Posted Apr 01, 2011 06:50 am CDT
The case was one of the first megadeals in the wake of the economic meltdown—a David and Goliath battle with more than $500 million in investments and the residences of more than 11,000 senior citizens at stake. But the Portland, Ore., bankruptcy court proceedings last fall weren’t in the hands of BigLaw; they were under the direction of Tonkon Torp, a midsize local firm that put more than half its attorneys to the task.
As part of a $1.2 billion transaction, Blackstone Real Estate Advisors acquired 146 senior living properties from now-defunct Sunwest Management, formerly the country’s largest privately held senior living operator. The deal followed a highly publicized 2009 Securities and Exchange Commission suit that targeted several well-known Pacific Northwest law firms and accused Sunwest of operating a Ponzi scheme that used more than $300 million raised from new investors to repay old lenders seeking to recoup losses on the company’s retirement facilities.
The unwinding, restructuring and sale of hundreds of Sunwest entities, which included more than 1,000 title holders, demanded legal expertise in securities, tax, real estate, litigation, and mergers and acquisitions. While some involved in the matter suggested it was a job for a prominent East Coast firm, Clyde Hamstreet, chief restructuring officer for the case, retained Portland bankruptcy attorney Al Kennedy and his colleagues at 86-lawyer Tonkon Torp.
“There were some people who had concerns about how a midsize firm in Oregon could handle such a big case,” Hamstreet says, “but I’d worked with the firm for some time and had a lot of confidence in the people.”
Tonkon Torp had keen knowledge of Oregon’s bankruptcy court system and high credibility with the presiding judge, adds Neal Miranda, vice president and senior counsel at Chicago Title Insurance Co., which oversaw the title companies involved in the transaction.
Their confidence in the law firm paid off. The magnitude of the matter stretched its resources far beyond any previous engagement. With more than 50 lawyers and support staff working on the case, Tonkon Torp recovered 44 cents to 50 cents and more on the dollar for investors, despite creditor pressure to wind down all the properties separately for pennies on the dollar. Further, the senior residents, whose average age is 85, were unaffected by the ownership change.
“We knew going into this that we’d have stresses and strains,” says managing partner Mike Morgan, who for more than a year devoted a portion of each day to addressing personnel issues.
“We had to get on the floor, walk around and try to detect who wasn’t telling you they had far too much to do, and get those people help,” he says. “We tried to make sure people knew they could talk to us; they didn’t have to suffer quietly.”
The firm held in-house training sessions for paralegals, corporate assistants and file clerks, and it implemented meticulous tracking systems for the massive amount of paperwork the case generated. Corporate partner Kenneth Stephens recalls a pivotal lunch with his colleagues as the vastness of the matter became clear.
“This has to be done perfectly,” Stephens recalls saying, “so let’s not kid ourselves about it.”
Morgan and Stephens credit the camaraderie of the single-office firm for its ability to tackle such a complex matter. “When you are in the same office, you can look at each other eyeball to eyeball and say, ‘This has got to be done. Is it going to be you, or will it be me?’ The fact that we are close to one another generates a measure of respect and cooperation,” Stephens says.
The firm’s apprentice-style mindset toward retention and promotion also allowed attorneys and staff not primarily devoted to the Sunwest matter to step up their workloads, which freed the schedules of those needed for the deal. The firm called upon senior associates and junior partners to assume responsibility for established clients.
“We expect associates to come here, become partners and stay their career,” Morgan says. “This develops a high level of trust, so senior attorneys can transfer work to junior attorneys, and ensures clients are well-served and that they will be here for the next generation. This is easier to do at a firm that tells associates they should think about ownership from the day they start.”