Page 23 - Delaware Lawyer - Winter 2022

John P. DiTomo, James D. Honaker, Eric S. Klinger-Wilensky, Susan Wood Waesco, Lauren K. Neal, Tarik J. Haskins, R. Jason Russell and Brian P. Egan from Morris, Nichols, Arsht & Tunnell
In the ‘90s, work was falling out of the sky. Any Philadelphia firm with a bank- ruptcy practice was interested in open- ing an office in Delaware.”
Unlike Chancery-centered offices, bankruptcy groups tend to spring from firms having a strong national or regional practice that generates large amounts of Delaware work. Pa- chulski Stang Ziehl & Jones, a na- tional bankruptcy firm, has 10 lawyers in Delaware, an office it solidified by hiring one of Delaware’s most produc- tive debtor-side lawyers, Laura Davis Jones, who joined the firm as a name partner in 2000. On the creditor side, Philadelphia’s Klehr Harrison Harvey Branzburg opened in 1994 with a two- lawyer Chancer y practice, but now has a 10-lawyer office focused largely on bankruptcy and restructuring.
According to Galardi, such firms have “the corporate clients to start a restructuring practice and then build an office around it. Large firms were giving away lots of clients and hours if they didn’t have a Dela- ware office.” Daluz pointed out that “rates charged by Delaware firms for
bankruptcy work tend to be in line with the national market, so there is little risk to entering the Delaware market.”
Expansion by Out-of-State Firms Has Stabilized
Galardi believes the number of out-of-town firms operating in Dela- ware has “stabilized.” As Delaware’s primacy as a bankruptcy venue has been challenged by Texas and New York, “the business has slowed down. While there is room for more players, there is less than there was.” Instead, “a lot of firms are moving to Texas and the Delaware firms are primar- ily moving around the deck chairs” with practitioners or groups migrating from one firm to another rather than opening new offices.
Intellectual property litigation has been less of a factor in the establishment of new offices, although Fish & Richardson’s Delaware office hosts 16 lawyers. For the most part, however, IP work is captured by a small number of Delaware firms.
The increasing shift to virtual of- fices offers a new economic rationale
for national and regional firms to situ- ate lawyers in Delaware. “The cost of a lawyer sitting in Delaware is far less than it is in many other places, largely because of rent and support staff sala- ries,” explained Rob Saunders, the for- mer Managing Partner of Skadden’s Delaware office. However, that eco- nomic incentive is limited. It can be harder to find qualified administrative, operational and accounting staff in a small market like Wilmington than in a major city. In addition, said Saunders, “M&A lawyers still have a strong sense that New York is the center of the fi- nancial universe and that’s where the core practices need to be.”
National and regional firms have had different rationales for entering the Delaware market over the past 40- plus years, but Delaware’s longtime prominence as a legal powerhouse continues to be a strong draw. While it is unlikely the next 40 years will see the same type of expansion as the past 40, law firms that recognize an oppor- tunity to expand their geographic and practice footprints will continue to pursue that upside.
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