Big Law Confronts Tail Risk Threat to Private Equity Bankruptcy

Big Law partners are looking at a ruling that sent shock waves through the bankruptcy world as a lesson rather than a serious threat to their model of representing both private equity sponsors and their distressed portfolio companies.

The fallout comes in the wake of a decision this month in the Eastern District of Virginia. The court declared Vinson & Elkins could not represent wood-pellet maker Enviva Inc. in its bankruptcy case due to the law firm’s longstanding relationship with Riverstone Investment Group LLC, a private equity firm that held 43% of Enviva’s publicly traded shares.

Given how commonly law ...