Service and Ethics to the Estate Proposal #3:
National Admission Proposal


Bankruptcy courts exist in the various federal judicial districts to supervise cases commenced under the Bankruptcy Code and adjudicate disputes arising in such cases. Attorneys who practice in the bankruptcy courts are, at a minimum, admitted to practice in their home districts. Often attorneys appear in bankruptcy courts in other districts because their clients are involved as parties in bankruptcy cases in such out-of-town districts. In order to represent such clients, these attorneys have to be admitted specially in the bankruptcy court where the case is pending, usually on motion of a local attorney. These special admission requirements are particularly burdensome on creditors (both private and governmental) and their counsel who usually receive a minimum amount of notice and are often called to distant fora to defend claims and interests of their clients.

Proposal

Admission to practice in one bankruptcy court, usually by virtue of being admitted to practice in the relevant United States District Court, should entitle an attorney, on presentation of a certificate of admission and good standing in another district court, to appear in the other bankruptcy court without the need for any other admissionprocedure. The proposal will not affect requirements (if any) to associate with local counsel. Similarly, the proposal will not change the requirements under state law governing the practice of law and the maintenance of an office for the practice of law. The proposal will only amend the local bankruptcy rule or practice requirements governing special admission of attorneys to the bankruptcy court who are otherwise not admitted to the bar of the district court in the district where the bankruptcy court is located.

I. Background: Admission of Nonresident [ FN: The term "nonresident " is used throughout this memorandum to mean an attorney (i) who is not a resident of the state in which the bankruptcy court sits, and (ii) who has not been admitted to the district court bar in the relevant district.] Attorneys to Practice

Admission to practice before a particular district court generally applies to the bankruptcy court in that district. [ FN: See , e.g. , Bankr. Ct. S.D.N.Y. LBR 2090-1(a) ( "An attorney who may practice in the District Court pursuant to General Rule 2(a) and (b) of the District Rules may practice in this Court. "); Bankr. Ct. D. MD. 4(a) ( "except as otherwise provided, ... only members of the Bar of the District Court may appear as counsel. ")] The local rules of the bankruptcy court in each district (with a few exceptions) provide the admission terms for attorneys who are not admitted to the district court bar of the district where the bankruptcy court is located in order to participate in a particular case. [ FN: The local bankruptcy rules that do not provide for the admission of nonresident attorneys generally incorporate by reference the local rule of the district court. See , e.g. , Bankr. D. Conn. Local Rule 2 ( "Only persons admitted to practice in the United States District Court for the District of Connecticut or admitted as visiting lawyers pursuant to the Local Rules of Civil Procedure shall practice in the Bankruptcy Court. ")] For the most part, these local rules closely follow the admission rules for the district court where the bankruptcy court is located. [ FN: The local bankruptcy rules often refer as well as conform to the district rule governing admission of attorneys. See , e.g. , Bankr. Ct. N.D. Fla. Rule 106 A ( "Except as provided herein, Local Rule 11.1 of the United States District Court for the Northern District of Florida governs the admission and appearance of nonresident attorneys before the Bankruptcy Court. "); Bankr. Ct. N.D. W. Va. Rule 5.205(a) (adopting the applicable district court ’s rule governing admission of nonresident attorneys).] While these rules vary widely among the ninety-four districts, there are some distinctsimilarities that are worth noting. Virtually all of the bankruptcy courts provide for either (i) admission to practice in a particular case after meeting certain requirements (usually a certificate of good standing from another U.S. Court or the highest court in a state and the payment of a fee), or (ii) appearance by pro hac vice motion. Additionally, a considerable number of bankruptcy courts waive the special admission requirements for attorneys representing the United States government or any of its agencies when appearing in a particular bankruptcy case. [ FN: See section I.C., infra .] Very few bankruptcy courts, however, waive the special admission provisions for nonresident state attorneys representing state agencies [ FN: See Bankr. Ct. N.D. Ill. Local Rule 600(c) (waiving the trial bar admission requirements for "the attorney general or other highest legal officer of any state ").] outside the state in which the bankruptcy court sits. [ FN: Some courts, however, waive admission requirements for attorneys appearing on behalf of the state in which the bankruptcy court sits. See , e.g. , Bankr. N.D. Ill. Local Rule 600(C) (waiving the trial bar admission requirements for, among others, "the state ’s attorney of any county in the State of Illinois. "); Bankr. S.D. Fla. Local Rule 910(F) (waiving admission requirement for attorney appearing on behalf of the state of Florida).]

A. Special Admission

Certain district courts and the bankruptcy courts within those districts admit attorneys who are members of the bar in another U.S. court. [ FN: Bankr. D. Ariz. (admitted to practice in any federal court); Bankr. E.D. Ark. (member of bar in state of residence and admitted in any other federal court); Bankr. D. Conn. (same); Bankr. D. Mont. (same); Bankr. W.D. Pa. (admitted in U.S. Supreme Court or any district court); Bankr. E & S.D.N.Y. (admitted in district court in N.J., Conn. or Vt. and state bar of relevant district court); Bankr. S.D. Tex. (admitted in any district court); Bankr. D. Vt. (admitted in any district court within the First or 2nd Circuits).] These districts generally require (i) the submission of a certificate of good standing; (ii) knowledge of, and consent to abide by, the disciplinary rules in the district; and (iii) payment of a fee. [ FN: See , e.g. , Bankr. D. Ariz. (submit application attesting to having read local disciplinary rules, attach certificate of good standing, and pay $50 fee); Bankr. D. Conn. (member of bar must sponsor visiting attorney ’s admission; must be a member in good standing and attorney nor any member of attorney ’s firm can have been denied admission to bar or disciplined under local rule 3; and include $25 fee).] Most districts that admit attorneys based on admission in other districts requirethe attorney to associate with local counsel. [ FN: In Connecticut, for example, the sponsoring attorney may be excused from further attendance in court upon granting of the motion to admit a non-resident attorney. Despite being excused from attending hearings, the sponsoring attorney is not excused from any other obligation of an appearing attorney. D. Conn. Rule 2(d).]

B. Pro Hac Vice Admission

The vast majority of bankruptcy courts have provisions for admission of a nonresident attorney by pro hac vice motion. [ FN: In fact, a study done by the Federal Judicial Center found that ninety out of ninety-four (96%) of the federal districts permit pro hac vice appearances. The four districts that do not have these provisions (D. Ariz., E.D. Mich., W.D. Pa., & E.D. Wis.) have adopted alternative admissions procedures that make pro hac vice provisions unnecessary. See Marie Cordisco, Eligibility Requirements for, and Restrictions on, Practice Before the Federal District Courts, Federal Judicial Center (Nov. 7, 1995)] Despite its popularity, pro hac vice admission has its limitations, which vary depending on the local requirements. Limitations run the gamut, from having to associate with local counsel to make the motion; having to file a written motion; having to file the motion with the clerk of the district court; having to pay a fee; and, to, having to file the motion three days prior to the hearing for which admission is requested.

C. Admission for Federal Government Attorneys

A fair percentage of local bankruptcy rules waive the admission requirements for attorneys appearing on behalf of the federal government and its agencies. [ FN: See , e.g. , Bankr. N.D. Ala. Local Rule 83.1 (waiving admission requirement for federal government attorneys); Bankr. S.D. Ala. Local Rule 3 (waiving pro hac vice requirement for federal government attorneys but requiring written certification that attorney read local rules); Bankr. D. Ak. (no pro hac vice requirements for federal government attorneys); Bankr. M.D. Fla. Local Rule 1.07(b) (same); Bankr. D. Ida. Local Rule 105(a) (same); Bankr. W.D. Mo. Local Rule 9.010 (same).] Very few local rules waive the admission requirements for attorneys representing state governments, even for attorneys representing the state in which thebankruptcy court sits. [ FN: See note 7, supra .]

II. Facilitating Appearances in Bankruptcy Court

The Commission has heard (both in testimony and by correspondence) that creditor participation in bankruptcy cases is very low. Disenfranchisement of creditors due to a bankruptcy filing in an inconvenient forum was the single most oft-cited reason the Commission heard in favor of proposing to amend the venue provisions of 28 U.S.C. § 1408(1). The cost to creditors of defending their claims in bankruptcy is also part of the low creditor participation equation. While the Proposal does not eliminate the costs of participation, it does reduce some of the expense of defending a claim in a nonlocal forum.

Bankruptcy proceedings also differ considerably from ordinary civil litigation. "Appearance" by counsel in a bankruptcy proceeding (as opposed to a district court proceeding) is often less formal and may only be for discrete hearings on issues that might affect the interests of that counsel’s client. Accordingly, admission procedures and rules should conform to these differences. For example, the Middle and Southern Districts of Florida distinguish between an attorney’s appearance for administrative bankruptcy matters and an appearance for contested or adversary proceedings. [ FN: See Bankr. M.D. Fla. Local Rule 1.07(b) (providing that an attorney residing outside the state of Florida and not admitted to the district court may appear without special admission in the following circumstances: 1. Filing a notice of appearance and a request for notices; 2. Preparation and filing of a proof of claim; 3. Attending and participating in the §341 meeting; and 4. "[A]ttendance and representation of a creditor at a hearing that has been noticed to all creditors generally except the representation of a party in a contested matter or adversary proceeding. ")]

For the majority of creditors (both private and government creditors) bankruptcy is a national practice and these entities may retain legal representation from parts of the country away from the judicial district where a case under the BankruptcyCode is pending. If an attorney has been admitted in any bankruptcy court pursuant to the rules of admission for that court, which generally involves being admitted to practice in the federal district court for that district, the admission should enable the attorney to appear in any other bankruptcy court. This would obviate the need for special admission or admission by pro hac vice motion. Under the Proposal, however, it would not, however, obviate the need for local counsel where required by local rule. The Proposal would include a Bankruptcy Code provision requiring that attorneys appearing under this provision will be subject to the disciplinary authority under the disciplinary rules where the case is pending.

National admission will also greatly assist attorneys who appear in bankruptcy cases on behalf of governmental entities, particularly state governments. Governmental entities are often brought into the bankruptcy court on short notice (often in injunctive matters) and, accordingly, government attorneys have very little time to coordinate admission with other attorneys in the district where the bankruptcy case is pending. Governmental entities should be able to appear with the least obstructions possible. National admission will streamline the appearance process for governmental entities.

III. Competing Considerations

The concept of nationwide admission is new and might seem to impose what may be regarded as an imposition on part of the autonomy of courts. It might also be seen, however inappropriately, as a limitation of the supervisory control over attorneys by the courts before whom attorneys practice. As demonstrated above, courts already admit nonresident attorneys under a variety of requirements and still maintain disciplinary control of bankruptcy proceedings. Some local courts presently charge a fee ($75, more or less) for special admission which may be used for federal bar purposes which could be lost if there was nationwide admission.