In re Intern. Horizons, Inc., Bankruptcy No. 81-01231A

• Decision Date: 21 March 1981
• Docket Number: and 81-01234A.,Bankruptcy No. 81-01231A,81-01233A,81-01232A
• Citation: 10 BR 895
• Parties: In re INTERNATIONAL HORIZONS, INC., Debtor. In re INTERNATIONAL HORIZONS (CURACAO), N.V., Debtor. In re NORTH AMERICAN EXPORTS, INC., Debtor. In re INTERNATIONAL HORIZONS, N.V., Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

10 B.R. 895 (1981)

In re INTERNATIONAL HORIZONS, INC., Debtor In re INTERNATIONAL HORIZONS (CURACAO), N.V., Debtor In re NORTH AMERICAN EXPORTS, INC., Debtor In re INTERNATIONAL HORIZONS, N.V., Debtor.

Bankruptcy Nos. 81-01231A, 81-01232A, 81-01233A, and 81-01234A.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

March 21, 1981.

David G. Bisbee, Bisbee & Parker, Robert A. Parker, Jr., Dale M. Schwartz, Troutman, Sanders, Lockerman & Ashmore, Atlanta, Ga., for debtors.

Jeffrey M. Smith, Trotter, Bondurant, Miller & Hishon, Atlanta, Ga., for Touche Ross & Co.

Jeffrey L. Raney, Robert W. Patrick, Jr., Jesse H. Austin, Karen Wildau, Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., for Bank of America.

Dennis S. Meir, Kilpatrick & Cody, Atlanta, Ga., for Creditors' Committee.

George Anthony Smith, Smith, Currie & Hancock, Atlanta, Ga., for C & S Builders.

ORDER

W. HOMER DRAKE, Jr., Bankruptcy Judge.

On March 31, 1981, the Court entered an Order authorizing the debtors to employ Troutman, Sanders, Lockerman & Ashmore (hereinafter "TSL&A") and Bisbee & Parker (hereinafter "B&P") to act under a general retainer as attorneys for the debtors in possession. On April 2, 1981, the Court entered an Order authorizing the debtors to retain Touche Ross & Co. (hereinafter "TR&Co.") under a general retainer to act as accountants for the debtors in possession.

On April 9, 1981, the debtors filed an application for authority to pay a retainer to the debtors' accountants and filed an amendment to the debtors' previously filed application for authority to pay a retainer to attorneys for the debtors. On April 13, 1981, the debtors filed a memorandum in support of the application for interim compensation and certain professional fees by attorneys and accountants of the debtors with affidavits attached. On April 13, 1981, the Bank of America, N.T. & S.A. (hereinafter "BOA") filed a brief in opposition to the debtors' application to pay retainer to either the debtors' attorneys or the debtors' accountants.

On April 14, 1981, the debtors' attorneys filed a supplemental brief in support of the application to pay retainers with an affidavit attached. On April 20, 1981, B&P filed an application for award of interim compensation. On April 21, 1981, a notice of hearing on application for interim compensation and retainers for B&P, TSL&A, and TR&Co. was mailed to creditors by the Clerk of the Court. That notice stated that any request for a hearing on these applications must be filed with the Court not later than April 29, 1981. Also filed on April 21, 1981 was an application for award of interim compensation and retainer by TSL&A.

On April 24, 1981, BOA requested a hearing on the applications for interim compensation and retainers. On April 27, 1981, the committee of unsecured creditors requested a hearing on the applications for interim compensation filed by the attorneys for the debtors. On April 29, 1981, an objection to the applications for interim compensation and retainers and a request for a hearing was filed in the Court by the law firm of Smith, Currie & Hancock as attorneys for a creditor. On May 11, 1981, a hearing on these applications was held before the Court and the matter taken under advisement.

At that hearing TSL&A and B&P filed and submitted a second memorandum in support of application for award of interim compensation. Since that hearing, TSL&A and B&P have filed an application to use certain cash collateral to pay administrative expenses including any award of interim compensation. That application, inter alia, was heard on May 18, 1981 and a ruling on that application will be forthcoming.

B&P has asked for $21,264.00 in attorneys' fees and $1,873.13 pre-petition expenses advanced and has requested allowance of $30,986.50 for post-petition attorneys' fees and $1,748.55 for post-petition costs for the period prior to April 14, 1981. B&P also filed an amendment showing costs and fees accrued between April 14 and April 30, 1981. The application shows 277.6 hours of attorneys' work for a resulting fee of $17,964.00 and actual expenses of $2,836.77. B&P has received a post-petition payment of $11,589.00 for fees and $195.50 for costs. The resulting net fees which B&P claims that are due are in the amount of $58,625.50 with resulting net costs in the amount of $6,262.95.

TSL&A has applied for $42,726.50 pre-petition fees and $44.51 pre-petition costs as well as $33,159.00 post-petition fees and $3,299.35 post-petition costs.

TR&Co. has requested that a monthly retainer in the amount of $17,500.00 be paid to it against costs and fees incurred.

The applications of the attorneys, TSL&A and B&P, are for specific amounts of attorneys' fees incurred at specific hourly rates by the attorneys who performed the services in question.

The Creditors' Committee has objected to the payment of any retainers on the grounds that both attorneys and accountants should be paid only for services actually rendered. The Creditors' Committee has also objected to payment for pre-petition services and to the reasonableness of the hourly rates charged by certain of the attorneys.

The Court finds that the retainer arrangement is inappropriate because it would require the debtors to pay for services which had not yet been rendered. The Court also notes that under a retainer arrangement there may be a tendency for the amount of services required to grow in order to consume the amount of funds available. Therefore, the Court denies the applications of TSL&A, B&P, and TR&Co. for retainers.

The Court declines at this point to rule on the issue of whether or not some or all of the pre-petition services in question are compensable as an administrative expense. Nor is the Court inclined, at this time, to determine or approve hourly rates of compensation for the attorneys involved in the pre-petition services.

However, the Court does not wish to require that the attorneys for the debtors in possession fund this reorganization proceeding. In order to avoid this result, the Court finds that it should award the attorneys for the debtors in possession reasonable interim compensation for their services. Therefore, the Court makes an interim allowance of fees to TSL&A, subject to subsequent revisions, either increases or decreases in the amount awarded as the Court may deem appropriate, in the amount of $30,000.00 and costs in the amount of $3,343.86. The Court further makes an interim allowance of compensation to B&P, subject to subsequent revisions as the Court may deem appropriate, in the amount of $34,000.00 and costs in the amount of $6,262.95.

In overruling, in part, the objections filed by the various parties in interest, the Court has reviewed the law applicable to the allowance of interim compensation as an administrative expense. As one commentator has stated:

"Complaints about unnecessarily high expenditures attendant upon liquidation and reorganization proceedings are common in the history of American bankruptcy law. There is practically no period in the development of the institution at which such complaints were not expressed, resulting often in the enactment of provisions intended to increase and strengthen judicial control over expenses of administration." 3A Collier on Bankruptcy ¶ 62.021, p. 1390-91 (14th ed. 1975).

Under the Bankruptcy Reform Act of 1978, limitations on expenses of administration, at least as these expenses pertain to the compensation of professional persons, are set forth in §§ 328, 329, 330, and 331. 11 U.S.C. §§ 328, 329, 330, and 331. Section 330(a) provides:

"After notice to any parties in interest . . . and a hearing, . . . the court may award to . . . the debtor\'s attorney —

(1) reasonable compensation for actual, necessary services rendered by such trustee, examiner, professional person, or attorney, as the case may be, and by any paraprofessional persons employed by such trustee, professional person, or attorney, as the case may be, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title; and

(2) reimbursement for actual, necessary expenses." 11 U.S.C. § 330(a).

Section 331 provides:

"A trustee, an examiner, a debtor\'s attorney, or any professional person employed under section 327 or 1103 of this title may apply to the court not more than 120 days after an order for relief in a case under this title, or more often if the court permits, for such compensation for services rendered before the date of such an application for reimbursement for expenses incurred before such date as is provided under section 330 of this title. After notice and a hearing, the court may allow and disburse to such applicant such compensation or reimbursement." 11 U.S.C. § 331.

The Court finds that because of the size of these reorganization cases, the complexity of the issues involved, and the time required on the part of the attorneys for the debtors in providing services necessary to achieve a successful reorganization of the debtors, it is appropriate to allow the attorneys for the debtors to apply more frequently than every 120 days for interim compensation.

The Court finds that it would be useful to establish a procedure by which the professionals employed by the debtors in possession and by the Creditors' Committee may seek interim compensation on a monthly basis. Each professional employed by the debtors or the Creditors' Committee may submit, during the first five days of each month, applications for compensation for services rendered in the preceding month. A hearing on these applications shall be scheduled for a convenient date toward the end of the month and notices of that hearing sent to all interested parties. After hearing on notice to interested parties, the Court shall allow further compensation as it deems appropriate.

The question remains concerning the amount of "reasonable...