UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
LEXINGTON DIVISION
IN RE:
TECHNOLOGIES
INTERNATIONAL HOLDINGS, INC. CHAPTER 11
DEBTOR CASE NO.
99-50867
IN RE:
ADVANCED
TECHNOLOGIES INTERNATIONAL, INC. CHAPTER
11
DEBTOR CASE NO.
99-50868
IN RE:
MERIDIAN TRANSPORT CO. CHAPTER
11
DEBTOR CASE NO.
99-50869
MEMORANDUM OPINION AND ORDER
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,
Reeds 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 Reeds 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 Reeds 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. Reeds 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
professionals customary billing rate, though exceeding the prevailing local
rate, may be justified due to the professionals 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 Waldoffs 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 Bunchs 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