The opinion of the court was delivered by: WHIPPLE
Many of the applicants contributed to this success. It is virtually impossible to pinpoint those applicants who may have been most responsible or the principal catalyst in achieving this result. I believe that all participants were of assistance to both the Court and the proceedings, even when one party's interests were adversary to those of another party. I received cooperation from each and every professional involved in this case, and the result was a blending or balancing of interests to reach the final outcome achieved here. While there is no question that some of the actors were more center-stage than some of the supporting players, I feel that the overall performance is the true measure of the cast, and I am happy to applaud the show. While the finale may have been long in coming, it was a happy ending.
I will now proceed to a brief review of the criteria I have considered in analyzing the applications, and I will then deal with the specific allowance requests.
In evaluating the various requests for allowances that are on file and before me for consideration, I have had the benefit of the submissions of various parties to these proceedings. Counsel for the Trustee has submitted a comprehensive memorandum pertaining to the general principles applicable to request for allowances, other counsel have made submissions, and the S.E.C. has submitted a memorandum outlining what it considers to be the relevant considerations and principles of law that bear upon the pending applications. The S.E.C. declined to make specific recommendations on the amounts to be awarded to the applicants.
The foregoing submissions, as well as decisions in the within proceedings by the United States Court of Appeals for the Third Circuit
and the District Court, have furnished me with considerable guidance. It is unnecessary to restate the principles contained in those source materials in any depth. Rather, I would note that my determinations on the individual applications took into account all of the principles enunciated therein, and I have considered each and every application from the standpoint of the time expended (and the quality of the time records maintained), the benefits conferred upon the estate by the work performed, the degree of difficulty of that work, the results accomplished, the standing of the particular professional performing the work both within his professional community and as a professional skilled in reorganization proceedings, and the other criteria enunciated in the numerous cases cited by counsel.
In summary, after applying all of the foregoing criteria, I have attempted to encourage the participation by all parties in interest to work toward the successful conclusion of the reorganization,
without indiscriminately compensating applicants who have merely been active, but have not satisfactorily met the tests enunciated in the authorities cited above.
BERNARD KUTTNER, ATTORNEY FOR ESTATE OF CHARLES HANDLER
Charles Handler appeared in this proceeding on behalf of Continana Corporation, one of the co-proponents of the plan that was ultimately approved and confirmed by this Court. However, Mr. Handler died long before the confirmed plan was submitted. For his representation of Continana Corporation, his estate now requests the sum of $3,500, together with disbursements. No detailed time records were submitted although 37 hours of time are claimed at the rate of approximately $100 per hour. As was set forth in the case of In re Meade Land & Development Co., Inc., 527 F.2d 280, 284 (3d Cir. 1975):
"We stress that it is the attorneys obligation to keep and submit to the court time records supporting an application for compensation. And, absent unusual circumstances, it is the court's independent obligation to give credit only where there are such supporting documents, even in cases where no interested parties raise objections to the claim."
See also cases cited in submissions referred to above.
From the submissions of Mr. Kuttner, it is difficult to determine any real benefit that inured to the estate from the work of Mr. Handler. Nonetheless, it can be stated that Mr. Handler did contribute to the movement of the case and may have inspired the filing of the first plan by Continana Corporation which incorporated features that might be traced to the confirmed plan which was also co-sponsored by Continana. Accordingly, I deem the services of Mr. Handler to this creditor to be compensable and I evaluate their worth to be $1,500, together with disbursements of $214.87.
SANFORD SILVERMAN AND EDWARD WALSH
On the affirmative side, it is clear that these gentlemen were responsible for the daily operation of the debtor and the resolution of the legal problems which also arose on a rather frequent basis during this period. They were involved in conducting an accounting analysis of the operations of the debtor, in the handling of purchase and sale negotiations and applications on behalf of the debtor, and in the frequent court proceedings which took place during the Chapter XI period.
On the negative side, there seems to have been little progress during the Chapter XI proceeding toward the molding of this enterprise into a viable, post-bankruptcy entity. Testimony taken at the hearings under Section 328 of the Bankruptcy Act for the conversion of these proceedings into Chapter X proceedings indicated that the debtor, at that time, had serious cash flow and financial problems. Moreover, the report filed by the Chapter X trustee under Section 167(5) of the Bankruptcy Act (at pages 97-99) indicates that even the maintenance of the status quo during the Chapter XI proceedings by these fiduciaries was not effectively accomplished. That report indicates that the Grant's Pass, Oregon, motel was lost, possibly due to inaction by the receiver and his attorney, and that the Little Rock motel, which proved to be a valuable asset of the estate, had to be recovered by the trustee after the receiver and his counsel failed to assert defenses in proceedings for possession of that motel. This report and the testimony I have heard on these subjects go unchallenged. For these reasons, I am not inclined to compensate the receiver and his counsel in the amount of $25,000 each, which is their requested allowance.
Mr. Silverman has reconstructed 512 hours of services for which he seeks compensation at the rate of approximately $50 per hour. His testimony showed only a modest familiarity with the debtor's affairs, although it must be recognized that his work was performed more than ten years ago. The time spent by Mr. Silverman on plan negotiations did not prove to be fruitful or beneficial to the estate. Based on the foregoing analysis, I feel that an allowance of $7,500 is appropriate.
Mr. Walsh also requests $25,000 for what he claims to be 1,728 hours of services. Mr. Walsh testified that he spent a "minimum of 8 hours per day" in his capacity as receiver, and that he spent a "minimum of 6 days per week" in the conduct of the operations of Imperial, as well as some Sundays. It is clear that Mr. Walsh did undertake some travel on behalf of the debtor and he claims that the rest of his time was spent at the corporate offices. Assuming that all these hours were, in fact, spent, I nonetheless feel that the other aspects of his services analyzed above warrant a maximum award of $7,500.
Joseph A. Sidoli and William E. Grigg, Jr., have filed a joint application for allowance as appraisers. They were appointed by the Court as appraisers of the assets of the debtor corporations on June 8, 1965. They indicate they visited and appraised 43 of the motels in the Imperial chain. They also indicate some appraisal of personal property. The compensation they seek is for an estimated 25 man days each, for a total of 50 man days, at the rate of $150 per man day, or a total of $7,500. Their petition does not indicate that the Court had ever fixed the rate per day by which they were to be compensated, nor does their petition reflect hours spent or any detail of the work performed. However, assuming that the estimated man days are correct, it is my view that fair compensation for appraisal work of this sort would be at the rate of $75 per man day and I therefore allow the sum of $3,500 to Messrs. Sidoli and Grigg for the work performed as Court-appointed appraiser. Bankruptcy Rule 10-215(c)(2).
SMOLIN, LUPIN AND COMPANY
This accounting firm requests an allowance of $2,100 based upon the performance of services at the rate of $75 per man day. The October 20, 1965 order authorizing the performance of work by this accounting firm indicated that the amount charged should not "exceed" $75 per man day. Moreover, the rates charged by this firm were $75 per day for senior and $40 per day for juniors. It is not clear from the application whether the work was performed by seniors or juniors. Moreover, some work was performed before the Court order and some was performed after Court authorization was obtained. Based on the foregoing facts and my analysis of the work performed, I feel an award of $1,000 is appropriate and reasonable.
The accounting firm of Touche Ross & Company (formerly Puder & Puder) performed services for the debtor corporations over several years. The bulk of the moneys due to them for services performed pursuant to Court authorization have been paid, but Touche Ross furthers at this time its claim for $22,734.96 as unpaid allowances.
Two Court orders are involved. Under one Court order, Touche Ross was authorized to perform services in reviewing plans of reorganization and drawing up a three-year projection of corporate financials in connection therewith. The Court order authorized the expenditure of $35,000 plus expenses. Pursuant to this Court authorization, Touche Ross performed certain work and submitted a bill for $33,847.50. Against this bill, Touche Ross was paid $18,836.04, leaving a balance due of $15,011.46. Since this work was performed pursuant to Court order, I deem it to be compensable.
A separate claim is made by Touche Ross & Company pertaining to a bill submitted by that accounting firm in the amount of $103,129.60. Against this billing, Touche Ross received $95,460.10, and Touche Ross therefore seeks only the balance due of $7,723.50. However, the Court orders under which this compensation is sought, authorizing Touche Ross to do certain work in conjunction with financial statement preparation, tax return work, spot audits, etc., only authorized $90,000 worth of services to be performed, together with reimbursement for expenses. The expenses were $5,460.10, so that the payment of $95,460.10 to Touche Ross is payment to the full extent of the authorized services. The excess value of the services performed of $7,723.50 cannot be allowed since it must be deemed either unauthorized or additional effort to complete work which had a maximum authorization which was paid.
In sum, the application of Touche Ross is allowed to the extent of $15,011.46.
MARINE MIDLAND TRUST COMPANY
An application has been filed on behalf of Marine Midland Trust Company, the Indenture Trustee for the convertible debentures issued by the debtor prior to these proceedings. This application is really two-fold in nature; Marine Midland seeks administration expenses for its role as Indenture Trustee and also seeks reimbursement for legal fees paid to its New Jersey counsel, Pitney, Hardin and Kipp.
With respect to the first part of the application, Marine Midland seeks $6,995 which consists of the fees and expenses due to Marine Midland for the entire period of the reorganization during which they served as Indenture Trustee. This sum includes a $500 annual fee for services as Indenture Trustee, a $100 annual fee for services as registrar and related charges. In my view, these are proper administration expenses and the $6,995 request is allowed.
Based upon the foregoing and the general principles enunciated herein, I believe an allowance of $5,000, together with reimbursement for disbursements of $793.99 should be made to Marine Midland Trust Company in partial reimbursement for the legal expenses incurred by it.
Bernard Hellring was designated as counsel for the stockholders of Imperial by order dated March 8, 1973. In this capacity, Mr. Hellring undertook to represent the interests of those stockholders from the date of his appointment until the confirmation of the plan. There was some duplication of the representation of the stockholder interests by dint of the fact that a major stockholder, Continana Corporation, was separately represented. Nonetheless, Mr. Hellring and members of his firm did participate in the latter stages of these proceedings and expended the hours set forth in Mr. Hellring's application. The bulk of the time was spent by Mr. Hellring and he seeks compensation at the rate of $100 per hour. Other partner hours are sought at the rate of $75 per hour and associate time is requested to be compensated at the rate of $40 per hour, for a total fee application request of $12,825.
It is clear from the affidavit and testimony that Mr. Hellring participated in several aspects of this case that were important chapters leading to the conclusion of the proceedings. He was active in evaluation proceedings which determined the total worth of the company and thereby determined the equity that would be available to stockholders under any reorganization plan. This matter was appealed to the United States Court of Appeals for the Third Circuit, and Mr. Hellring participated in that appeal. Additionally, he was active during the hearings on the Schiavone plan which was approved by this Court although it did not obtain confirmation. He also had some discussions pertaining to the provisions of the plan which ultimately was confirmed.
For the participation as outlined above, I deem it appropriate to award Mr. Hellring the sum of $9,500, together with reimbursement for disbursements in the amount of $711.20.
RIKER, DANZIG, SCHERER & DEBEVOISE
The firm of Riker, Danzig, Scherer & Debevoise represents the largest single unsecured creditor in this proceeding, the four General Tire Pension Funds (hereinafter "General Tire"). The Riker firm has represented General Tire since the commencement of these proceedings and the time for which they seek compensation includes a small amount of time spent in the Chapter XI proceeding. The request made by the firm is for an allowance of $50,000 which represents billings over the entire length of the reorganization proceedings at the average rate of $100 per partner hour and $50 per associate hour.
The work for which the applicant seeks compensation includes participation in attempts to arrive at a successful plan of reorganization. In this connection, the applicant conducted active negotiations, but these negotiations were specifically on behalf of the individual client, General Tire. The fact that they inured to the benefit of Class 7A of unsecured creditors is of interest, but not critical to my consideration since General Tire comprised virtually 75% of Class 7A.
The other area for which Riker, Danzig, Scherer & Debevoise seek compensation is for its activities in connection with the repayment of interim allowances by the trustee and counsel for the trustee, as well as the repayment to the estate of interest thereon. See In the Matter of Imperial '400' National, Inc., 432 F.2d 232 (3d Cir. 1970) and 456 F.2d 926 (3d Cir. 1972). The applicant concedes that more than half of its time was spent on these matters. It should be noted, however, that the efforts in these cases, which redounded to the benefit of the estate by the replacement of operating cash into the estate pending final administration awards, were the joint efforts of counsel for General Tire, counsel for Union Bank, counsel for the Creditors Committee and included the participation of the S.E.C. While I believe that these efforts did accomplish a temporary benefit for the estate, I cannot, of course, award each participant full credit for the benefit, nor can I overstate its value in terms of dollars awarded.
In my view, the efforts of Riker, Danzig, Scherer & Debevoise were basically on behalf of a private client and only to a limited extent for the general benefit of the estate and assistance of the reorganization court. In fact, the applicant has received $28,750 in fees, together with partial reimbursement for expenses from General Tire. In light of the foregoing, I deem an award of $12,750 to be ...