Opinion ID: 317782
Heading Depth: 1
Heading Rank: 2

Heading: Principles Governing Bankruptcy Fee Allowances

Text: 21 In determining whether the fees awarded counsel were excessive, we are guided by the economic spirit of frugality that underlies the Bankruptcy Act. In In re Mt. Forest Fur Farms of America, Inc., 157 F.2d 640, 644 (1946), this court, speaking through Judge Martin, said: 22 '. . . the policy of the Bankruptcy Act, manifest in all its provisions regarding expenses and fees, is to reduce to a minimum the cost of administering estates, . . . the courts are bound to give the statute such construction and application as will fulfill the intention of Congress. In re King, D.C.W.D.Tenn., 11 F.Supp. 351, 357. Among other authorities, reference was made to the opinion of Mr. Justice Cardozo in Realty Associates Corporation v. O'Connor, 295 U.S. 295, 299, 55 S.Ct. 663, 79 L.Ed. 1446, where he declared for the unanimous court that extravagant costs of administration in winding up estates in bankruptcy have been denounced as crying evils; that, in response to those complaints, Congress had attempted to fix the limit for expenses growing out of the services of referees and receivers; and that a court should not forget that Congress meant to hit the evil of extravagance, wherefor the meaning of the words of the Bankruptcy Act if doubtful, must be adapted to its aims.' 4 23 More recently, Bankruptcy Judge Asa S. Herzog has written as follows: 24 'There is . . . one overriding principle which governs bankruptcy fees and overshadows all other canons. This is the economy principle, often referred to as the 'Economic Spirit of the Act' . . . 25 'Economy in administration is now axiomatic, and . . . it is sufficient to note that the Supreme Court has denounced extravagant costs of administration as a 'crying evil' and has warned against 'vicarious generosity.' 26 'The importance of the economy principle is that it modifies the business standards which ordinarily are the measure of fees. Bluntly, fees in bankruptcy cases must be considerably lower than the compensation of those engaged in private practice.' Herzog, 'Fees and Allowances in Bankruptcy', 36 Conn.B.J. 374, 376-377 (1962). 27 3A Collier on Bankruptcy P62.12, at 1491-93, (14th ed. 1971) analyzes the elements which, in additon to the economy principle, should be used to determine the reasonable value of services rendered by counsel: 28 'In determining the reasonable value of services rendered by an attorney the following elements are to be considered: 'The time spent, the intricacy of the problems involved, the size of the estate, the opposition met, the results achieved,-- all subject to the economical spirit of the Bankruptcy Act.' In view of the primary purpose of bankruptcy liquidation it is not surprising to find that, aside from the principle of economy, the results achieved constitute the factor of greatest determinative weight. This implies that (1) great success and benefit to the estate commands a liberal compensation, and (2) all effort and labor may go virtually without reward where no benefit accrued to the estate. Benefit to the estate as a yardstick for measuring the value of attorneys' services has been recognized by the Supreme Court in Randolph v. Sruggs, (190 U.S. 533, 23 S.Ct. 710, 47 L.Ed. 1165 (1903)). But even where the estate undoubtedly benefitted, for instance where the total amount of claims was reduced thanks to counsel's efforts, there may be at least two reasons for reducing his compensation as earned by the benefit conferred. One is the estate's financial inability to carry the burden of an adequate remuneration. The other, again an offshoot of the everpresent economy doctrine, may be the fact that counsel for trustee or receiver in performing certain services, for instance contesting claims against the estate, acted not only on behalf of the estate, but also on behalf of creditors, individual or groups.' 29 The United States District Court for the Northern District of Ohio has codified the factors to be considered in determining counsel's compensation in its Bankruptcy Rule 12(c), which provides as follows: 30 'Among the factors to be taken into consideration in determining the compensation to be allowed to attorneys entitled thereto by law are the following: (1) The amount of work done. (2) The difficulties or intricacies of the problem presented. (3) The skill required and experience of counsel in similar cases. (4) The results accomplished. (5) The amount involved in connection with the services rendered. (6) The size of the estate. (7) The length of time consumed. (8) Contingency or certainty of compensation.' 5 31 Finally, we state the standard of review which we apply in considering orders of the Bankruptcy Court which have been confirmed subsequently by the District Court. This court has held consistently tha the findings of fact by a Bankruptcy Judge will not be reversed unless they are clearly erroneous. In re Nelson & Sons, Inc., 426 F.2d 235 (6th Cir. 1970); Rule 52(a), Fed.R.Civ.P. In In re Nelson, the District Judge filed an extensive opinion and order in which he detailed his reasons for confirming the findings of the referee, and we cited approvingly Cunningham v. Elco Distributors, 189 F.2d 87 (6th Cir. 1951), wherein we said: 32 'No principle has been more firmly established in this circuit than that concurrent findings of the referee in bankruptcy and the district judge are not to be set aside, except upon clear demonstration of mistake.' 189 F.2d at 88-89. 33 In the present case, the District Judge incorporated the opinion of the Bankruptcy Judge and confirmed the Bankruptcy Judge's allowance of fees.