Allegations of potential conflicts regularly arise in bankruptcies but rarely result in disqualifications. The unusual Enviva decision illustrates how power has become concentrated in the hands of a relatively small number of law firms that dominate a restructuring scene made up of troubled companies and the investment houses that back them.
A handful of larger firms have also grown deft at turning their private-equity clients into a pipeline of bankruptcy work. When a client's investment turns bad, law firms can apply to represent the interests of its portfolio company in bankruptcy. That can require taking positions against the private-equity sponsor.
Judge Kenney said that the conflict was large enough to lead to disqualification because V&E can't delegate the reorganization task, and some of its lawyers work on Enviva and Riverstone matters simultaneously. And that's a giant deal for the way massive Biglaw firms that have their hands in both the PE and bankruptcy cookie jar do business.
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