Mr. Pennypacker withdrew as counsel for the debtor, but, continued in the case representing Mr. Gossling as private trustee for a large stockholder, and in this capacity advised in connection with the promotion of the "Gossling Plan," one of the two plans which aborted in the early part of 1938. Mr. Gossling is not now claiming any compensation for services rendered during any part of this period, but limits his claim to the three years following April, 1938. It is based wholly upon services in connection with the plan which was finally adopted. Throughout this period, Mr. Hayes, one of the parties largely interested in the reorganized company, acted with Mr. Gossling. Much that has been said about Mr. Middleton applies to Mr. Gossling. He states in his petition that he "labored both unceasingly and most diligently," and that statement is undoubtedly made in good faith and is true. However, I must consider the value of his services to the reorganization and, so considered, I am unable to give them the value which he claims for them. I believe $55,000 is a proper allowance.
Mr. Pennypacker, counsel for the debtor: This claim relates entirely to services rendered in connection with the Gossling Plan, which had to be abandoned and of which comparatively little substance was carried over into the debtor's plan finally adopted. Mr. Gossling, who worked with Mr. Pennypacker throughout this stage of the proceedings, and who made no claim for that part of his work, testified: "Q. Then I understand that you do not consider your services for the Gossling Plan were of any benefit to the company? A. You can say that if you wish, yes." Here, as in all the requests, the question is not what the services were worth to the interest represented, but only their value to the estate. I also think it proper to state that on a review of the whole matter, in the light of my present knowledge, I have come to the conclusion that the interim allowance of $4,000 allowed to Mr. Pennypacker was more than it should have been. The total amount of compensation is therefore fixed at $6,000.
Bondholders' and Creditors' Committees and attorneys for same: There are certain general principles which apply to all of these. Entirely apart from the actual amount of work performed by these petitioners, and the abstract value (if the term is permissible) of their services, two well established rules, binding on me, require a drastic reduction in the amounts claimed.
First: In Dickinson Industrial Site, Inc., v. Cowan, 309 U.S. 382, 60 S. Ct. 595, 599, 84 L. Ed. 819, the Supreme Court held that such claimants are entitled to allowances only for "service rendered to and benefits received by the estate." Services rendered in connection with plans which have been abandoned or in opposing other plans as unfair and unsound, may under special circumstances, command compensation out of the estate, but the question of the value of their contribution to the ultimate reorganization must always be the controlling factor, and it must be decided in the light of the admitted fact that in all cases of this kind the claimants do represent special interests to whom they may look for compensation for such portion of their work as was primarily for their clients. Tested by this principle it is obvious that a very large part of the work done by the Committees and their counsel prior to April, 1938, was absolutely sterile as far as any progress toward a successful reorganization was concerned. Although at the Referee's hearings and during the negotiations there was a great amount of discussion and argument as to the fairness and feasibility of the two opposing plans, the real difficulty was the practical one that the proponent of neither plan ever commanded enough votes to even have his plan considered, and a large amount of the legal work was bound to be wasted effort until that difficulty could be overcome.
Second: In Re Standard Gas & Electric Company, 106 F.2d 215, 217, the Circuit Court of Appeals for this Circuit ruled, without qualification and in the plainest possible language, that security holders' committees and their counsel in corporate reorganizations "cannot expect to be compensated at the rate which similar services would command in purely private employment." This rule is broader than the one just stated and applies to claims for services by such committees which directly contribute to the reorganization. Otherwise there would have been no use in stating it.
Mr. Brown's claim as counsel for the Independent Bondholders' Committee involves some special considerations. His contention that he and his committee "started the ball rolling" is not without foundation. Of course, the major hindrance -- the deadlocked interests -- was, at the same time, being eliminated, and, in addition, the Indenture Trustee's active entry into the negotiations gave the whole thing a strong impetus; so that it is not intended to say that the reorganization would not have got under way without this committee and its counsel. They did, however, make a substantial contribution to the result. Mr. Brown's services covered a comparatively short period, about a year from January, 1938, to February, 1939, and in part were duplicated, or at least assisted, by Messrs. Hayes and Gossling.
Independent Bondholders' Committee:
Barclay, Chairman: $ 1,000
Wetherill, Member. Disallowed:
Brown, Attorney: 6,000
Bondholders' Protective Committee:
Warnock, Chairman: 3,000
McClaim, Secretary: 3,000
Felix, Attorney: 7,000
Klauder, Secretary: 1,000
Jenkins & Montgomery, Attorneys: 6,000
Minority Stockholders' Committee:
Roper, Attorney: 100
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