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MONDAY,
MONDAY, APRIL 5,
JANUARY
WWW. NYLJ.COM

5, 2010
2009

Financial
So YouMeltdown
Want to
Start ATriggers
Firm
BY THOMAS J. HALL
BY
ANDADAM SETH
THOMAS J. TURK
McCORMACK RightLitigation
Out Of
W
Many
their law
E LIVE

dreamedmarket
planswith
firm,
lawyersincan
global
school
what it losses,
and their
personal
turbulent
recession,
would be
name
tell you financial
career when,trillions
gaping
retirement
about a moment
of dollars
sitting
like to holes
on the topaccounts,
times—a
of equity
in class,
have their in pension
in
they
own law
massive
of the stationary
School
Wave
job as
and layoffs,
synonymousa worldwide
with thecreditlaw asmarket
the likescollapse,
of Skad-
unprecedented
den, Cravath andhome mortgage
Proskauer. For some default rates
it was and
Consti-
boomingLaw
tutional home andforeclosures.
for others it was In thisLegalenvironment,
Writing.
it isTypically
not surprising
when they thatpicture
the litigation
starting a train
firm ithas is
already
seven leftyears
to 10 the into
stationtheirand legalis career,
gathering aftersteam
clerking as
it proceeds
for a judge and down a multi-year
working at a largetrack. law firm,Indeed, the
learning
bubble
and honing of mortgage
their craft.defaults is expected to rise
dramatically
With law over school theadmission
next two years, soaringas to borrowers
new re-
move and
cords off thetheinterest-only
New York legal phase jobofmarket
their repayment
in sham-
obligations.
bles, law firmsWe
ripe areas
hiring less. for
There
neysCollateralized
address
of all sizes are
litigation.
both new and old
below
layingsome
is an overflowing number of attor-
fighting
of the more
off attorneys

for fewer positions

and
You can do it, and succeed.
Debt Obligations
in this new marketplace. While it is not as simple as

ISTOCK
The last
hanging out decade
a shingle, haswithseen theanright
explosion
planning of itthe
is
use and to
possible issuance
take your of collateralized
shiny diploma debt and toobligations
start a law
(CDOs).
firm directlyLenders
out of and other mortgage originators
law school. that a lawyer needs to work for a big firm for a few should be relatively low. Premiums increase each
packaged
Startingmortgages
a firm should (frequently
not be viewedsubprime) as a into
tem- attention
years beforeonhethe canoriginators
succeed onofhis the CDOs
own. and the
However, as the
year detailed reports
as they cover youoffrom
confidential
the time sources.
you start your
mortgage-backed
porary fix or something securities
to dowhich while werewaitingsoldfortoa underlying
many mortgage-backed
practicing lawyers can tell securities. Allegations
you, a large number In addition,
practice. Check claims
with thehavelocalbeen brought against
bar association to see
third-party
different investors,
position to open thereby
up. Some shifting the will
skeptics risksay
of have
of been made
attorneys at big that
lawthefirms
originators misrepresented
or working in govern- the
if it rating agencies
offers any group that
rates.rated the risks.1 Whether
non-payment
that a new lawyer fromhasthe nolenders
business tostarting
the third-party
his own the risks
ment associated
positions with have
for years thesenever
financings
filed aor failed to
complaint rating agenciestowill
If planning openbea exposed
firm withtoa liability
partner, be is
investors.
firm. They These
may claim mortgage-backed
such a person securities were
is not qualified warn
or them
taken adequately
a deposition onoftheir
theseown.risks. For instance, unclear.
careful from Rating agencies
the onset. Make surehavealltraditionally
partners have
themselves
to both run his packaged into CDOs,
own business which were
and practice rated
law simul- in Teamsters Local 445 Freight Div. Pension Fund v. defended
agreed on such how to claims
dividebyboth
asserting that they
the revenues andare
ex-
by credit agencies. First Things to Focus On
taneously. However,CDOs after threewereyears
issuedofinlaw tranches,
school, Bombardier Inc., 2005 WL 2148919 (SDNY Sept. immune
penses and, from liability
most under §11
importantly, thatof theallSecurities
they share the
with the
passing thetranche
Bar exam ratedandasbeingthe least riskyto
admitted receiving
practice 6, 2005),
Startinganaearly law harbinger of the present
firm is equivalent wave
to starting Act
same of 1933,
goals and thatethics.
and business their published rating
the lowest
law, interest
one is fully rate and
equipped to the more risky tranches
simultaneously practice of litigation,
any new business purchasers of securities
entity; certain decisionsbacked
need by
to opinions
If you are
are protected freeaspeech
going to start under the
firm, research andFirst
find
receiving
law and open highera lawinterest
firm. rates. When home prices pools
be of mobile
made at the home
onset.loans
One brought
of the mostsecurities fraud
important Amendment
out exactly what of the
suitsU.S.
yourConstitution.
particular needs. There
began to fall in the
As evidenced pastrecent
by the coupledissolutions
of years, mortgage
of Thel- claims
is which against the issuers
corporate and to
structure underwriters
use, PLLCof(profes-
those areFunding
many informative
Suspension books published as well as
Litigation
delinquencies
en, Thacher Proffitt rose causing
& Wood increasing
and Heller losses to the
Ehrman securities,
sional alleging
limited thatcompany),
liability the defendantsPLLP falsely stated
(professional online groups that can help you make an educated
third-party
over the past CDO investors.
few years, even the most seasoned attor- in offering
limited documents
liability partnership) thator“strict and prudent”
PC (professional cor- With the tightening of (or, some would say,
decision.
neysIncan
litigation to date,properly
have trouble the investorsrunning have focused
a business. standards (such as credit score requirements) were
poration). evaporation
In New York of) credit
State markets,
you may not be alenders
partner inarea
This is not a problem limited to new attorneys. usedAnother
in originating
is whether thetounderlying
work fromloans.home and get increasingly
law firm until looking for aways
you are also memberto avoid
in goodlending
stand-
Other critics will say a new lawyer lacks the ex- Plaintiffs
a virtual alleged
office with that defendants
a Manhattan disregarded
address, which obligations.
ing of the bar. Real estate
From lawdevelopers are claiming
school graduation in with
May,
perience necessary to be a competent attorney, and thoseatstandards
start a few hundred by generating a large or
dollars a month, volume of
a perma- increasing
to taking the frequency
bar examininlitigation that their
July, to waiting whatlenders
seems
underlying
nent office loans
that intoManhattan
applicants with “no thousands
can run assets, no have
like animproperly
eternity to refused
find outtoyour release
scoreconstruction
sometime in
THOMAS J. HALL and THOMAS J. McCORMACK are evidence
of dollars of a employment,
month. A newly debtformed
exceeding income,
law firm will funds,
the fall,causing manybeing
to ultimately to halt construction
admitted to the bar work
can
litigation partners with Chadbourne & Parke and and poor
need FICObank
multiple scores.” Thougha the
accounts; court refused
business to
operating and
take consider
from sevenbankruptcy.
months to over Several
a year.have gone to
head its
Adam Sethbanking
Turk is a litigation practice
founding partner group.
of the They
Manhattan dismiss the
account, andclaims againsttrust
an attorney all defendants,
account. Many the banks
court court demanding that their lenders release funds
foundthe that scienter wasfornot adequately pled as to While Waiting for Bar Admission
canfirm
law be Turk
reached at thall@chadbourne.com
& Davidoff PLLC. He co-founded the lawand
firm offer latter account free. so that development work can continue.
tmccormack@chadbourne.com.
upon graduating from law school. He canFirm associates
be contacted at the While
corporate it isparent because those
not mandatory allegations
to have were
malpractice Back in the
Use this time1990s real
wisely. Sitestate recession,
and write lender
out a business
JASON PARK or
212-265-4900 , JONATHAN NOBLE and. FRANCESCA
aturk@turkdavidoff.com vague and itconclusory
insurance, is stronglyand, unlike the allegations
recommended. When first liability suits were
plan, outlining prevalent.
budgets At that
and goals for time, in an
the foresee-
PERKINS assisted in the preparation of this article.
www.turkdavidoff.com against other
starting a law defendants,
practice the were premiumsnot supported
on a policyby effort to improve
able future. the prospectsEstablish
Start networking: of repayment, many
a network of
 MONDAY,
MONDAY,JANUARY
APRIL 5,5, 2010
2009

programs
lawyers andtojudges
identify and contact
to serve as mentors homeowners
and advisors. in became
attorneysinsufficient
who welcome to cover
the chance the accrued
to helpinterest,
a young written
Olderwith the goal
attorneys and of moremaking the rescission
established law firms
danger as
Attend of many
delinquency.
recent law school graduate events as and the negative
motivated esquire.amortization feature (adding the process
tend to abeprivate
slow toone.”
adopt 11
the newest trends and use
youThe settlement further provides for a loan
can find. unpaid
If you interest
wouldtolike thetoprincipal)
focus yourcommenced.
new practice on themFinally,
to theirthe benefit.
court pointed
While theseout thattoolsthemay TILA not
modification
Interview for program.
attorneyDepending
positions aton the firms.
other form In 2005, the
transactional couple
work, filed volunteering
consider a class actionatlawsuit a local damage provision
land a Fortune 500hascompany
a cap of theas alesser
client,ofit’s
$500,000
a great
of loan,onmodifications
Going interviews willmay giveinclude
you a chance writingtodownmeet against Chevy Chase
bar association, whichBank, alleging
may train violations
volunteer of the
attorneys or 1 percent
place to startoftothe creditor’s
build a clientnet worth for the total
base.
the principal
more experienced balance to 95
lawyers percent
face to faceofand theaskcurrent
ques- Truth
on certainin Lending
mattersAct in (TILA),
exchange15 forUSC
taking§1635,
on a andcer- recovery
Do not in limit
class clients
actions. to In
one contrast,
geographicalthe courtarea.
value about
tions of thehow property, converting
their successful firmtoisfixed-rate
run. The seeking
tain number damages under
of cases pro§1640(a)(2)
bono. and rescission ruled
Many that becausefirms
established recoveries
are slow could possiblybeyond
to expand reach
mortgages, cutting
information gathered variable
on these interest
interviews ratescanto asprove
low underAs §1635.
a recent TILA
studentis theyou federal law developed
are more likely to be to the
theirhundreds
city limits.ofBy millions
travelingintothis meetcase and similar
a client outside
as 2.5inpercent,
vital with limitsstages
the development on future of yourrate own
increases,
firm. protect
comfortable consumers
asking for engaging
help from in credit transactions
a mentor. Contact ones
of theon a class basis,
immediate area, athe firmnotable
shows aabsence
commitment of a
and
It extending
will also keepinterest-only
your mind sharp or introductory-rate
as you engage in by
yourassuring “meaningful
law school’s alumnidisclosure
department of credit
and local terms”bar similar provision
to that client. As ain the TILA
result, rescission
the client will be provision
more like-
payment
legal debate,periods.
and Countrywide
will help you also stay agreed
updatedtoon waivethe to the consumer.
associations §1601(a).
to inquire aboutTILA’s most significant
mentorship programs. suggests Congressthe
ly to recommend didfirm
nottointend
friendstoand include class
colleagues.
prepayment
latest penalties
legal trends. and fees for
Additionally, late you
it gives payments,
an op- requirements
There is no reason concern
for you information
to repeat other thatattorneys’
must be actions
Use for rescissions.
all available resources in order to achieve the
delinquency
portunity to makeand loan modifications.
an impression on the experienced disclosed
mistakes, so to seek
a borrower
out other before extending
lawyers who have credit,
also goal. A young lawyer should not hesitate to call an
Conclusion
While
lawyers so this
that settlement
the next timeresolves you seethe eachclaims
other of at such
startedastheir
the own termfirms
of the and loan,
don’tannual
be afraidpercentage
to ask for older family friend for a favor or press a friend for
athe attorneysevent,
networking general,or needin early
to place December
a phone 2008,call to rate
theirand totalHaving
advice. costs to anthe borrower.attorney
established The plaintiffs
mentor There is no question that a tremendous wave
a referral.
the holder
each other, they of securities
are likely to backed
remember by Countrywide
you and take claimed that several of Chevy Chase’s disclosures
can be invaluable. of litigation is flowing
Many established from the
attorneys and unprecedented
larger firms rou-
amortgages
meeting or filed suit seeking
a phone call. damages allegedly arising were misleading, particularly regarding whether collapse
tinely turnofaway the clients
subprime thatmortgage
can not affordindustry
theirand fees
Do Not Be Intimidated
out of the modification to the loan terms.8 The the initial interest rate was fixed. Additionally, related
or matters creditthatcrunch.
to them While the outcomes
are small. You can to callsome
and
Join Bar Associations
plaintiff contends that Countrywide’s settlement the Once
coupleyou, claimed
a newthat the stamp
attorney, take theused by and
steps the of these cases
befriend may appear
established to some and
practitioners to besee predictable,
if they can
withMost the bar state attorneys such
associations, general, as the in New
which York it bank
open on theits disclosure
doors to a law forms,
firm,which referred
you must not to letthe
es- the
refernature of the cases
the smaller claims andandpotential
magnitude of the
clients thatlosses
can-
modified
City Bar, New loanYork terms, Statewill
Barcause it damages.
Association, The
New York note as a “WS
tablished attorneysCashflow 5-Yearyou.
intimidate Fixed Note
There areInterest
lawyers will likely lead
not afford theircourts
fees toand you.litigants
As a new intolawuncharted
firm, you
plaintiffLawyers
County contends that Countrywide
Association and the American simply had Bar Rate 1.950%,”
with over 20 years wasofsimilarly
experience deceptive
who stillbecause the
get things legal
will notterritory.
have the overhead costs of larger firms and
no right to modify
Association are freethe orterms
heavily of the mortgages
discounted for andthe document
wrong on acould regular bebasis.
understood to identify the note as a result can handle the matter for a smaller fee
that,year
first under afterthebeing
applicable
admitted contracts,
to practice. Countrywide as having
When aspeaking fixed rate. to opposing council, do not and still make a•••••••••••••
profit.
Opening a law firm •
• ••••••••••••••
is obligated
A newly to purchase
admitted at face
lawyer valuebecome
should any mortgage
a mem- feelThe district by
intimidated court the inotherthelawyer’s
Easternexperience.
District of If is more than a job; it is a
thatofit as
ber modifies.
many of these groups as possible and take Wisconsin
something feels grantedout summary
of place and judgment in plaintiffs’
the opposing coun- 1. See, While
lifestyle. e.g., Teamsters
you may Local
not 282
alwaysPension Trust Fund
be sitting at your v.
Moody’s Corp., No. 07 Civ. 8375 (SDNY) (alleging that
advantage of all the benefits of membership. Most favor,
sel may authorizing
be wrong,rescission
you mustand awarding
double check attorney’s
and say desk or misrepresented
Moody’s in court, youorare always
failed working.
to disclose that Every per-
it assigned
barClass
associations
Actionsoffer the chance to network with
by Borrowers fees. 9
The district court granted class certification
something. “excessively
son you meet high should
ratings” be
to subprime
seen as MBSs and CDOs
a potential and
referral
thereby misled investors about the quality and relative risk of
other lawyers, access to their extensive legal libraries, underNewly Ruleadmitted
23(b)(2) attorneys
of the Federal are no Rules of Civil
longer just or future client.
those investments).
Another
including category to
subscriptions of Westlaw
recent and litigation
LexisNexis,has Procedure, allowing
lowly law students; all are
they class members
members of the
the right
bar and to 2. See Counterclaim, Wachovia Bank v. Promenade at Doral
included
and even claims
a place by to borrowers
meet with clients who claim in a either
profes- rescind
need to act theirlikemortgages.
it. Clients The will notcourtseeheld
your thatmonthlythe LLC Are You Delaying
II, 08-13745CA02 (11ththe Cir. Right
July 21, Dream?
2008); see also
Complaint, Urbana Holdings, LLLP v. Bank of America, No.
inadequate
sional setting.disclosure or misrepresentation as to certified
bills piling class
up,would
nor doinclude
they care anyabout
person whodebt.
school had If you are(11th
08-47824CA27 a recent law 20,
Cir. Aug. school
2008); graduate
Complaint, and cer-
Regent
the terms of their mortgage financing. Federal obtained
By having an your adjustable-rate
own law firm, mortgage a client willfromviewChevy
you as tain that
Hotel, LLC you want
v. First toNo.
Bank, open your own
00009879 (Cal.law firm
Super. Ct.right
May
Learning Those Skills 1, 2008); Cross-Complaint,
law obligates that certain disclosures be made to Chase on a primary
a successful professional residence between April
and entrepreneur who2004 has now, then going to workJ.P.for Eliopulos Enter. law
a different
Bank F.S.B., No. GC040588 (Cal. Super. Ct. May 20, 2008).
Inc. v. IndyMac
firm only
homeowners
The most engaging in mortgage
difficult obstacle financing,when
to overcome and and January
achieved 2007, status.
a certain and who had received a Truth in postpones
3. Michael your dreams.
Corkery, “Builders Sue Banks That Pull
with increasing
starting a firm soon frequencyafter borrowers
completing arelawcontending
school is Lending Disclosure
It is your name on Statement
the door; from Chevynot
you should Chase
feel Mostasattorneys
Financing Constructionnever achieve
Projects their goal ofWall
Lie Unfinished,” open-
St.
that thenew appropriate disclosures were not made. bank containing any of the language the court J., July 23, 2008, at C1.
learning practice skills. like a lesser attorney. ing4. their own firm, and as the years go by
Relativity Media v. Citigroup, 08 Civ. 9721 (SDNY 2008).
their ca-
A significant
In a typicalissue law firmin these
setting,cases
senior is whether
associatessuch and found deficient under TILA. reers take
5. See on v.a different
Tripp path. When
IndyMac Financial Inc., 2007theyWL are4591930
finally
claims can be brought on a class action associates
basis. While
Generating Business
partners would train newer and junior on On appeal, the U.S. Court of Appeals for the (C.D.
ready Cal. Nov. positions
to leave 29, 2007) at (court
largerdismissed
firms and complaint for
establish
failure to plead scienter noting that while the restatement
common
the properlaw claims may
methods be subjectpractices.
and standard to class action
If you Seventh
For a Circuit
new lawnoted firm to that while in
succeed thisNew
wasYork a matter
City their
of the own,
bank’s they havewas
financials families and mortgages
some indication and are
that defendants
consideration,
start a firm rightthe outavailability
of school, however,of class you actions
needfor to of first do
it must impression
more thaninjust thatgood circuit, the First
legal work: and
The part- unable
were to oftake
aware the risk.in those records, “an even stronger
inaccuracies
statutory
be claims is less clear.
more proactive. Fifth
ners willCircuits,
need toingenerate
addition to California’s
business. They mustCourt draw inference
When is that the Defendants
considering were simply
whether this unable
is the to shield
right
themselves as effectively as they anticipated from the drastic
In
ForAndrews
example,v. ifChevy you wantChasetoBank, focus2008 your U.S.firm of Appeals,
attention to have held that
themselves and rescission
their name.class actions choice infortheyou,
change remember
housing the words
and mortgage marketsofand,hockey leg-
once that
App. LEXIS
around 20153 (7th
litigation, spend Cir.a Sept.
few days 24, 2008),
at theSusanlocal are Become
unavailable under of
a member TILA youraslaw a matter
school’sofalumni
law.10 end Wayne
inability became Gretzky:
evident, “You missfinancials
IndyMac’s 100 percent of the
were changed
and Bryan Andrews
courthouse. Befriend alleged they obtained
the employees who work a loanbe- The court ruled
association. Havethat because the TILA
an announcement printedrescission
about accordingly”).
shots you don’t take.”
6. See Banca Cremi, S.A. v. Alex Brown & Sons Inc., 132
from the
hind Chevy Chase
counters Bank,
along withF.S.B.
othertocourthouse
refinance theirstaff; remedy
the new firm requiresin thethe mostreturn
recentofalumni
borrowers to the
newsletter. If you,
F.3d 1017 (4thasCir.a newly
1997), minted law school
(court upheld dismissalgraduate,
of claims
home.
they areThe bankglad
usually offered
to showthem an unusual
a respectful “cashflow
young attor- position
Use all theyavailable
occupied before the loan
technologies was signed,
to establish the against
have the a broker
rightwho sold collateralized
attitude, confidence mortgage obligations
and skills, and
payment to the plaintiff, a foreign bank, finding that the plaintiff bank
ney how tooption”
properly loan, thatand
fill out enabled them to vary
file paperwork. In a it is a purely
firm’s presence personal
on theremedy internet. to be fashioned
Consider takingby put ainsophisticated
was the amountinvestor,
of workheld necessary
$5 billionto succeed,
in assets, you
had
theirminutes
few payments theybased
may showon their monthly
you more about cash
howflow.the individual
time and starting creditors and about
a blog debtors. an Moreover,
up-and-coming the can achieve your
“extraordinary” goal ofexperience,
investment opening aand law had
firmemployees
directly
This flexible
court system mortgage
works thanoption allowedinthem
you learned your to pay
entire court indicated
legal subject, that
offer the personal
elementary advicenature
while of the
giving with
frombusiness
law school.expertise and background in the industry); In
re Apple Computer Securities Litig., 886 F.2d 1109, 1115 (9th
a monthly
law minimum payment at a low interest rate
school career. rescission
readers contact remedy makes it both
information procedurally
to follow up with ques- and Cir. 1989) (“We conclude that in a fraud on the market case,
for an
Also initial
observeterm. While
other theirin
lawyers interest
court, rateand was
watch to substantively
tions. unsuitable for class certification. the defendant’s failure to disclose material information may
adjust monthly,
closely as they interactthe minimum
with theirpayments remained
clients, judges and The
Explorecourtall remarked
marketing thatoptions
while the statutesocial
through does
Reprinted with permission from the January 5, 2009 edition
fixed at the
opposing low rate
counsel. Tryuntil the initial term
to accompany a veteranexpired
lawyer or not explicitly
networks such as prohibit
LinkedIn, the Facebook
use of a class action
and Twitter. of the NEW YORK LAW JOURNAL© 2009 Incisive US
thecourt
to outstanding balance exceeded
for an afternoon; there are 110many percent of the
seasoned for
These rescission purposes,
are cost effective ways the
to lack of an
establish explicit
a brand. Properties, LLC. All rights reserved. Further duplication without
original loan (through negative amortization). After instruction in this area is not dispositive. In fact, permission is prohibited. For information, contact 877-257-3382
a time, the Andrews’ minimum monthly payment the court wrote that TILA’s rescission remedy “is or reprintscustomerservice@incisivemedia.com. # 070-01-09-0010

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