In re Robertson Companies, Inc.

• Decision Date: 14 December 1990
• Docket Number: Bankruptcy No. 90-05568.
• Parties: In re ROBERTSON COMPANIES, INC., d/b/a Robertson Lumber Company, Noeske Lumber Company, Highland Manufacturing, and Lumber Dealers Supply, Debtor.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of North Dakota

123 B.R. 616 (1990)

In re ROBERTSON COMPANIES, INC., d/b/a Robertson Lumber Company, Noeske Lumber Company, Highland Manufacturing, and Lumber Dealers Supply, Debtor.

Bankruptcy No. 90-05568.

United States Bankruptcy Court, D. North Dakota.

December 14, 1990.

Michael Fadlovich, Minneapolis, Minn., for U.S. Trustee.

Barbara Stuart, Minneapolis, Minn., for debtor.

Edward Klinger, Moorhead, Minn., for Creditors Committee.

Kim Anderson, Minneapolis, Minn., for First Bank.

Vik Welk, Fargo, N.D., Creditors' Committee member.

MEMORANDUM AND ORDER

WILLIAM A. HILL, Bankruptcy Judge.

Before the court is an Application For Interim Fees And Expenses filed by the Debtor's counsel, Moss & Barnett, brought pursuant to sections 330 and 331 of the Bankruptcy Code.

The Application, filed November 9, 1990, requests interim fees of $122,382.85 for 925.15 hours of legal services provided the Debtor for the period July 17, 1990 through October 31, 1990 inclusive, and for expenses incurred for the same period of $9,938.71. Attached to the application are some 121 pages of itemized billing statements detailing the work performed, the hours spent and the attorneys involved. Objections were interposed by the United States Trustee, the unsecured creditors committee, and individual unsecured creditors, all of whom amplified their objections by detailed briefs. The application came on for hearing on November 29, 1990.

1.

The Debtor, Robertson Companies, Inc., is a publicly held corporation with in excess of 790,000 shares outstanding. It has been involved in the wholesale and retail lumber and building material trade since 1881 and, operating through three divisions, owned and operated twenty lumber yards in North Dakota and Minnesota. It also manufactures various building components such as roof trusses and doors. It maintains an inventory of residential lots as a service to contractors and from time-to-time constructs spec houses and garages. It filed for relief under Chapter 11 on July 17, 1990, and in its schedules listed debts of $7,046,000.00 inclusive of $3,486,000.00 secured and $3,477,000.00 unsecured. It listed assets of $14,000,000.00 inclusive of $6,000,000.00 real property and $8,000,000.00 in personal property.

The filing was precipitated by severe competition, the inability to meet secured loan agreements and difficulties with trade creditors, one of whom had sought summary judgment in excess of $730,000.00 and who had scheduled a hearing on the same for the day following the petition filing. The company lost money in the two years preceding its filing and is projected to continue suffering losses at least through 1991.

By Order of July 23, 1990, the firm of Moss & Barnett was authorized to appear on behalf of the Debtor with specific permission being granted to four members of the firm: James E. O'Brien, Barbara G. Stewart, Mary E. Langan and David M. Henry. Previous to undertaking the Chapter 11 representation, Moss & Barnett had provided the Debtor with general legal services in connection with its ongoing corporate and financial problems and received $135,789.00 in fees and $8,215.00 in costs for the period between January 1, 1990 and July 17, 1990.

Since July 17, 1990, a variety of services have been provided the Debtor by fifteen different Moss & Barnett attorneys and four paralegals at hourly rates ranging from a high of $195.00 per hour to a minimum of $55.00 per hour.

Citing the Debtor's continuing financial problems and apparent lack of any reasonable reorganization prospects, the objecting parties first assert that the fees are excessive in view of the results thus far obtained, particularly since the firm already received $135,000.00 for pre-petition services ostensibly rendered in connection with the very financial conditions still plaguing the company. They also believe that there has been serious over billing by the various firm attorneys who, they charge, have engaged in unnecessary duplication of services. As an example of this, the United States Trustee points to a billing dated July 19, 1990, where five firm attorneys working on matters relating to cash collateral needs and agreements, billed out 24.6 hours earning $3,280.00 in one day on cash collateral matters alone. The objecting parties also feel that the hourly rates charged by the Moss & Barnett attorneys are far in excess of what is typical for North Dakota and further that the expense charges are improper.

2.

Section 330 of the Bankruptcy Code provides that the court may award:

(1) reasonable compensation for actual, necessary services rendered by . . . an attorney . . . and by any paraprofessional persons employed by such . . . attorney . . . based on the nature, the extent, and the value of such services, time spent on 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).

This court has in past cases analyzed attorney fee applications by reference to the twelve point criteria set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974). See e.g., In re Trout, 108 B.R. 235, 236 (Bankr.D.N.D.1989) and In re Garnas, 40 B.R. 140, 141 (Bankr.D.N. D.1984). These twelve factors are:

(1) the time and labor required;

(2) novelty and difficulty of the issues;

(3) skill required;

(4) preclusion of other employment;

(5) customary fee;

(6) whether the fee is fixed or contingent;

(7) time pressures;

(8) amount involved and results obtained;

(9) the experience, reputation and ability of the attorney;

(10) the undesirability of the case;

(11) the nature and length of the professional relationship with the client;

(12) awards in similar cases.

In a series of five cases the United States Supreme Court announced a departure from the Johnson criteria and said that the "lodestar" method constituted a balanced approach to the fee analysis problem.¹

In Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), the court believed a more equitable starting point for determination of a reasonable fee is the number of hours reasonably expended multiplied by a reasonable hourly rate. Although the court in fashioning the lodestar method said that many of the Johnson criteria were subsumed within the original calculation, those factors still exist whether separately articulated or not since the notion of what constitutes a reasonable expenditure and what constitutes a reasonable hourly rate depends in many respects on the very same inputs. Hensley created a hybrid approach that shares elements of both Johnson and the lodestar method of fee analysis. Pennsylvania v. Delaware Valley Citizens Council, 478 U.S. at 564, 106 S.Ct. at 3097.

A reasonable hourly rate is the prevailing market rate in the community for similar services by lawyers of reasonably comparable skills, expertise and reputation. Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 1547, 79 L.Ed.2d 891 (1984). The argument that Moss & Barnett attorneys should be restricted to an hourly rate typical for North Dakota attorneys is unduly parochial particularly in this age of national and regional law firms working on larger more complex bankruptcy cases of more than local import. Moss & Barnett argues that the hourly rates charged in this case are their regular hourly rates and as such conform to the usual rates for attorneys of similar ability in the metropolitan Minneapolis area. The court accepts this as a fair statement and believes that the hourly rates charged are reasonable given the fact that the Debtor is a fairly large company with business interests spanning several states.

Whether the hours billed were "reasonably expended" is a far more difficult analysis and recalls many of the Johnson criteria. In Hensley the Supreme Court itself said that good faith billing judgment is important and attorneys are ethically obligated to exclude from fee requests hours that are excessive, redundant and unnecessary. 103 S.Ct. at 1939-40.

The notion of reasonableness means that all time actually expended may not necessarily be billed. Here we get into the objections of unnecessary, excessive time and duplication of services. This case has been pending since July 17, 1990, with the goal presumably being to save the company through a confirmed Chapter 11 plan. Utilizing the expertise of numerous lawyers, the firm consumed 173.2 hours and charged $18,372.00 in fees for services relating to the preparation of the Chapter 11 petition and schedules. Related issues dealing with creditors' claims consumed 137.85 hours and generated $16,285.75 in fees. 225.9 hours have been expended on a plan and disclosure statement and billed at $37,589.39. Cash collateral matters consumed 215.4 hours and generated $31,408.75 in billings.

Duplication of effort is very difficult to discern from a mere review of the statements themselves and reaching a general conclusion that duplication has in fact occurred would be very subjective. Indeed, the Supreme Court in putting its imprimatur on the lodestar method noted in the later case of Pennsylvania v. Delaware Citizens Council that the Johnson criteria were too subjective and gave judges unlimited discretion. 478 U.S. at 563, 106 S.Ct. at 3097. At first blush, a charge of $18,372.00 for petition and schedule preparation does seem excessive but the billing statements do provide in fairly definite detail what activities were performed and by who. Except for certain specific items, the court could not detect any overt duplication. While it is correct to say that where more than one attorney is involved in a project there exists a greater propensity to duplicate efforts, it also is correct that the mere employment of two or more professionals on the same project does not in and of itself necessarily make it duplicative. What may appear routine is not always so in the context and complexities of a particular case. In re Washington...