Top Law Schools

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1) I don't know who told you that, but it's not true. UT places all over the state, but mainly in the larger cities (Dallas and Houston, with a few in Austin). SMU and UofH are largely city-specific, but that's not due to rivalries as much as more regional schools. Law schools aside, there does tend to be clear lines for Texas residents as to which city they prefer. Dallas, for instance, does not suck too badly, while Houston, for example, is quite full of suckage.

2) No idea for your application, but probably not as important as having competitive numbers. It's a little more important when you start looking for jobs. Are you from Texas? Family in Texas? Employers will want to know why you want to be in that city and what will keep you there.

3) T14 is pretty broad. Will UT grads compete and place well against lower T14? Yes. Will Harvard and other high T14s place better? Yep.

As to the first part of #2, if you have no obvious ties and really want to go there, include a "Why Texas" statement in your application. There is a chance they'll ask you for one otherwise, but just do it outright -- it'll only take you a few hours.