In re Stoecker, Bankruptcy No. 89 B 02873.
| Decision Date | 24 May 1990 |
| Docket Number | Bankruptcy No. 89 B 02873. |
| Citation | 114 BR 965 |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
| Parties | In re William J. STOECKER, Debtor. |
COPYRIGHT MATERIAL OMITTED
Thomas Raleigh, Raleigh & Helms, Chicago, Ill., Trustee.
David Missner, Leroy Inskeep, Rudnick & Wolfe, Chicago, Ill., Representative of Rudnick & Wolfe.
Gerald F. Munitz, Jim Blanco, Winston & Strawn, Chicago, Ill., Amy R. Wolf, Wachtell, Lipton, Rosen & Katz, New York City, for Connecticut Bank and Trust Co.
Ronald W. Hanson, James A. Cherney, Latham & Watkins, Chicago, Ill., Jonathan L. Greenblatt, Kenneth A. Freeling, Shearman & Sterling, New York City, for Citibank, N.A.
M. Scott Michel, Chicago, Ill., U.S. Trustee, Richard C. Friedman, Chicago, Ill., for trustee.
This matter comes before the Court on the application of Rudnick & Wolfe (the "Applicant") pursuant to 11 U.S.C. § 330 and Federal Rule of Bankruptcy Procedure 2016 for allowance of final compensation in the amount of $102,283.651 and reimbursement of expenses in the amount of $7,485.05 from the period March 9, 1989 through October 31, 1989. Proper notice was given to all creditors and parties in interest pursuant to Federal Rule of Bankruptcy Procedure 2002. For the reasons set forth herein, the Court hereby allows the Applicant compensation in the amount of $130,000.00 and reimbursement of expenses in the amount of $6,597.33.
A hearing was held on the fee application on January 18, 1990. Objections were filed by Citibank, N.A. ("Citibank"), Thomas Raleigh, ("Raleigh") the trustee of the estate of William J. Stoecker (the "Debtor"), the United States Trustee, and The Connecticut Bank and Trust Company ("Connecticut Bank"). The Court allowed the parties to amend or supplement the application and the objections. Subsequently, on March 13, 1990 a second hearing was conducted. At that time, the Court heard testimony from representatives of the Applicant. The Court gave the Applicant leave to submit closing arguments by or before March 23, 1990. Responses thereto were due April 6, 1990 and any reply was due April 13, 1990. Thereafter, the matter was taken under advisement.
The Court has jurisdiction to entertain this fee application pursuant to 28 U.S.C. § 1334 and General Rule 2.33(a) of the United States District Court for the Northern District of Illinois. This matter constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), and (O).
Many of the facts, background and some of the history of this case is contained in an earlier Opinion of the Court. See In re Stoecker, 103 B.R. 182, 184-185 (Bankr.N. D.Ill.1989). On February 21, 1989, an involuntary Chapter 11 petition was filed against the Debtor. Prior thereto, involuntary petitions were filed against five corporate holding companies; Grabill Corporation, Camdon Companies, Inc., Foxxford Group, Ltd., The Techna Group, Ltd. and Windsor-Hamilton, Ltd. Stoecker is the sole equity holder in those related corporate debtors. The background information concerning those cases is contained in earlier Opinions of the Court. See In re Grabill Corp., 110 B.R. 356, 358 (Bankr.N.D. Ill.1990); In re Grabill Corp., 103 B.R. 996, 997-998 (Bankr.N.D.Ill.1989).
On March 8, 1989, after a full evidentiary hearing, the Court ordered the appointment of a Chapter 11 trustee. Shortly thereafter, on March 14, 1989, the Court entered an order for relief under Chapter 11. Raleigh was thereafter appointed by the U.S. Trustee on March 20, 1989, to serve as trustee of the Chapter 11 estate. The case was subsequently converted to Chapter 7 on February 26, 1990. Raleigh was thereafter appointed by the U.S. Trustee to serve as interim trustee of the Chapter 7 estate pursuant to 11 U.S.C. § 701(a). Raleigh continues to serve as the trustee under 11 U.S.C. § 702(d).
The Applicant was originally retained pre-petition by the Debtor on or about January 17, 1989. On April 11, 1989, the Applicant filed the requisite statement pursuant to 11 U.S.C. § 329 and Bankruptcy Rule 2016(b), disclosing that it had received a $150,000.00 retainer from the Debtor. On April 13, 1989, the Court entered an Order authorizing the employment of the Applicant nunc pro tunc to February 21, 1989. Thereafter, on August 11, 1989, the Applicant filed a supplemental statement disclosing that it received an additional retainer in the amount of $10,000.00 from Thomas A. Durkin, criminal counsel for the Debtor, in connection with "matters stated in the April 11, 1989 Affidavit." On September 18, 1989, pursuant to leave of Court, the Applicant withdrew as counsel for the Debtor upon the Debtor's discharge of the Applicant in open Court. Although the Applicant withdrew on said date, it seeks fees through October 31, 1989.
Several parties have filed objections to the fee application based upon various grounds. Raleigh objects to payment of any fees or expense reimbursement subsequent to the Applicant's withdrawal on September 18, 1989. Moreover, Raleigh questions the benefit to the estate of many of the services performed in light of the fact that such services were rendered in connection with the Debtor's criminal defense of various bankruptcy fraud charges. Furthermore, Raleigh suggests that some of the services performed by the Applicant related to his duties as trustee pursuant to 11 U.S.C. §§ 704 and 1106, and the Applicant was not authorized pursuant to 11 U.S.C. § 327(e) to be employed as special counsel to represent the estate on such matters. Raleigh concludes that an allowance of $49,391.64 is appropriate compensation and $6,294.20 in expenses should be reimbursed for the post-petition period. Raleigh makes no objection to the fees charged by the Applicant for the pre-petition services.
Connecticut Bank objects to any fee allowance whatsoever based on a lack of benefit to the estate. Furthermore, Connecticut Bank alleges that the services were for the benefit of the Debtor alone and not the estate. Additionally, Connecticut Bank argues that some of the work was duplicative of work performed by Raleigh.
Citibank objects to many of the services on the basis that the Debtor's estate was not benefitted. In fact, Citibank suggests that many of the services were for the benefit of the five corporate estates. Moreover, Citibank objects to some of the post-petition services as they are allegedly duplicative of the work performed by Raleigh and his counsel. Citibank concludes that $43,441.70 would be an appropriate allowance for compensation, and concurs with Raleigh's recommended expense reimbursement of $6,294.20. Citibank does not object to the fees charged by the Applicant for pre-petition services, although it suggests that only $80,859.89 should be allowed for that period.
The U.S. Trustee objects to the fee application as a whole based upon a lack of benefit to the estate, with the exception of categories nine and thirteen. The U.S. Trustee suggests that the Applicant's services have hindered the administration of the case and have been superfluous. Moreover, the U.S. Trustee suggests that any compensation allowed be reduced five percent. This reduction is recommended due to the Applicant's billing practice of minimum .25 hour increments, rather than in tenth of an hour increments, contrary to the local custom and practice followed by the Court. Furthermore, the U.S. Trustee recommends an additional ten percent reduction of fees because the Applicant failed to properly advise the Debtor of his duties under 11 U.S.C. § 521(4) and Bankruptcy Rule 4002(3). The U.S. Trustee objects to the application of the $10,000.00 additional retainer to any criminal work rendered by the Applicant because the statement disclosing the compensation paid referred only to civil bankruptcy work. The U.S. Trustee objects to the reimbursement of expenses in toto. The U.S. Trustee recommends an allowance of $33,019.75 for post-petition compensation and does not object to the fees charged for the pre-petition work.
The several objectors, especially Raleigh and Citibank, provided very detailed and specific objections. Rarely does the Court receive from the professionals who are intimately involved and familiar with a case, such particular and defined recommendations with actual dollar amounts specified. Under the Bankruptcy Code, the Court is removed from the case with regard to most administrative matters, but ironically, is required to evaluate fee applications. The assistance furnished by the objectors as well as the professionals representing the Applicant has made the Court's review of the fee application less difficult and time consuming.
Generally, professional persons seeking compensation from the estate must first be authorized to be employed under section 327 and Bankruptcy Rule 2014. Pursuant to section 330, authorized and employed professionals applying for fees must then demonstrate that their services were actual, necessary and reasonable. The legislative history of section 330 expressly notes the Court's correlative duty to closely examine the reasonableness and necessity of the fees incurred. S.Rep. No. 989, 95th Cong., 2d Sess. 40-41 (1978), U.S.Code Cong. & Admin.News 1978, 5787, 5825-5827. Bankruptcy Rule 2016(a), in turn, requires that "an entity seeking interim or final compensation for services, or reimbursement of necessary expenses, from the estate shall file with the court an application setting forth a detailed statement of (1) the services rendered, time expended and expenses incurred, and (2) the amounts requested." Fed.R.Bankr.P. 2016(a).
In addition, section 329 permits the bankruptcy court to review the fees of a debtor's attorney, paid during the year prior to the filing of the petition, for services rendered in contemplation of or in connection with the...
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