LAW Home Court Advantage

THE HIGH NUMBER OF BANKRUPTCIES IN wealthy Collin County has spurred the federal judges of the 5th U.S. Circuit Court of Appeals, which includes Texas, into shifting a full-time bankruptcy judge from Beaumont to Piano. Local lawyers, judges, and civic officials say the move could mark [he first step toward the establishment of a lull-blown federal bench in Piano, a sure-fire sign a community has arrived in the business big leagues.

But don’t hold your breath. With the Republican Congress pinching every last penny, proponents of a Piano court say it still may be quite some time before Piano gets its own federal judge.

Collin, Denton, and the other counties north of Dallas are part of the Texas federal court system’s Eastern District, an oddly shaped dogleg that stretches from Beaumont north to Texarkana, bends sharply westward at Tyler, and skirts North Dallas to sweep in Piano and points north all the way up to Paris and Sherman. (Dallas, on the other hand, is in the Northern District; geography apparently is not government s strong suit.)

The district now is centered in Beaumont, where its chief judge, its top federal prosecutor, and one of its two bankruptcy judges sit. The other bankruptcy judge sits in Tyler, and the two have been riding circuit, taking the entire court-lock, stock, clerks, and files-on the road to Piano one week each month. That means if you need a judge in a pinch and they’re between road trips, you make the trek to Tyler or Beaumont.

Now the number of bankruptcy filings north of Dallas has led the judges to go where the business is: Piano, the state’s 12th largest city and one of the fastest growing cities in the country. Between 1992 and 1994, Piano’s population rose more than 11 percent to 158,450. (Assistant City Manager James McCarley estimates the current population at 175,000 to 178,000, with a continual growth of about 10,000 a year.) In the same period, bankruptcy filings in the Eastern District’s Paris and Sherman divisions-which the Plana court covers-rocketed up 57 percent, from 1,480 to2,324.Andby November 1995, tilings already had eclipsed the 1994 totals by more than 10 percent. So, in January, U.S. Bankruptcy Judge Donald R. Sharp took up residence in a courtroom on the third floor of the First Interstate Bank building on die southeast corner of Piano Parkway and Central Expressway, a move everyone agrees makes perfect sense.

“I think it’s overdue,” says well-known Piano lawyer David McCall, a leader in efforts to bring a federal bench to Plano.

But it’s no sure deal that this federal foot in the door will lead in short order to a federal court that can held the full range of civil and criminal cases. That’s because while the bankruptcy judges can stake out a court anywhere in the district they choose, the other federal judges are on a shorter leash. They need Congress’ approval before the administrative office of the U.S. Courts in Washington, D.C. can pony up the money for a new facility. So even though a federal district judge technically could sit in Piano now, he’d have no place to hang his robe.

If Plano now lacks the home-court advantage, it’s not for lack of trying. Four years ago, the Collin County Bar Association appointed McCall to look into the possibility of bringing a federal court to Piano. McCall gathered data on case filings, met with local, state, and federal officials, and otherwise stirred the pot. Richard A, Schell, chief judge of the Eastern District, who is from Piano, also has been pushing for a full -time federal court there. He says the judges decided a few years ago that the heavy concentration of population in Collin and Denton counties had shifted the district’s center of gravity away from Beaumont. Schell says former Democratic congressman Jack Brooks, a Beaumont native, twice introduced legislation in the 1990s to secure the Piano facility. The measures, tucked into massive omnibus bills, failed with the bigger bills, and Brooks was swept away in the Republican tide of 1994. But that doesn’t mean the move has ended.

“It’s not dead,” says McCall. “There’s still an effort.”

“We’re still interested,” says McCarley, Piano’s assistant city manager, who has worked with McCall on the efforts.

Schell, who continues to beat the drum with the local congressional delegation, says he’s unsure when the next legislative attempt will be mounted. The need isn’t quite dire, Schell says, but it’s very real, More than half the district’s cases now arise in the counties north of Dallas, with the lion’s share coming out of burgeoning Plano.

“We’ll need a facility there,” Schell says. “It’s unusual to have such a big city with no place to hold court.”

In fact, Collin and Denton counties, two of the nine counties that make up the Paris and Sherman divisions, rank eighth and ninth respectively among state counties in population. Yet the nearest federal judge in the district camps out up near the Oklahoma border in Sherman, in Grayson County. Sherman has just a fifth the population of Plano.

What would a federal bench bring to Piano? No doubt, it carries a certain amount of prestige. Federal judges, who are nominated by the president on the recommendation of a state’s U.S. senators, have life tenure and carry tremendous clout, with the full winds of federal power at their backs. They’re the judges who get in the middle of some of the highest profile and most controversial litigation around, like school desegregation cases, major racketeering and fraud prosecutions, and bet-the-company commercial mega-disputes.

Given the wide range of business they handle, federal courts tend to act like magnets for top-shelf lawyers, who like to hitch their offices as close to the federal rail as they can. That would inject more legal business into Piano, according to George A. Martinez, an SMU assistant professor of law who teaches courses on the federal courts, in fact, you see evidence of that already at the Piano bankruptcy court, where one of the area’s most active practitioners, Robert E. Barron, has ensconced himself in offices one floor down from Judge Sharp’s spacious third-floor courtroom.

But there’s more to it. Martinez says a Piano court locale might have a healthy effect on businesses by reducing the size of jury verdiets. Rural juries, especially in East Texas, are known for slamming companies with huge awards. Piano jurors, who would be more upscale than their counterparts in Tyler, Beaumont, or Sherman, could be expected to be more sympathetic to corporate interests, Martinez says. Furthermore, as Piano and environs continue to attract high-tech businesses, Martinez predicts a federal court there would develop a reputation like that of the court in San Jose, in the Northern District of California. That court has become a hotbed of intellectual property action because its proximity to Silicon Valley has flooded the docket with high-tech wrangles, forcing the judges to develop substantial expertise in that esoteric field.



OF COURSE, THE SHIFT OF A FULL-TIME BANKruptcy judge to Piano raises a question: Why are so many folks going bust in a community that, by all outward appearances, is quite rich and bristles with business activity?

A visit to the court provides some answers. The clerks maintain a big black binder with hundreds of pages of bankruptcy filings logged in. Many of the cases come from the small towns north of Piano, but many are from Piano itself If you pull random files and start leafing through them, you see a definite pattern in this catalogue of financial horrors.

Most bankruptcies arc being filed by couples crushed with garden-variety debt: mortgage and auto payments, back taxes, credit cards. Many of them are two-earner couples who, despite good jobs at employers like EDS and JCPenney, are so maxed out on their plastic that they can no longer rob from Peter (MasterCard) to pay Paul (Visa). The collection hounds are baying at the door. As they teeter on the financial brink, all it takes is one ill wind to blow them over, Barron, possibly the busiest bankruptcy lawyer in Piano, ticks off three things he says shove 98 percent of those who file over the edge; divorce, illness, and layoffs or other loss or income.

” People don’t intend to file tor bankruptcy,” Barron says. “But these things affect people who live from paycheck to paycheck, as most of us do. “

For people faced with financial ruin, the breathing space provided by bankruptcy, which freezes all bill collectors in their tracks and makes it possible to hang on to your home, is a mighty attractive option. At the going rate-in most straightforward consumer cases it costs less than $1,000 in legal and court fees to file for bankruptcy-it’s a downright bargain.

Area lawyers say there also may be other factors at play that explain the surge in filings. Some bankruptcy lawyers, spooked by the judges in Dallas, are going to Piano with business bankruptcy cases that could be brought in either the Northern or Eastern districts. One Dallas judge in particular, Harold C. Abramson, scares the bejesus out of some lawyers, who say he’s hard on debtors and even harder on Dallas” big law firms. A number of them have felt his wrath, including the state’s second largest firm, Akin, Gump, Strauss, Hauer & Feld, which Abramson recently rapped with an $8 million judgment over alleged ethical lapses. Lawyers say that has landed Piano some big bankruptcies that could have been brought in either district, including the Endevco and U.S. Brass cases, “It’s not so much a selection of Piano,” says one well-known bankruptcy lawyer who asked not to be identified. “It’s a studied effort by most lawyers to avoid Harold Abramson.”

Ami there’s a misperception that bankruptcies rise only when times are very bad. For sure they do, but they also rise when times arc very good. All new businesses have a high fatality rate, and that’s especially true among high-tech companies, many of which have moved into Piano, In that fast-paced arena, the whole operation can collapse with the other guy’s next major software advance.

It’s little wonder that a rising population and a volatile business climate have brought a jump in bankruptcies. But there’s another reason why growth in personal bankruptcies is far outstripping population growth: advertising.

Barron, who says he has filed 832 cases in Piano since opening his office there in January 1993, says he came to Piano from East Texas with a simple plan: open a shop on the new court’s doorstep and advertise tike mad in places where people in dire financial straits would likely look-green sheets, auto shoppers, TV listings, Before then, he says, local lawyers advertised only in the Yellow Pages, and by the time someone is browsing there for a bankruptcy lawyer, it’s generally too late. Their options have been foreclosed and the only choice is Chapter 7-complete liquidation, the bankruptcy equivalent of unconditional surrender.

But Barron, whose front door sports the moniker “Bill Consolidation Office,” says he prefers Chapter 13, which is a reorganization that allows people room to maneuver and catch up on their debts. So Barron bombards the area with ads promising consumers an opportunity to beat back creditors, save their homes and cars, and yet still pay off debts, which helps them hang on to some of their self-esteem.

“I’m pushing !3s pretty hard,” Barron says, “That helps people a lot more than Chapter 7 does. But if you don’t catch them early, it’s too late.”

It also may be too late for Piano to catch its federal court. Although the population and filing numbers argue in favor of the expansion, the political winds are gusting strongly against such a move. Congress has been making a lot of noise lately about the lavish spending habits of the federal courts, and U.S. Rep. Sam Johnson, a Republican who represents North Dallas and Piano, wears his anti-pork credentials proudly. Which means, according to Chief Judge Schell, that until the political winds shift again, Piano just may have to wait on its federal bench.