In re Bank of New England Corp., No. 91-10126-WCH.

Decision Date09 December 1991
Docket NumberNo. 91-10126-WCH.
Citation134 BR 450
PartiesIn re BANK OF NEW ENGLAND CORPORATION, Debtor.
CourtU.S. Bankruptcy Court — District of Massachusetts

COPYRIGHT MATERIAL OMITTED

Terry Gibson, Asst. U.S. Trustee, Boston, Mass., for Dr. Ben Branch, Chapter 7 Trustee.

Deborah Griffin, Peabody & Brown, Boston, Mass., for FDIC.

Hugh M. Ray, Andrews & Kurth, Houston, Tex., and James Whitlock, Palmer & Dodge, Boston, Mass., for Dr. Ben Branch, Chapter 7 Trustee.

DECISION REGARDING THE INTERIM FEE APPLICATIONS OF ACCOUNTANT TO THE TRUSTEE, COUNSEL TO THE TRUSTEE, CHAPTER 7 TRUSTEE, INTERIM TRUSTEE, COUNSEL TO THE INTERIM TRUSTEE, ACCOUNTANT TO THE INTERIM TRUSTEE, AND SPECIAL COUNSEL TO THE TRUSTEE

WILLIAM C. HILLMAN, Bankruptcy Judge.

This matter is before the Court on applications for interim compensation pursuant to § 331 of the Bankruptcy Code. Both the United States Trustee and the Federal Deposit Insurance Corporation ("FDIC") filed objections to the applications.

BACKGROUND

The debtor is a holding company for a variety of bank and non-bank subsidiaries as shown on Exhibit A. Regulators seized the bank subsidiaries on January 6, 1991. On the following day, the debtor filed the original petition herein for relief under Chapter 7 of the Bankruptcy Code. There followed the appointment of an interim trustee and his retention of counsel; the election of a trustee at the § 341 meeting;1 the trustee's motions for the appointment of various counsel (all granted by this Court); and the commencement of a tug-of-war between the trustee and FDIC (in various capacities) involving hundreds of millions of dollars. The last continues, often conducted with attitudes which would cause Miss Manners much distress.2

PRELIMINARY CONSIDERATIONS

Counsel filing applications for the allowance of fees and expenses in this Court carry a difficult burden. There is little precedent as to which expenditures of time, and which disbursements, are proper subjects for allowance. The few cases from this district and circuit discuss only fragmentary parts of the picture and are not always in agreement.

This decision relates to what is probably the first of many hearings on interim fee applications in this case. As a guide to the professionals involved, this opinion will first describe the basic rules which will be followed in dealing with this and any later applications. The Court's intention is to adopt these same guidelines as general principles in other and unrelated cases.

It should be noted at the outset that these rules may be subject to exceptions in clearly demonstrated special circumstances.

FEE ALLOWANCES IN GENERAL

The standard for fee allowances in this circuit is the lodestar approach, Boston & Maine Corp. v. Moore, 776 F.2d 2 (1st Cir.1985), which expands upon the criteria of Bankruptcy Code § 330(a)(1). It requires the court to determine a reasonable hourly rate and apply it to the time reasonably expended, and then perhaps adjust by various factors. Grendel's Den, Inc. v. Larkin, 749 F.2d 945, 950 (1st Cir.1984); M. Berenson Co. v. Faneuil Hall Marketplace, Inc., 671 F.Supp. 819 (D.Mass.1987).

This language represents a shift from prior bankruptcy law, which emphasized the policies of conservation of the estate and economy of administration. In re Casco Bay Lines, Inc., 25 B.R. 747 (Bankr. App. 1st Cir.1982). The effort now is "to balance a spirit of economy on the one hand with fees sufficiently close to market rates to attract qualified counsel on the other." Boston & Maine Corp. v. Sheehan, Phinney, Bass & Green, 778 F.2d 890, 898 (1st Cir.1985); In re WHET, Inc., 61 B.R. 709, 715 (Bankr.D. Mass.1986).

Even without regard to objections by other parties in interest, the court has an independent judicial responsibility to evaluate professionals' fees. In re First Software Corp., 79 B.R. 108 (Bankr. D.Mass.1987). "The court . . . is itself an expert on the question (of attorney's fees) and may consider its own knowledge and experience concerning reasonable and proper fees and may form an independent judgment either with or without the aid of testimony of witnesses as to value." In re WHET, Inc., 61 B.R. 709, 713 (Bankr. D.Mass.1986).

TRAVEL TIME

Some courts hold that travel time cannot be billed, although special exceptions may be made. E.g., In re Grimes, 115 B.R. 639 (Bankr.D.S.D.1990); In re Carter, 101 B.R. 170 (Bankr.D.S.D.1989); Jungkurth v. Eastern Financial Services, Inc., 87 B.R. 333, 337 (E.D.Pa.1988); In re S.T.N Enterprises, 70 B.R. 823, 837 (Bankr.D.Vt.1987); In re Seneca Oil Co., 65 B.R. 902, 909 (Bankr.W.D.Okla.1986); In re Pacific Express, Inc., 56 B.R. 859 (Bankr.E.D.Cal. 1985); In re Four Star Terminals, Inc., 42 B.R. 419 (Bankr.D.Alaska 1984).

Others allow for one half the attorney's hourly rate. In re Environmental Waste Control, 122 B.R. 341 (Bankr.N.D.Ind. 1990); In re Ginji Corp., 117 B.R. 983 (Bankr.D.Nev.1990); In re Hogg, 103 B.R. 207 (Bankr.D.S.D.1988); In re Pothoven, 84 B.R. 579, 585 (Bankr.S.D.Iowa 1988); In re Taylor, 66 B.R. 390, 397 (Bankr.W.D.Pa. 1986).

Still others consider 75% of the attorney's hourly rate appropriate. In re C & J Oil Co., 81 B.R. 398, 404 (Bankr.W.D.Va. 1987).

In re Frontier Airlines, Inc., 74 B.R. 973, 977 (Bankr.D.Colo.1987) held that travel time was compensable because it was reasonable and necessary. Accord In re Cano, 122 B.R. 812 (Bankr.N.D.Ga.1991). Approved, In re Microwave Products of America Inc., 102 B.R. 661 (Bankr. W.D.Tenn.1989).

The Court feels that "travel time" is a generic within which different species may be differently treated.

Commuting time, between an attorney's residence and primary place of business—the attorney's usual office—is charged to the business of life and not to the matters handled upon arrival.

Travel from office to court3 may be just a few moments down the hill from Boston's financial district, or almost 1,800 air miles from Houston, as is the case in one application before the Court.

The Court is aware of the yardstick in § 330(a)(1)—that fees be based in part on the cost of comparable services outside of the bankruptcy arena. Nevertheless, a debtor or trustee under the Code must act reasonably. The debtor or trustee should act as would "a well-informed private client, paying his own fees." Maceira v. Pagan, 698 F.2d 38, 40 (1st Cir.1983).

That case dealt primarily with the reasonableness of hiring distant counsel at a higher fee than the local rate, a problem not present in these applications.4 However, the case does point out that it is unreasonable to select non-local counsel "in an ordinary case requiring no specialized abilities not amply reflected among local lawyers." Id. See also Palmigiano v. Garrahy, 707 F.2d 636 (1st Cir.1983).

The Court may indulge a debtor, trustee, or committee desiring to retain professionals from outside of the district in a case which could be handled by local persons, but, generally speaking, it will not permit fees to be paid from the estate for travel time greater than those which would be incurred if the professional's office were within the district.5 Following the practice of the Internal Revenue Service ("IRS") as regards travel expenses,6 a professional travelling directly from home to court should deduct normal commuting time from the calculation of allowable travel time.

These restrictions are neither parochial nor protectionist; they serve to place reasonable limits on charges against estates. As indicated in the foregoing discussion, if the local pool of professional talent can provide the necessary abilities to represent the interest requiring assistance, such persons should be retained. If the debtor/trustee/committee wishes to obtain the services of professionals beyond the limits of the district, they may be approved, but on the same terms as local professionals; the estate, being before this Court, cannot afford the luxury of importing professionals without a compelling reason therefor.

Applications for the employment of professionals not based within the District should explicitly specify where the operational personnel are based and what travel expenses are sought to be reimbursed.

The rule as applied to the professionals employed in the present case will be dealt with subsequently in connection with the discussion of individual fee requests.

As to "outbound" travel, where the case is pending in this Court, necessary travel time of local counsel attending proceedings outside of the District and the like will normally be allowed. The presence of local counsel in the forum may make the attendance unnecessary.

Travel time should be separately specified in the detail of activities required by Local Rule 34.

As to the rate of reimbursement, the Court adopts the position espoused by In re Cano, 122 B.R. 812, 814 (Bankr. N.D.Ga.1991):

Non-bankruptcy attorneys typically bill their travel time at the full hourly rate because it precludes them from engaging in other billable professional work. Because bankruptcy attorneys are no less entitled to compensation for opportunity costs, travel time should be considered as part of the total hours spent serving the client and should be reimbursed at the full hourly rate. Attorneys may not be as productive when travelling, but § 330(a)(1) does not demand that productivity be considered when awarding fees. Instead, as long as travel is necessary and the rate is reasonable, that provision is satisfied.
Of course, reasonableness is an important factor. If, for example, the trip is unnecessary or the attorney would not have otherwise billed out the time, compensation is not called for. Similarly, if the method of travel is overly luxurious or if travel fees become too large a percentage of the total requested compensation, the travel compensation should be reduced. (citations omitted).

SERVICES OF PARAPROFESSIONALS

The Court accepts that paraprofessionals performing limited professional tasks can result in...

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