In re General Oil Distributors, Inc.
| Decision Date | 18 July 1985 |
| Docket Number | Bankruptcy No. 882-80516-20. |
| Citation | 51 BR 794 |
| Parties | In re GENERAL OIL DISTRIBUTORS, INC., et al., Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
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Myron Trepper, Levin, Weintraub & Crames, New York City, for debtors.
Glenn B. Rice, Otterbourg, Steindler, Houston & Rosen, P.C., New York City, for Creditors' Committee.
Steven L. Cohen, Weisman, Celler, Spett, Modlin & Wertheimer, New York City, for Southville and Wechters individually.
Brad Eric Scheler, Fried, Frank, Harris, Shriver & Jacobson, New York City, for Sun Refining & Marketing Co.
Gerard Hanson, Brener, Wallack & Hill, Princeton, N.J., for Kerr McGee Corp.
Craig Olsen, Coffey, McHale, McBride, Olsen & Shooltz, Melville, N.Y., for Crown Central Petroleum Corp.
Samuel D. Rosen, Milgram, Thomajan, Jacobs & Lee, P.C., New York City, for Horizon Products Co.
Stephen R. Kaye, Proskauer, Rose, Goetz & Mendelsohn, P.C., New York City, special counsel for debtors.
George Colin, Baer, Marks & Upham, New York City, for Gulf Oil Corp.
DECISION AND ORDER
The court has before it the applications of various entities seeking compensation and/or reimbursement of expenses from the Chapter 11 estates of General Oil Distributors, Inc. ("General Oil"), Inwood Petroleum Corp., Wechter Petroleum Corp., and Southville Industries, Inc. (collectively referred to herein as "the debtors"). Gulf Oil Corp. ("Gulf") and Crown Petroleum Corp. ("Crown"), as unsecured creditors of General Oil, have filed detailed objections to several of the applications. In addition, the debtors have responded to the fee applications by filing "recommendations" setting forth only the dollar amounts the debtors believe that the applicants should receive.
In considering the fee applications, this court will utilize the "lodestar" approach to fee setting, a mechanism first adopted in this circuit in Furtado v. Bishop, 635 F.2d 915, 919-20 (1st Cir.1980). The "lodestar" is the product of "the number of hours reasonably expended multiplied by a reasonable hourly rate." Id. (quoting Copeland v. Marshall, 641 F.2d 880, 891 (D.C.Cir.1980)). Inherent in the determination of whether the number of hours expended and the hourly rate are reasonable are considerations including:
See 11 U.S.C. § 330; In re Sapolin Paints Inc., 38 B.R. 807, 810, 11 B.C.D. 875, 876 (Bankr.E.D.N.Y.1984); see also Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974). The Supreme Court has recently instructed courts to begin their determination by multiplying the hours reasonably spent by a reasonable hourly rate, and then where appropriate, to increase or decrease the product by considering further the subjective factors outlined above. See Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 1939-40, f.n. 9, 76 L.Ed.2d 40 (1983). The lodestar approach requires that the applicants keep detailed records of both the amount of time spent and the manner in which it was spent. Sapolin Paints, id. Uncertainties arising due to poor record-keeping or vague applications will be resolved against the applicant. See New York State Ass'n for Retarded Children v. Carey, 544 F.Supp. 330, 338 (E.D.N.Y.1982).
The court will first address the applications of the attorneys and the accountants for the creditors' committee and the debtor, which are the usual entities submitting fee applications in a reorganization proceeding.
The law firm of Otterbourg, Steindler, Houston & Rosen ("Otterbourg"), counsel to the section 1102 unsecured creditors' committee of General Oil, seeks compensation pursuant to section 330 of the Bankruptcy Code for professional services rendered and reimbursement for expenses incurred. Specifically, Otterbourg requests $372,509 in compensation, inclusive of a 30% bonus, and $19,789.68 for reimbursement of expenses.
The 30% bonus request, amounting to $85,963.62, is hereby rejected. An application for fees should be closely scrutinized to prevent overcharging, and the burden of proof on all fee matters is on the applicant. In re Liberal Market, Inc., 24 B.R. 653, 657-58 (Bankr.S.D.Ohio 1982). Otterbourg states that its 2½ year and 2,153 hour investment in representing the creditors' committee helped produce excellent results for the unsecured creditors. No such excellence is, however, readily apparent from any of the voluminous documents connected with this proceeding. Neither has such excellence been attested to by other parties involved herein. In any event, Otterbourg would have to demonstrate something beyond excellence in the representation of its clients to warrant a bonus. The court is familiar with these proceedings and counsel's substantial activity therein, and yet, just as counsel has not articulated a concrete basis therefore, the court cannot cite anything extraordinary in connection with Otterbourg's "investment" to justify awarding a bonus.
Other than with regard to the bonus, the only objection to Otterbourg's request was made by Gulf. In addition to asserting that a bonus was completely unwarranted, Gulf contends that the basic fee should be reduced because the results obtained were in many respects "poor". As an example, Gulf cites the fact that the bulk of payments provided for by the plan are contingent payments over an 11 year period. In addition, Gulf points out that Otterbourg had the assistance of the numerous attorneys who devoted much of their time to committee work, many of whom are seeking fees to be paid from the estate. Although the court believes that Otterbourg's work herein was not so extraordinary as to warrant a bonus, Otterbourg's role is nevertheless deserving. Accordingly, in the absence of any particular objections to the basic fee and expenses requested, the court authorizes compensation in the amount of $286,545 (Otterbourg's fee request minus the $85,963 bonus) and $19,789.68 reimbursement for expenses.
The firm of Levin & Weintraub & Crames ("L & W & C"), counsel for the debtors, seeks $480,000 in compensation and $21,279.44 as reimbursement for expenses incurred in connection with the rendering of its legal services. Although the reimbursement request is reasonable, the $480,000 compensation fee, which broken down amounts to a $201 hourly rate, is not. Accordingly, L & W & C agreed at oral argument to accept the debtor's recommendation that the fee be reduced to $360,000.00. Such a reduction satisfied all objections raised with respect to L & W & C, and therefore, compensation will be set at $360,000.00 and expenses at $21,279.44.
By order of this court dated August 12, 1982, the debtors in possession were authorized to retain the firm of Stryker, Tams & Dill ("Stryker") as special tax counsel. Pursuant to section 330, Stryker now seeks $5,756 in compensation for services rendered and $254.37 for expenses incurred in connection with the rendering of such services. The work performed by Stryker appears to have been most successful. The request is without opposition, appears reasonable, and is therefore granted in all respects.
On May 17, 1982, this court authorized Proskauer Rose Goetz & Mendelson ("Proskauer") to act as special corporate and litigation counsel for the debtors. Pursuant to section 330, Proskauer now seeks $758,477 in compensation plus $37,607.53 for reimbursement of expenses.
The Proskauer firm having requested by far the largest amount of compensation, has consequently drawn the most objections. Gulf filed objections to Proskauer's request based primarily on a comparison of the $758,477 fee requested to the results achieved by Proskauer's services. Gulf points to Proskauer's recovery of approximately $690,000 in its collection efforts of the debtor on various receivables, a sum less than that requested in fees. As to the portion of the fee requested in connection with General Oil's action against Horizon Products Co. ("Horizon"), Gulf asserts that the fee request of $535,458.75 in connection with the Horizon action should be reduced dramatically in light of its outcome. In the Horizon action General Oil sued Horizon for goods sold and delivered in the amount of approximately $1 million. Horizon claimed as defense an offset of the $1 million against a $2 million indebtedness owing from General Oil and Refining, a company formed by one of General Oil's principals. Horizon took the position that General Oil was responsible for the debt owed from General Oil and Refining and interposed a counterclaim for $2 million. The final outcome of the litigation was that General Oil succeeded in its $1 million goods sold and delivered cause of action but Horizon obtained judgment for $2 million on its counterclaim.
With respect to the litigation other than in the Horizon action, Gulf asserts that most of the matters were routine collection cases, requiring the work of only junior personnel. As an example, Gulf cites Proskauer's request of about $39,000 for work on the Kings County Transportation Corporation matter. Gulf contends that General Oil could have as easily obtained a default judgment and collected thereon by employing counsel junior to Lester Kirshenbaum, a then senior associate whose time constituted half of the attorneys' time spent on the matter.
In addition to Gulf's objection, Crown filed an affidavit objecting to Proskauer's application. In its affidavit, Crown indicated it had no opposition to the fee...
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