In re Temple Retirement Community, Inc.

• Decision Date: 05 February 1989
• Docket Number: Bankruptcy No. 87-60663-C.
• Citation: 97 BR 333
• Parties: In re TEMPLE RETIREMENT COMMUNITY, INC., Debtor.
• Court: U.S. Bankruptcy Court — Western District of Texas

97 B.R. 333 (1989)

In re TEMPLE RETIREMENT COMMUNITY, INC., Debtor.

Bankruptcy No. 87-60663-C.

United States Bankruptcy Court, W.D. Texas, Waco Division.

February 5, 1989.

Michael R. Rochelle, Rochelle & Balzersen, Dallas, Tex., for debtor.

George E. Henderson, Fulbright & Jaworski, Austin, Tex., for indenture trustee First RepublicBank Temple, N.A.

ORDER AWARDING ATTORNEY'S FEES

LEIF M. CLARK, Bankruptcy Judge.

This Order addresses the application of the law firm of Rochelle & Balzerson, counsel for the debtors, for compensation. After a hearing, the court took the application under advisement to further review the application in detail and to consider the propriety of the hourly rates requested. Upon consideration thereof, the court finds and concludes, for the reasons set out in this Order, that the fees should be awarded in the amount requested, without reduction or diminution.

BACKGROUND FACTS

The debtor, doing business as a retirement community known as the Village on Canyon Creek, had fallen on difficult times due in large part to the misfeasance (or malfeasance) of its original developer and management entity. AmeriCare developed the Village with money raised from a bond issue. Most of the bondholders were individuals, many of whom had invested their life savings in these bonds. The bond indenture trustee held a first mortgage on the development. The Village's residents were solicited with a guarantee of life care in exchange for a rather substantial frontend deposit, which the Village promised to refund should a resident choose to leave. AmeriCare failed to honor this obligation, however, and further was unable to maintain an occupancy sufficiently high to service the bond debt, which fell into default. The retirement community's board of directors fired AmeriCare, and cast about for a buyer who would put enough capital into the community to prevent catastrophe for bondholders and residents alike. In late 1985, the board of directors engaged Rochelle & Balzerson, a Dallas firm which has for many years specialized in bankruptcy, to assist in the reorganization effort. The firm put together a process for soliciting and evaluating potential buyers, working with the residents' council, the indenture trustee, and an ad hoc bondholders' committee. Eventually, the firm negotiated an agreement with LeGan, Inc., an entity out of Denver, Colorado, to manage and eventually acquire the facility via a carefully timed bankruptcy filing. The process required careful coordination with nervous residents, jittery and fractious bondholders, an equally jittery bank serving as indenture trustee, querulous trade creditors, and an often difficult and occasionally overbearing purchaser. The firm successfully orchestrated a bankruptcy which, in just four months, resulted in a confirmed plan. Post-confirmation, it successfully resolved a dispute with the State Board of Insurance that threatened to undo the reorganization before it even closed.

The application accurately and best summarizes the accomplishments of the firm:

. . . The Debtor\'s facility could continue to function only so long as the residents were confident that progress was being made on solving the Village\'s problems. Had the residents lost that confidence, they would have quickly voted with their feet; a significant drop in occupancy might have rendered the Village unreorganizable, given that its most precious asset is its residents. . . .

The plan was confirmed 117 days after the filing of the case, 63 days before the end of the exclusivity period.

This would be a sizable case in any court, with more than $20 million in total claims against the estate. . . . pre-petition planning succeeded in assuring that no trade or utility creditors existed at filing, thereby simplifying the plan and keeping the Debtor\'s trade credit unimpaired. Applicant Firm also succeeded in creating an environment hostile enough to the Debtor\'s original promoter, Americare, Inc., to convince it not to seek any share of the assets coming from the sale of the facility, even though it asserted a $1.9 million claim. . . .

The two major creditor groups in this case were the bondholders and the current and former residents. It appears that the bondholders will receive more than the 60% dividend estimated in the disclosure statement.

Current and former residents, being unsecured creditors, will receive considerably more under the plan than they would have in a liquidation. . . . the residents have . . . improved their position by now having a claim against LeGan, which is a solvent, experienced, and capable operating entity.¹

With reference to both bondholders and residents, it must be said that the results which they enjoy under the plan are considerably better than were foreseen eighteen months ago.

The firm, in its application, seeks compensation of $74,472 and reimbursement for expenses totalling $12,417.88 covering a period of just over six months. A total of 517.90 hours were expended, at an overall average blended rate of $143.80 per hour.

The following billing rates are requested in the application:

                Michael R. Rochelle       $195.00/hr
                Stephen T. Hutcheson      $125.00/hr. 1987
                                          $145.00/hr. 1988
                Patrick J. Neligan        $110.00/hr
                Pedro V. Hernandez, Jr.   $85.00/hr
                

All travel was billed at one-half the hourly rate of the attorney doing the traveling. Routine services such as reviewing claims, drafting and presenting administrative motions, and maintaining routine communications with the client were handled mostly by Messrs. Hernandez and Hutcheson. Mr. Rochelle was the principal architect of the plan and disclosure statement and conducted the critical negotiations with LeGan, the indenture trustee, and the residents' council.

ANALYSIS

In this decision, this court addresses a number of issues common to all fee applications as well as one issue endemic to this fee application. We turn first to the general issues.

A. The necessity for independent review by the court

At the outset, this court holds with numerous other courts that it "has the independent authority and responsibility to determine the reasonableness of all fee requests, regardless of whether objections are filed." Matter of Pothoven, 84 B.R. 579, 583 (Bankr.S.D.Ia.1988); In re Pettibone Corp., 74 B.R. 293, 299 (Bankr.N.D. Ill.1987); In re NRG Resources, Inc., 64 B.R. 643, 650 (W.D.La.1986); In re JensenFarley Pictures, Inc., 47 B.R. 557, 585 (Bankr.D.Utah 1985); In re Wilson Foods Corp., 36 B.R. 317, 320 (Bankr.W.D.Okla. 1984); see also 2 Collier on Bankruptcy, para. 328.02 at 328-8 (15th ed.1987); Lavien, Fees as Seen from the Bankruptcy Bench, 89 Com.L.J. 136-138 (March 1984). This duty arises in part from the very wording of the statute, which specifies that, after notice and a hearing,

the court may award . . . (1) reasonable compensation for actual, necessary services rendered by the professional . . . based on the nature, the extent, and the value of such services, the 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)(1). The award of fees is discretionary, bounded by (1) whether the compensation is reasonable and (2) whether the services were actually rendered and were necessary. In re Nucorp Energy, Inc., 764 F.2d 655, 658 (9th Cir.1985). Compensation of professionals employed by the debtor is always an appropriate province for judicial scrutiny "to protect the creditors of the estate and the debtor against overreaching by an officer of the court who is in a peculiarly advantageous position to impose on both the creditors and his client." Bankr.R. 2017, Advisory Comm. Note (1987); 2 Collier on Bankruptcy, para. 329.02 (15th ed.1987). "The numerous limitations imposed by the Bankruptcy Code upon compensation of court-appointed counsel . . . are designed to insure the highest standards of ethical conduct and minimize the overhead expenses which can easily deplete a debtor's estate." Matter of Consolidated Bancshares, Inc., 785 F.2d 1249, 1255 (5th Cir.1986).

A bankruptcy court is also charged with evincing an "over-arching policy of avoiding the waste of the debtor's estate." In re Wonder Corp. of America, 82 B.R. 186, 191 (D.Conn.1988), citing Continental Vending Machine Corp, 543 F.2d 986, 994 (2d Cir.1976) and In re United Merchants and Manufacturers, Inc., 674 F.2d 134, 140 (2d Cir.1982).

The bankruptcy judge can and must apply his own expertise sua sponte, if necessary, in order to be fair to both counsel and creditors because, in the final analysis, either excess generosity or extreme miserliness in allowing fees will reflect in the public perception of the system.

Lavien, Fees as Seen from the Bankruptcy Bench, 89 Com.L.J. at 138. A recent decision out of the Southern District of Texas adds that

Congress has in effect required bankruptcy judges to weigh the "public interest" in the calculation of fees by compensating counsel only for "actual, necessary services." 11 U.S.C. § 330(a)(1). . . . Public interest still plays a part in a determination of fee awards in bankruptcy cases . . . at least inherently from the standpoint of the Code\'s requirements for court supervision of fees, and the public\'s perception of the integrity and fairness of our bankruptcy system and courts.

In re Gulf Consolidated Services, Inc., 91 B.R. 414, 419-20 (Bankr.S.D.Tex.1988).²

The duty to serve this "public interest" is imposed in this Circuit upon all court-appointed counsel. See Matter of Consolidated Bancshares, Inc., 785 F.2d at 1255.³ The reality, however, is that many cases have only one court-appointed counsel, the debtor's attorney. Even in cases served by committees, however, the court-appointed lawyers, "sharing the mutual goal of securing approval for their fees, enter into a conspiracy of silence . . . best characterized . . . as a ...