An ill wind: what a law firm's Dallas move reveals about the credit cycle

Shipman & Goodwin, a midsize law firm from Hartford, Connecticut, announced on September 8th that it had opened an office in Dallas by hiring two restructuring partners, Rachael Smiley and Megan Clontz, from a local rival called Ferguson Braswell Fraser Kubasta. On its face the news belongs in the trade press: two lawyers changing firms happens thousands of times a year, and American lawyers rarely stop to ask whether the public is bored. Yet the move is a useful miniature map of where the American credit cycle now stands, and of who gets paid to clean up after it. No investor can buy shares in Shipman & Goodwin, which is a private partnership. That is precisely why the story is worth reading as evidence rather than as a stock.

Start with the destination. Shipman did not choose Dallas for its weather. The Northern District of Texas, which covers the city, has overtaken the bankruptcy courts of New York and New Jersey as the busiest venue for large American restructurings over the past year. Smiley, who will run the new office, has nearly two decades of experience in Chapter 11 work and has spent about a decade referring Texas cases to Shipman as co-counsel. The firm's chairman of the workout group, Eric Goldstein, explains the logic plainly: "distressed-asset activity continues to grow," in his phrase, and having trusted advisers on the ground in Texas is a competitive advantage. The managing partner, Leander Dolphin, calls the expansion "strategic, thoughtful growth," following an earlier push into Boston.

What makes the Dallas branch a growth business is, of course, that so many other businesses are failing. Restructuring is the one corner of the economy that profits from other people's ruin. And ruin is abundant. Chapter 11 filings hit a ten-year high in 2025, the fourth consecutive year of increase; corporate bankruptcies had already reached a 14-year peak in 2024. Distressed exchanges and loan defaults ran at about 4.3% of issuers last year, comfortably above the 2–3% that prevailed before the pandemic. The engines of distress are familiar: high interest rates, persistent inflation, strained consumers, and a pile of pandemic-era debt coming due. The largest single factor is the future. Roughly a trillion dollars of speculative-grade debt matures in 2028, and companies, sponsors and lenders are already negotiating the amendments and exchanges that will keep or sink them until then.

That forward calendar is why a firm hires restructuring partners now rather than waiting for the wave. Legal talent is finite, and the bar that knows how to run a big Chapter 11 is small. The economics of a law firm are unusual: it owns no factory, no inventory, no patents — almost nothing but its people and their reputations. When a practice heats up, the people command the rent. Lateral moves reached a five-year high in 2025, with more than 3,000 partner hires in America, up 10% year on year, and average partner pay rose to about $1.4m, a quarter higher than in 2022. The two-partner deal in Dallas is a low-cost option on a hot practice in the hottest venue, secured by buying a relationship the firm already owned.

It is tempting, then, to read the move as a straightforward bet on More Misery, and to treat the firm as a quiet index of distress. One caution. The very force that is feeding the boom is also the force compressing the fees that pay for it. Private credit — the fast-growing direct lenders that now dominate middle-market finance, with assets that Moody's expects to reach $3trn by 2028 — is restructuring its victims cheaply and quickly. Rather than file a costly Chapter 11, private lenders increasingly push to restructure out of court, handing the keys to better owners or running liability-management exchanges to defer a reckoning. These exercises exist largely to save fees and shorten timelines. The tap that fills the restructuring lawyers' pipeline, in other words, is the same tap that throttles what they can bill per case: more volume, smaller price tag, and a steady drift of work out of the courtroom that made Dallas famous.

For the reader this resolves into two useful facts rather than one. The first is atmospheric: a mid-sized firm choosing this moment to staff up a national distress bench is evidence that the stress beneath the American economy is broad and durable, not a blip to be reversed by a rate cut. The K-shaped economy — AI-rich markets humming while retailers, restaurants and property struggle — produces exactly this distribution of work, and the 2028 maturity wall guarantees it a long run. The second is a warning about reading too much into any single hire. A two-person lateral move is a cheap, reversible bet, not a statement of conviction the size of the distressed-debt market. It says the firm's principals expect pain to persist; it says nothing about how comfortably the lawyers will be paid for it, because their own clients are the ones demanding cheapness.

The longer judgment is the grimmer one. Bankruptcy lawyers are a rare profession whose members, paid by the hour, can be relied upon to wish their clients well and their competitors ill. The people who will do best from the next few years are the restructuring bar and the lenders who fund the work of unwinding the debts of the last cycle. That is a market signal, not a moral one. It describes incentives, and those incentives are working exactly as designed: every distressed company is an argument for more restructuring lawyers, and the argument keeps getting louder. Watch the credit cycle and count the new offices opening in Dallas. They will tell you how much pain is still to come, and who is already billing for it.