Opinion ID: 460232
Heading Depth: 2
Heading Rank: 2

Heading: Compensation of Attorneys

Text: 20 Underlying the district court's decision to reduce the fee awards was its determination that both the hours and the hourly rates claimed were unreasonable. We believe, however, that the court abused its discretion by failing properly to apply the lodestar method as enunciated in Furtado and its progeny, as well as by overlooking the above special considerations appropriate in a reorganization case like this. The district court's reductions were inappropriately harsh. 21 Most of the reasons given by the court in reducing the fees center on what it perceived as an unjustifiable duplication or inefficient use of attorneys' time. For example, in deducting 350.5 hours from the 2450.5 hours expended on the labor arbitration proceedings, the court criticized Shea's use of six attorneys as excessive, noting that the firm's original plan to use Moore and one associate would have been adequate for the task. Specifically, the court concluded that the 567.75 hours spent on joint tasks by two or more attorneys were duplicative and therefore not fully compensable. See 46 B.R. at 976-97. 22 We believe, however, that the court abused its discretion in characterizing these hours as duplicative. According to one of B & M's officers, the issues raised in the labor arbitration were formidable in size and scope--and indeed it is undisputed that the issues were both numerous and factually complex. It seems reasonable to us that in a case of this magnitude, some of the tasks would require the efforts of several attorneys to complete in a timely manner, particularly given the relatively short time available for Shea to prepare. In fact, if Shea had tried to staff the case with just the two attorneys originally planned, the consequences for the railroad may well have been disastrous, as well as being contrary to B & M's specific instructions to assign additional lawyers to the case. Our conclusion that Shea's hours were properly expended is confirmed by the observations of B & M's officers that Shea prepared better and more efficiently than any other lawyers we might have chosen for this particular assignment. 23 In what may be its most significant reduction, the court also disallowed about 60 percent of the requested fees for work on the Lenfest litigation. Although the court found that Moore's hours were reasonable, it considered his firm's efforts in 1982 generally excessive, both in its staffing decisions and in hours billed. The court thought that the Lenfest plaintiffs' challenge had been inherently weak, that Shea encountered no difficulties before or during trial, and met no surprises from the opposition at trial, and that Shea had been under no particular time constraints in preparing for trial. In particular, the court cited Shea's assertion (made during the Lenfest litigation)--that the plaintiffs' claims were demonstrably untenable on the merits--as in effect conceding that only minimal efforts were needed to defend the arbitration award. 24 But an advocate's assertion that his opponent is demonstrably wrong is hardly conclusive. Attorneys do not often have anything good to say about their opponent's case. The Lenfest suit was a clear threat since, had it been successful, it would have vitiated the hard-won arbitration victory, and rendered improbable B & M's emergence from bankruptcy. Even assuming B & M had the better legal position, the potential damage to the railroad that a defeat would have caused justified an all-out effort by its attorneys, and this, in fact, is what the railroad requested. We observe as well that the Lenfest court did not dismiss the plaintiffs' case out of hand. It denied B & M's motion for summary judgment, and when finally deciding in the railroad's favor after a nine-day trial, the court wrote a 30-page memorandum opinion. See 537 F.Supp. 324. Contrary to what the district court found, moreover, the railroad and its counsel faced time constraints: the Lenfest trial date was set unexpectedly, leaving Shea only ten days to prepare for trial. Shea's ability to use a number of attorneys at this juncture was an advantage to B & M, permitting the case to go forward on schedule, with the railroad well-prepared and able to put its best foot forward. 25 The district court also depreciated Shea's conduct of the state DPU proceedings, finding that there had been considerable duplication of effort. For example, it disallowed certain hours as excessive because, in the court's opinion, most of the case amounted to little more than a repetition of safety evidence which B & M had presented earlier to the arbitrator during the arbitration proceedings. The record suggests, however, that the safety of reduced train crews was an issue that was more important, more vigorously contested, and necessarily more extensively presented during the DPU proceedings than during the arbitration hearings. While it is easy to speculate in hindsight that counsel might have succeeded with a less thorough presentation, it is also possible that they would have failed, leaving the railroad without the important benefit of reduced labor costs. 26 The court also disallowed certain hours because it believed that it was unnecessary for Shea attorneys to attend prehearing conferences in Boston during the time when Herrick & Smith was still the lead counsel. Although the court found that there was no showing that the presence of Shea attorneys was needed, the firm's previous familiarity with the underlying issues made it obviously reasonable for one of its attorneys to be on hand. The record shows, moreover, that work on the days at issue included services other than just attending the conferences. And Shea's attendance at the prehearing conferences ultimately helped B & M, since Shea later assumed primary responsibility for the case. 27 In a different vein, the court deducted 98.75 hours of time spent on the DPU proceedings because petitioner's contemporaneous time record did not adequately disclose the nature of the work performed. According to the court, it needed more information in order to differentiate hourly rates, depending on the work performed, since not all time is worth the same. This court has stated that in proper circumstances different rates should be assigned for different kinds of work, even when the same attorney is involved. Miles v. Sampson, 675 F.2d at 9. But this court has also pointed out that different rates are not always required, Maceira v. Pagan, 698 F.2d 38, 41 (1st Cir.1983), and Miles itself recognized the danger that this approach can lead to overly refined distinctions. 675 F.2d at 9. 28 We think the distinctions made here fell into that category. There is a point beyond which it is neither possible nor profitable to assess the quality of a counsel's time. See In re Casco, 25 B.R. at 756 n. 22 (noting that the grading in of a 'quality' factor in determining an hourly rate on a task by task basis can [ ] degenerate into a highly subjective process). The very example mentioned by the court here--between time spent reporting on events to co-counsel and time spent actually discussing a plan of action--exposes the difficulty as well as the time-consuming nature of such a comparative analysis. It is instructive that even where the court had the necessary detailed information, it did not perform such a rate-differentiation analysis. Because we believe that the kind of analysis envisioned by the court would have been counter-productive in these circumstances, and because the hours at issue were sufficiently explained, we believe the 98.75 hours should have been allowed. 29 One final illustration of what we perceive to have been overzealous reductions was the court's reduction of the average hourly rate in some cases, not because it found that any specific rate of a particular attorney was unreasonable but, because it judged that more of the work--left unidentified for the most part--could have been done by associates rather than partners. 8 Associates, however, are not invariably more cost-effective than partners. In some circumstances, and assuming of course that the partner is not performing merely routine work, 9 the use of a more experienced attorney may save time because of his ability to size-up and do only what needs to be done most effectively. Cf. Copeland v. Marshall, 641 F.2d 880, 903 & n. 50 (D.C.Cir.1980) (en banc) (affirming reduced hours on grounds of inefficiency, noted that the use of more partners would have made attorney efforts more efficient). 30 Where time constraints sometimes mandated quick preparation, and where the complexity and number of issues required special skill and effort, it was reasonable for another partner with background in railroad labor work to have assisted Moore. 10 The appropriate question is whether the talents of a higher-priced attorney with special skills were fully engaged, Maceira v. Pagan, 698 F.2d at 40, not whether the percentage of partner-hours was higher than in the typical case. In this case, we believe that the district court overlooked many factors, well-documented in this record, which justified Shea's greater use of partners. Moreover, given Shea's reputation and its success, and B & M's satisfaction with the firm's efficiency, we are not persuaded that it should be second-guessed as to the best use of its own partners and associates. The same expertise which caused the firm to be selected was implicated in the decision as to which of its attorneys was best suited to handle particular tasks. 11 31 The above are not the only areas in which we believe the district court went too far in paring the requested fees. However, we shall not attempt to review every issue separately. Instead, we make a few general observations. We point out, first of all, that this case is in sharp contrast to Grendel's, where the absence of contemporary time records, in conjunction with extraordinarily high hourly rates and claims for time spent in the most punctilious appellate research and preparation forced a close scrutiny of the fee award. 749 F.2d at 950. In this case, the hours expended were carefully documented, and the legal work involved was both factually intricate and varied in nature. There is undisputed testimony, moreover, that because B & M considered a favorable arbitration award--and the subsequent defense and implementation of the award--critical to a successful reorganization, it expressly requested Shea to use whatever manpower was necessary to prepare the case as thoroughly as humanly possible. 32 Given these circumstances, it is important for a court to maintain a sense of overall proportion, Gabriele v. Southworth, 712 F.2d 1505, 1507 (1st Cir.1983), and not become enmeshed in meticulous analysis of every detailed facet of the processional representation, Lindy Brothers Builders, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 116 (3d Cir.1976) (Lindy II). It is easy to speculate in retrospect that the work could have been done in less time or with fewer attorneys or with an associate rather than a partner. On the other hand, it is also possible that B & M would not have enjoyed the success it did had its counsel managed matters differently. Fee-cutting ideally should be tempered with a view towards the need for the services at the time they were rendered. In re Casco, 25 B.R. at 756 (emphasis added). It is of no small importance that B & M's trustees and officers, who observed Shea's work first-hand, concluded that Shea handled its tasks efficiently and with minimum investment of lawyer time as measured against the need for thorough preparation and presentation. 33 Although the district court conceded that Shea's work was of high quality and that the results were beneficial, it seems to have given but little attention to these factors in determining what fees were reasonable. There can be no question that Shea did an exceptional job and that the favorable arbitration award was vital to the reorganization of the railroad. In addition to the considerable savings in labor costs, there was testimony from the trustee who negotiated the railroad's sale that Shea's efforts helped B & M to obtain a substantially better offer from the new owners. In fact, he went so far as to say that if it had not been for their work, ... we would never have sold the property to [the new owners]. In light of Shea's unqualified success, and the trustees' satisfaction both with the attorneys' performance and their charges, we believe Shea should have had the benefit of the doubt on close questions as to the reasonableness of the number of hours expended or hourly rates charged. 34 We also believe that the court erred in not giving some weight to the fact that the ICC had already approved the entire amount of the compensation requested as the maximum permitted, pursuant to section 77(c)(2) of the Bankruptcy Act. In construing an almost identical provision, section 77(c)(12), this court observed that the ICC's findings are presumptively correct so that a party opposing its findings and conclusions is bound to go forward and demonstrate any error, whether of law or fact. In re Boston & Providence, 428 F.2d at 161. Yet, there was no mention of the ICC's findings in any of the court's rulings. 35 Finally, we note that underlying the district court's efforts to reduce attorney fees may have been a conviction that strict economy should be practiced when a bankrupt estate is involved--although the court never explicitly discussed this. We fully accept the importance of protecting bankrupt estates from excessive attorney fees under section 77(c). Nonetheless, we also stress the importance of compensating attorneys serving in reorganization cases at rates sufficient to attract competent counsel. Boston & Maine v. Sheehan, 778 F.2d at 897 - 98. Here, the legal services which the bankruptcy railroad sought and obtained involved the handling of railway labor issues that could have arisen as well in a nonbankruptcy context. It is essential that an entity struggling to reorganize successfully be able to compete in the marketplace for competent counsel in the field of specialty required. Id. at 898 - 99.