Full opinion text
MEMORANDUM OF DECISION UPON APPLICATION FOR FINAL ALLOWANCES GEORGE B. HARRIS, Chief Judge. Preliminary Statement This is the epilogue of a judicial drama that has occupied the attention of this Court for a period in excess of five years. The decision approving the plan of reorganization appears in 242 F.Supp. 561 (D.C.1965). A review of the decision will disclose a complete exposition of the interplay of the economic forces that brought about the business catastrophe in the first instance, as well as the benign and constructive forces which led to the joint plan of reorganization. The said decision disclosed that the Court appointed Frank T. Andrews as Trustee on March 21, 1962. The Trustee encountered an almost hopeless situation with all of the concomitants of insolvency present. The Court observed and found that the complete dedication, talent and industry of the Trustee in directing the affairs of the company, planning its financial program, hiring key employees, together with a complete command of the accounting aspects, in large measure made the result possible which the company presently enjoys. The Court further observed that recognition should be given to the team of lawyers headed by Burton J. Goldstein, including Ralph Golub, Austin C. Clapp and Joseph B. Purteet, representing the Trustee. The litigation which they encountered was vast, complex and demanding and required the highest degree of industry and talent. They discharged their obligation in the finest tradition. The Court further observed during the course of said opinion and decision: When the Trustee was appointed, the proceedings under Chapter XI had been in force approximately 6% months. Without question, the Chapter X proceedings inherited almost insurmountable operating difficulties and administrative impediments. The objective of Chapter XI was liquidation and, to that end, backlogs of work dwindled, sales efforts were curtailed and frustrated, many key employees resigned, or were terminated, collection of accounts was neglected, many vendors required cash on delivery of materials, performance bonds were obtainable only upon depositing cash with the insurer, many customers withheld or can-celled orders, job bidding was careless and haphazard, there were numerous carry-over and continuing job losses, and confusion prevailed respecting litigation, interpretation of agreements, and with product warranties. The net loss for the year 1961 was $14,106,252 Regarding the role played by the attorneys for the Creditors’ and Debenture-holders’ Committees, the Court said: It is significant to note that the close cooperation between the attorneys for the Trustee and the attorneys representing the Creditors’ and Debenture-holders’ Committees and Judson Steel Corporation resulted in the achievement of the plan presently submitted to this court and denominated “Joint Plan of Reorganization of Trustee Creditors and Debentureholders (Second Revised).” In view of the concerted effort of the Trustee, his attorneys, and the attorneys representing the Creditors’ and Deben-tureholders’ Committee, the Court hopefully expected that this closing chapter of the reorganization proceedings would be conducted in a happier vein, particularly in view of the magnitude of the accomplishments. All of the major applicants for compensation have filed herein lengthy mem-oranda in support of their applications and submitted themselves for direct and lengthy cross-examination. The transcript alone of the hearings on compensation occupies 10 volumes with 946 pages of transcript. Subsequent to the lengthy hearing, the Securities and Exchange Commission undertook the preparation of its memorandum on applications for compensation. Final hearings were conducted based on this memorandum and the applicants again filed lengthy and responsive memo-randa wherein critical observations were made concerning the integrity of the recommendations submitted by the Commission. Preliminary to a discussion of the memorandum of the Securities and Exchange Commission, certain general observations should be made: The Commission does not dispute any of the time records kept and maintained by the attorneys. There is no contention that any of the services were inept, unnecessary or wasteful. In fact, the transcript of the hearings on fee applications is replete with encomiums concerning the effective services rendered by the Trustee and his counsel. Further, it should be pointed out that a misconception is generated by the memorandum as a result of considering the fees and other expenses heretofore paid under the Chapter XI proceedings as having some relevancy or materiality to the total compensation requested in the Chapter X proceedings. The result represents an unfair appraisal and misunderstanding of the total amounts requested as final fees herein. In advance of the Court’s analysis of the Securities and Exchange Commission memorandum, the comments of counsel concerning the document should be reviewed. The observations, in part, of Burton Goldstein, Esq., attorney for the Trustee: I simply do not understand the situation in which we find ourselves so far as that report is concerned, and I and my fellow lawyers thank God that we are here before this Court as the arbiter of this problem and not before the Administrative Agency which sets itself up in some ivory tower in Washington, D. C., removed from this courtroom, and removed from the problems with which we have labored here, and removed from the personalities, and removed from the struggle and the strain and the ire and the fight and the difficulties, as well as the harmonies which have been a part of this proceeding. They purport to say to us, “Well, gentlemen, you have done a great job here, you saved a sick patient, you were great surgeons, but basically, while we give you our compliments, we do not think that you are worthy of the hire which your status in the profession and which your hours of effort entitle you to.” ****** Because to me it is a great travesty that when you have a case like this one which from the start seemed to be hopeless and was termed hopeless, at least by the time I came into it in January of 1963 when there was this great hue and cry for a liquidation, for an adjudication, and where everybody was concerned, was bewildered, was perplexed as to what direction we should go, whether you could save this corporation, starting with that and then winding up where we do today with not only a reorganized company that is solid and sound and operating, not even close to being a corporate cripple, but one which has its head up in the sun of the business world today * * And mind you, Your Honor, under the circumstances of the present situation in the market, for example, where Yuba stock is going up and is up above the issuing price of April 1st of this year, when everything else is sliding down, we hope only on a temporary basis, in view of this, in view of the fact that we have done a job in which I consider an admirable way, we are now put in the position of having to come before you and literally plead with the Court to ignore the recommendation of this large government agency in Washington. ****** By some mechanics that I am not able to fathom, they say to Your Honor in this report, “Look at what this reorganization cost, two million and several hundred thousand dollars,” and what do they put in that figure ? They put in all the cost of the Chapter XI with which basically we are not concerned here. It is unfair to saddle us with those. Those were paid on court order for another purpose. They’re done. They throw in all of the administrative costs for people like consultants appointed by the Court to assist the Trustee in the beginning, Mr. Murphy, Mr. Gilmore, who all did their job in their proper place. They throw in all of the special counsel who were involved in specific litigation and did their job in their own way and place. They throw in even the Booz, Allen & Hamilton report and their work, a $62,-000 item which has to do with the basis of the reorganization and should not be any indication of what either counsel here or private individuals or ourselves are entitled to, nor should it be a charge against us, and I could go on and on, and Your Honor will remember that I objected to this exhibit when it was offered during the Plan hearings. And I still object, and I haven’t changed my mind about that. And it came in for a limited purpose only, not for the purpose for which it wound up in this report, but I must mention it because Your Honor should not, as we view it, charge us with the cost either of the XI or of the executive or administrative personnel or assistants, particularly when we consider that had this corporation been operated in private industry, its costs for counsel, for executive help, for administration, for vice-presidents, for engineers would have been far, far greater than it is in the capable hands of the Trustee. It is an irrelevancy. And I hope that Your Honor, in viewing it overall, will look at it in that context. ****** Now, that brings us to some other matters which affect all of us. It seems to us that the function of an SEC advisory report, whether it is for fees or anything else, is to assist the Court. I respectfully say that this report is an affront to Your Honor. It is of no assistance to Your Honor, because there is no basic discussion whatsoever of how fees are or should be evaluated. They are pegged so low that I would respectfully say that they are meaningless in a reasonable or fair consideration of what the decision of the Court should be. The observations of Richard Keatinge, Esq., one of the attorneys for the debtor corporation, are in practically the same vein: If I can turn for a moment now to the specific application which was filed in our behalf, as Your Honor will remember, this includes services rendered both by Keatinge and by Sterling and by the firm of Quittner, Stutman, Treister & Glatt. It covers 1,852 hours of services. We have requested a fee of $75,000, roughly $40.00 per hour. The Securities & Exchange Commission has recommended a total fee for both firms of $15,000, a figure of approximately $8.10 per hour. Mr. Quittner, also attorney for the debtor, said in part: If the Court please, it was on March 26, 1966 that I celebrated my 40th year of admission to practice law, and as a young lawyer I was started in the bankruptcy practice, and the firm that I was with got $10.00 an hour, which in 1926 was considered fairly standard pay. Now, after some 40 years of practice and after receiving at least some favorable recognition from the bench and bar, the SEC thinks that I am worth $8.10 an hour, which I think is great progress. Next, we should consider the comments made by Bernard Shapiro, Esq. who, in association with August Rothschild, Esq., represented the Creditors’ Committee: * * * as has been said so many times before today, that we are going to be met with that $20.00 or $25.00 an hour figure that was used as some kind of measure about 25 years ago, and which hasn’t been changed in the ensuing 25 or more years. A lot of things have changed in that time, but that figure doesn’t seem to have changed. Walter Hoffman, Esq., whose extensive services as well as lengthy cross-examination played an important role in the evaluation hearings and the plan for reorganization, had this comment to make concerning the report of the com-mision: The SEC here has made a recommendation that senior counsel for applicant be paid at the rate of $8.09 per hour, and if we further consider and make an allowance for some 58 hours that were consumed in the processing of this application, we could reduce it by 10%, which comes to $7.20 per hour, and if we make a further reduction for an estimated 40% in overhead, we see where we land. I believe, Your Honor, that the recommendation of the SEC is tantamount to an implicit finding that senior counsel for applicant should take a drastic loss, financial loss, in this case. It can’t be viewed from any other light. I was in the courtroom when Chapter XI was before this Court, and I remember Mr. Keatinge, at that time being counsel for debtor, resisted the position of the SEC that the proceedings should be moved from Chapter XI to Chapter X, and some of us will recall that momentous morning when Mr. Keatinge came into this courtroom and said he would no longer resist the move, that he would acquiesce in the position of the SEC for the movement of the proceedings from Chapter XI to Chapter X. And I recall at some time thereafter Mr. Keatinge applied for attorneys’ fees and I was present in court when Mr. Odenweller stated that he thought that $50.00 an hour was a reasonable fee for Mr. Keatinge to receive in the proceedings. At that time the financial situation of the debtor, of course, was dire and the outlook very bleak and dismal as compared with the flourishing situation now. It is somewhat comforting to me to think that Mr. Thacher, who was quite critical of all counsel, in his memorandum of May 18, 1966 says: “In conclusion, the rule of economy of administration means just that, and fees based on an hourly rate for partners’ time for significant work in excess of $40.00 would seem questionable under the cases, regardless of what this counsel’s opinion in the matter may be.” Well, at least, Your Honor, we have" got a concession up to $40.00. “Applicant stated in its application and supported the- statement with testimony that, absent special circumstances, a reasonable rate adopted by many lawyers in San Francisco for regular work of a senior partner or an experienced lawyer was $50.00 an hour.” We have alleged here that there are special factors why it should be increased to $75.00 per hour. The special factors being the results achieved. Secondly, the strenuous day-by-day participation in the proceedings, in the court work, and the intensive preparation for court work, examination of testimony and exhibits. And in this, applicant senior partner took the lead in the interest of the unsecured creditors. The third factor, direct influential participation in the formulation of the Plan and an active participation in the conferences. And the final factors, financial resources of this data, and lastly, the ability of the debtor to pay, the debtor now being in flourishing circumstances. In conclusion, I want to say, Your Honor, that lawyers are just wage earners, except we deal with the products of the mind. We want to be paid for a day’s work just like any wage earner. We have families that we have to support after taxes. We don’t have the advantage of capital gain devices which businessmen have. And you ask yourself the question: What great, burning interest has the SEC in these proceedings to degrade the profession? What is their interest? Surely it can’t be the interest of the trade creditors and the debentureholders who are now converted shareholders. It may as well be said that the interest of the SEC is to simply satisfy its own vanity and to be able to say, “See what I have done. See what I have done.” Sidney Rudy, Esq., attorney for the debentureholders and also for Mr. Beach Soule, made the following statement: If the court please, by way of a general reaction to the memorandum of the Securities and Exchange Commission, my comments would, of course, echo for the most part what has already been stated by other counsel. I think it is clear that the amounts proposed by the SEC to be allowed are absurdly low and indicate that the amounts were arbitrarily fixed. It is difficult to try to meet the argument of the memorandum because truly no argument is made. There has been a recital in each case of the work that was done, and in most cases a complimentary recital, and then an abrupt conclusion that the amount to be allowed should be either 20% or 10% or 30% of what was asked for by each of the counsel. T will not dwell on the general reaction, because I think that Mr. Goldstein and the other counsel who have spoken have covered the field quite thoroughly. The position of Mr. Beach Soule, as Chairman of the Debentureholders’ Committee, and of the counsel for the committee, is made even more difficult than that of the other applicants. They have needed only to point out to Your Honor that the amounts allowed were much too low and not appropriate to the services rendered. In our case the SEC has concluded that they find no way of separating the work of the Chairman of the Committee and the work of his counsel, and they therefore propose a joint allowance of $40,000. This compares to the total amounts requested of $110,000 for counsel and some $37,000 for Mr. Soule. I am not sure that I need to argue this point to Your Honor. I state that it is wholly inappropriate that the SEC should file a memorandum presumably prepared by an attorney or attorneys and to suggest that counsel should be placed in the position of dividing a fee with the Chairman of the Committee for the Debentureholders. At the conclusion of the hearing regarding the integrity of the SEC memorandum and on submission of the final fee applications, this Court observed, in part: Sacrifices have been made, of course, with the hopeful expectation of compensation in the ultimate end. No one could dream at the threshold of this case that the result would be as we now see it, and certainly it is not due to magic and it is not due to legerdemain; it is due to intensive service, well-disciplined service, and of course with a bit of ingenuity and resourcefulness. The foregoing excerpts, although bountiful and perhaps burdensome from the standpoint of the space occupied, represent, nevertheless, in context, the views of the attorneys and the Court concerning the recommendations made in the SEC report. The Court has spent many trying weeks in attempting to reconcile the suggestions made by the Commission as to compensation and those requested by the attorneys, in the light of the realities of the litigation. This is not the first occasion that a United States District Court in comparable situation, has found little judicial comfort and solace in the Commission’s attempt to fix by remote control and by extra-judicial process, adequate and reasonable compensation. In In re North American Light & Power Co., 101 F.Supp. 931 (D.C.Del. 1951), affirmed, 3 Cir., 202 F.2d 638, Cert. den. Securities and Exchange Comm. v. Masterson, 346 U.S. 818, 74 S.Ct. 30, 98 L.Ed. 345, Chief Judge Leahy, speaking for the Court, refused to follow the SEC recommendations and said: Though there is much to recommend the SEC position in fixing the figures of compensation in that the SEC, having observed the work of counsel before it, is possibly better able to appraise the value of such services than the judge to whom the question of fees is submitted on review, still, the awareness of the judiciary of the work of counsel’s contribution to any particular litigation should not be ignored or underestimated. To ignore entirely the judicial cognizance of fees would, I think, be assuming a judge has never been a practicing attorney and has never had the opportunity to acquire a legal sophistication as to the value of the toilers per diem in matters of corporate reorganization, (p. 935) * * * The services of an attorney — interviewing witnesses, getting evidence, doing research, planning strategy — may be highly complementary, even though ‘duplicative’. In my experience at the bar and on the bench, I have observed lawyers of great talent simply sitting at the counsel table and not, apparently, engaging in the combat of litigation, yet obviously their contribution to the matter for determination, whether before an administrative agency or a court, is not without professional significance. And their contributive worth to the legal drama cannot be ignored or brushed aside by the semantics of such loose words as ‘dupli-cative’ and ‘unproductive’, (p. 936) The lengthy excerpts from the applications, the memorandum of the Securities and Exchange Commission, and the transcript seem to be justified. It would be difficult to wrench out of context segments of the position taken by the Commission and equally unfair to counsel in attempting in many instances to summerize their position. Further, it seems to the Court when the respective positions are portrayed in their essential particulars, the SEC position becomes transparent and simplified and the analysis perhaps more poignant and appealing. I The standards in measuring a reasonable fee may be succinctly set forth: 1. The time and labor required; 2. The novelty and difficulty of the questions involved; 3. The skill requisite properly to conduct the debtor’s affairs; 4. The professional standing, reputation, and ability of counsel; 5. The customary charges of the Bar for similar services; 6. The amount involved in the controversy ; and 7. The benefits resulting from the services. These standards have been stated in Matter of General Stores Corporation, D. C., 164 F.Supp. 130, as follows: “ ‘ * * * (1) The time which has fairly and properly to be used in dealing with the case; because this represents the amount of work necessary. (2) The quality of skill which the situation facing the attorney demanded. (3) The skill employed in meeting that situation. (4) The amount involved; because that determines the risk of the client and the commensurate responsibility of the lawyer. (5) The result of the case, because that determines the real benefit to the client. (6) The eminence of the lawyer at the bar, or in the specialty in which he may be practicing.’ ” (p. 146) As stated in Campbell v. Green, 112 F.2d 143 (5th Cir. 1940): “The Court, either trial or appellate, is itself an expert on the question (of attorneys’ fees) and may consider its own knowledge and experience concerning reasonable and proper fees and may form an independent judgment either with or without the aid of testimony of witnesses as to value.” (p. 144) In Official Creditors’ Committee of Fox Markets, Inc. v. Ely, 337 F.2d 461, the United States Court of Appeals for the Ninth Circuit, in discussing the time element as a factor in determining a reasonable allowance said: “In our view, the fallacy of the theory advanced by claimants, reflected in the testimony of their witnesses and evidently embraced by the Trial Court, is that the time element as a factor in determining a reasonable allowance was relegated to one of minor importance. We think the cases abundantly support the premise that where fees are sought by an officer of the Court under See. 241, the time element is of major importance, although there are other factors which may be given consideration. In Chicago and West Towns Railways, Inc. v. Friedman, et al., 7 Cir., 230 F.2d 364, 367, the Court in discussing fee allowances under Sec. 241 (11 U.S.C.A. § 641) stated, ‘Reasonable fees for such services depend largely on the hours spent and the allowance per hour.’ In contrast, the Court pointed out that under Sec. 242, compensation is allowable only where ‘The services must be beneficial to the estate.’ To the same effect, In re Solar Mfg. Corp., 3 Cir., 206 F.2d 780, 781. See also London et al. v. Snyder, 8 Cir., 163 F.2d 621, 626; Dickinson Industrial Site, Inc. v. Cowan et al., 309 U.S. 382, 389, 60 S.Ct. 595, 84 L.Ed. 819; In re Food Town, Inc., D.C., 208 F.Supp. 139, 145. (p. 465) * 4Í- * -X- -X- -X- As we have shown, there is no substantial basis in the record for the fee allowance as made by the District Court. It was clearly excessive. Having so concluded, we are faced with a difficult problem of determining a reasonable fee within the contemplation of the Bankruptcy Act. Taking all pertinent factors into consideration, it is our judgment that a total award of $50,000 would be fair and reasonable. This is at the rate of $74.00 an hour for all time expended by the claimants, including Kadison’s law assistant, as shown by their time sheets, or, if we accept Ely’s allegation that he spent twice as much time as shown by the time sheets, this allowance for all time spent is at the rate of $62.00 an hour.” (p. 470) The wide disparity between the Commission’s recommendations in the case at bar, i. e. approximately $8.10 per hour, as compared with the factors applied in the Fox Markets case is at once apparent. The fee range approved in the Fox Markets case, supra, necessarily has a persuasive effect and material bearing upon this Court’s ultimate findings regarding reasonable compensation. Mindful of the foregoing general principles . in awarding fees, the unique factual background confronting the Court in a given case must be considered, and it is not possible to single out any particular case as affording a predicate for the award. At best, the decided cases merely establish convenient guidelines. ' The principal cases relied upon by the Securities and Exchange Commission to support its views as to the allowance of fees in this matter are Finn v. Childs Co., 2d Cir., 181 F.2d 431, and In the Matter of Hudson & Manhattan Railroad Company, Debtor, U.S.D.C., S.D.N.Y., 224 F.Supp. 815. Suffice, that these cases represent an entirely different factual background from that presented in the case at bar, and they are of very little help to this Court, and are readily distinguishable. II THE APPLICATIONS FOR COMPENSATION So that there may be a full and complete exposition of the general outline of the services rendered by the attorneys and Trustee, the Court sets forth extensive excerpts from the applications, as follows: The Application of Frank T. Andrews, Trustee The application of Frank T. Andrews, Trustee, supported by his testimony, in part reflects the following: Since October 13, 1965, the date of applicant’s last application for interim allowance, applicant,' pursuant to Order of this Court under Section 167(1) of the Bankruptcy Act, continued to perform and carry out the duties required by said Order. In this connection, applicant continued to investigate the acts, conduct, property, liabilities and financial condition of Debtor, the operation of its business, and other matters relevant to the corporate reorganization and to the formulation of a plan therefor. Applicant has had the responsibility both of actively participating in the management of the construction, manufacturing and other businesses conducted by Debt- or and its subsidiaries, and also of carrying forward his duties as Trustee with relation to the specific problems posed by the Chapter X corporation reorganization. Applicant has continuously been required to make comprehensive decisions on all phases of the management of the Debtor’s business operations and to directly participate in decisions and courses of action, investigations and consultations with respect to legal problems required to be met by applicant and his legal counsel. Reference is hereby made to the applications of Trustee filed herein on October 12, 1962, April 10, 1963, October 7, 1963, April 7,1964, October 7,1964, April 7, 1965, and October 13, 1965, referring to the procedures, matters in progress, and general scope of applicant’s duties and activities, which are incorporated herein by reference, and applicant continued to carry out such duties and activities subsequent to September 30, 1965. On a day-to-day basis, applicant has personally conducted the business and affairs of Debtor, has conferred with his counsel and has advised persons interested in the Estate of Debtor of the course and conduct thereof, such as the Securities and Exchange Commission, interested creditors, debentureholders, and others. It is well-nigh impossible to detail the multitude of services performed by applicant, so that, by way of example only, applicant refers to the following matters which illustrate the nature of the duties and responsibilities undertaken by him and the decisions and procedures adopted by him: (a) Reference is made to paragraph 3(a) of applicant’s last prior application concerning his duties in formulating and submitting a plan of reorganization. Subsequent to the filing of applicant’s last report the revised Joint Plan of Reorganization was confirmed by the Court on December 6, 1965, by Order which became final on or about January 17, 1966. During the period just mentioned applicant participated in many discussions and conferences with his attorneys, representatives of the Unsecured Creditors Committee, the Debenture Holders Committee, and others, relative to the corporate management structure which should be adopted by the reorganized corporation to provide the maximum efficiency in its operations. During this period, also, applicant applied for and secured from the Court an Order in Aid of Consummation of the Plan of Reorganization, laying down an orderly procedure for the organization of the Board of Directors for the reorganized corporation, its consideration of various policy matters to govern the operation of the business of the reorganized corporation and generally to provide for an orderly transition from the conduct of the business of the corporation by applicant to its assumption by the Board of Directors so organized. As a further step in the direction of the consummation of the Plan of Reorganization, applicant caused the Certificate of Incorporation of the Debtor to be amended and filed and recorded in the State of Delaware, the State under whose laws the Debtor was and is incorporated, and caused said amendment to be filed with the appropriate officials in the other States of the United States where the Debtor was qualified to do and wished to continue to do business. Applicant, in consultation with his attorneys, prepared and submitted to the Board of Directors by-laws for the governing of the business of the corporation, which were adopted by the Board of Directors and, upon application, approved by the Court. Several meetings of the Board of Directors have been held, during which a substantial number of policy questions were discussed, an Executive Committee and a. Sinking Fund Committee of the Board were created and their powers and duties delineated, the management structure of the corporation and its divisions and subsidiaries were discussed and determined upon, and, in general, all steps were taken to prepare the way for consummation of the Plan of Reorganization. (b) The steps taken as reported in applicant’s last application filed October 13, 1965, and applicant’s continuing supervision and the carrying out of the plans which had been evolved resulted, during 1965, in the obtaining by Debtor of a gross volume of business of approximately $28,241,000.00, and as of the date of this application the volume of business is continuing to increase. (c) In line with applicant’s program of making a more functional, efficient and productive use of Debtor’s existing plant facilities, he has continued to make improvements in production, in quality control, cost-control programs, inventory-control programs, and has supervised improvements in bidding procedures and production control. (d) Applicant has continued to consummate advantageous sales of Debtor’s nonproductive assets, including the transaction reported in paragraph 3(d) (3) of applicant’s last application of the sale of the real property near Fairplay, Colorado, which was sold, with the approval of the Court, for the sum of $66,600.00 in cash. (e) Applicant has continued to make personal inspections of the plants and operations of the divisions and subsidiaries of the Debtor, conferring with management employees concerning their problems. (f) Since the time of his application for interim allowance, applicant has continued his efforts to obtain the services of qualified administrative, sales and technical personnel in all of Debtor’s divisions and subsidiaries for the purpose of developing greater efficiency and increased sales activity. As noted in paragraph 3 (d) of applicant’s application for interim allowance of April 7, 1965, efforts in this connection were made more difficult by the reluctance of qualified personnel to become employed by a corporation in bankruptcy. In addition, many individuals interviewed by applicant expressed a, reluctance to become engaged by an organization whose management will change within the very near future. Nonetheless, applicant succeeded in obtaining the services of a number of qualified men to fill certain key sales, engineering and administrative positions. It is expected that these personnel changes will be reflected in improvements in efficiency, productivity and sales. (g) In connection with his continuing duty to investigate, review, analyze, evaluate and verify claims against Debtor, applicant has conferred extensively with his staff and his general counsel. He has personally participated in negotiation for settlement of a number of the major contingent, unliquidated or disputed claims and in this connection reports that as of the date of this application there remain, as yet undisposed of, claims totaling $227,322.00, which applicant believes will be disposed of for a substantially lesser amount. The balance of listed contingent, unliqui-dated or disputed claims, amounting to $3,744,945.00, was disposed of by payments and allowances totaling $452,109.-10. In addition, counterclaims against these claimants produced $157,000.00 in cash, paid to the Trustee for and on behalf of the Debtor’s Estate, so that the net cost of disposing of these disputed claims was only $295,109.10, slightly less than eight per cent of the total amount asserted by the claimants. (h) Without specifically enumerating the details, applicant has supervised and participated in the making of decisions, of entering into contracts, in the carrying forward of Debtor’s activities in all phases of the business of Debtor and its divisions and subsidiaries. Applicant has made important decisions in the fields of construction, contracts, labor relations, collections of moneys due Debtor, processing and settling of law-suits and claims in which Debtor is involved, hiring and discharging personnel, accounting procedures to be followed, and financing Debtor’s operations. (i) The generally beneficial results of applicant’s efforts is shown by the fact that net profits for the period January 1, 1965, to November 30, 1965, were $954,-687.00, compared with estimated earnings for the purpose of considering the feasibility of the Plan of Reorganization of $697,000.00 per year. 4. In applying for final allowances and in reporting the imminence of consummation of the revised Joint Plan of Reorganization, applicant refers to the fact that on March 21, 1962, when applicant assumed his duties as Trustee, there was a great clamor on the part of many creditors and others concerned with the affairs of the Debtor corporation for immediate liquidation of the assets of the Debtor, their conversion into cash at forced sale prices and a distribution of such pittances as would remain to the creditors as a minute fraction of the moneys owed to them. Approximately four years later, as a result of the joint efforts of applicant and his counsel and with the cooperation of those creditors who believed in the feasibility and actuality of the reorganization of the debtor, the various classes of creditors will receive in cash and securities, as provided by the Plan of Reorganization, the following percentages of the dollar amount of their claims: Class Percentage 2-A 100% 2-B 96,57735% 2-C 93.65172% In this connection it is to be noted that the cash to be received by the Class 2-A and Class 2-B creditors, under the Plan, will amount to approximately $20.00 per $100.00 of claim, a sum which is at least twice the amount which would have been received by these creditors in a liquidation, with no further assets or income by which the balance of their claims could be recovered. This result has been accomplished only by the expenditure by applicant of his full time and effort in the affairs of the Debtor corporation. 5. The reasonable value of the services of applicant for the remainder of interim allowances, and as a final allowance for applicant’s services, is the sum of $140,-000.00, determined as follows: (a) The sum of $60,000.00 as the remaining interim allowance for the period October 1, 1965, to and including March 3, 1966; (b) The sum of $70,000.00 as the remaining amount heretofore requested by applicant in the several applications for interim allowances filed by him and which was not heretofore allowed by the Court. In this connection, applicant’s prior applications for interim allowances have requested the total sum of $420,000.00. Allowances by Order of Court total $350,-000.00, leaving a net difference for applicant’s interim services for the period from March 21, 1962, to and including September 30, 1965, of the sum of $70,-000.00. (c) The sum of $10,000.00 as a final allowance for applicant’s services over and above the amounts requested in subdivisions (a) and (b) of this paragraph. With respect to the request in this paragraph for payment of the sum of $70,-000.00 as the remaining amount heretofore sought for interim allowances but not previously allowed by the Court, applicant refers to the individual applications previously filed setting forth in detail the services rendered during the specific periods referred to. The Trustee testified on direct and cross-examination in support of the foregoing application. The SEC’s observations and recommendations, in part, concerning the application of Frank T. Andrews: * * * In this capacity he evaluated and revamped the Debtor’s production, construction and selling facilities, disposed of unprofitable operations and unnecessary real and personal property, secured necessary financing, reduced overhead, negotiated labor contracts and revised the safety program which substantially reduced workmen’s compensation premiums. He was also active in the settlement and disposition of claims, although these were essentially and primarily the work of his general and special counsel, as noted hereafter. * * * There is no doubt that the Trustee has rendered substantial and effective services in the administration of the Debtor’s estate and in the resolution of the many corporate and financial problems of the Debtor. For such services the Trustee is entitled to reasonable compensation and in determining what is reasonable due recognition, among other things, should be given to the professional and executive assistance of others who have been paid for their services or who have applications on file for allowances. As the Trustee has already received $400,-000 as compensation we recommend that the amount so received be deemed the final allowance to the Trustee for all his services. This is at the rate of $100,000 per year, which we consider ample compensation for the Trustee who, in this case, served as the chief executive officer of the Debtor during the Chapter X proceeding. The Court’s Comment and Allowance The Court allows as and for a final fee herein to Frank T. Andrews, Trustee, the sum of $90,000, representing reasonable compensation and payment in full for the asserted remainder of interim allowances and as a final allowance for applicant’s services as said Trustee. The Trustee as a result of his zeal and devotion to the infinite number of problems confronting him has developed this company from a hopeless “corporate cripple” to a position wherein it presently occupies an enviable position in the financial community. It should be observed that the Trustee set up a reserve to meet the expenses incident to the discharge of the final fee applications and other expenses incident to concluding the Chapter X proceedings. Yuba Consolidated Industries, Inc. as a result of the reorganization, is a successful operation known as Yuba Industries, Inc. It has adequate working capital, substantial assets, an excellent operating statement and substantial backlog. These circumstances, in part, distinguish the case at bar from many of those cited by the SEC and necessarily must be taken into account in determining the reasonableness of the fees applied for. The company’s progress in reorganization is reflected in the consolidated balance sheet and statement of income as of September 30, 1966. The statements demonstrate the splendid progress made by management as Yuba Industries, Inc. emerges from the trusteeship and corporate reorganization. The Application of Burton Goldstein, Esq. Burton Goldstein, Esq., on behalf of the attorneys representing the Trustee, has filed an application for the remainder of interim fees and for final fees. The application represents a compendium of the complex litigation disposed of and the settlements effected, the disposition of the so-called Lucas litigation of incredible complexity, together with reference to the time and effort expended in the proceedings incident to the establishment of the plan of reorganization. It appears further, that Burton Gold-stein, Esq. and his firm were acting as general counsel for the Trustee in the management and conduct of the diversified business affairs of the Debtor, and at the same time carrying out their duties to the Trustee in the Chapter X proceedings. The applicant summarizes the request for fees under paragraph V of the application, as follows: Reasonable fees as and for the remainder of interim allowances, and as a final allowance for applicants’ services, is the sum of $489,775.00, determined as follows: 1. The sum of $79,000.00 as the remaining interim allowance for the period October 1, 1965 to and including February 28,1966. This is based upon a reasonable interim hourly charge for the services performed by senior counsel for the Trustee, namely, Burton J. Goldstein, Ralph Golub and Austin Clapp, at the rate of $50.00 per hour, and by junior counsel for the Trustee, namely, Joseph B. Pur-teet, at the rate of $25.00 per hour. 2. The sum of $60,775 as the remaining amount heretofore requested by applicants in the several applications for interim allowances filed by them and which, on an hourly basis, was not heretofore allowed by the Court. In this connection, applicants’ prior applications for interim allowances have requested the total sum of $600,775.00. Allowances by order of the Court total $540,000.00, leaving a net difference, on straight hourly time charges for the period from January 28, 1963 to and including September 30, 1965, of the sum of $60,775.00. 3. The sum of $350,000.00 as a final allowance for applicants’ services over and above the amounts requested in subdivisions 1 and 2 of this paragraph here-inabove. Burton Goldstein, Esq. testified on direct and cross-examination in support of the foregoing application. The SEC Memorandum observations and recommendations: The applicant requests a final allowance of $1,029,775 for services rendered from the time of appointment to February 28, 1966, less $600,000 of interim allowances previously awarded, or an additional $429,775. Applicants claim to have devoted 15,760 hours of recorded time to the affairs of the Debtor, 11,434 of partners’ time and 4,326 hours by an associate. The services have been rendered primarily by three partners, Burton J. Goldstein, Ralph Golub, and Austin Clapp, and an associate, Joseph B. Purteet. The partners have had considerable experience in corporate and business law and particularly in litigation, but have not held themselves out to be experts in Chapter X proceedings. The associate, Mr. Purteet, has been practicing law for approximately six years. The services rendered by the firm in this proceeding may be divided into three general categories: (1) services rendered to the Trustee in furtherance of the general business activities of the Debtor, or services which a general counsel would have performed for a major corporation; (2) services in connection with lawsuits and disputes affecting the Debtor, which involve a very large docket of major litigation and objections to claims; and (3) services rendered in connection with the plan and other phases of the Chapter X proceeding. Since April 1, 1963, the Debtor has not employed house counsel and this necessitated in the earlier stages of the proceeding the assistance of Clapp, a partner, in the office of the Debtor to assist the Trustee in day-to-day matters. For a while, Clapp spent 50% of his time in the Debtor’s office until apparently the function of house counsel became less demanding and, by appropriate procedures, a considerable portion of the house counsel’s functions was reduced to fairly routine matters, such as the collection of accounts receivable. Generally, applicant’s services as Trustee’s counsel included, among others, negotiation of contracts and bidding procedures, patents and tax matters, mortgage and real estate transactions, the handling of licenses for the Debtor under various state statutes, and general corporate matters. The second category of services involved the handling of substantial court litigation initiated by and against the Debtor in various parts of the country. When counsel were appointed, there were more than 20 lawsuits pending involving over $5,250,000. During the course of the proceeding, the applicants instituted a number of additional proceedings directed toward the recovery of money or assets for the Debtor. The condition of the pending litigation upon their appointment was in many respects chaotic and they were confronted with numerous deadlines which called for expeditious action to protect properly the interests of the Debtor. The firm acquainted itself with the nature, scope, and extent of the Debtor’s operations in a very short period of time after appointment. Counsel reviewed the existing legal and court files and various financial reports and records, conferred with attorneys for various parties and others, and immediately attended to matters which required prompt treatment. Counsel handled most of the contested litigation themselves and, in addition, supervised the activities of many special counsel in various parts of the country. Counsel usually assisted special counsel in the preparation of evidence, pre-trial proceedings, negotiations, and in developing other aspects of the litigation. Counsel, separately and in conjunction with special counsel, participated in the settlement and disposition of many claims against and on behalf of the debtor. The firm’s efforts reduced the Debtor’s outstanding liabilities and, together with the disposition of assets, produced seven millions in cash which were thereby available to the Trustee for working capital and further debt reduction. At the time that the applicant was appointed there were on file in the proceeding over 400 claims by general unsecured creditors totaling in excess of $17 million, which claims were disputed. Trustee’s counsel examined these claims to determine their validity, and whether the Trustee should assert defenses, counterclaims or setoffs. The results of counsel’s work is reflected in the settlement of over $15 million in claims for approximately $2 million, partially by payment in cash and partially by the allowance of these claims as Class 2-A or Class 2-B unsecured claims. During the 37 months from the time of their appointment to February 28, 1966, applicants prepared a total of 497 pleadings, some of which involved difficult substantive issues of law. More than 1,000 docket entries were made by the Clerk of the Court in the Chapter X proceeding during this period. Counsel conducted a series of examinations pursuant to Section 167(2) of Chapter X which are reported in approximately 1,-200 pages of transcript. While the Trustee personally wrote his section 167(3) report, as well as the proposed plan of reorganization which he filed in October 1964, counsel advised the Trustee on these matters. Counsel was active in the Court hearing on the plan of reorganization, which extended over 19 days, and negotiated with other parties regarding the joint plan which was subsequently confirmed by the Court. Counsel did legal research on substantial questions raised by the Trustee’s plan, objections to the plan by other parties and on the joint plan. After the joint plan was approved, counsel prepared the necessary information to be sent to the creditors for voting on the plan, and, after confirmation, prepared all of the appropriate documents necessary to effectuate the provisions of the confirmed plan, such as amendments to the certificate of incorporation and the bylaws, and orders in aid of consummation. Counsel have demonstrated a high degree of skill and competence in the services they have rendered throughout the proceeding. The reorganization of the Debtor and its continuation as a going concern is in no small measure attributable to the results obtained by the firm in the disposition and settlement of litigation and contested claims. As noted, the firm has expended 15,760 hours of recorded time in the performance of services in the proceeding, of which about 73% is partners’ time. Its request for a final allowance in the amount of $1,029,775 (including $600,000 received in interim fees) is at the rate of $65 per hour. In the firm’s periodic requests for interim allowances, the amounts were computed at the rate of $50 per hour for partners’ time and $25 per hour for associate time. If, without conceding such proposed hourly amounts, we apply the two-to-one ratio to the $600,000 heretofore allowed, then, on the basis of 15,760 hours of services, the firm has been compensated at the rate of about $44 per hour of partners’ time and $22 per hour for the associate. While hourly rates are not the sole determinant of the reasonable fee that may be awarded in Chapter X proceedings, they are one of the factors in making the statutory determination. We have fully considered the substantial time that counsel have devoted to the Debtor’s affairs and the effectiveness of counsels’ services both in the administration of the estate and towards the financial reorganization of the Debtor. We have also taken into account the services of special counsel retained by the Trustee for purposes of litigation, and the amounts heretofore allowed to such counsel totaling $159,788. Under all the circumstances the Commission is of the view that the amount of $600,000 already awarded to the applicant represents more than adequate, and perhaps liberal, compensation for the competent and diligent services performed by this applicant. The foregoing is expositive of the tremendous number of hours expended and demonstrates a clear predicate for the final fee hereinafter allowed. The Court’s Comment and Allowance It would be difficult, if not impossible, to set forth in extenso the benefits which accrued to the estate of the Debtor as the result of the extensive legal services rendered by the attorneys for the Trustee. The summary of the Securities and Exchange Commission, at least in part, gives recognition to the intensity of their effort and purpose. The settlements accomplished on behalf of the Debtor corporation and the termination of the intensely complicated litigated matters justify the award of fees as hereinafter set forth. The Court allows as and for a final fee herein to said attorneys for the Trustee the sum of $240,000, representing reasonable compensation and payment in full for the asserted remainder of interim allowances and as final allowance for applicant’s legal services. The Applications of the Firms of Rothschild & Phelan and Gendel, Raskoff, Shapiro & Quittner, as Attorneys for the Committee of Unsecured Creditors The applications of August B. Rothschild and Bernard Shapiro on behalf of said law firms, set forth in detail the services performed. The applicants state, in part: The foregoing recitation is, of course, a mere summary of all of the complicated work that went into the formulation of the plan of reorganization that was confirmed in this case. No useful purpose would be served in setting these matters down in greater detail in this application, since the actual time expenditures are described in Exhibits A and B hereto and, further, a great part, of the work performed by applicants is well known to the Court and to the parties and to the Securities & Exchange Commission by reason of the very manner in which the negotiations were conducted. The variety of the filed plans is reflected in the Court’s records. The applicants and the Unsecured Creditors’ Committee represented the interests of the single largest interested group occupying the highest priority in the case, for all practical purposes. Applicants were therefore charged with a responsibility that is unusual in the experience of attorneys in insolvency matters, at least in this part of the country. It has been stated many times that this ease, to put it conservatively, occupies a very high position both in complexity and size, as far as Chapter X proceedings are concerned. Although the plan of reorganization was confirmed in a time that is short when viewed against all of the complexities in the case, nevertheless applicants have performed their services over a period of four years, without any compensation of any kind. Applicants have no agreement for compensation, nor do they expect any compensation from any individual creditor. Applicants strongly believe that, in the light of all of these factors (the extensive period over which the services were rendered without interim payments, the size and complexity of the matters dealt with, the great responsibility placed on counsel because of the large potential losses that might be suffered by creditors, the size of the estate, and its ability to pay) the services rendered by applicants should not be compensated upon a time basis alone. In cases where only time is a factor, applicants are currently charging, for services within their specialty, from $60 to $75 per hour where such charges are made to private clients, and applicant Bernard Shapiro’s firm requests such hourly rates currently in applications for fees before courts of bankruptcy in the United States District Court Central Division. (In the Northern District of California, fees in bankruptcy proceedings are normally not fixed on a time basis.) If a time basis alone were used for the hours expended by the firms of each of the applicants, a fair and reasonable fee would be the sum of $69,453.75, computed as follows: August B. Rothschild 625% hours at $60= $37,515.00 Bernard Shapiro 326 hours at $60= 19,560.00 Marvin Greene 158 hours at $50= 7,900.00 Philip L. Ball 27 hours at $50= 1,350.00 Work of other associates of Gendel, Raskoff, Shapiro & Quittner 27 hours at $35= 945.00 Work by associates of Rothschild & Phelan 65% hours at $25= 1,643.75 Walter G. Schwartz Tax Associate of Rothschild & Phelan 9 hours at $60= 540.00 Nevertheless, by reason of all of the facts set forth above, the awarding of fees to applicants in this ease on a time basis alone would not result in a fair and reasonable fee. When all of the foregoing facts are taken into account, applicants believe and represent that a fair and reasonable fee to applicants for services rendered during the pendency of these Chapter X proceedings is the sum of $130,000.00 (One hundred and thirty thousand dollars), and that there be refunded to them costs * * * Messrs. Rothschild and Shapiro appeared in person at the hearings and they were subjected to lengthy direct and cross-examination and submitted testimony in support of their application. The memorandum of the Securities and Exchange Commission reviews their application as follows: The Unsecured Creditors’ Committee included Class 2-A and Class 2-B creditors, who are of equal rank inter se. The attorneys for this Committee are the firms Rothschild & Phelan and Gendel, Raskoff, Shapiro & Quittner, who are requesting a final allowance of $130,000 for services rendered during the proceeding, primarily in connection with the plan. These services were rendered during the proceeding, primarily in connection with the plan. These services were rendered principally by August B. Rothschild and Bernard Shapiro, partners of their respective firms and experienced bankruptcy lawyers. Their request is based upon 1,238 hours of services. The Shapiro firm kept daily records which show a total of 538 hours of recorded time. The Rothschild firm did not maintain complete time records, but the total estimate of 700 hours was made when the application for allowances was prepared. On the basis of recorded and estimated time these applicants are requesting compensation at a rate exceeding $100 per hour. These firms represented the official Creditors’ Committee in the Chapter XI proceeding, and for services therein they received a final allowance of $10,000. They continued to represent the somewhat altered Committee in the proceeding under Chapter X. At the argument on the Commission’s motion under Section 328, they urged adjudication of the Debtor rather than reorganization under Chapter X, and state that during the first year of the Chapter X proceeding they had serious doubts as to whether a reorganization was feasible. The application states that the two firms rendered services (1) “in aid of the administration of this estate by the Trustee” and (2) in developing the reorganization plan. During the first year or so their time was spent substantially on matters of administration, which were largely attended by the Rothschild firm whose office is located in San Francisco. In the proposed division of functions it was intended that the Shapiro firm, located in Los Angeles, should render joint services with the Rothschild firm in matters of importance, but the schedule of services attached to the petition indicates that both offices were reviewing applications and petitions filed by the Trustee’s counsel and others. It is stated that of the two firms the Shapiro firm made the major contribution to the plan. Counsel attended most of the hearings under Section 167, but did not interrogate any witnesses nor was he prepared to undertake any such interrogation. Counsel attended the hearings with respect to the Lucas claim, but did not in any way actively participate in the proceeding and the settlement of this substantial claim. They read or reviewed many pleadings filed by the Trustee, such as applications for the sale of assets and confirmation thereof, for turnover orders, for employment of appraisers, accountants, management consultants and special counsel, objections to claims, interim fee requests by the Trustee and his counsel, and many others. As to all these and like matters, the record does not disclose what tangible or demonstrable benefit these services or activities produced for the administration of the Debtor’s estate or its reorganization. According to the time schedule attached to the application, over 50% of counsel’s time was expended on these unproductive efforts. Certainly the major, and apparently the sole, contribution of applicants consisted in developing the plan of reorganization. Discussions with reference to the plan commenced in the Fall of 1963, and subsequently these were extended to include the chairman and counsel for the Deben-tureholders’ Committee. Differences of opinion developed be.tween the two committees relating, among other things, to the going-concern value of the Debtor and the type of securities to be issued. When negotiations with the Debenture-holders’ Committee reached an impasse, the applicants prepared and filed on November 20, 1964 a plan of reorganization on behalf of the Unsecured Creditors’ Committee. This plan, like the Trustee’s plan filed a month earlier, was based upon the assumption of a going-concern value of between $10.5 million and $11 million and credito