In Re ISC Financial Corp.

16 B.R. 7

• Court: United States Bankruptcy Court, W.D. Missouri
• Decided: February 27, 1981
• Docket: 18-61283
• Status: Published

Opinions

ORDER ALLOWING FEES AND EXPENSES TO THE ATTORNEY FOR THE DEBTOR

FRANK P. BARKER, Jr., Bankruptcy Judge.

Gene A. DeLeve, Attorney for the debtor, has requested $625,000 in fees plus reimbursement of expenses in sum of $4,524.12. No attorney fees were paid over the three-year life of this case, (except a $15,000 retainer), until an interim allowance of $300,000 was authorized after notice and hearing on October 30, 1980.

Mr. DeLeve in his application indicates that the normal charges for the services of counsel for the debtor would be approximately $311,041.25 for 3,809 hours or an average hourly rate of $81.83. The requested fee, however, doubles this standard charge. In fact, it is substantially higher than the average fee requested by counsel for the Receiver.

The Court will adopt the factual allegations in Mr. DeLeve’s Application as its findings of fact as it would serve no useful purpose to detail again the complex and myriad problems encountered by the debtor, all successfully resolved.

Counsel for the debtor urges the Court to fix his fee by the use of multipliers as is done in class-action cases. See Lindy Bros. Builders, Inc. of Phila., et al. v. American Radiator & Standard Sanitary Corp., et al., 487 F.2d 161 (3rd Cir. 1973).

I see no compelling reason to do so; in fact, such would appear to be contrary to the Bankruptcy Act. See Rule 219 and Rule 11-31, FRBP, as well as the numerous cases under the Act regarding attorney fees in bankruptcy cases.

In the case at bar I find no reason to conclude that there was any real “contingency” about the payment of costs of administration, or if there was any, it was so slight as to be minimal. It is also noted that a $15,000 retainer fee was paid to Mr. DeLeve prior to filing the case.

Several matters do disturb me: (1) As pointed out by the SEC it appears that 75% of the total time spent on this case by Mr. DeLeve’s firm was attributed to him at a $90 normal hourly rate. Was it really necessary for a senior partner to personally do 75% of the work or could not more of it have been delegated to associates? (2) In addition to the attorney for the debtor, there was a Receiver, his Counsel and an active Creditor’s Committee. On occasions, the principals mentioned above were in an adversary position. If this case had been converted to a Chapter X case doubtless the shareholders of ISC would have been wiped out and a great deal of Mr. DeLeve’s time was spent in successfully litigating this question.

And, as always happens in a complex ease, there being no clear-cut guidelines as to the Receiver’s duties and the debtor’s responsibilities, there is bound to be some duplication of effort.

In a separate order the Court has allowed compensation to the attorneys for the Receiver in sum of $500,000. While the total time was 4,869 hours, which is significant and was given consideration, the Court’s main reason for allowing more than a “usual fee” was that ISC was not an ordinary case. Second, in the Court’s judgment, $500,000 was a reasonable fee for the services rendered.

To be consistent, I must also find in Mr. DeLeve’s case, that ISC was not an ordinary case and that a fee higher than normal should be allowed. What bothers me is that Mr. DeLeve was representing the debtor and its shareholders, not the creditors. In this respect he did an outstanding job and the shareholders should be beholden to him. The point I’m trying to make is that I’m not persuaded that the creditors (whose money it is that is paying his fees) should be charged because he did such fine representation for the company.

My remarks should not be construed to infer that Mr. DeLeve did not have creditors in mind during these proceedings. I know for a fact from my personal contact with him over these three years that such was not the case. On the other hand, he was in an adversary position much of the time with the Creditor’s Committee and devoted many hours to defending the principals of ISC against charges made by the SEC for violations of the Securities & Exchange Act. I have serious reservations that this time should even be compensated for at the expense of the creditors.

On the other hand, no fees were allowed Mr. DeLeve over the three-year period. During this time inflation set in and the Consumer Price Index rose substantially. While it may appear that the Court is taking away compensation on the one hand and giving it back on the other, such is not the fact. I am only trying to set down my thoughts and processes in arriving at a reasonable fee for counsel for the debtor under all the facts and circumstances of this case. This task is not only difficult but distasteful. Mr. DeLeve and his law firm are experts in the field of bankruptcy reorganization cases and the creditors and stockholders were fortunate to have lawyers of Mr. DeLeve’s and Mr. Margolin’s caliber to represent them.

Based upon all of the foregoing, and taking into consideration the unusual amount of senior partner’s time, the sometimes adversary position between counsel for the debtor versus the creditors and Creditor’s Committee, the total number of hours of all partners, associates, law clerks, para-legals, etc., and the outstanding results accomplished, I conclude that a reasonable fee is $400,000. It is

ORDERED, that Gene A. DeLeve is allowed total attorney fees of $400,000 for all services rendered up to and including November 1, 1980 of which $315,000 has been paid. It is

FURTHER ORDERED, that Gene A. De-Leve be reimbursed for expenses actually incurred in sum of $4,524.12.