On Appeal from the United States District Court for the Western District of Pennsylvania. (D.C. Civil Action No. 91-cv-01665).
Before: Scirica, Lewis and Roney*fn* , Circuit Judges
This is an appeal from the bankruptcy court's award, pursuant to 11 U.S.C. § 330 (1988),*fn1 of over $3.1 million in fees and expenses for accounting services Zolfo, Cooper & Company provided during Chapter 11 reorganization proceedings to the debtors, Allegheny International, Incorporated, its affiliates, and subsidiaries. The debtors were predecessors in interest to appellee, Sunbeam-Oster Company. Zolfo Cooper disputes the bankruptcy court's disallowance of fees totalling $249,957.87 and of expenses totalling $84,852.97. The district court affirmed the bankruptcy court, and this appeal followed. We will affirm.
On February 20, 1988, the debtors filed petitions for bankruptcy under Chapter 11 of the Bankruptcy Code. On July 12, 1990, the bankruptcy court confirmed the debtors' disclosure statement and plan for reorganization, and in September 1990 the plan was consummated. As a result, Sunbeam-Oster Company acquired all the assets and liabilities of the debtors.
At the outset of the bankruptcy process the debtors filed motions for authorization to employ financial and bankruptcy advisors. The bankruptcy court authorized Zolfo Cooper's employment on February 20, 1988. Zolfo Cooper was one of seventeen legal, financial, and accounting firms, each of which submitted monthly fee applications to the bankruptcy court for review and approval during the bankruptcy proceedings.
On December 14, 1989, the bankruptcy court issued the first of many opinions regarding fee applications, in this case a decision on the fee requests of four law firms. In its opinion, the bankruptcy court stated, "With certain exceptions, we find the hourly rates requested to be too high. They depart from the cost of comparable services in Western Pennsylvania." In re Allegheny Int'l, Inc., No. 88-448, slip op. at 4 (Bankr. W.D. Pa. Dec. 14, 1989) ("December 14, 1989, Opinion"). The court noted its dismay over the behavior of the lawyers who "reinvented the wheel several times" and were parties to "greed and personality clashes . . . ." Id. at 5.
The court turned to consider the "hourly rates in our local bankruptcy court marketplace." Id. (quoting In re Shaffer-Gordon Assocs., Inc., 68 Bankr. 344, 350 (Bankr. E.D. Pa. 1986)). It determined "our experience tells us that the market rate in Western Pennsylvania for bankruptcy counsel of high caliber is $150 per hour. We routinely observe quality bankruptcy work billed at that rate in chapter 11 cases by partners, and lesser amounts by associates." Id. at 5-6.
The bankruptcy court then stated it recognized the difficulty, complexity, and size of this particular case, and announced it would therefore "allow rates higher than the aforementioned market rates, as listed below in our Discussion of the appropriate rates for each of the four law firms." Id. at 6. The court added the caveat that the maximum rate was not unvaryingly warranted as the case also contained many routine matters. It explained lower rates were proper due to lack of success and because payment was guaranteed. It reasoned that bankruptcy practice is national in scope for large cases such as this one, but that the New York City rates the law firms requested would not alone set the national standard.
In orders and memorandum opinions dated August 21, 1990, and December 20, 1990, the bankruptcy court addressed Zolfo Cooper's applications for interim compensation for the periods February 20, 1988, to February 28, 1989, and March 1, 1989, to September 15, 1990, respectively. On April 30, 1991, the bankruptcy court issued an order regarding Zolfo Cooper's application for compensation for services from September 16, 1990, to December 31, 1990, for all previously disallowed fees and expenses, and for premium compensation in the amount of $1.1 million. The bankruptcy court denied this last application in its entirety.
In the bankruptcy court's memorandum opinion of August 21, 1990, it incorporated by reference the December 14, 1989, opinion described above. The court explained it was capping Zolfo Cooper's fees at an hourly rate of $225 per hour in part because "almost all of the work done by this applicant was done by highly paid personnel; there were virtually no lower paid personnel rendering services. Moreover, the court is concerned that the services rendered by this applicant may overlap the services of the debtor's counsel, investment bankers, and accountants. For these reasons, the court limits hourly rates to $225." In re Allegheny Int'l, Inc., No. 88-448, slip op. at 2 (Bankr. W.D. Pa. Aug. 21, 1990) ("August 21, 1990, Opinion"). The court also criticized Zolfo Cooper's fee petitions, which it asserted "contain numerous listings which are too vague or do not specify the parties involved or the subject matter of the service . . . . For those listings, the court is unable to determine whether such services were actual and necessary services and whether the time allotted was reasonable." Id. at 4.
Zolfo Cooper filed a motion for reconsideration and a request for clarification. The bankruptcy court denied the motion for reconsideration on August 16, 1991, and expressly reaffirmed its earlier orders and opinions. The August 16, 1991, order also incorporated by reference a separate memorandum opinion of the same date which stated, "The rates [we] found to be the costs of comparable services in non bankruptcy situations in Western Pennsylvania may not be the rates which are prevalent in other metropolitan areas or which may have become comparable nationally in large Chapter 11 cases." In re Allegheny Int'l, Inc., 134 Bankr. 814, 820 (Bankr. W.D. Pa. 1991) ("August 16, 1991, Opinion"). The bankruptcy court then stated that Japonica Partners, who ultimately took control of the debtors through Sunbeam-Oster,*fn2 had voluntarily paid higher rates to the professionals it hired. The other professionals urged these rates upon the bankruptcy court as evidence of comparable market rates for their services. The bankruptcy court noted, however, that Japonica Partners paid those rates during a hostile takeover, and that there were "important differences between the two processes and that the professional fees obtained in mergers and acquisition and hostile takeover activities are not comparable for Chapter 11 cases." Id. at 820.*fn3
Zolfo Cooper appealed the bankruptcy court's order of August 16, 1991, to the district court, which affirmed. This appeal followed.
In our review of the bankruptcy court's factual findings we, like the district court, review for clear error. Resyn Corp. v. United States, 851 F.2d 660, 664 (3d Cir. 1988). Our review of legal precepts is plenary. Id. (quoting Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3d Cir. 1981)). Since we are in as good a position to review the bankruptcy court's decision as the district court was, we will review the bankruptcy court's findings by the standards the district court would apply. Universal Minerals, 669 F.2d at 102. Fee awards are reviewed for an abuse of discretion, which can occur "if the Judge fails to apply the proper legal standard or to follow proper procedures in making the determination, or bases an award upon findings of fact that are clearly erroneous." Electro-Wire Prods., Inc. v. Sirote & Permutt, P.C. (In re Prince), 40 F.3d 356, 359 (11th Cir. 1994) (quoting Hatcher v. Miller (In re Red Carpet Corp.), 902 F.2d 883, 890 (11th Cir. 1990)).
Jurisdiction in the bankruptcy court was proper under 28 U.S.C. § 157(a) (1988). The district court had jurisdiction over the appeal from the final order of the bankruptcy court, id. § 158(a), and we have jurisdiction over the appeal ...