Boston and Maine Corp. v. Sheehan, Phinney, Bass & Green, P.A.

• Decision Date: 19 December 1985
• Docket Number: No. 84-1912,84-1912
• Citation: 778 F.2d 890
• Court: U.S. Court of Appeals — First Circuit
• Parties: Bankr. L. Rep. P 70,798 In re BOSTON AND MAINE CORPORATION, Debtor, Appellee, v. SHEEHAN, PHINNEY, BASS & GREEN, P.A., Petitioner, Appellant.

Page 890

778 F.2d 890

Bankr. L. Rep. P 70,798

In re BOSTON AND MAINE CORPORATION, Debtor, Appellee, v. SHEEHAN, PHINNEY, BASS & GREEN, P.A., Petitioner, Appellant.

No. 84-1912.

United States Court of Appeals, First Circuit.

Argued June 7, 1985.

Decided Oct. 15, 1985.

As Modified Dec. 19, 1985.

Michael C. Harvell, Manchester, N.H., with whom Wm. S. Green, Mark L. Weaver and Sheehan, Phinney, Bass & Green, P.A., Manchester, N.H., were on brief, for appellant.

Francis K. Morris, Framingham, Mass., with whom Morris & Collins, Framingham, Mass., was on brief, for appellee.

Before CAMPBELL, Chief Judge, RUBIN ^* and BREYER, Circuit Judges.

LEVIN H. CAMPBELL, Chief Judge.

This is an appeal by petitioner Sheehan, Phinney, Bass & Green, P.A. (Sheehan), from an order by the United States District Court for the District of Massachusetts awarding petitioner approximately one-third of the amount it requested as compensation for legal services rendered on behalf of the Boston and Maine Corporation (B & M) in connection with an eminent domain proceeding before the New Hampshire Eminent Domain Commission. Because we find the fees requested were reasonable, we remand the case to the district court with instructions to award the petitioner the full amount of its requested fees.

I.

In 1970 B & M began bankruptcy reorganization proceedings under Sec. 77 of the Bankruptcy Act of 1898, 11 U.S.C. Sec. 205 (1976 ed.). On October 29, 1975, the Public Utilities Commission of the State of New Hampshire (the Commission) exercised the state's power of eminent domain over two railroad lines owned by B & M. As required by 498-A:11 N.H.R.S. (Supp.1979), the Commission deposited $1 million with the Merrimack County Superior Court, representing its initial estimate of the amount of just compensation owed to B & M. In January 1978 Sheehan was retained by the trustees of B & M to litigate the amount of damages arising from the taking.

According to Sheehan's undisputed testimony before the district court, the customary fee among New Hampshire attorneys for representation of compensation disputes in eminent domain cases is 50% of the amount recovered in excess of the commission's tender deposit. Because it thought this arrangement would result in a disproportionately large fee, however, Sheehan proposed to be billed on a time and efforts basis, plus expenses, with the addition of a contingent fee of 15% of the excess of the award over the tender deposit. B & M's trustee accepted this proposal and engaged the services of Sheehan under a blanket authorization from the prior district judge overseeing the proceedings to the trustees of B & M to hire counsel. See Order No. 105, In re Boston & Maine Corp., No. 70-250-F (D.Mass. March 27, 1972), reprinted in In re Certain Special Counsel to Boston & Maine Corp., 737 F.2d 115, 127-28 (1st Cir.1984).

The representation of B & M before the commission was conducted chiefly by William S. Green, a name partner of Sheehan with extensive experience in trying eminent domain cases, and by Warren Rudman, formerly the Attorney General of New Hampshire. Sheehan faced at least two significant obstacles in representing B & M. First, title to 10 to 20% of B & M's lines was subject to the claims of persons purporting to hold residual interests or competing claims. It was important, however, to have the land treated as if it were owned in its entirety in fee simple, since the expert evidence presented by B & M tended to show that the value of the entire rights-of-way was greater than the sum of the values of each separate parcel. Sheehan successfully persuaded the Commission to treat the two railroad lines as owned in fee simple in their entirety, reserving a fund of $100,000 from the final award to satisfy any possible claim by one particular claimant, Loch Haven Corporation.

Second, during an earlier proceeding before the district court in which it sought to abandon the lines because they were unprofitable, B & M presented testimony by its employees that the net value of the land, track, and bridges on the line as of January 1973 was $979,377, or $20,623 less than the Commission's tender deposit, and that the appropriate method of valuing the lines was their net salvage value. This testimony directly contradicted testimony before the Commission that the net salvage value of the line in 1975 was $2 million, and that the appropriate method of determining the lines' fair market value was to use the value of the lines as corridors for sewer lines, utility lines, etc.

Despite these difficulties, on July 24, 1980, Sheehan succeeded in obtaining for B & M an award of $2.328 million plus whatever funds remained from the reserved $100,000 after satisfying the claims of Loch Haven Corporation, plus the sum of $331,058.56, representing interest accrued on the $1 million tender deposit since 1975. This amount exceeded by at least $1.328 million the Commission's tender offer, and by $703,000 the State's final pre-trial offer of $1,625,000.

On September 25, 1980 Sheehan filed a petition with the district court for payment for legal services rendered through November 30, 1979. As provided under the terms agreed to by B & M's trustees, Sheehan requested $226,975.76 in compensation. This amount consisted of $25,517 for the time spent by its attorneys in preparing B & M's case, billed at their respective customary hourly rates; $683 for secretarial services; $1,575.76 for expenses; and $199,200 representing 15% of the difference between the $2.328 million minimum final award and the $1 million tender offer. Sheehan subsequently amended its petition to add another $7,593 for attorney's fees, $189 for secretarial services, and $209.12 for other expenses incurred between December 1, 1979 and November 30, 1980. Acting under the former 11 U.S.C. Sec. 205(c)(2), the Interstate Commerce Commission (ICC) approved in September 1981 the total requested fees and expenses--$234,966.88--as the maximum allowable amount. The ICC found at that time that the "normal" fee in New Hampshire for representation in eminent domain cases is 50% of the difference between the tender deposit and the final award, and that the award was both reasonable and not unduly burdensome to B & M's estate.

On November 17, 1981, the district judge overseeing the B & M reorganization held a hearing on Sheehan's petition. In January 1982, the judge revoked Order 105 and other orders, issued by a previous judge, under authority of which Sheehan and other counsel had been retained, since he believed that they did not comply with required procedures. The trustees applied to the court to have the appointments of counsel approved retroactively. After some delay, the reorganization judge circulated a draft memorandum of an order denying fees for all services rendered pursuant to the revoked orders except as fees might be allowed under equitable principles. Sheehan, along with other counsel retained by B & M's trustees to perform various legal services, then brought a petition for writ of mandamus before this court to compel the district court to grant their fee petitions. We denied the writ, but instructed the district court that counsel's appointments "should be confirmed, to be effective as of the date work was assigned to them," thereby placing counsel "in the status they would have occupied had prior court orders been entered which complied strictly with the rule." In re Certain Special Counsel, 737 F.2d at 119.

Pursuant to this direction, the district court held another hearing on Sheehan's fee petition on August 29, 1984. Robert Meserve, a trustee for B & M, testified that the result obtained was "very satisfactory," and that the 15% difference charged in addition to Sheehan's hourly billings was "completely warranted by New Hampshire practice and by the results obtained." No objections or other opposition to the requested fees was filed at the time. Nonetheless, in an October 14, 1984 memorandum and order, the district court awarded Sheehan only $80,000 in fees plus $1,889.88 for expenses. See In re Boston & Maine Corp., 46 B.R. 983 (D.Mass.1984).

The court began its reasoning by granting in toto Sheehan's requested hourly fees of $33,110, plus its requested expenses of $2,656.88 less $767 for secretarial services, "which item the court [regards as] properly subsumed in normal overhead." As to Sheehan's request for $199,200, representing 15% of the difference between the tender deposit and the final award, the court found that such an award would amount to allowing Sheehan to share in the assets of the debtor with the creditors; such a scheme, it said, "has no place in bankruptcy reorganization proceedings," which "are primarily for the benefit of creditors." The court appeared to conclude that the 15% bonus "was based on the prevailing practice in New Hampshire," but found that appointed counsel for bankrupt estates are "officer[s] of the court and [their] compensation is not as in the private sector."

After rejecting the additional 15% award as inappropriate, the court resorted to the "lodestar" method to find reasonable compensation for Sheehan. Under this method, the number of reasonable hours worked is multiplied by a reasonable hourly rate. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983); Furtado v. Bishop, 635 F.2d 915, 919-20 (1st Cir.1980); In re Casco Bay Lines, Inc., 25 B.R. 747, 755-56 (Bankr. 1st Cir.1982). This so-called lodestar fee may then be adjusted up or down to take into account various factors--including quality of representation, potential delay in payment, and the results obtained--as long as they are not already reflected in the basic fee. Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 1548-50, 79 L.Ed.2d 891 (1984); Miles v. Sampson, 675 F.2d 5, 8 (1st Cir.1982); In re Casco, 25 B.R. at 756. ¹ In this case, the court determined that the hourly fees were reasonable as billed, and then...