Two Spanish Law Firms in Bankruptcy
Why a pair of formerly high-flying firms have closed up shop.
Spain may be out of recession, but the number of companies filing for bankruptcy continues to rise. And now, for the first time in 20 years, two law firms have joined them. Barcelona's Maniega & Soler and Madrid-based MLA Associates—once lauded for their independent, go-getting prowess—have both requested court-assisted creditors meetings, the Spanish vehicle of filing for bankruptcy.
For Maniega & Soler, the end seems to be linked to a falling-out between the name partners—who happened to be husband and wife. Focused on M&A and procedural law, the firm was founded in 1992 by lawyer Laura Maniega and her husband, manager José Antonio Soler, and once boasted a 70-lawyer team in six offices, including a branch in Sarajevo. Spanish business daily Expansion pegged its 2011 revenues at $18.1 million. But last May the firm filed for a creditors meeting in a Barcelona commercial court with debt of $1.8 million, Maniega says. Both the Spanish tax and social security agencies have opened investigations into the firm for accounting irregularities, according to Maniega—who says that she has filed a separate lawsuit against Soler for allegedly bankrupting the firm and doctoring accounts to hide it. Soler declined to comment on the allegations, but says that the firm was always solvent and profitable, and that that if he had retained control of the firm, he would not have filed for bankruptcy.
When Maniega and Soler's marriage began to fall apart at the beginning of 2012, say two former lawyers at the firm, the atmosphere in the office deteriorated and the firm's demise became "inevitable." "I have the feeling that what happened was less about the economy and more the result of a failed marriage," says Manuel Martín, managing partner at Gómez-Acebo & Pombo, Spain's fourth-largest firm by revenue. " What got caught in the middle was the firm." Another turbulent situation brews at MLA Associates, which was founded in 2007 by attorney Nicolás Martín, who had previously headed the Madrid labor teams at both Jones Day and Hogan Lovells . At press time the firm's bankruptcy case had not yet been published in the official state bulletin, but a spokesperson for the Madrid commercial court confirmed that MLA had filed for bankruptcy . Martín did not return repeated phone calls.
Two former partners say that Martín spent lavishly to lure lawyers from big firms, such as Ignacio Hidalgo from Cuatrecasas, Gonçalves Pereira, and MLA rented office space on the Paseo de Recoletos, one of Madrid's most expensive streets. In the summer of 2012 the firm threw a party for around 1,000 lawyers, clients, and other guests with an "around the world" theme of exotic foods and performers—even a trapeze artist. At the time of the party, MLA had around 60 lawyers. By the winter, says Hidalgo, who left the firm in January to join Chávarri & Muñóz in Madrid, the majority of the firm's lawyers had left—driven away, Higalgo asserts, by Martin's poor management and people skills. By March 2013, only a handful of partners and lawyers remained. Unlike in the United Kingdom and France, Spain's regional bars do not have procedures to deal with law firms in financial distress. As in all Spanish bankruptcy hearings, a commercial court will decide whether it was a "fortuitous" bankruptcy or if there was negligence. Spain hasn't seen cases like these in two decades. The last prominent law firm bankruptcy was that of Madrid law firm Fabregat y Bermejo, which closed in 1990, a year after a young Cuatrecasas backed out of a proposed merger.