Law Review: Lawyer finds a niche outside the legal world

In grim economic times, when deals dry up and jobs at the big law firms dwindle, law schools like to tell their nervous and often heavily indebted students that a legal education can be put to work in myriad ways, and that the career path for lawyers doesn't necessarily mean staying put at a firm until retirement.

Michael Forman knows that from personal experience.

Forman runs a real estate-investment fund and a start-up secondary-loan-market fund aimed at retail investors out of offices at the Cira Centre in University City.

But he started his career as a lawyer at Klehr, Harrison, Harvey, Branzburg & Ellers L.L.P. after graduating from Rutgers University Law School in Camden and rose to become a senior partner there.

He focused at first on representing commercial clients in corporate securities matters. But almost from the beginning, he was doing his own real estate deals on the side, starting with a handful of apartments in Philadelphia.

What he discovered was that it was far more exciting to be the deal maker in a transaction than a service provider, in his case the dispenser of legal advice.

"There is a risk in that and a reward in that," he said of his deal making.

So Forman made the jump in 2004. His main focus no longer is practicing law, but running his investment funds. Lately, he has been spending most of his time on the start-up secondary-loan fund, begun in January, which had raised $45 million through the end of the second quarter.

The idea is to invest in commercial loans that banks are looking to unload in order to raise capital. He typically buys these loans at a 30 percent discount.

Retail investors of relatively modest means - Forman says he markets to teachers and other working-class customers - then get a chance to make an investment play that typically is the province of financial insiders.

In theory, the lower purchase price of the debt will generate outsize returns. And the initial returns appear to have been good.

The fund, called FS Investment Corp., paid out stock distributions of 15.6 percent through the end of the second quarter.

The downside risk in an investment of this sort is that the loans could go bad.

Forman says his legal training has served him well. It has been especially helpful in managing his firms' expenditures on outside counsel.

It is probably the case that Forman's hyper-entrepreneurial personality is more the exception than the rule at the typical law firm.

But the so-called Great Recession may force some of this city's youngest lawyers to imagine their careers outside the four walls of some august firm of their dreams.

The pace of layoffs has slacked off measurably. But the damage so far has been huge. The legal Web site Law Shucks calculates that big firms have laid off 13,353 lawyers and staff since Jan. 1, 2008.

Forman's experience was different from that of these young lawyers in several important ways. The downturns of 1990-91 and 2000-2001, both of which Forman lived through as a practicing lawyer, were harsh but didn't have the slashing impact of the current recession.

More important, Forman left his firm as an established deal maker and senior partner. He wasn't starting from square one. But he chose to leave the practice of law behind to play on what is perhaps a more dynamic, albeit riskier, stage.

And he says that for him it was the right thing to do.