In re Public Service Co. of New Hampshire
| Decision Date | 30 August 1993 |
| Docket Number | Bankruptcy No. 88-0043. |
| Citation | 160 BR 404 |
| Parties | In re PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, Debtor. |
| Court | U.S. Bankruptcy Court — District of New Hampshire |
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Richard Levin, Thomas E. Garcin, Stutman, Treister & Glatt, Los Angeles, CA, Thomas R. Jones, Kevin J. Burke, Cahill, Gordon & Reindel, New York City, Charles P. Normandin, Harold J. Marcus, Ropes & Gray, Boston, MA, Catherine E. Shively, PSNH, Manchester, NH, for debtor.
R. Carl Anderson, Sulloway Hollis & Soden, Concord, NH, local counsel to debtor.
Michael J. Farrell, Richard H. Klapper, Marilyn Fisch, First Boston Corp., New York City, Financial Advisor to debtor.
Gerri Karonis, Manchester, NH, for U.S. Trustee.
E. Franklin Childress, Boston, MA, U.S. Trustee.
Mark Vaughn, Devine, Millimet & Branch, Manchester, NH, Harold T. Judd, Asst. Atty. Gen., Office of Atty. Gen., Concord, NH, for State of NH.
George A. Hahn, Hahn & Hessen, New York City, for examiner.
Geoffrey B. Kalmus, Kramer, Levin, Nessen, Kamin & Frankel, New York City, for Creditors' Committee.
J. Michael Deasy, Deasy & Dwyer, Nashua, NH, local counsel for Creditors' Committee.
Howard J. Berman, Greenberg & Taurig, New York City, for Equity Committee.
Lee E. Buchwald, Rothschild, Inc., New York City, Financial Advisor to Equity Committee.
John B. Nolan, Day, Berry & Howard, Hartford, CT, for Northeast Utilities.
Noel E. Hanf, Stephen Karotkin, Wiggin and Dana, New Haven, CT, for United Illuminating.
Barbara J. Gould, George Wade, Shearman & Sterling, New York City, for Citicorp. & CUC.
TABLE OF CONTENTS
PAGE(S)
I. Introduction .................................................406-07
II. Fee Awards To Date ..............................................407
III. The "Enhancement" Requests ...................................407-09
IV. Factual Context: 1988-1990 ...................................409-11
V. Legal Standards: The Logical Problem .........................411-19
VI. Synthesis Of The Standards ...................................419-21
VII. Who Brought The Value? .......................................421-24
VIII. Stutman, Treister & Glatt ....................................424-28
IX. First Boston Corporation .....................................428-37
X. Rothschild, Inc. .............................................437-45
XI. Paul L. Gioia, Examiner ......................................445-51
XII. United Illuminating Company ..................................451-56
XIII. Conclusion ...................................................456-61
This opinion deals with the remaining final fee awards in what is hopefully the last chapter in this unprecedented reorganization in the bankruptcy courts of an operating and regulated monopoly public utility company.1 The present case was the first reorganization to squarely present the problems of an operating utility burdened by an excess cost nuclear power plant in which the filing was necessitated by the manifold questions of allocation of that investment, and the absorption of non-recoverable costs, between creditors, stockholders, and ratepayers. These questions ultimately had to be resolved in a forum in which the regulatory agencies involved were only parties-in-interest among many others to the ultimate determination of those conflicting demands necessary to implement the Federal Bankruptcy Code as well as other federal and state regulatory laws.
As such, this case at the time of its filing was indeed unique and unprecedented. All of the professionals involved in this reorganization effort were congratulated by the Court at confirmation in handling a unique and complex case with relative expedition culminating in a successfully confirmed reorganization plan. Unfortunately for the Court certain of the professionals were not completely happy receiving only congratulations, and their various fee awards, and have sought upward adjustments (variously referred to as "enhancements", "bonuses", or "premiums")2 to the lodestar base level reasonable fee calculated by multiplying reasonable hourly rates by the number of hours reasonably expended in performing the professional's services in the case. One applicant, United Illuminating, seeks a special "substantial contribution" award under a separate statutory provision.
These requests for upward adjustments of the "lodestar level" fee (hereinafter referred for brevity as "enhancement" requests) are recognized in the applicable case law in this Circuit but require a specific showing of the justification therefor by the applicant and a careful evaluation of that showing and of the record of the case by the Court in that regard. This case by its nature has meant that that review by the Court has been quite time-consuming and often interrupted by other pressing Court business which tends to destroy the continuity of that review. At long last, however, the Court has completed its necessary review and this Opinion deals with all remaining pending final fee award requests.
The professional fees and expenses paid to date in this case total $50,306,448.17. A breakdown of this amount is included as Annex "A" to this opinion listing all such prior fee awards.3 If the requested enhancements are included in the final fee awards of the parties so requesting, then the total final fee awards in this case would be $59,161,741.17. To that amount would be added an additional $2,980,000.00 if a pending request for a § 503(b) "benefit to the estate" administrative claim allowance is granted to United Illuminating Company. United Illuminating Company was one of the competing bidders for the acquisition of the debtor during the reorganization proceedings. Northeast Utilities ultimately was the successful "high bidder" and acquired the company under the confirmed reorganization plan.
The following are the specific enhancement and contribution requests remaining for decision for the Court:
Stutman, Treister & Glatt, as general counsel to the debtor-in-possession, requests a final fee award of $7,500,000. This would be an enhancement of $3,155,293 over the $4,344,707 which they billed to the debtor under their "guideline hourly rates" for interim allowances during the case. (More about that missed "guideline" signpost later.) A total of 15,808 hours was expended by Stutman, Treister & Glatt in performing the services involved.
First Boston Corporation, for merger and acquisition ("M & A") services rendered under an engagement letter dated March 28, 1989, requests allowance of a transaction fee of $4,500,000 for such services. While technically not an "enhancement" but a separate application, this request is in effect an additional request over the $3,570,297.00 paid to First Boston Corporation for its services as financial advisor to the debtor under Court orders authorizing payment of flat monthly fixed fees for their retention.4
Rothschild, Inc., as financial advisor to the Official Committee of Equity Security Holders, requests an enhancement of $1,000,000 over and above the $2,090,000 paid to them in fees under the orders authorizing their retention under fixed monthly fee payments. Those orders recognized that they reserved the right to claim an enhancement fee at the conclusion of the case.
Paul L. Gioia, as the Court-appointed examiner, requests an enhancement of $200,000 over and above the $268,875 previously allowed to him based on his hourly rates under the order authorizing his appointment.
United Illuminating Company, a regional utility company that was one of four outside utility companies that competed during the plan process for acquisition of the debtor, requests not an "enhancement" but a "benefit to the estate" allowance under § 503(b) of the Bankruptcy Code for its participation in that process to cover its costs and expenses in making its competing bid. While the rubric is different, some of the same "enhancement" principles governing final fee awards in the bankruptcy courts apply and accordingly this request is also addressed in this Opinion.
Hearings on the foregoing applications were held on a number of dates: Gioia, September 27, 1991 (Transcript, Court Doc. 5795); Rothschild, Inc., January 13, 1992 (Transcript, Court Doc. 5863); United Illuminating, January 27, 1992 (Transcript, Court Doc. 5886); Stutman, Treister & Glatt, February 10 and 11, 1992 (Transcripts, Court Docs. 5907 and 5908); and First Boston, March 10 and 11, 1992 (Transcripts, Court Docs. 5911, 5912 and 5914). The Court deferred action on any enhancement requests, pending the completion of the hearings on all such requests, and directed further briefing by certain parties. All enhancement requests were considered ready for decision at the completion of briefing on May 12, 1992. The Court allowed an updating of case citations on July 15, 1993 and received a number of supplementary lists of case decisions by July 30, 1993.
As indicated above, the Court has had some difficulty in reviewing the record with any degree of continuity. Moreover, as noted at the outset of the case, see In re PSNH, 86 B.R. 7, at 11-12 (1988), it is very important that the bankruptcy court to make every effort to eliminate the "hindsight" factor when dealing with final fee awards in a reorganization case. As I noted there:
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