The economy seems to be on the mend. Corporate profits are strong, and the Dow is north of 12,000. In the legal world, layoffs are down, bonuses are up, and hiring is way up.

But governments — federal, state, and local — are staggering under mountains of debt. State and local governments have borrowed $2.4 trillion as of mid-2010, and they’ve promised another $3 trillion in retirement benefits.

There is tons of talk out there about a possible wave of municipal bankruptcies. And even if the talk might be overblown, the possibility of default by multiple local governments or even state governments — which might someday get the ability to declare bankruptcy — can’t be ruled out.

If municipal bankruptcies start popping up all over the place, Dewey & LeBoeuf will be ready. The firm just picked up a leading expert in the area….

Here’s the report, from Am Law Daily:

Bruce Bennett, a name partner at Los Angeles-based bankruptcy boutique Hennigan Bennett & Dorman, is leaving the firm he co-founded for Dewey & LeBoeuf, Dewey announced on Monday.

Best known for steering Orange County, Calif., through one of the largest municipal bankruptcies in U.S. history, Bennett, 52, brings more than two decades of experience to Dewey’s L.A. office. He and nine other Hennigan Bennett attorneys are officially joining Dewey on Monday.

Before it was an awesome TV show, the OC was a blockbuster bankruptcy case — the largest municipal bankruptcy in U.S. history.

With these new arrivals, Dewey seems set to give the traditional bankruptcy powerhouses a run for their money. In fact, Dewey is throwing down the gauntlet:

For Dewey, the hires will help push the firm into the upper echelon of national restructuring practices and add more strength to a “deep bench” of bankruptcy expertise, according to Martin Bienenstock, leader of the firm’s business solutions and corporate governance group.

“This enables us to provide the same or better level of excellence that a Kirkland or Weil can provide in the reorganization area,” Bienenstock, pictured left, says. “This is just a tremendous combination.”

Bienenstock, a superstar of the bankruptcy bar, was snatched away from Weil back in November 2007. Since joining Dewey, he’s racked up some major matters, as noted by Michael de la Merced of DealBook:

Upon joining Dewey in 2007, Mr. Bienenstock founded the firm’s “business solutions and governance department” — read bankruptcy and restructuring — and won assignments on cases like those involving the Ambac Financial Group and the Capmark Financial Group.

He also had a hand in formulating what became General Motors‘ reorganization plan, which involved placing the carmaker’s desirable assets in a new company.

Contrary to the gloomy predictions of many naysayers, the GM reorganization appears to have worked out well. If you watched the Super Bowl last night, you can thank Bienenstock et al. for all the annoying GM car commercials (at $3 million a pop).

Congratulations to Dewey on its new talent, and to Bruce Bennett and his colleagues on their new professional home.

We’ve reprinted the full press release, sent to us by a spokesperson for Dewey & LeBoeuf, at the end of this post.

Dewey Brings on 10 Lawyers From L.A. Bankruptcy Boutique [Am Law Daily]
Dewey & LeBoeuf Strengthens Its Bankruptcy Team [DealBook / New York Times]
Dewey & LeBoeuf Hires Municipal Bankruptcy Specialist and His 9-Lawyer Team [ABA Journal]

DEWEY & LEBOEUF — PRESS RELEASE

Renowned Bankruptcy and Reorganization Team Joins Dewey & LeBoeuf’s Los Angeles and San Francisco Offices

(LOS ANGELES – February 7, 2011) – Dewey & LeBoeuf LLP is pleased to announce that renowned bankruptcy and reorganization lawyer Bruce Bennett has joined the firm. He will be accompanied by Partners James Johnston, Sidney Levinson, Bennett Murphy, Joshua Mester, Counsel Joshua Morse, Monika Weiner and three associates. All were previously with Hennigan, Bennett and Dorman LLP. The group will join Dewey & LeBoeuf’s Los Angeles office, with the exception of Mr. Morse, who will be in San Francisco.

“Bruce is one of the premier restructuring attorneys in the country, with unparalleled experience in Chapter 11 corporate reorganizations and Chapter 9 municipal reorganizations,” said Dewey & LeBoeuf Chairman Steven H. Davis. “We are delighted to have Bruce and his team join us. Their interdisciplinary restructuring experience further cements our reputation as a go-to firm for complex matters in this area and provides exciting opportunities for growth.”

Mr. Bennett has been involved in many of the largest corporate reorganization cases in the United States, including in the fields of retail, telecommunications, heavy industry, aviation, manufacturing, real estate, insurance, energy, banking, and computer technology. He served as lead debtor’s counsel in the country’s largest municipal bankruptcy, In re County of Orange, California, which commenced following a $1.7 billion loss in County investment pools. As counsel to the debtor, Mr. Bennett was the architect of the Plan of Adjustment that comprehensively resolved the County’s financial problems. That Plan was confirmed and successfully implemented in approximately 18 months. In related litigation the County recovered over $870 million.

Prior to joining the firm, Mr. Bennett was a founding partner of Hennigan, Bennett & Dorman LLP and head of that firm’s Business Reorganization and Restructuring Department.

Mr. Bennett commented, “Dewey & LeBoeuf is a world-class law firm with an extensive global presence. The breadth of expertise it provides in such areas as corporate and tax have become an important factor in creditor and debtor representations and will greatly enhance the value we offer clients.”

The arrival of Mr. Bennett and his team follows that of Martin Bienenstock who joined the firm in December 2007 from Weil, Gotshal & Manges LLP, where he was co-head of that firm’s Business Finance and Restructuring Department. Upon his arrival Mr. Bienenstock established the Business Solutions & Governance Department, which was instantly active and has been engaged in such high-profile restructurings as:

* Ambac Financial Corp. and Capmark Financial Group (debtors counsel).
* Lehman, CalGen and Innkeepers USA Trust (counsel to creditors or shareholder including banks and hedge funds).
* General Motors (formulated its 363 sale strategy ultimately used by the US Auto Task Force for the Chapter 11 cases of Chrysler and GM).
* The firm also represented companies in successful out-of-court restructurings including Value City, Finish Line, Chrysler Financial and LNR Property LLC.
* Mass tort cases including successfully reorganizing G-I Holdings, Inc., and representing creditors and shareholders in WR Grace and other cases.

Mr. Bennett’s team is Dewey & LeBoeuf’s latest high-profile addition in California. In January, the firm announced the arrival in its San Francisco office of a preeminent group of intellectual property litigation lawyers led by Partner Henry Bunsow.

In July 2009, the firm brought in a group of transactional lawyers led by Richard Climan to its Silicon Valley office. Since their arrival, this group has built a leading technology M&A and licensing practice and counts among its clients Alibaba.com, Applied Materials, Dell, eBay, Hewlett-Packard, Merz Pharmaceuticals, Onyx Pharmaceuticals, Qualcomm, Riverbed, SANYO Electric, Sony, Synopsys and Zynga.

Biographies for the partners and counsel accompanying Mr. Bennett are as follows:

James O. Johnston, Partner

Mr. Johnston specializes in corporate reorganization and commercial bankruptcy matters, including both debtor and creditor representation. Mr. Johnston was a lead attorney in the group that represented Orange County in its chapter 9 municipal bankruptcy case, and subsequently has represented a number of debtors in chapter 11 proceedings, including Barry’s Jewelers, Inc., Kenetech Windpower, Inc., Komag, Inc., SmarTalk TeleServices, Inc., Solidus Networks, Inc., and WestStar Cinemas, Inc. Mr. Johnston also served as reorganization counsel to the City of Desert Hot Springs, California, the first California city to reorganize under chapter 9 of the Bankruptcy Code, and as counsel to the chapter 7 trustee for Brobeck, Phleger & Harrison LLP in one of the largest law firm insolvency proceedings.

Mr. Johnston regularly represents creditors, creditor groups, indenture trustees, and other parties in interest in chapter 11 cases and out-of-court workouts across the country, including Official Committees of Unsecured Creditors in chapter 11 proceedings involving RBX Corporation and SpectraSite Holdings, Inc., members of the Official Committee of Unsecured Creditors of Calpine Corporation and Hawaiian TelCom, Inc., ad hoc committees and creditor groups of Tribune Company, Adelphia Communications, Ashanti Goldfields, and the City of Klamath Falls, indenture trustees (at the request of majority bondholder groups) in the United Air Lines, Delta Airlines, and Northwest Airlines bankruptcy cases, and the largest creditors in chapter 11 proceedings involving the Tropicana Las Vegas Resort and Casino and R.H. Donnelley Corporation and affiliates. Mr. Johnston also recently represented special committees formed by the Board of Directors of SemGroup Energy Partners, L.P., in connection with investigations relating to the bankruptcy of its ultimate parent, SemGroup L.P.

Sidney P. Levinson, Partner

Mr. Levinson specializes in bankruptcy. His clients include debtors, trustees, bondholders and creditors’ committees in a variety of large, complex proceedings, including Hawaiian Airlines, Inc. (Chapter 11 Trustee), Fontainebleau Las Vegas (Term Lender Steering Group), WestPoint Stevens, Inc. (Steering Committee of First Lien Lenders), Azabu Buildings Company Ltd. (Petitioning Creditors), Premier Entertainment Biloxi (Majority Noteholders), NorthPoint Communications Group, Inc. (Chapter 7 Trustee), Peregrine Systems, Inc. (Official Committee of Unsecured Creditors), Liberty House, Inc. (Debtor-in-Possession), and Aureal Inc. (Debtor-in-Possession).

Mr. Levinson’s practice also includes bankruptcy-related commercial litigation. In 2007, he represented Hawaiian Airlines in obtaining an $80 million judgment, plus an award of $3.9 million in attorneys fees, against Mesa Air Group, arising from Mesa’s breach of a confidentiality agreement. Hawaiian ultimately recovered from Mesa a cash settlement payment of $52.5 million. In 2010, he obtained a $9.5 million judgment in Mississippi bankruptcy court against a solvent debtor for violation of a no-call provision. Formerly, Mr. Levinson was a trial attorney at the Department of Justice, Civil Division, where he specialized in bankruptcy and commercial litigation.

Joshua M. Mester, Partner

Mr. Mester’s practice focuses primarily on bankruptcies, corporate reorganizations and bankruptcy-related litigation. Mr. Mester has represented debtors, trustees, creditors’ committees, and individual creditors in a variety of large, complex proceedings. His recent representations include Westpoint Stevens, Inc. (Secured Lenders), Hawaiian Airlines, Inc. (Chapter 11 Trustee), Brobeck, Phleger & Harrison, L.L.P. (Chapter 7 Trustee), Factory 2-U Stores, Inc. (Debtor-in-Possession), United Airlines, Inc. (Indenture Trustee), Peregrine Systems, Inc. (Official Committee of Unsecured Creditors), SpectraSite Holdings, Inc. (Prepetition Ad Hoc Committee of Bondholders), LTV Steel Company, Inc. (Debtor-in-Possession), Aureal Inc. (Debtor-in-Possession), and WestStar Cinemas, Inc. (Debtor-in-Possession).

Bennett J. Murphy, Partner

Mr. Murphy was previously co-head of the Business Reorganization & Bankruptcy department at Hennigan, Bennett and Dorman.

Mr. Murphy has spent his entire career as a bankruptcy lawyer. Among other matters, he has represented creditors’ committees in the cases of Continental Airlines, Orange County, Sizzler Restaurants, Wilshire Financial Services Group, Dade-Behring, WorldCom, and Solutia. He has been counsel to the Chapter 7 trustee for Brobeck, Phleger & Harrison, and was special litigation counsel to the LTV Steel Company in its widely followed litigation over securitization issues.

Joshua Morse, Counsel

Mr. Morse’s practice focuses primarily on bankruptcy and bankruptcy-related litigation and transactions representing debtors, creditors’ committees and individual creditors.

Mr. Morse was the lead associate in the representation of Factory 2-U Stores, Inc., Komag, Incorporated and Opal Concepts, Inc., et al., in their respective Chapter 11 cases, and has represented a number of debtors in successful Chapter 11 proceedings, including Liberty House, Inc., Strouds, Inc., Aureal, Inc., and SmarTalk TeleServices, Inc. Mr. Morse also served as counsel to the Chapter 11 trustee for Hawaiian Airlines, Inc., and the Chapter 7 trustee for Brobeck, Phleger & Harrison LLP.

Mr. Morse also has represented creditors and creditor groups in a number of Chapter 11 cases and out-of-court workouts, including ad hoc committees of bondholders of Solutia Inc., Adelphia Communications Corporation, the City of Klamath Falls, and Dade Behring Holdings, Inc., as well as the senior bondholders of SONICblue Incorporated.

Monika Weiner, Counsel

Ms. Wiener specializes in bankruptcy and bankruptcy-related litigation. She has represented a variety of significant stakeholders—including debtors, trustees, and creditors’ committees, as well as individual creditors, both secured and unsecured—in various Chapter 11 proceedings on issues including the use of cash collateral, relief from the automatic stay, assumption and rejection of executory contracts, and plan solicitation and confirmation. She has had extensive involvement in complex cases such as In re Adelphia Communications Corp., In re USA Commercial Mortgage Co., In re Covanta Energy Corp., In re California Power Exchange, and In re Global Health Sciences, Inc. In addition, she has represented plaintiffs and defendants in litigation involving claims for preferences and fraudulent transfers, equitable subordination, and aiding and abetting breaches of fiduciary duty.

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