In re Dole Company

• Decision Date: 19 July 1965
• Docket Number: No. BK-63-15-ND.,BK-63-15-ND.
• Citation: 244 F. Supp. 751
• Parties: In the Matter of the DOLE COMPANY, Debtor.
• Court: U.S. District Court — District of Maine

244 F. Supp. 751

In the Matter of the DOLE COMPANY, Debtor.

No. BK-63-15-ND.

United States District Court D. Maine, N. D.

July 19, 1965.

Gerald E. Rudman, Bangor, Me., Joseph Kruger, Boston, Mass., petitioners.

GIGNOUX, District Judge.

This matter is before the Court on the petition of Joseph Kruger and Gerald E. Rudman, attorneys for The Dole Company, the debtor in possession in this proceeding for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C. §§ 701-799, for review of an order of the referee in bankruptcy awarding them $30,000 as counsel fees.

The necessary background facts can be briefly stated. The Dole Company has been in business for many years as an electrical contractor, with its principal office at Bangor, Maine. On January 17, 1963, it filed with the referee at Bangor a petition stating its intention to propose a Chapter XI arrangement with its unsecured creditors. At the time of the filing of the petition the debtor was working on substantial construction projects, either as prime contractor or as subcontractor, in Maine, New Hampshire, Vermont and Massachusetts. Its assets, as set forth in the balance sheet prepared by the court-appointed auditors (as at February 28, 1963), amounted to $522,029.83, and its liabilities to $628,008.16. Upon the filing of the petition the referee authorized the debtor to operate its business as debtor in possession, and no receiver or creditors committee was appointed. On February 19, 1964, a plan of arrangement was confirmed providing for a 20% cash dividend to unsecured creditors. All such dividends have either been paid or funds are now on deposit with which to pay them, and the debtor is continuing in business. The total amount which has been thus allocated for the payment of the 20% dividend to general creditors is $76,132.87.

The petitioners have acted throughout these proceedings as counsel for the debtor and for the debtor in possession. Their principal services were rendered during a period which extended from December 21, 1962, through March 24, 1964, although there are additional services which have been required of them since in resolving disputed claims and in closing the case. Their services, as the referee found, have justifiably required a total time expenditure of 1411 hours. The referee further found that a substantial number of these hours was devoted to routine telephone calls, correspondence and office work, but that a considerable portion of petitioners' time was spent in attendance at various court proceedings, in researching legal problems, in preparing numerous applications and proposed orders, and in extensive negotiations with creditors, opposing counsel, lenders, bonding companies, suppliers, contractors, owners and the referee. There is no question, as the referee found, that the caliber of the professional services rendered by the petitioners was the primary factor leading to the success of the Chapter XI proceeding and that the professional standing and abilities of both counsel are of the highest order.

The petitioners' original request was for an allowance of counsel fees in the amount of $50,000, which would reflect an hourly rate of $35.44. In his original opinion the referee reviewed the various factors to be weighed by the court in determining a fair and reasonable allowance for attorneys' fees, including the complexity of the problems involved, the opposition encountered, the results achieved, the time consumed, the experience and standing of counsel, and the size and ability of the estate to pay. See Texas Bank & Trust Co. v. Crippen, 235 F.2d 472, 476 (5th Cir. 1956); In re Owl Drug Co., 16 F.Supp. 139, 142-145 (D.Nev.1936), aff'd sub nom. Cohn v. Edler, 90 F.2d 823 (9th Cir. 1937); In re Osofsky, 50 F.2d 925, 927 (S.D.N.Y. 1931); 3 Collier, Bankruptcy, para. 62.12(5) (14th ed. 1964). In a thoughtful analysis, he pointed out that the allowance must represent a fair return to the attorneys involved and that it must be sufficient to encourage the future participation of experienced and reputable attorneys in bankruptcy proceedings; but that at the same time the principle of economy in the administration of bankruptcy estates must be considered and attorneys cannot expect to be compensated in bankruptcy at the rate which they might reasonably charge a private client. See Texas Bank & Trust Co. v. Crippen, supra; In re Seed Marketing Ass'n, 228 F.Supp. 812, 813 (D.Neb. 1964); In re Owl Drug Co., supra; 3 Collier, op. cit. supra, para. 62.12(5). Cf. In re Gilbert, 276 U.S. 294, 296, 48 S.Ct. 309, 72 L.Ed. 580 (1928). The referee concluded, on the basis of the entire record, that a fair and reasonable total allowance for the services rendered by petitioners ought not to exceed $30,000. Following petitioners' request for reconsideration of his original order, he reaffirmed this conclusion in a second opinion, in which he amplified his previously expressed views and dealt specifically with the points which are raised by petitioners on this petition for review.¹

It is the universal rule that the fixing of attorneys' fees in bankruptcy is peculiarly within the discretion of the referee and that the referee's judgment, if sufficiently supported by evidence and free from error of law, ought not to be disturbed unless it is so manifestly inadequate as to constitute an obvious miscarriage of justice. Roth v. Reich, 164 F.2d 305, 309, 311 (2d Cir. 1947); In re Valentine, 139 F.Supp. 576, 577 (D.C.Md. 1956); In re Higgin Mfg. Co., 19 F.Supp. 120, 123 (E.D.Ky.1937); In the Matter of E. S. Brown Co., 9 Am.Bankr.R.,N.S., 439 (D.Mass.1927); In re Am. Range & Foundry Co., 41 F.2d 845, 847-848 (D.Minn.1926); 3 Collier, op.cit. supra, para. 62.12(4); cf. Klein v. Rancho Montana DeOro, Inc., 263 F.2d 764, 770 (9th Cir. 1959). The Court has no hesitation in holding that the referee's award is amply supported by the evidence.² Petitioners contend, however, that it suffers from three errors of law.

The first error alleged is that in determining the compensation to be awarded petitioners the referee improperly used as a guide the minimum hourly charge of $15 recommended by the local county bar association for attorneys practicing in the Bangor area. As the referee noted in his opinion on reconsideration, petitioners' argument on this point results from a misconception of the nature of the referee's reliance on this factor in determining a reasonable allowance for their services. A careful reading of the referee's opinions makes it clear that he utilized the local minimum fee schedule as no more than a starting point providing a helpful reference and that he weighed it cumulatively with numerous other factors in reaching a composite evaluation. Cf. In re 2747 Milwaukee Ave. Bldg. Corp., 12 F.Supp. 557, 567 (N.D.Ill.1935). Thus, the referee specifically noted that the recommended local minimum hourly rate "must be appropriately adjusted in response to the skill and diligence demonstrated, the complexity of the problems confronted, the opposition encountered, the results achieved, the experience and standing of counsel and the size of the estate." He pointed out that in accordance with Canon 12 of the Canons of Professional Ethics of the American Bar Association (1957), upon which petitioners rely, "the customary charges of the Bar for similar services" may be considered in fixing fees, and in determining the customary charges of the bar for similar services it is proper to consider "a schedule of minimum fees adopted by a Bar Association." In fact, the referee allowed a fee which represents an hourly rate of $21.26, which, as he pointed out, is substantially higher than the recommended bar association minimum of $15. The referee's opinion and his allowance thus belie petitioners' contention that the referee's reference to this factor was inappropriate, or that he placed undue reliance upon it.

The second error alleged by petitioners is the referee's consideration, as one of the factors derogating against the requested allowance, of the fact that it was large in proportion to the total payments to general creditors ($50,000 as compared with $76,132.87, approximately 66%). In this connection, petitioners contend that the referee ignored a more apposite yardstick for measuring compensation in a corporate reorganization proceeding (whether under Chapter X or XI), which they suggest would be the ratio between the allowance and the size of the estate ($50,000 as compared with $522,029.83, approximately 10%). See Finn v. Childs Co., 181 F.2d 431, 435-437 (2d Cir. 1950).

The Court cannot agree with petitioners that it was improper for the referee to consider the relationship between the requested allowance and the total distribution to general creditors. This factor has been considered in other Chapter XI cases, Application of Pine Tree Associates, 77 F.Supp. 270, 271 (E.D.N.Y.1948), in the unreported Chapter XII case on which petitioners rely, In re Rayfield, In Bankruptcy No. 1080-62, D.Mass., July 19, 1963, and in Chapter X proceedings, In re Lennox Metal Mfg. Co., 263 F.2d 891 (2d Cir. 1959), as well as in straight bankruptcy cases, In re Paramount Merrick, Inc., 252 F.2d 482, 485-486 (2d Cir. 1958); In re Osofsky, supra; see 3 Collier, op. cit. supra, para. 62.12(5), p. 1493, n. 81. It is true, as petitioners point out, that in a Chapter XI proceeding the amount awarded as counsel fees does not pro tanto diminish the dividends to be received by general creditors, as is true in a straight bankruptcy case, because in a Chapter XI proceeding the amount of dividend to creditors is fixed before attorneys' fees are awarded and any reduction in the allowance requested merely reverts to the debtor and does not directly benefit the creditors. See 8 Collier, op. cit. supra, para. 5.34(6). Still, the amount of the agreed payments to general creditors reflects their assessment of the financial strength of the debtor; and the financial...