DEBTOR CASE NO. 99-50867





DEBTOR CASE NO. 99-50868





DEBTOR CASE NO. 99-50869






This matter is before the Court on the Application by Michael H. Reed for Final Allowance and Payment of Compensation and Reimbursement of Accrued Expenses (“the Application”).  Objections to the Application have been filed by the United States Trustee, creditor Bank One, Kentucky, N.A., the Unsecured Creditors Committee and creditor Commonwealth Technology, Inc.  Mr. Reed and his firm, Pepper Hamilton LLP (“Reed” or “Pepper”) of Philadelphia, Pennsylvania, are attorneys for the debtors, Reed being chief counsel.  This Court has already ruled on the Application for Final Allowance and Payment of Compensation and Reimbursement of Accrued Expenses as it relates to W. Thomas Bunch and his firm, Bunch & Brock of Lexington, Kentucky, local counsel for the debtors.      

Reed requests fees in the amount of $274,573.00 and reimbursement of expenses in the amount of $47,083.97, for a total of $321,656.97, as well as allowance of a premium of 6% of the total fees allowed to him in these cases on an hourly basis.  Reed sets out in his Application that if he is granted the fees he requests, the total hourly compensation allowed to him thus far would be $486,824.50 which includes the interim allowance of compensation and reimbursement of expenses in the total amount of $242,537.48 (compensation of $216,251.50 and expenses of $26,285.98), less voluntary reductions of $4,000.00, for the period February 26, 1999 through June 30, 1999.  The premium requested would be $29,209.47, calculated on the entire amount of compensation ($486,824.50 x .06 = $29,209.47).  If the premium is granted, Reed’s total compensation in these cases would be $516,033.97. 

Reed states that this amount is $75,562.53 less than the total compensation Reed would have received if the total number of hours allowed by the Court had been compensated at the normal hourly rates Pepper charges, including Reed’s normal hourly rate of $365.00.  Reed and Pepper had previously agreed to accept a maximum hourly rate of $250.00, under the “Professionals’ Budget” established pursuant to the Agreed Orders of Adequate Protection entered in these cases.  Reed contends that the $250.00 per hour cap does not apply to the fees requested here, but states that he will continue to abide by it.  The introduction of the question of Reed’s normal hourly fee makes the question before the Court a hybrid of sorts.  Reed requests an enhancement of the fees requested, but it appears that the purpose of the enhancement is to bring the total closer to what it would have been if the hourly rate applied had been $365.00 in his case, and other amounts in excess of $250.00 per hour in the case of other Pepper attorneys.

The compensation of professionals is governed by 11 U.S.C. 330, which provides for "reasonable compensation for actual, necessary services."  The burden is on the fee applicant to prove entitlement to fees.  In re Wildman, 72 B.R. 700, 708 (Bkrtcy.N.D.Ill. 1987).  The starting point for determining an award of attorney fees is the application of the "Lodestar" method, whereby "the attorney's reasonable hourly rate [is multiplied] by the number of hours reasonably expended."  In re Boddy, 950 F.2d 334, at 337 (6th Cir. 1991).  It is the Court's task to determine what is "reasonable". 

While conceding that “the ‘lodestar’ analysis articulated in Boddy represents the law of the Sixth Circuit on professional compensation in bankruptcy cases,” Reed argues that enhanced compensation (by way of the requested 6% premium) is both authorized and justified in this case.  He cites several cases in support of his position.  One of these case, In re Apex Oil Co., 960 F.2d 728 (8th Cir. 1992), stated as follows:

Because this lodestar amount presumably reflects (1) the novelty and complexity of the issues, (2) the special skill and experience of counsel, (3) the quality of representation , and (4) the results obtained, these factors normally cannot serve as independent bases for increasing the fee award above the lodestar amount.  See, e.g., Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S.  546, 565, 106 S.Ct. 3088, 3098, 92 L.Ed.2d 439 (1986) (Delaware I); Blum v. Stenson, 465 U.S. 886, 898-900, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984).  The Supreme Court, however, has stated that upward adjustments of the lodestar are permissible “in certain ‘rare’ and ‘exceptional’ cases, supported by both ‘specific evidence’ on the record and detailed findings by the lower courts.”  Delaware I, 478 U.S. at 565, 106 S.Ct. at 3098.

. . . . . .

  We conclude that [quality of representation and results obtained] can justify a fee enhancement.  Because the lodestar amount may already compensate the applicant for exceptionally good service and results, however, the fee applicant must do more than establish outstanding service and results.  The applicant also must establish that the quality of service rendered and the results obtained were superior to what one reasonably should expect in light of the hourly rates charged and the number of hours expended.

At 732. 

This Court believes that this statement succinctly articulates the standard that must be employed in deciding whether to award an enhancement of fees.  Reed was consistently praised by fellow counsel as an exceptionally skilled and learned advocate in the bankruptcy arena.  This Court agrees with that assessment.  Reed’s representation of the debtors certainly was instrumental in obtaining the generally positive outcome of these cases.  However, the Court cannot say that the quality of service rendered and the results obtained were superior in light of the hourly rate charged and the number of hours expended.  This is especially evident when the Court considers that the other counsel involved in these cases are also highly skilled and experienced, and that they also made major contributions to the resolution of many difficult and complicated matters.

The question of hourly rates for attorneys that are higher than prevailing rates in the locale where services are being rendered was addressed in In re Southern Indus. Banking Corp., 41 B.R. 606 (Bkrtcy.E.D.Tenn. 1984).  There the court stated:

In a complex case compensation based on a professional’s customary billing rate, though exceeding the prevailing local rate, may be justified due to the professional’s experience or expertise. ...  However, if a local professional with the required expertise could have been retained, a professional from another jurisdiction may be “reasonably compensated” even though the allowed fee is based on a rate lower than his customary charge. ....


At 612.  See also In re Waldoff’s Inc., 132 B.R. 329 (Bkrtcy.S.D.Miss. 1991).  In this instance, a “local professional with the required expertise” was retained to be local counsel for the debtors.  Reed has acknowledged that W. Thomas Bunch’s participation in the representation of the debtors was critical.  It appears to the Court that it is eminently reasonable that they be compensated at the same rate.

In consideration of all of the foregoing, it is therefore the opinion of this Court that Michael H. Reed should be awarded fees in the amount of $274,573.00 and reimbursement of expenses in the amount of $47,083.97, for a total of $321,656.97.  His application for a 6% enhancement of fees should be overruled.

It is hereby so ORDERED this      day of August, 2000.


By the Court -





                                                                         Judge William S. Howard


Copies to:


W. Thomas Bunch, Esq.

Michael H. Reed, Esq.

Tracey N. Wise, Esq.

Thomas Miller, Esq.

Laura Day DelCotto, Esq.

Taft McKinstry, Esq.

Jonathan D. Goldberg, Esq.

U.S. Trustee