Joseph L. Schwartz is a partner with Riker Danzig Scherer Hyland Perretti LLP and head of the firm’s Bankruptcy and Reorganization Group. He concentrates in all facets of restructuring, insolvency law, and complex bankruptcy and commercial litigation.
Over the past few years, Schwartz has represented a number of Chapter 11 debtors. During his career, the vast majority of Schwartz’s clients have been secured and unsecured creditors, creditor committees, third-party purchasers, unions, private equity/hedge funds, bankruptcy trustees, insurance companies, litigation trustees, and indenture trustees. He represents clients in a number of industries, including healthcare, real estate, manufacturing, retail, distribution, and finance. He frequently speaks and writes on a variety of bankruptcy-related topics for various organizations.
Thomson Reuters has included Schwartz on the New Jersey “Super Lawyers” list for Bankruptcy Law each year since 2006. Best Lawyers in America, a peer review of U.S. lawyers, has included him on its Best Lawyers list for Bankruptcy and Creditor-Debtor Rights, as well as for Litigation-Bankruptcy Law, since 2010. Additionally, Chambers USA: America’s Leading Lawyers for Business has included Schwartz in its Client's Guide for Bankruptcy Law since 2010.
Q: How did you gravitate into turnaround and restructuring work, or did you start out there?
Schwartz: I graduated from Rutgers University with an undergraduate accounting degree and thereafter went right to law school. Other than internships, I never actually practiced as an accountant, nor did I sit for the CPA exam. Nonetheless, I always had an interest in business, accounting, and finance. As a result, bankruptcy, and particularly commercial bankruptcy, was an area that peaked my interest while I was in law school.
When I graduated in 1991, bankruptcy was a relatively busy area, and there were a number of law firms in New Jersey looking to hire commercial bankruptcy associates. Given the fact that I had an interest in commercial bankruptcy law, it was a perfect fit. I accepted a position at Cole Schotz, which was and still is a very good law firm, in its bankruptcy group and began doing bankruptcy, restructuring, and turnaround work right from the beginning of my career, and I’ve been doing it for 27 years.
Q: So, you’ve seen a lot of changes along the way?
Schwartz: I have, and there have been quite a few.
Q: Is it easier or harder now than when you started, or just different?
Schwartz: It’s both different and harder. After working at Cole Schotz for my first three years after graduating from law school, I moved over to Riker Danzig in June 1994, which makes me a dinosaur these days, because most lawyers don’t stay at law firms that long.
For my first 15 or 20 years after graduating from law school, or probably until about 2010, I used to joke with people that I could work 24 hours a day, seven days a week, because there was so much bankruptcy work. It wasn’t that hard to get bankruptcy work because there was just so much of it out there. Since about 2010, however, the bankruptcy practice has both slowed down and substantially changed.
I think it started changing in the early to mid-2000s, which became obvious from and after 2005, when the Bankruptcy Code was amended. Those amendments, which were publicly broadcast as being changes that primarily would affect consumer bankruptcies, also substantially affected commercial bankruptcies in that Congress made some substantive changes to the commercial provisions of the Bankruptcy Code, which most practitioners had not previously anticipated.
Certain of those changes made it much harder for Chapter 11 debtors to reorganize, which resulted in a substantial slowdown in the Chapter 11 practice, both in terms of quantity of filings and length of Chapter 11 cases. The slowdown in Chapter 11 filings, however, wasn’t felt right away, primarily due to the financial crisis in around 2007-2008. Nonetheless, since about 2010 or 2011, there’s been a substantial reduction in the number of Chapter 11 bankruptcy filings, as well as a reduction in the length of time cases remain in Chapter 11.
The foregoing, coupled with the low interest rate environment that we’ve been in for the past eight to 10 years, have been among the primary reasons that Chapter 11 filings have generally decreased steadily over the past eight to 10 years. There have been a few blips here and there, where Chapter 11 bankruptcies pop for a short period of time, primarily due to problems affecting certain sectors of the economy. But generally speaking, there has been a steady and substantial reduction in the number of Chapter 11 filings, especially with respect to larger cases, which makes it much more challenging to get business and to stay consistently busy.
The financing environment has substantially changed as well. I used to represent primarily banks and other similar commercial lenders that made loans to businesses that went into financial distress. While I still do a fair amount of bank work, over the past 10 to 15 years, many of those banks or similar commercial lenders that I used to regularly represent have sold their distressed loan portfolios. Many other businesses have obtained financing through the issuances of bonds or through loans from private equity firms or hedge funds, which has further changed the practice. Luckily, I also do a fair amount of indenture trustee work, so I have remained involved with some of the larger Chapter 11 cases, but the landscape has become very challenging.
Q: What have been some of your most gratifying or favorite cases along the way?
Schwartz: A few years ago, I represented the lender in a Chapter 11 bankruptcy case called Ocean Place Development, which was a luxury, full-service hotel resort and spa located on the Jersey Shore in Long Branch, New Jersey. My client, a private company, had purchased a distressed promissory note from Barclays, which held both a mortgage against the real property and liens against the personal property owned by Ocean Place Development. My client was potentially interested in taking ownership of the hotel, which was in financial distress and because of that had gone into disrepair.
In that case, Ocean Place Development filed its Chapter 11 case with the intention of attempting to restructure the note, on terms that were not acceptable to my client. The case involved substantial motion practice and litigation, including litigation in connection with competing Chapter 11 plans. My Chapter 11 plan involved my client purchasing the hotel in exchange for a credit bid. After substantial discovery and related litigation, ultimately, the Bankruptcy Court confirmed my plan, and my client wound up buying the hotel for a credit bid.
Since it obtained ownership of the hotel, my client has invested a substantial amount of money to extensively renovate and refurbish the hotel, which is now one of the crown jewels of the New Jersey Shore. It was very gratifying to me to get a great result and allow for my client to achieve its goal.
I’ve had many cases along the way where I have obtained good results for clients. Nonetheless, that case, in particular, stood out because there was a fair amount of money at stake, there were very sophisticated legal issues involved, my client was willing to spend what it would take to get the result that they wanted, and we achieved a favorable result.
Q: What have been some of the key milestones in your career that have helped make you who you are today?
Schwartz: Obviously, making partner at Riker Danzig, effective in January 2001, was a milestone. That was a goal that I set out to achieve. When I graduated law school, I decided I wanted to work for a large firm; work on sophisticated, complex matters; become a good lawyer; and ultimately make partner.
I’ve always been a goal-oriented person. When you’re in school, you have goals such as getting good grades, or if you play sports, you want to reach certain statistical goals. When you go to work, however, the goals change, as certain goals are hard to define by benchmarks. I guess some people can say that their goal is to make money, but that’s an amorphous goal. Saying, “I want to make partner” is a goal that is not necessarily defined by statistics or metrics, but, rather, is a goal somewhat outside of your control that you set out to achieve.
Another goal of mine was to work my way up within the firm, which I’m still in the process of doing. That’s an ongoing goal. I can’t say that I’ve achieved exactly what I want to, but there’s always something you need to strive for. If you stop striving to achieve, then you’re kind of dead, right?
Q: Just lasting as a bankruptcy attorney in the current environment is an achievement. There’s been a fair amount of change in the personnel in the industry.
Schwartz: There has been, and it’s kind of disheartening. Years ago, when I was younger lawyer, I had discussions with certain of my New Jersey friends in the bankruptcy industry who are my contemporaries, and we predicted that when we got to a certain age, we would be in a position to control a lot of the commercial bankruptcy business in the state. Unfortunately, as I’ve said, commercial bankruptcy has substantially slowed, and in New Jersey it has slowed more than it has on a national basis. As a result, while I and some of those friends are certainly recognized as important Chapter 11 practitioners in New Jersey, there’s just not enough bankruptcy work here.
Additionally, some of my friends in the bankruptcy industry have gotten out of the bankruptcy business altogether over the past few years. In fact, just recently, a law firm in New Jersey, a smaller boutique kind of commercial bankruptcy firm, basically imploded, and some of the lawyers went to work for another firm. A number of those lawyers are friends of mine. Hopefully, they can succeed at this new firm.
When a firm derives a substantial portion of its revenue through bankruptcy business and bankruptcy slows down, unfortunately there are consequences. With larger firms, other pockets of the firm that are busy can support an area, such as bankruptcy, that may be relatively slow. However, when a firm derives a substantial portion of its revenue from either one source of business or from one client, it can obviously become a problem.
You try to ride out the wave because you have hope and/or confidence that business will ultimately pick up again, particularly when you like what you do. I still get my share of business, but I wish that it was a little busier right now.
Q: What role has your TMA membership played in your career?
Schwartz: I’ve been a member of TMA for a long time. I’ve been on the board of the TMA New Jersey Chapter now for four or five years, and I’ve been on the chapter’s Executive Board for the last couple of years. I’m the director of membership for the chapter. I’ve always enjoyed being associated with TMA New Jersey because there are a lot of good people within the organization.
Q: What advice would you have for someone who was new to the industry or was thinking about getting into the industry?
Schwartz: I guess if they were thinking about getting into the industry right now, I probably would recommend that they hook themselves up with a good, experienced mentor who can train them and really show them the ropes. My associates are lucky in this way because I do that for them.
What you learn in law school is much different from what you actually do when you start practicing. How you’re trained as a young lawyer really defines who you become as a lawyer. If you are not trained properly in your first few years out of school, I truly believe you will have a tough time ever becoming a good lawyer. It’s easy to develop bad habits. It’s easy to cut corners if you’re not trained properly. As a result, I think your first few years in practice are extremely important and formative in your career. That doesn’t mean you won’t make money or that you can’t be perceived by people outside your area as a successful lawyer. However, lawyers know who in their practice area is good and who is not.
Q: What are you passionate about outside the office?
Schwartz: I have a few outside passions. I am a huge baseball fan. In fact, I’m probably as big a Yankees fan as you will ever find. It’s been that way since I was a little kid. Unfortunately, the Yankees can actually affect my mood. My mother used to say when I was younger that she could always tell by my mood if the Yankees were winning.
I have always been very statistics-oriented. Ever since I was very young, I would memorize baseball players’ stats, especially the Yankees’ players. I have two daughters. They are 18 and 22. I encouraged both of my daughters to play sports, which they both did. Among other sports, they both played softball at high levels. My younger daughter is now a freshman in college, and she’s playing softball for her college. My passion is not only watching baseball but also watching her play softball.
Another of my passions is working out. Truth be told, I’m a big gym rat. I go to the gym all the time, and I’m very into working out. I go pretty much every day. It is a big part of who I am.
Finally, I also have a big yard that I take a lot of pride in. I’m always out there on the weekends, and whenever I have free time, doing my yardwork, landscaping, and things like that. I have a yard that is meticulously landscaped with many, many flowers and colors.
Q: What might people who only know you in your professional capacity be most surprised to learn about you?
Schwartz: I have a soft side that people who just know me professionally would not necessarily see. Don’t tell anyone this, though, as I can be tough when I’m involved in a case. They wouldn’t know that I’m an animal lover, or that I enjoy doing my yard and garden work.
Q: Are you saying that you’re a farmer at heart?
Schwartz: Well, I’m not sure about that, but I certainly get satisfaction from working in my yard. I’m also a little like Noah on his ark, because, again, I’m an animal lover. I have a dog and cats at home. I was always a dog person, but until I bought the house where I live now, I had never been a cat person. The house came with an old cat that was living in the yard, which I discovered shortly after I closed on the place.
I started feeding this cat because I felt bad for it. Next thing you know, another cat shows up, and that cat has kittens, and this happens a number of times over the next few years. I gave away most of the kittens, and finally I got smart and started getting them all spayed or neutered. But I couldn’t get rid of all of them, so I now have three cats that live indoors and two that live outdoors in my yard, and I feed and take care of them every day.
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