In re Wonder Corp. of America

• Decision Date: 28 April 1987
• Docket Number: Bankruptcy No. 5-86-00436.
• Citation: In re Wonder Corp. of America, 72 B.R. 580 (Bankr. Conn. 1987)
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re WONDER CORPORATION OF AMERICA, Debtor.

72 B.R. 580 (1987)

In re WONDER CORPORATION OF AMERICA, Debtor.

Bankruptcy No. 5-86-00436.

United States Bankruptcy Court, D. Connecticut.

April 28, 1987.

COPYRIGHT MATERIAL OMITTED

Douglas A. Strauss, David A. Greenberg, Pullman, Comley, Bradley & Reeves, Bridgeport, Conn., for debtor.

Richard D. Zeisler, Craig I. Lifland, Zeisler & Zeisler, P.C., Bridgeport, Conn., former attorneys for debtor.

Christopher Belmonte, Kevin Preston, Lane & Mittendorf, New York City, for Waldco, Inc.

Richard Belford, New Haven, Conn., Former Chapter 7 Trustee.

Robert S. Evans, Byron P. Yost, Evans & Baldwin, P.C., Bridgeport, Conn., for former Chapter 7 Trustee.

Martin W. Hoffman, Hartford, Conn., for Unsecured Creditors' Committees.

Donald Lee Rome, Stephen E. Goldman, Susan Roman, Caren A. Senter, Robinson & Cole, Hartford, Conn., for Chase Manhattan Bank, N.A.

Thomas A. Gugliotti, Walter E. Paulekas, Schatz & Schatz, Ribicoff & Kotkin, Hartford, Conn., for Old Stone Bank.

Michael A. Zizka, Murtha, Cullina, Richter & Pinney, Hartford, Conn., Ethan D. Fogel, Neal Colton, Dechert, Price & Rhoads, Philadelphia, Pa., for Societe Generale.

MEMORANDUM AND DECISION ON ALLOWANCE OF ADMINISTRATIVE EXPENSES UNDER CODE § 503(b)(1)(A) AND DETERMINATION OF REASONABLE FEES AND EXPENSES UNDER CODE § 506(b)

ALAN H.W. SHIFF, Bankruptcy Judge.

On June 23, 1986, Wonder Corporation of America ("Wonder") filed a petition under Chapter 7 of the Bankruptcy Code. The case was converted to Chapter 11 on September 18, 1986. On March 4, 1987, an ex parte scheduling order entered fixing March 20, 1987 as the last date for filing all applications for administrative expenses under Code § 503 and for professional fees and costs under Code § 506(b).¹ The order further stated that "in the event that the applications are not so filed with this Court by that date, such claimants are forever barred from seeking reimbursement or compensation on account of such claims". April 3, 1987 was set as the date for a hearing to determine all such claims. On April 7, 1987, an order entered confirming an amended plan² filed jointly by Wonder and Waldco, Inc. (the "Proponents"). The plan calls for the payment of administrative expenses and § 506(b) fees and related costs as allowed by the court. This decision provides the amount of certain administrative expenses and all of the § 506(b) fees and costs and the findings upon which those determinations are made.

I

ADMINISTRATIVE EXPENSES

Administrative claims trace their origin under the Code to § 503, which provides in pertinent part:

(b) After notice and a hearing, there shall be allowed administrative expenses, . . . including —

(1)(A) the actual, necessary costs and expenses of preserving the estate . . .

Code § 327(a) authorizes a trustee, with court approval, to employ attorneys, accountants, appraisers, and auctioneers. Similarly, § 1103(a) authorizes a creditors' committee, appointed under § 1102, to employ attorneys and other professionals. On July 11, 1986, Richard Belford, Esq. was appointed Chapter 7 trustee, having served as interim trustee since the commencement of the case. Trustee Belford thereupon applied for and obtained court approval for the employment of, inter alia, Paul Bruggeman, consultant; Phillip Sweedler & Son, auctioneer; Leonard Plotnick, appraiser; Evans & Baldwin, P.C., attorneys; and Laventhol & Horwath, certified public accountants.

On August 26, 1986, Martin W. Hoffman, Esq. was appointed attorney for the Chapter 7 committee of creditors holding unsecured claims,³ and on November 14, 1986 he was appointed attorney for the Chapter 11 creditors' committee.

There has been no objection to the administrative expense classification of the trustee's fees and costs, the fees and costs of those he employed, or the fees and costs claimed by Attorney Hoffman. I agree with those classifications and accordingly turn to a consideration of their allowable amount.

Code § 330(a) provides in pertinent part that after notice and a hearing, the court may award to a trustee and a professional person appointed pursuant to §§ 327(a) and 1103(a),

(1) reasonable compensation for actual, necessary services rendered by such trustee . . . professional person, or attorney . . . 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.

Section 328(a) limits compensation under § 330(a) as follows:

Notwithstanding such terms and conditions of employment, the court may allow compensation different from the compensation provided under such terms and conditions after the conclusion of such employment, if such terms and conditions prove to have been improvident in the light of developments not capable of being anticipated at the time of the fixing of such terms and conditions.

In construing § 330(a), courts generally consider the factors initially articulated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir.1974), which concerned the reasonableness of attorneys' fees awarded in class action employment litigation under title VII of the Civil Rights Act of 1964. Those guidelines were subsequently extended to the determination of attorneys' fees in bankruptcy cases in In re First Colonial Corp. of America, 544 F.2d 1291, 1298-99 (5th Cir.) cert. denied 431 U.S. 904, 97 S.Ct. 1696, 52 L.Ed.2d 388 (1977); see also In re Yermakov, 718 F.2d 1465 (9th Cir.1983), and are also useful in assessing the services of other professionals. The factors identified by the Johnson court are as follows: (1) time and labor required; (2) novelty and difficulty of the questions; (3) skill requisite to perform the legal service properly; (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) experience, reputation and ability of the attorneys; (10) "undesirability" of the case; (11) nature and length of the professional relationship with the client; and (12) awards in similar cases.

With those factors and the purposes and policies of the Bankruptcy Code in mind, and having reviewed the applications, and considered the arguments of the parties in interest as well as the relevant portions of the file in this case, I conclude that administrative expenses should be allowed and paid in the following amounts for the reasons corresponding thereto.

1. CHAPTER 7 TRUSTEE

Richard Belford, Esq.

Attorney Belford, an experienced and highly competent trustee, seeks payment of $13,025.00⁴ for his services as Chapter 7 trustee. He rendered valuable services both in arranging for the protection and preservation of estate property and in negotiating for its sale. His efforts to arrange for a public sale for an amount in excess of the secured debt were vigorously resisted by Chase Manhattan Bank, N.A. ("Chase"), Old Stone Bank ("Old Stone"), and Societe Generale ("Societe") (the "Banks" or "Bank"). That opposition is reflected in the hours claimed by the trustee and all attorneys in this case.

The amount requested by the trustee is fully documented by the time sheets he submitted. His application was not opposed by the debtor, the creditors' committee, or any other party in interest; it was supported by George A. Vannah, Esq., the Estate Administrator; and it is accordingly allowed as follows:

   Allowed fee —                    $13,025.00
                   Allowed costs —                       55.00
                                                     __________
                   Total allowed administrative
                     expense —                      $13,080.00
                

2. ATTORNEYS FOR CHAPTER 7 TRUSTEE

Evans & Baldwin, P.C.

Attorney Byron Paul Yost, on behalf of the Evans & Baldwin firm, filed an application as counsel for the Chapter 7 trustee which itemized 363 hours and requested a fee allowance of $49,002.00. A review of the time sheets discloses that Attorney Yost's employment commenced on August 12, 1986. That employment terminated on September 18, 1986, when the case was converted. During that short period, Attorney Yost's efforts were essentially directed at negotiating a sale of estate assets by public auction with a minimum guaranteed bid in an amount in excess of the secured lenders' claims so that there would be a dividend for unsecured creditors.

Selling estate assets is a Chapter 7 trustee's primary function, and it is difficult for the court to find that so much attorney time was necessary in this case. The trustee, however, supports his attorney's application on the basis that the resistance mounted by the secured creditors necessitated Attorney Yost's assistance.

In addition, it must be observed that the application reveals excessive duplication. While it is clear that Attorney Yost was the principal representative of the firm, all too often and for no justifiable reason, not only Attorney Yost, but his senior partner, Robert S. Evans, Esq. appeared at conferences and hearings. Furthermore, an inappropriate number of hours has been claimed for intra-office conferences and meetings with other parties.

Attorney Yost's application also includes a request for reimbursement of $1,213.00. Although this request was not accompanied by an affidavit, as required by Local Rule 20,⁵ sufficient information was submitted to support a finding that those expenses were actually incurred and are reasonable.

Taking the trustee's argument into account but reducing the fees in recognition of the fact that more attorney time was charged than is reasonably necessary, I conclude that 200 hours at $135.00 per hour is reasonable, and that amount and costs are allowed as an administrative expense as follows:

   Allowed fee —                     $27,000.00
                   Allowed costs —                     1,213.00
                                                     __________
                  Total allowed administrative
                    expense —

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