“We’re in an economy that has had a significant dropoff in Chapter 11 activity,” Stutman shareholder Jeffrey Davidson said in an interview on Tuesday.
Stutman, founded in 1948, staffs 25 lawyers in Los Angeles and New York and has represented hedge funds and other bondholders in bankruptcies including Lehman Brothers LEHMB.UL, Delphi Automotive Plc (DLPH.N) and Residential Capital RESC.UL, according to firm representatives.
Bankruptcy lawyers say the shuttering of Stutman, scheduled to take effect on May 1, marks the latest sign that a downturn in Chapter 11 proceedings has hit the top U.S. bankruptcy law firms.
Chapter 11 filings fell by 36 percent between 2010 and 2013, from 15,251 filings to 9,811, according to data on the United States Courts website.
Stutman’s Davidson said companies that previously would have filed for bankruptcy now opt for refinancing because of lower interest rates offered by banks. That, in turn, hurt business for bankruptcy lawyers, he said.
The major New York law firm Weil Gotshal & Manges cited a downturn in bankruptcy work, including business associated with its role in guiding Lehman Brothers through Chapter 11, when it laid off 60 junior lawyers and 110 support staff in June 2013.
Davidson declined to elaborate on Stutman’s closing, but referred to a statement in the California legal trade publication the Daily Journal that said the firm “has determined that it is in the best interest of our clients, creditors, shareholders and employees that we cease the practice of law.”
Davidson will join the larger bankruptcy law firm Pachulski Stang Ziehl & Jones, along with Stutman shareholders Isaac Pachulski and Gabriel Glazer, according to a news release issued by Pachulski Stang.
The Daily Journal in Los Angeles first reported the news of Stutman’s closure.
(Reporting by Casey Sullivan in New York; editing by Ted Botha and Matthew Lewis)