Mogul Corp. filed in Delaware. All but Delphi have emerged.
Southeast Michigan law firm principals said that in an manufacturer's Chapter 11 they would expect to assist as local counsel for Michigan matters or on legal issues such as supply-chain disruptions and creditor concerns.
I would expect that, said James Simpson, principal at Detroit-based Miller, Canfield, Paddock and Stone PLC. Our firm or others (locally) might assist a coastal firm if they need it, just going by precedent.
Simpson is co-leader of the Capital Market Lending Group of Miller Canfield, which was Michigan counsel in Chrysler's application last fall for loans under the Troubled Assets Relief Program.
Simpson said Miller Canfield assisted national counsel Schulte, Roth and Zabel LLP in New York, but said that would not necessarily lead to a role in a Chrysler bankruptcy.
Attorneys at New York-based Dewey & LeBouef LLP and Weil Gotshal & Manges LLP have confirmed they are counseling GM on its restructuring options. Weil Gotshal represented GM in TARP financing and as a creditor in the ongoing Delphi bankruptcy, with assistance from Detroit-based Honigman Miller Schwartz and Cohn LLP.
Patrick Dreisig, shareholder at Detroit-based Butzel Long PC and co-chair of its Global Automotive Industry Group, said law firms in the New York and Washington areas simply have more personnel and resources to represent a global client in multiple jurisdictions.
He also said Butzel, which has one of the largest supplier practices in Michigan, has explored its own role in a possible automaker bankruptcy, he said.
We've done an enormous amount of looking at that question over the past six months, he said. If a supplier itself should go into bankruptcy because of an OEM's inability to pay receivables, they would want a national firm's resources to file and appear in every court (jurisdiction) involved.
He said Butzel has seen an increase in client queries about their legal standing as creditors and in their eligibility to become critical vendors who can still receive payment during reorganization.
He expects Butzel and other Detroit firms to assist East Coast firms with secondary legal issues.
Our firm would be positioned to handle specialization matters within the automotive supply chain such as program cancellation, or downstream issues between companies along the supply chain, or in representing creditors.
Joel Applebaum, partner in the bankruptcy practice at Clark Hill PLC in Detroit, said he expects high-level involvement for Detroit firms even if the cases themselves land in East Coast courts.
Some of that, he said, is owing to history and the larger firms' involvement with tier-one suppliers. But he also noted Honigman's extensive involvement in the Delphi case and said Clark Hill is interested in representing OEMs and suppliers.