Local Counsel

<p>Local counsel rules bother me. In the Western District of Texas (at least at the bankruptcy court level), we
don't have any local counsel rules. Some jurisdictions (most notably the District of Delaware) do have local
counsel rules—and strictly enforce them to boot. For the life of me, I don't know what function these rules
serve in the Information Age.

</p><p>Don't get me wrong. I understand the value of using local attorneys in bankruptcy cases, as opposed
to importing attorneys from other parts of the country. There are many fine firms in San Antonio, for
example, that are more than capable of handling any case that might be filed here. The idea that all the
capable bankruptcy attorneys are concentrated in just a few firms in the largest cities has been disproven
time and again, as many a lawyer from New York, Chicago, Los Angeles or Dallas can attest from bitter
experience. Local counsel, in this sense of the word, really has nothing to do with the local counsel rules
that I'm talking about.

</p><p>Just as surely, I recognize that there are those cases that, because of their size or their complexity, might
need the expertise that only larger or more specialized firms from other parts of the country can offer. For
example, some firms are better suited to handle large, publicly held companies that file bankruptcy simply
because they have a stable of securities lawyers ready to guide the unsuspecting bankruptcy lawyer through
that specialty. The national or global aspects of some companies may demand the resources of larger law
firms. Indeed, there are a number of firms that justifiably lay claim to having a "national practice."

</p><p>The local counsel rules that I'm talking about, of course, are the ones that say that out-of-town counsel must
"associate" with local counsel as a condition to practicing before that court. Perhaps there was a valid function for
such rules at some time in our past. I'm not so sure that those functions are valid today, however.

</p><p>One traditional reason for enacting such rules is to ensure that a party will receive prompt, timely notice
of hearing settings—and that the court will thus be able to resolve matters more quickly. It used to be that
notifying a lawyer located a thousand miles away might take much longer than notifying one located across
town. And it used to be that the lawyer located a thousand miles away could not be expected to appear on
short notice simply because it would take too long for the lawyer to travel the distance. But, as an article in
the May 1999 <i>ABI Journal</i> noted, the rules have changed. The article told how Hahn Loeser &amp; Parks LLP
in Cleveland were the debtor's counsel in the largest health care organization to have filed chapter 11 up to
that time—Allegheny Health, Education and Research Foundation (and four affiliate entities). The article
explained that the cases were filed in Pittsburgh, but most of the creditors and professionals, aside from local
counsel, were scattered across the country. To solve this problem, the firm created an online bankruptcy case
document library—one of the first of its kind. Creditors can look at the web site to find up-to-date information
about the proceedings, counsels' names and addresses, instructions for filing proofs of claim, the current status
of motions that have been filed and more. In addition, interested parties can e-mail inquiries directly to the
firm through the web site and have those questions answered without ever picking up the telephone.

</p><p>The web is not the only saving grace. "In order to be an attorney with a regional practice, which is what
is happening in the bankruptcy arena, you must utilize e-mail. I could not have accomplished as much as I
have without using this amazing tool," said Jean R. Robertson, an associate with Hahn Loeser &amp; Parks. "The
clear majority of the documents filed in this case have traveled between cities with the click of a button. We
have saved the debtors' estate an unquantifiable amount of money in telephone costs, paper, postage, delivery
and, most important of all, time."

</p><p>Technological advances have substantially eliminated one of the principal justifications for having local
counsel. In addition, of course, lawyers today are accustomed to zooming around the country by air. For
those that cannot reach a given locale at a given time, other technological advances have helped to
compensate. Many courts (mine included) have the ability to permit counsel participation by telephone at
hearings that are on the record. Some are even beginning to use televideo conferencing, which permits the
introduction of exhibits and witness testimony. Then, of course, there is the advent of electronic filing,
which permits a pleading to be filed with the clerk of court directly from the computer on your desk. That
same technique will permit attorneys to monitor the docket in a far more thorough and efficient manner
than sending a local lawyer down to the courthouse to "check out the file."

</p><p>Needless to say, the cost of local counsel becomes an administrative load that must be borne either by
the estate or by the creditor entity that must use that local counsel. With current advances in technology,
that cost overlay is much more difficult to justify. Indeed, many fee-application cases in recent years have
underscored that problem, with the inflated costs that result from having both in-town and out-of-town
counsel.

</p><p>Of course, one reason urged for retaining local counsel is to assure familiarity with local rules and
customs. True enough. There will be local variations so long as we use human beings as judges. But it is
one thing for a client to decide to use local counsel for that purpose; it is quite another for local counsel to
be <i>imposed</i> on the client by local rule. In the case of many bankruptcies, the client might not even <i>need</i>

local counsel because their own law firm may already be well familiar with the local rules and practices
of that court. Certainly this is true for the many firms that now routinely practice before the Delaware courts
in the large chapter 11 cases. In fact, some jurisdictions commend themselves as favorable venues for the
regional, national or global business bankruptcies precisely because they are <i>not</i> "local"—they are ostensibly
neutral and less likely to introduce local or regional biases into the decision-making process. One would
think that these jurisdictions would be the very ones in which local counsel rules would be needed least.
That is apparently not the case, however.

</p><p>If such rules serve as a mere cordiality, a paean to the genteel practices of yore, then why enforce them
with a vengeance? It might be "nice" to have a local lawyer introduce an out-of-town lawyer to the court, but
is it necessary? And if it is not necessary, simple logic (to say nothing of a concern for the economics of
handling bankruptcy cases) ought to demand that such rules be abolished. The fact that they have not been
casts considerable suspicion on the real motivation for maintaining such mandatory rules in today's
Information Age.

</p><p>In fact, having a local lawyer monitor the file of very large cases for out-of-town counsel is far less efficient
than managing the same task via computer access. The error rate is higher, as is the cost, if one uses local
counsel for that task.

</p><p>Some cases complain about duplication of effort, while others contend that out-of-town counsel should
not have been involved. Either approach overlooks the real problem—arcane rules that require local counsel
in the first place.

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