In re Balport Const. Co., Inc.
| Decision Date | 14 January 1991 |
| Docket Number | Bankruptcy No. 90 B 20285. |
| Parties | In re BALPORT CONSTRUCTION CO., INC., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Marc Stuart Goldberg & Associates, P.C., New York City, for CCS.
Gainsburg, Greene & Hirsch, (Hal M. Hirsch, of counsel), Purchase, N.Y., for debtor.
DECISION ON APPLICATION OF CCS FOR AN ORDER GRANTING AN ADMINISTRATION CLAIM
CCS Associates, Inc. ("CCS"), a creditor in this Chapter 11 case, has moved for an order granting it an administration claim pursuant to 11 U.S.C. § 503(b)(3)(D) for making a substantial contribution in this case. CCS seeks a total administration claim in the sum of $37,977.68, although approximately $28,000.00 represents invoiced services performed by CCS for the debtor, Balport Construction Co., Inc., before the debtor filed with this court its voluntary petition for reorganizational relief on April 6, 1990.
CCS was retained by order of this court, dated May 15, 1990, as an expert and witness for the preparation of documentation and trial materials necessary to substantiate the debtor's state court litigation against Con Edison for damages resulting from construction delays experienced by the debtor and allegedly caused by Con Edison. CCS is a consulting firm in the construction industry, specializing in evaluating construction damages.
The debtor contends that CCS should be compensated for its services in support of the debtor's state court litigation in accordance with the standards prescribed under 11 U.S.C. § 330(a) for the actual, necessary services rendered in this Chapter 11 case by professionals and others retained on behalf of the debtor and not pursuant to the substantial contribution provision expressed in 11 U.S.C. § 503(b)(3)(D). Therefore, the debtor reasons that CCS should be compensated only for those beneficial services performed by CCS after the commencement of the Chapter 11 case and the entry of the May 15, 1990 order retaining CCS. The debtor objects to including any portion of CCS's prepetition services in the total compensation claimed because the retention order was not effective nunc pro tunc and because CCS should not be allowed to elevate its prepetition unsecured claim for professional services to the level of an administration claim by combining the prepetition unsecured claim with the claim for post-petition services performed pursuant to the May 15, 1990 order of retention.
1. On April 6, 1990, Balport Construction Co., Inc. ("Balport" or "debtor") filed with this court a voluntary petition for reorganizational relief under Chapter 11 of the Bankruptcy Code and continued in possession of its assets and managed its business as a debtor in possession in accordance with 11 U.S.C. §§ 1107 and 1108.
2. Prior to the filing of this Chapter 11 case, the debtor was engaged in the business of general contracting, specializing in sewer construction projects.
3. In 1982, during the course of a construction project under contract with the City of New York, the debtor claims it encountered alleged utility interference from Consolidated Edison Company of New York, Inc. ("Con Edison"). Accordingly, the debtor commenced a civil litigation against Con Edison in 1982. It retained the law firm of Altieri, Kushner, Miuccio & Frind, P.C. ("the Altieri firm") as its counsel in the law suit.
4. The debtor sought compensatory damages against Con Edison in the sum of $846,609.00 and punitive damages in the sum of $1,000,000.00, claiming that Con Edison was liable to the debtor for Con Edison's allegedly wrongful acts and omissions, which the debtor claimed delayed and prevented the debtor from performing its construction contract with the City of New York.
5. The debtor's action against Con Edison in the New York State Supreme Court continued for approximately eight years, until 1990, when the trial was scheduled to begin on May 16, 1990.
6. Pursuant to a Notice of Settlement of Order dated May 3, 1990, the debtor's bankruptcy attorneys prepared a proposed order for submission to this court which sought to authorize the debtor to retain the Altieri firm as special litigation counsel for the Con Edison state court litigation and to retain experts for the preparation of, and appearance at, the trial. The proposed order also would authorize the debtor to retain Robert Cavaliero, a former officer of the debtor, and CCS, as experts and witnesses, for the preparation and appearance with respect to the trial with Con Edison. The stated compensation for these services was $125.00 per hour for each of the named experts, to be paid from the proceeds recovered, if the litigation was successful.
7. In the event that the debtor's litigation with Con Edison was not successful, the proposed order provided that Robert Cavaliero and CCS would be "afforded an administrative expense claim pursuant to 11 U.S.C. Section 503(b)(1)(A)."
8. The proposed order and supporting application, dated May 3, 1990, did not clearly reveal that CCS had asserted a prepetition claim against the debtor for consultation and expert services performed for the debtor in connection with the Con Edison litigation before the filing of the debtor's Chapter 11 case, which services were invoiced by CCS to the debtor in the approximate amount of $25,000.00.
9. In a letter from Marc Stuart Goldberg, the attorney for CCS, to the attorney for the debtor, dated May 8, 1990, Goldberg referred to the prepetition CCS claim and said:
10. In a letter from Goldberg to the attorney for the debtor, dated May 11, 1990, Goldberg repeated his objection to omitting certain prepetition services in the retention order in the following language:
11. On May 15, 1990, the debtor's attorneys submitted an amended order, with notice, to the Assistant United States Trustee, the Altieri firm, Robert Cavaliero and Marc Stuart Goldberg, authorizing the debtor to retain the Altieri firm as special litigation counsel and to retain experts for the preparation and appearance with respect to the pending Con Edison litigation in the New York State Supreme Court.
12. The amended order specifically stated that CCS had been "providing litigation preparation assistance to the debtor for a substantial period of time prior to the date of the petition . . . ".
13. Included in the decretal clauses in the proposed amended order was the following language:
ORDERED, that the Debtor be, and the same hereby is authorized to pay to CCS ASSOCIATES, INC. THIRTEEN THOUSAND THREE HUNDRED TWENTY SEVEN ($13,327.50) DOLLARS and FIFTY CENTS, for services performed thereby prior to the date of petition in preparation of the trial of the subject litigation pursuant to the terms and conditions of this Order.
14. The court refused to sign the order as submitted unless the decretal paragraph dealing with payment to CCS for prepetition services was deleted. The debtor's counsel agreed to the deletion of this paragraph, which was stricken by the court.
15. The decretal paragraph dealing with the compensation of CCS was modified to read as follows:
16. Mr. Goodman, the president of CCS, testified that CCS was recommended to the debtor by the Altieri firm, for whom CCS had previously performed expert services in connection with other construction damage litigations. There was no written contract between the debtor and CCS governing or describing the services to be performed by CCS.
17. Albert S. Tablante, an attorney with the Altieri firm testified that CCS performed valuable services, prepared important charts, and provided substantial preparation and expert services with respect to the pending Con Edison litigation, including evaluations, which were used and submitted to Con Ed's attorneys during settlement discussions.
18. On the eve of the trial, the debtor and Con Edison settled their law suit, with the result that the debtor received $390,000.00 in payment for its claims against Con Edison. Therefore, CCS was not required to testify because the trial was discontinued, although CCS had prepared valuable charts, documents and supplied beneficial expertise with respect to the construction damage claims alleged in the litigation between the debtor and Con Edison which had been pending for approximately eight years.
18. There was no dispute that the work and expertise supplied by CCS was instrumental in achieving a satisfactory settlement of the debtor's litigation with Con Edison. Nor was there any evidence to contradict the debtor's...
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