Kenneth Eckstein of Kramer Levin Naftalis & Frankel is one of the nation's leading bankruptcy attorneys. He was in the eye of the storm heading teams for creditors in both the GM and Chrysler bankruptcies, and he also represented St. Vincent's Catholic Medical Centers in New York in a creative solution to its bankruptcy that will lead to the creation of a 24-hour emergency facility. He serves as co-chair of Kramer Levin's 40-attorney corporate restructuring and bankruptcy practice.
Lawdragon: Can you describe you practice to our readers, including what type of clients you tend to represent?
Kenneth Eckstein: I have a diverse practice cutting across all aspects of the bankruptcy and restructuring world. Most of my work is creditor-based, but I have a significant company-side component to my practice as well. I have had a leading role in many of the highest-profile bankruptcy cases over the past 30 years, starting in the 1980's with Texaco and Eastern Airlines. I've been involved in some of the largest mass tort bankruptcy cases, including the Dow Corning bankruptcy stemming from the breast implant litigations as well as the Owens Corning asbestos case.
More recently, I represented the creditors' committees for General Motors and Chrysler and represented bondholders of Adelphia. On the company side, I recently represented St. Vincent's Medical Center and Bally Total Fitness, the health club chain. I have had an interesting and diverse practice, and have been fortunate to be on the front lines dealing with some of the most cutting-edge issues that have defined bankruptcy law.
LD: How many restructurings and reorganizations are you working on at any given time?
KE: That really varies. Typically I have a very hands-on practice. I have day-to-day responsibility for three or four cases at a time. As co-chair of Kramer Levin's 40-attorney bankruptcy practice, I also have oversight responsibility for several additional cases. Fortunately, I have the support of very talented partners and associates.
LD: What were some of the challenges you faced in working out the St. Vincent's case?
KE: It has been a fascinating case. Overseeing the closure of a major New York City hospital presented many unique challenges. It required a delicate coordination of the bankruptcy issues - working with competing creditors groups, as well as the patient-care issues, which were extremely important. We had to make sure St. Vincent's healthcare facilities throughout the metropolitan area were properly maintained and that patient services were not compromised.
There were also some very difficult political issues we had to contend with because St. Vincent's was such a significant health care provider in New York with a long history in the Greenwich Village community. The governor had even formed a task force before the bankruptcy to try to deal with St Vincent's problems. We also had some tough labor issues because we had doctors, nurses and many other employee groups who were affected by a closure of the Manhattan hospital. And of course there was the real estate aspect.
In the end, we were fortunate to weave together a complex real estate and health care transaction that balanced the creditors' needs to maximize their recovery while providing for a continuation of a significant new health care facility in Greenwich Village. It was definitely an extremely creative transaction - one of the more creative deals I've worked on.
LD: What do you see as the benefits of the solution reached?
KE: The transaction for the Manhattan real estate turned out to be a very good use of the bankruptcy system. The court approved a $260 million sale of the St. Vincent's campus to the Rudin family and North Shore/ LIJ, and the buyers are partnering to develop the first stand-alone 24-hour emergency and ambulatory surgical facility in New York City. We obtained unanimous support from our creditors and the support of the unions and secured lenders while coming up with a creative heath care solution for the Village. Importantly, this new healthcare facility is being funded without the need for government support. I was very pleased that the transaction garnered so much consensus.
LD: What was 2009 like for you and your group after being selected, in the period of about a month, as counsel to unsecured creditors in both the GM and Chrysler bankruptcies?
KE: Being selected within six weeks for both the Chrysler and General Motors creditors' committees was a tremendous achievement for the bankruptcy department and the entire firm. It was a fantastic opportunity for Kramer Levin to play a major role in a historic period in financial restructurings. This was a very intense period for our entire department. Both cases proceeded on an extraordinarily expedited basis. Chrysler was accomplished essentially in 60 days. GM required about 90 days. There was about a month of overlap.
Our teams were working essentially around the clock to deal with all the issues and the time table being imposed for the transactions. We mobilized large teams from throughout the firm - corporate, tax, litigation, pensions. It's a good example of how our firm deals with complex restructuring cases. A lot of lawyers throughout Kramer Levin, including many of our top partners, are accustomed to working on these types of cases. So we were able to mobilize people quickly and efficiently. Obviously, many, many parties were involved in these transactions, but we are proud we were able to make an important contribution to the restructuring of the auto industry in this country.
LD: What do you think makes your group attractive to prospective clients?
KE: Well, with me and my co-chair, Tom Mayer, you have two very experienced, recognized leaders in the practice area, and we have many other experienced partners and a deep and talented group of associates. Together we have cutting-edge experience in the widest spectrum of cases on both the company and the creditors' side and a tremendous track record in court. We have a very pragmatic, solutions oriented approach, and time and again we've delivered. And since we are such a significant part of Kramer Levin, we can draw on the best talent throughout the firm's practice areas. We assemble the A team for every one of our cases.
LD: What do you expect to see in the coming year in terms of the number of corporate bankruptcy filings and work for your practice group?
KE: The corporate bankruptcy arena today is relatively calm. Interest rates and the default rate are at historic lows. Many of the problems that came out of the recent financial crisis have been worked through or deferred because interest rates remain very low and there have been few situations not susceptible to refinancing. If companies faced maturities or defaults, in most cases they were able to avoid the problem by refinancing and extending maturities. While the corporate arena has been quiet, we have been focusing on the health care and municipal arenas. There has been activity in these areas, but not an overwhelming number of troubled situations. That could increase.
Traditionally, bankruptcy activity has ebbed and flowed. It's hard to predict what will trigger more distressed situations, just like it is difficult to predict the future direction of the economy. Interest rates or inflation at some point will rise, or unanticipated events like the litigation that produced the Texaco bankruptcy and the asbestos bankruptcies could trigger cases that none of us can predict. Experience has shown that bankruptcy has become a more well recognized tool to address and solve economic problems.
LD: How did you come to focus on bankruptcy matters in your career? Was this something you saw yourself doing in law school?
KE: Like most law students, bankruptcy was not something I was familiar with. My involvement in the practice is a fortuitous story. When I was a law student, bankruptcy judges did not have permanent law clerks. They had part-time law clerks. I was at NYU and knew somebody completing a clerkship for Judge John Galgay in the Southern District of New York. My friend asked if I was interested in interviewing for the position. I was hired to be a part-time clerk during law school - Fridays and two afternoons a week. This was my introduction.
When I applied for permanent jobs, I was one of the few candidates with any exposure to bankruptcy, so I was encouraged to try it. I began my career at Weil Gotshal, which had the largest bankruptcy practice at the time. I started in 1979, just when the new bankruptcy code was going into effect. The new code introduced a new era of bankruptcy as a strategic corporate tool. I was fortunate to enter on the ground floor of a growing practice area that has become one of the high-profile practice areas of the last 30 years. I moved to Kramer after a few years at Weil to take advantage of a great opportunity, and I never looked back.
LD: What type of skills or characteristics do you look for in younger attorneys interested in this type of practice?
KE: What I find most interesting about the bankruptcy practice is that it is one of the few remaining multi-disciplinary practices in big-firm law. You have to be a bankruptcy specialist, a corporate lawyer, a skilled deal lawyer and an effective litigator. Bankruptcy lawyers have principal responsibility for coordinating very complex corporate cases. I look for attorneys who, in addition to being smart, are multifaceted and able to see the big picture. Many different skill sets come into play. To be a successful bankruptcy lawyer in large reorganization cases, it is critical to be able to coordinate many complex issues, while at all times keeping your eye on the goal and knowing what you need to do to get there.