Opinion ID: 460232
Heading Depth: 2
Heading Rank: 4

Heading: Compensation for Delay

Text: 38 We turn now to the final and perhaps the most difficult issue--whether the district court abused its discretion in denying petitioner's two supplemental petitions requesting compensation for delay in payment of his attorney fees and expenses. 39 On October 15, 1984, the court denied Moore's request for interest on fees and expenses awarded under the First Petition, at least partly on the basis of its understanding that section 3.3(2) of the Amended Plan for B & M's reorganization specifically provided for nonpayment of interest on administration claims. See 46 B.R. at 978. Moreover, the court denied interest payments as a matter of discretion because [o]ther claimants have been denied interest ... and Petitioner is in no better position in relation to the unsecured creditors than other claimants. Several months later, in its denial of petitioner's second request for interest on fees and expenses, the court further pointed out that it is not unusual for payment of fees of counsel, and other administration of allowances, to be postponed until final consummation of the plan of the reorganization and closing of the estate are in view. See 46 B.R. 990, 1002-03. For support, the district court looked to this court's decision in In re Boston & Maine Corp., 719 F.2d 493 (1983), cert. denied, City of Cambridge v. Meserve, --- U.S. ----, 104 S.Ct. 1913, 80 L.Ed.2d 461 (1984), which denied a request by taxing authorities for interest on delayed payments of taxes. The court also expressed concern that interest payments would diminish the shares of general unsecured creditors, penalizing them through no fault of their own. 40 After careful consideration of petitioner's arguments and the existing caselaw on the subject, we hold, subject to certain qualifications discussed infra, that the district court did not abuse its discretion in denying compensation for delay. Petitioner did not present, and we did not find, any clear federal precedent requiring the district court to award interest for delay in payment of attorney fees caused mainly by the time taken by the court, on its own motion, in reviewing the fees incident to a bankruptcy reorganization. While it is true that courts at times have adjusted attorney fees to take delay into account in nonbankruptcy contexts, they have been reluctant to award compensation for delay to counsel servicing a bankrupt estate. See, e.g., In re Yale Express, Inc., 366 F.Supp. 1376, 1382 (S.D.N.Y.1973); In re Citizens Mortgage Investment Trust, 37 B.R. 813 (Bankr.D.Mass.1984); In re Holiday Mart, Inc., 35 B.R. 181 (Bankr.D.Hawaii 1983). 41 In this case, while much time has passed since Shea rendered its legal services, reorganization is an inherently lengthy process for all participants, and Shea was not singled out for unfair treatment in this regard. Cf. Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 163-64, 67 S.Ct. 237, 240, 91 L.Ed. 162 (1946) reh. denied, 329 U.S. 833, 67 S.Ct. 497, 91 L.Ed. 706 (1947); Thomas v. Western Car Co., 149 U.S. 95, 116-17, 13 S.Ct. 824, 833, 37 L.Ed. 663 (1893). Moreover, problems with the validity of the orders authorizing the employment of counsel further delayed action on Shea's fee petitions. Particularly since the delay, as petitioner conceded in his brief, was primarily caused by the time-consuming judicial proceedings involved in reorganization, it seems unfair to tax the railroad for delay when its trustees were perfectly willing to pay the fees in a timely manner. Cf. In re Boston and Marine Corp. 719 F.2d at 499-500. Compare In re Meade Land & Development Co., 5 B.R. 464 (Bankr.E.D.Pa.1980) (denying interest on counsel fees, reasoning that there is no reason to reward the party who is at least partially responsible for the delay). 42 In its denial of Shea's second petition for compensation for delay, the district court appeared to retreat from its earlier reading of the Amended Plan as prohibiting payment of interest on all administration claims, including attorney fees. Instead, the court listed the Amended Plan's provision as simply another factor to which [w]eight must be given in exercising its discretion whether to grant compensation for delay. Even assuming that the court's later characterization of the Amended Plan, which favors the petitioner, is the correct one, we find that the district court did not abuse its discretion in denying compensation for delay. The court properly took into account the fact that other administrative claimants, those to whom the Amended Plan's provision for nonpayment of interest clearly applied, did not receive any interest. Moreover, we have already denied interest on deferred, post-petition taxes that B & M owed to taxing authorities. See In re Boston & Maine, 719 F.2d 493. 43 While we thus affirm in most respects the district court's denial of Shea's request that it be compensated for delay in receiving its fees and expenses, we are troubled by one aspect. According to representations by Shea, under an agreement between the trustees and the newly reorganized railroad, $3 million have been set aside in a separate, interest-bearing fund as of June 30, 1983 for the specific purpose of paying certain outstanding claims arising out of the reorganization that had not been paid prior to the consummation date of the reorganization. See Appellant's Brief, Appendix A. Apparently, Shea's attorney fees are included among the claims which are to be paid from this fund. See section 6.04 of the Consummation Order (June 17, 1983). According to an affidavit filed by the then Assistant Vice-President of Finance, this fund should contain sums sufficient to cover all pending petitions for attorney's fees filed as of that date as well as pending personal injury settlements and other expenses. It is also our understanding that this fund has been earning interest since June 30, 1983. 44 Assuming that all this is true, we see no reason why the amount of interest earned by the portion of the fund that is to be awarded to Shea should not be paid to petitioner. See In re Penn Central Transportation Co., 23 B.R. 499, 513 (E.D.Pa.1982); cf. Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 162, 101 S.Ct. 446, 451, 66 L.Ed.2d 358 (1980) (The usual and general rule is that any interest on an interpleaded and deposited fund follows the principal and is to be allocated to those who are ultimately to be the owners of that principal.). It is true, of course, that Shea has no right to the money until its fee petitions are granted. Nonetheless, if some of the money was earmarked for payment to B & M's counsel, and Shea is now entitled to payment from that fund, it seems appropriate for petitioner to receive its proportionate share of the interest that has accrued in the interim. For parties other than for whose benefit the fund was established to receive the interest that has accrued, simply because the fees had not been paid earlier to Shea, strikes us as an undeserved windfall to them. 45 We are conscious, however, that we do not have enough information to make a final resolution of this matter. Particularly because our decision as to Shea may well implicate other pending attorney claims, we are reluctant to make a final determination as to the interest, if any, that might be awarded to petitioner relative to this fund. In these circumstances, we prefer to remand to the district court for specific determination of Shea's right to a portion of the interest that has accrued in the separate fund from June 30, 1983. The court should determine, for example, whether the fund contains sufficient sums to make such interest payments; the proper amount to award, if any; and the effect on other outstanding claims. If circumstances and equities permit, we authorize the district court to award the proper amount of interest that has accrued from June 30, 1983 to the time the payments are actually made. Because we are reversing the district court on the issue of reasonable fees, we remand to a different judge for this determination. See O'Shea v. United States, 491 F.2d 774, 779 (1st Cir.1974).