In re Malden Mills, Inc.
| Decision Date | 22 August 1984 |
| Docket Number | Bankruptcy No. 81-1640-L to 81-1642-L. |
| Citation | 42 BR 476 |
| Parties | In re MALDEN MILLS, INC., Weavers-Morgan Corp., Malden Mills Industries, Inc., Debtors. |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
This matter is before the Court on the final fee applications of the various professionals who have rendered services in these cases. After appropriate notice and hearing, I find as follows:
BACKGROUND
These proceedings commenced on September 11, 1981, by the filing of voluntary petitions under Chapter 11 by three separate but related corporations. Malden Mills, Inc. and Weavers-Morgan Corp. were wholly owned subsidiaries of Malden Mills Industries, Inc. Doing business in several states, the Debtors were engaged in the manufacture and sale of apparel and upholstery textile products. The Schedules and Statement of Affairs filed by the Debtors indicated that the combined value of the Debtors' assets exceeded fifty million dollars and that there were several thousand creditors with total claims in excess of sixty million dollars.
While these Debtors were relatively free of secured debt, the initial problem in these cases was the Debtors' extremely poor cash position. Unable to obtain credit by any other means, the Debtors had to negotiate and enter into factoring arrangements with several lenders whereby the lenders were granted priorities under 11 U.S.C. § 364(c)(2), (3). These negotiations and agreements, as well as all subsequent work in these intertwined proceedings, were made more difficult by the need to reconcile the often adverse positions of the respective creditor bodies of each of these Debtors. The speed and efficiency in which these arrangements were consummated and approved by the Court enhanced the Debtors' ability to withstand the shock waves which emanate from the filing of any major reorganization proceeding.
However, with the winter months historically being the Debtors' least profitable period, it was essential that operating expenses be trimmed to the maximum in order to minimize the early losses in the Chapter 11. In cooperation with the other professionals in the proceedings, particularly the Examiner, David Ferrari, whose incisive reports pinpointed troublesome and unprofitable sectors of the Debtors' operations, Debtors' counsel utilized to the full extent the range of powers given to a Chapter 11 debtor to streamline the companies' operations. These trimmings were done swiftly and surely with little wasted effort and quickened the Debtors' recovery from the early losses.
Further, complex litigation involving the Debtors' pre-filing activities, which could have ground to a halt any reorganization efforts, proceeded apace without that effect on the proceedings. In a large part due to the above-mentioned efforts, the Debtors' financial situation greatly improved and a successful reorganization became possible. Debtors' counsel, principally Richard L. Levine and the firm of Hill & Barlow, analyzed and determined the precise amount of each preference payment and instituted appropriate proceedings for their recovery. By means of settlement negotiations, the Debtors were able to collect (or were excused from dividend payments of) approximately three and a half million dollars, thus enabling the Debtors to fund their plans of reorganization.
The result obtained from the efforts of these professionals has been an unqualified success. The Debtors' plans of reorganization confirmed by this Court on April 7, 1983, provided, inter alia, a dividend to unsecured creditors that could be as much as one hundred percent (100%) of the allowed claim, depending on the particular Debtor and option selected by the creditor. Under the plans, the Debtors were merged into one entity, which has operated very successfully since confirmation. Nearly all proceedings and claims have been resolved and the consideration of final allowances is now appropriate.
The factors which this Court must consider in establishing final allowances are well-established in this Circuit and are set forth in the case of Furtado v. Bishop, 635 F.2d 915 (1st Cir.1980). Although these standards evolved in the context of awards of attorneys' fees in civil rights litigation, they have been regularly applied in this Circuit in bankruptcy proceedings. See, e.g., In re Continental Investment Corporation, 28 B.R. 972 (D.Mass.1982); In re Casco Bay Lines, Inc., 25 B.R. 747 (Bankr. 1st Cir.1982); In re Bolton Hall Nursing Home, et al., 40 B.R. 657 (Bankr.D.Mass. 1984). Additionally, one fee applicant has requested a premium for the work performed in these cases. As to that request, the Court will apply the standard that is set forth in Blum v. Stenson, ___ U.S. ___, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984) and applied in Bolton Hall Nursing Home, et al., supra.
I have considered the standards set forth in Furtado with regard to each applicant. I have reviewed the services performed by the Debtors' co-counsel in light of the United States Trustee's objection that there was a certain amount of duplication of effort between co-counsel. I am aware that although no objections to the remainder of the fee applications were filed, the Court has an independent duty to examine the reasonableness of all fee requests. Because of the large number of applications to be considered, no useful purpose will be served by articulating in this memorandum a repetitive detailed analysis of the Furtado criteria with respect to each application. Instead, the Court will focus upon the major players in these cases and deal with applications for lesser amounts in less detailed fashion.
Richard L. Levine and the law firm of Hill & Barlow have served as co-counsel to the Debtors during these proceedings providing services in the fields of bankruptcy law and litigation. Mr. Levine was previously the Director and Counsel, Executive Office for United States Trustees, United States Department of Justice and he is currently a member of the Advisory Committee on Bankruptcy Rules of the Judicial Conference of the United States. His expertise in bankruptcy law was a major factor in achieving the successful results in these cases.
Hill & Barlow was retained by the Debtors subsequent to the Debtors' Chapter 11 filings replacing counsel who had represented the Debtors pre-petition and during the early days of the Chapter 11 proceedings. Because counsel came into the case after the proceedings had begun, counsel had to work intensively to learn the operations of the Debtors. The Debtors' liabilities, assets, business operations, and facts relevant to litigation, threatened or actual, all had to be assimilated quickly for counsel to perform meaningfully. These tasks were done quickly and surely and served to stabilize the Debtors' Chapter 11 operations.
The tasks performed by Hill & Barlow during these proceedings were typical of those performed by bankruptcy counsel in major reorganization cases. A brief and partial listing of the matters successfully handled by Mr. Levine and Hill & Barlow includes negotiations and litigation with the creditors' committees and parties-in-interest concerning (a) extensions of the Debtors' exclusivity periods for filing plans of reorganization; (b) resistance to threatened appointments of Chapter 11 trustees; (c) negotiations and drafting of feasible, acceptable plans of reorganization; (d) resistance to attempted termination of the Debtors' worker compensation self-insurance status; (e) defense of litigation that sought to impose a constructive trust on a substantial portion of the Debtors' assets; and (f) recovery of preferential payments. The expeditious and successful results achieved from counsel's efforts in these matters assured the success of the Debtors' reorganization proceedings.
A review of time records submitted by Hill & Barlow indicates that attorneys and paralegal assistants at this firm devoted a total of 4,731.6 hours to these cases. The weighted average hourly rate charged by these personnel during the course of these proceedings is approximately $103.60, for a total requested base fee of $490,169.50. Based upon my observation of work performed and my review of the detailed time sheets submitted by this applicant, I find the time expended and the lodestar rate charged by the applicant appropriate.
In their sworn application for final allowances and reimbursement of expenses Hill & Barlow requests (1) a twenty percent premium for the time expended on general administrative and legal services in these cases, a premium of $72,212 ($361,059 × 20%), and (2) a ten percent premium on the approximately $3,500,000 of preference recoveries generated by counsel, a requested increase in Hill & Barlow's straight-time charges for this task of $129,110 to approximately $170,000.
Based upon my analysis of the services performed, I do not find that the quality of services rendered by Hill & Barlow on administrative and general legal matters in these cases was superior to that one reasonably should expect in light of the hourly rates charged. The work was typical of that done in a reorganization proceeding, it was done efficiently and billed at rates that are fully compensatory to the applicant.
Accordingly, Hill & Barlow's request for an upward adjustment of the fees charged on these tasks is denied. See Blum v. Stenson, ___ U.S. ___, ___-___, 104 S.Ct. 1541, 1548-1549, 79 L.Ed.2d 891, 901-902 (1984).
With respect to the services performed in recovering preferences, however, I find that the quality of legal services rendered by Hill & Barlow was superior to what one should expect in light of the charged hourly rates and that applicant's services accomplished a result that can be considered "exceptional". See Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1...
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