Local Counsel

Local Counsel

Journal Issue: 
Column Name: 
Journal Article: 

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.

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.

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."

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.

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 ABI Journal noted, the rules have changed. The article told how Hahn Loeser & 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.

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 & 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."

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."

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.

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 imposed on the client by local rule. In the case of many bankruptcies, the client might not even need 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 not "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.

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.

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.

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.

Journal Date: 
Monday, May 1, 2000