UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

COVINGTON DIVISION

IN RE:

STABIL, INCORPORATED

DEBTOR CASE NO. 94-20819

MEMORANDUM OPINION

This matter is before the Court on the Objection to Final Fee Applications of Debtors' Counsel filed herein on February 17, 1995, by the U.S. Trustee. The U.S. Trustee has filed the same objection in a companion case, William R. Goan, Case No. 94-20818. Debtors' counsel filed their applications for compensation in each case on January 10, 1995. After a hearing on the matter on March 7, 1995, the parties were given time to furnish documentation and to file further objections, after which the matter was submitted for decision.

Both the debtor herein and William R. Goan have previously been before this Court in 1992 in Chapter 11 proceedings. Both cases were dismissed in 1993. On or about April 13, 1994, Chapter 11 petitions were filed on behalf of both debtors in the Bankruptcy Court for the District of Connecticut. On July 14, 1994, the Bankruptcy Court for the District of Connecticut, pursuant to a Motion filed by the U.S. Trustee in that District, entered an Order transferring the venue of these proceedings to this Court. On or about October 28, 1994, both proceedings were converted to Chapter 7 following the filing of Motions to Convert or Dismiss by the U.S. Trustee.

The U.S. Trustee objects to Z & Z's billing in regard to certain issues or areas of case management in both proceedings as follows:

1. The billing of a minimum of $4,478.50 in resisting the transfer of venue;

2. The billing of a minimum of $3,067.00 in attempting to withdraw as counsel;

3. The billing of a minimum of $3,125.00 for the drafting of schedules and statements;

4. The billing of over $5,313.00 for strategy discussions, meetings and conferences concerning plan development and the sale of lots;

5. The billing of over $2,956.50 for responding to a motion concerning the appeal of debtor Stabil's initial Chapter 11 proceeding in Kentucky;

6. Billing for the following specific items: a) $3,010.50 for travel time by attorney Matthew K. Beatman at his regular hourly rate of $135.00; b) $280.00 for secretarial overtime; c) $348.00 for a law clerk to attend the venue hearing in Connecticut with attorney Beatman; d) $105.00 for a conference in November 1994 between attorney Beatman and attorney Richard D. Zeisler concerning the status of the case, even though attorney Zeisler had not previously billed any time in the case. Except for item 6(d), these amounts represent the totals billed in both cases.

The U.S. Trustee contends that the amount of fees sought by Z & Z is excessive in relation to the benefit derived by the bankruptcy estate from the legal services provided. The U.S. Trustee further contends that the itemization submitted with the fee request calls into question the firm's billing judgment. In this regard the U.S. Trustee is especially concerned with Nos. 1-5 above.

In addition to the concerns raised by the U.S. Trustee, the Court, pursuant to its own review of the fee applications and itemizations in each case questions the fact that in more than one hundred instances there were billings on the same date for identical services with identical amounts of time expended in both cases. The billing for these items amounts to more than $9,000.00 in each case. While the Court does not necessarily conclude that all of these items represent duplicative billing, the sheer number of them raises the issue.

Courts often apply a 12-factor formula set out in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), in making determinations about "reasonableness". These factors are: 1) the time and labor required; 2) the novelty and difficulty of the question involved; 3) the skill requisite to perform the legal service properly; 4) the preclusion of other employment by the attorney due to acceptance of the case; 5) the customary fee; 6) whether the fee is fixed or contingent; 7) time limitations imposed by the client or the circumstances; 8) the amount involved and the results obtained; 9) the experience, reputation and ability of the attorney; 10) the undesirability of the case; 11) the nature and length of the professional relationship with the client; and 12) awards in similar cases. Id., at pages 717-719.

In addition, as Judge Schmetterer points out in In re Wire Cloth Products, Inc., 130 B.R. 798 (Bkrtcy.N.D.Ill. 1991):

At page 806.

The Court will first address the specific issues of excessive fees and billing judgment raised by the U.S. Trustee. The U.S. Trustee has argued that the amounts billed for resisting the transfer of venue, attempting to withdraw as counsel, drafting schedules and statements, and for strategy discussions, meetings and conferences concerning plan development and the sale of lots are excessive considering the results obtained in this case. No plan was ever been filed in the Chapter 11 case; indeed the case was only in Chapter 11 for a little more than six months before it converted. Considering the debtor's history, the prospects for reorganization in this second Chapter 11 proceeding were questionable and this must have been apparent to counsel for the debtor.

Counsel for the debtor in any case is expected to perform adequate and reasonable due diligence before expending significant amounts of time and effort. The due diligence issue was discussed in depth by the court in In re Narragansett Clothing Co., 160 B.R. 477 (Bkrtcy.D.R.I. 1993), in regard to a fee request by the attorney for the trustee. An offer to purchase the debtor had been negotiated and accepted. Shortly thereafter, the purchaser filed for bankruptcy and the purchase price could not be collected. The court stated:

At page 480. In a related footnote, the court referred to counsel's "duty to investigate, ...". (fn. 3). If counsel for this debtor did not sufficiently analyze its viability as a candidate for reorganization, it should have.

As concerns the other specific instances of billing questioned by the U.S. Trustee (item 6 above), this Court has previously ruled in In re East Kentucky Lumber Company, Inc., supra, that an attorney may not bill for travel at his full hourly rate. In that case, the attorney's billings for travel were reduced by half. Secretarial overtime is considered overhead for which the bankruptcy estate should not be charged. See In re Leonard Jed Co., 118 B.R. 339 (Bkrtcy.D.Md. 1990), at page 342.

Attendance at a hearing by a law clerk, without explanation of the need for his/her attendance, is not compensable. See In re Wire Cloth Products, Inc., 130 B.R. 798, supra, at page 810, wherein Judge Schmetterer disallowed fees where "...entries fail to explain why more than one professional was needed to attend a certain meeting or court hearing, and fail to describe the participation of each individual professional." Similar reasoning may be applied to billing for activities by attorneys who appear in the case only once.

The U.S. Trustee objects to the billing of $105.00 for a conference between attorney Beatman and Richard D. Zeisler, apparently one of Z & Z's principals. This is the last item in the billing summary, and it is Mr. Zeisler's first, last and only appearance in this case. In the absence of an explanation of the need for a conference with an attorney who had had no part in the representation of the debtor to that point, the Court is inclined to believe that this conference was more about the law firm's business than the debtor's. This item is not compensable.

In conclusion, it is the opinion of this Court that the total fee request in this case is not reasonable in view of the results obtained, and that counsel for the debtor failed to exercise proper billing judgment in certain instances. The Court will therefore reduce the total fee request by 25%. The expense reimbursement requested will be allowed in its full amount. An order in conformity with this opinion will be entered separately.

Dated:

By the Court -

_________________________________

Judge

Copies to:

Debtor

Matthew K. Beatman, Esq.

U.S. Trustee