Stewart Grossman
Title: Partner, Posternak Blankstein & Lund
Age: 68
Experience: 42 years
Stewart Grossman got into bankruptcy law, ultimately, because he came to Boston. He grew up in Queens, New York, and when he wanted to escape, he listened to an uncle who worked in Boston (actually, former Celtics coach Red Auerbach) and looked into law school. For the first time in his life, he started getting As and that’s when he realized he’d found his niche. Grossman said he enjoys bankruptcy law because it requires creativity. Appropriately, he paints and sculpts in his spare time. Grossman recently talked to Banker & Tradesman about alternatives to bankruptcy and why failure isn’t necessarily a bad thing.
Q: You’ve said you do a lot of reorganization work, but also that “reorganization isn’t what it used to be.” Why is that?
A: I think it’s because bankruptcy has become really expensive to do reorganization in. The legal fees are off the charts because everything has turned into litigation, regulation, and the bankruptcy law has become quite specific, like securities law. When I first started it was very loose, and the judge had a lot of power to decide what to do and when to do it. Now judges are required to do certain things in a certain number of days. And most things get resolved in the courtroom, whereas, in the 1970s when I started, things got resolved in the hallway.
The practice has changed to be more litigious, and when it’s litigious it gets more expensive. So I prefer alternatives to bankruptcy. I prefer assignment for the benefit of creditors, or informal workouts, because what happens is pretty much the same whether you’re in bankruptcy or you’re out of bankruptcy. You get rid of parts of the business or the person’s portfolio that are burdensome or not productive, and if you do it outside of a bankruptcy proceeding it’s faster and less expensive. … But sometimes you need bankruptcy because there are certain things that you can do in bankruptcy that you can’t do outside of bankruptcy.
Q: What has been the effect of the financial crisis and the lingering recovery on your work?
A: I think it hurt law firms across the board. Banks haven’t been lending money like they had historically, and that means that there aren’t as many loans out there. The lack of bank lending at a fast clip results in fewer bad loans, so that would affect my type of work where businesses get in trouble and the loan goes bad.
The banks might be rewriting the note, or they might be giving a forbearance agreement and saying “Ok, I’ll give you six months to do better,” and then if you don’t do it in six months they might give you three more months to improve the situation. So banks haven’t been as quick to foreclose. That impacts reorganizational lawyers, and it also impacts lending lawyers. Because without a lot of bank money circulating, there are fewer loan transactions and fewer mergers, because banks are the key to the business’s success and failures, so it’s been flat.
And when it’s flat it’s been slow. So I think across the board, lawyers – every type of lawyer, except for divorce lawyers – have been impacted by the recession.
I hope, with the entire real estate boom going on now, and the low unemployment rate, that banks will start lending money at a faster pace across the board and business people will expand and take some risks, and that’s my prediction and hope for the future. Right now the economy seems stable, and people are feeling confident. But it’s still flat.
Q: And you don’t necessarily think it’s a bad thing for businesses to fail.
A: I did agree with Mitt Romney on one thing: it’s very healthy for businesses to fail. When businesses fail, the weak members of whatever that industry is get eliminated and it makes everyone else work harder and get stronger. But when everyone’s limping along, then you’re not weeding out the unhealthy entities and then everything’s just kind of like mashed potatoes. It’s not very productive. I think it’s important for companies to fail, and for the people to move on and do something else. … I think it’s healthy for companies to fail and for people to roll up their sleeves and do something else. You learn from your mistakes.
And when you do what I do, hitting a homerun doesn’t happen all the time; I’m given people with terrible financial situations, or I’m given very hard investigations where there just aren’t that many assets to find. Every time I fail I always learn something that I can bring with me to the next matter – and even [when] I don’t fail. But failing is really a good way to learn. You learn about yourself, and you learn more law, more facts and more strategy than you knew before.
Grossman’s Five Favorite Artists:
- David Hockney
- Jean Arp
- Zang Auerbach
- Henry Moore
- Josef Albers
