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October 12, 1971

In the Matter of IMPERIAL '400' NATIONAL, INC., a Delaware Corp., et al., Debtors

Shaw, District Judge.

The opinion of the court was delivered by: SHAW

Counsel for the Trustee, Joseph M. Nolan, Esq., filed a petition seeking a fourth interim allowance of counsel fees for the period from September 1, 1969, to August 31, 1970, and on April 15, 1971, the Court issued an order to show cause why the fourth interim allowance should not be granted and made the same returnable on May 10, 1971. A hearing was commenced on May 10th and continued on May 12, 1971. The matter was then referred to the Honorable Vincent J. Commisa, Referee in Bankruptcy, for continued hearing and for his report of findings and recommendations to the Court as a Special Master. The hearing was continued by the Special Master on June 8, 1971, and his report of findings and recommendations was filed on July 13, 1971, copy of which is appended hereto for ready reference.

 The propriety of consideration of a fourth interim allowance of counsel fees was approved by the United States Court of Appeals. In In re Imperial '400' National, Inc., 432 F.2d 232, 242 (3rd Cir. 1970) the court stated:

We note, again, that "we are impressed * * * with the apparent success of the reorganization to date" (page 237 of August 18 opinion). Also we note that periodic awards of interim compensation in the future, as well as interim compensation for the period from September 1, 1969 to the present, may be granted in the discretion of the District Court if "necessary" and after comment by the creditors and the Securities and Exchange Commission.

 Pursuant to the direction of the Court, notice was given that a hearing would be held on the report of the findings and recommendations of the Special Master on August 4, 1971. The hearing was continued by direction of the Court to August 5, 1971. The only appearances were by Jerome M. Lynes, Esq., attorney for counsel to the Trustee, Stephen Bosin, Esq., attorney for the Securities and Exchange Commission, and Sheldon Schachter, Esq., attorney for the Creditors Committee. Laurence W. Levine, attorney for the Union Bank and Chairman of the Creditors Committee, forwarded an affidavit objecting on behalf of Union Bank to any fourth interim allowance of counsel fee in excess of $45,000. Though notice of the hearing was given to Mr. Levine, he states in his affidavit that:

Union Bank is not appearing at the hearing personally because a) the Court has indicated that it does not desire its participation -- nor will it listen to it, and b) it is not appearing personally, in addition to the Court's previous statements about it, because there have been too many recent heart attacks in the profession caused by emotional reactions. * * *

 It would serve no useful purpose to comment here on what Mr. Levine conceives to be the grievances of his client, Union Bank, and his own personal grievances. He has an absolute, unqualified right to disagree with any ruling of the Court and with any proposal of the Trustee or counsel for the Trustee relating to the administration of the estate. But, in fairness, it is the opinion of the Court that he should not be permitted to associate such disagreements with allegations of lack of integrity and suggestions that there is deliberate mismanagement of the estate unless there is a factual basis in support thereof. In the discharge of the duty cast upon it by law in the supervision and control of the administration of the Chapter X proceeding, this Court in every matter that came before it has exercised its own independent judgment and does not misconceive its function to the extent that it treats advice and suggestions of the Securities and Exchange Commission as directives which seem to be a matter of concern to Union Bank as evidenced by a letter written to the Chairman of the Commission on October 28, 1970.

 It is felt by the Court that the affidavit of Mr. Levine setting forth the objection of his client, Union Bank, to a fourth interim allowance to counsel for the Trustee should be read in context with other affidavits and correspondence which he has forwarded to the Court detailing the grievances of his client and his own personal feelings. Accordingly, the Clerk of the Court is directed to file all of this material so that it will be available for review of any questions Mr. Levine chooses to raise. Though Rule 4(C) is relaxed for the purpose of permitting the filing of such material, this is not to be construed as a continued relaxation of the rule. If, for good cause shown, the rule should be relaxed as to future papers, application for such purpose, made in accordance with the rules and practice of the court will be entertained.

 Sheldon Schachter, appearing as counsel for the Creditors Committee, advised the Court that the majority of the committee had no objection to a fourth interim fee, but felt that it might be slightly high and noting also that the hourly reports included time spent in connection with litigation arising out of rulings of the Court on allowances of counsel fees. *fn1"

 Mr. Bosin, counsel for the Securities and Exchange Commission, did not oppose the award of a fourth interim allowance of counsel fees, but directed attention to the fact that time spent included hours in argument concerning interim fee awards before the United States Court of Appeals, and further, that the expense claimed for Xeroxing was in excess of the actual cost. *fn2"

 Independent review of the record of services rendered by counsel for the Trustee from September 1, 1969, to August 31, 1970, leads the Court to the conclusion that the findings of the Special Master as set forth in his report are amply supported. The Court is not entirely in agreement with the recommendations. The Court also has the benefit of personal knowledge of the legal services performed and the nature of the problems which were encountered. In fact, since the appointment of counsel for the Trustee on February 24, 1966, all petitions filed were reviewed by the Court and every action of any consequence which was taken was considered by the Court before approval was granted. Very few matters have been referred to the Referee in Bankruptcy as Special Master. Indeed, attention to this estate has involved many days and often a week or more in every month to assure continued expeditious progress toward adoption of a plan of reorganization that would be fair, equitable and feasible to all interests involved. The vexatious problems which arose from week to week are too numerous to recite in detail here but they may be briefly summarized as falling within the following general categories.

 1. Recovery of assets which were being lost by methods of accounting by co-owners in effect prior to the Chapter X proceeding; 2. discovery of funds which had been misapplied and actions to compel turnover, including in some instances reference of the derelictions to the United States Attorney; 3. the attempts of co-owners in some instances to misappropriate funds and to resist control of management; *fn3" 4. the vexatious problems of threatened mortgage foreclosures and the application of varying State laws in thirty-eight States as they related to the complex financing of each motel and the legal effect of agreements upon which the Debtor entered before the Chapter XI proceeding.

 The complexity of the affairs of the Debtor were not fully conceived at the time the Chapter XI petition was dismissed. See In re Imperial '400' National, Inc., 274 F. Supp. 342 (D.C.N.J. 1966). Counsel fees paid out on the eve of the filing of the Chapter XI petition in anticipation of bankruptcy were not readily discernible upon the available records. Here again, diligence and accounting experience unearthed assets of the estate which would not have been apparent if the records kept by the Debtor corporation were taken at face value. See In re Imperial '400' National, Inc., 274 F. Supp. 351 (D.C.N.J. 1967). Parenthetically, in connection with the refund of counsel fees, it might be added that the plenary action to which reference is made in In re Imperial '400' National, Inc., supra, to recover $24,000 taken for counsel fees for work allegedly ...

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