In re Wire Cloth Products, Inc.
| Decision Date | 06 August 1991 |
| Docket Number | Bankruptcy No. 90 B 4251. |
| Citation | 130 BR 798 |
| Parties | In re WIRE CLOTH PRODUCTS, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
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Thomas W. Drexler, Chicago, Ill., for debtor.
William A. Brandt, Jr., Chicago, Ill., Trustee.
Brenda J. Gilmer, Chicago, Ill., for Arline Spampinato.
Kenneth A. Skolnick, Rudnick & Wolfe, Chicago, Ill., for Marine Midland Business Loans, Inc.
Ronald Peterson, Jenner & Block, Chicago, Ill., for Trustee.
Thomas E. Raleigh, Raleigh and Helms, Chicago, Ill., for the Unsecured Creditors Committee.
This is a proceeding under Chapter 11 of the Bankruptcy Code. The following parties have applied to the Court for an interim allowance of fees and expenses incurred in this bankruptcy proceeding from March, 1990 through April, 1991: Thomas Drexler ("Mr. Drexler"), counsel for debtor Wire Cloth Products, Inc. ("Debtor"); Jenner & Block ("J & B"), counsel for the Chapter 11 Trustee; William Brandt, Jr. ("Mr. Brandt"), the Chapter 11 Trustee, and his consulting firm, Development Specialists, Inc. ("DSI") (collectively, the "Trustee"); Marine Midland Business Loans, Inc. ("Marine"), a secured creditor, by its counsel, Rudnick & Wolf ("R & W"); and, Raleigh & Helms ("R & H"), counsel for the Committee of Unsecured Creditors ("Creditors Committee"). Several parties have raised objections to fees requested by other parties. In addition, Mrs. Arline Spampinato, ("Mrs. Spampinato") president and sole stockholder of Debtor, has raised further objections to the fee petitions.
Following hearing held May 1, 1991, orders were entered allowing the above requested compensation in part (the "Interim Orders"). For reasons stated below, the Court allows the fees and expenses set forth below. Amounts paid pursuant to the Interim Orders will be credited against the allowances provided here, as will all retainers previously received.
On March 7, 1990, Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Following an evidentiary hearing Debtor obtained an order for use of cash collateral over objection of Marine, but the Court ordered appointment of a Chapter 11 Trustee. The appointment of Mr. Brandt as Chapter 11 Trustee was approved. On April 11, 1990, the Court approved appointment of J & B and its attorneys as counsel for the Trustee, effective as of April 6, 1990, the date such approval was applied for.
Soon after his appointment, the Trustee resumed Debtor's operations and rehired its employees. During the following months, Trustee monitored Debtor's daily operations. Debtor has since enjoyed an adequate cash flow.
Prior to Trustee's appointment, Marine Midland and Alco Industries ("Alco"), another of Debtor's secured creditors, each moved for relief from the automatic stay. The Court denied both motions. In an Order entered March 29, 1990, the Court found that Marine maintained an equity cushion of approximately $500,000.
Throughout this proceeding cash collateral orders have been negotiated and entered into by Debtor with both Marine and Alco. In consideration for its use of their cash collateral, Debtor has agreed to pay monthly adequate protection payments to Marine and Alco.
Despite the Court's finding in its March 29, 1990 Order, on October 22, 1990, Marine filed a motion to receive an adequate protection payment in the amount of $262,000. The Court denied the motion after finding from evidence that Marine remained comfortably oversecured.
Although Debtor's cash flow enabled it to operate under protection of the bankruptcy court, the Trustee has expressed doubts that Debtor will be unable to reorganize successfully because it is unable to obtain alternative financing. He therefore embarked upon an effort to sell Debtor's business as a going concern. The Trustee eventually received two offers to purchase Debtor's assets, and obtained a written agreement with one of the bidders, Standard Gasket Mfg. Co., Inc. ("Standard Gasket"). The agreement (subject to court approval) provided that Standard Gasket would purchase most of Debtor's assets and its real estate for the sum of $2,305,000. Trustee filed a Chapter 11 Plan that incorporates the proposed sale to Standard Gasket. However, Trustee's Plan and that agreement have since been put on hold indefinitely due to a pending investigation into the extent of environmental problems on Debtor's business premises.
Prior to filing of Trustee's Plan, Debtor filed its own Plan of reorganization and Disclosure Statement which contained certain financial information and cash flow analyses ("Debtor's Plan"). Debtor's Plan proposed the internal reorganization of Debtor. Trustee supported the distribution of competing plans to creditors, but objected to Debtor's Plan as being defective as a matter of law.
From December 5, 1990 through December 17, 1990, a preliminary evidentiary hearing was held on the feasibility of Debtor's Plan. At the conclusion of that hearing, the Court found that Debtor's Plan was defective as a matter of law and ordered that it be stricken. Debtor was granted leave to amend its Plan in order to conform with findings of the Court and the requirements of the Bankruptcy Code. As of this date, Debtor has not filed an amended plan, in part because all parties are awaiting final results of the pending environmental investigation.
An environmental investigation of Debtor's property has been conducted by an approved professional. The extent of remediation costs are now being explored.
Trustee, Marine, and counsel for the various parties here seek interim compensation for fees and expenses incurred from the petition date through April of 1991. The Court takes note of all objections raised by the parties, including those asserted by Mrs. Spampinato, the president and sole stockholder of Debtor. The proceedings throughout have been protracted at times due to hostility and distrust on the part of Mrs. Spampinato and some of her employees1 toward the rest of the parties, in particular the Trustee and his counsel, and Marine and Alco and their counsel. The secured creditors are hostile to her. The Trustee has come to view Mrs. Spampinato as an impediment to proper operations, and after the fee hearing filed a recent motion to allow her discharge as chief operating officer. She and some employees filed motions to discharge the Trustee and restore Debtor in possession to full authority. The Trustee's motion was allowed and she is no longer employed in any operational capacity. The motions to discharge Trustee were denied. Those matters and their outcome are not part of the instant fee proceeding but are mentioned to underline the fact that strong personal views on all sides have made for extended and sometimes acrimonious proceedings throughout.
Section 330 of the Bankruptcy Code governs compensation of professionals. It provides in relevant part that the court may award to professionals "reasonable compensation for actual, necessary services" rendered by such professionals. 11 U.S.C. § 330. Once services have been performed, Bankruptcy Rule 2016 requires that:
A person 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. (emphasis added). Bankr. Rule 2016.
The primary objective of any fee petition is to provide sufficient data to enable the court to determine whether the services rendered were reasonable, actual, and necessary. In re Jensen-Farley Picture, Inc., 47 B.R. 557, 582 (Bankr.D.Utah 1985). The record-keeping requirement will generally be satisfied if the court can from the application and accompanying narrative pass on all aspects of services performed. The burden is on the applicant to demonstrate entitlement to fees. In re Wildman, 72 B.R. 700, 708 (Bankr.N.D.Ill. 1987).
All fee applications are reviewed by a bankruptcy judge in accordance with authorities requiring applicants to supply adequate information to the Court. See In re Pettibone Corp., 74 B.R. 293, 301-03 (Bankr.N.D.Ill.1987) and In re Wildman, 72 B.R. 700, 708-09 (Bankr.N.D.Ill.1987), and cases cited.
Hensley, 461 U.S. at 434, 103 S.Ct. at 1939-40; quoting Copeland v. Marshall, 641 F.2d 880, 891 (D.C.Cir.1980) (en banc). The requirement of Section 330 that compensation be for "actual" and "necessary" services makes the exercise of "billing judgment" a mandatory requirement in bankruptcy fee matters. In other words, a debtor's estate should not bear the costs of services which were either excessive or duplicative of the efforts of other professionals. See Pettibone, 74 B.R. at 303-05 and Wildman, 72 B.R. at 709-11 for examples of appropriate exercise of "billing judgment" in bankruptcy cases.
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