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IN RE UNIVERSAL LUBRICATING SYS.

July 22, 1947

In re UNIVERSAL LUBRICATING SYSTEMS, Inc.


The opinion of the court was delivered by: GOURLEY

This matter comes before the Court on petition for allowance of attorneys' fees by the various members of counsel who were concerned in litigation in which the Reorganized Company was involved.

At No. 3342 in Equity in this Court, in the suit of Stewart-Warner Corporation v. Universal Lubricating Systems, Inc., a bill of complaint had been filed on or about the 6th day of October, 1937, by said Stewart-Warner Corporation against the Universal Lubricating Systems, Inc., debtor herein, praying for injunctive relief and other relief by reason of alleged infringement of certain patent or patents; thereafter in that said proceeding at Equity No. 3342 and answer and counterclaim and then an amended counterclaim were filed by the said debtor, defendant and counterclaimant. With further reference to the said counterclaim, as amended, there have been at said Equity No. 3342 various and sundry proceedings in lumine and of a preliminary nature, all of which will more fully appear by reference to the docket entries at said No. 3342 in Equity.

 On May 12, 1941, bankruptcy proceedings were instituted for the purpose of protecting creditors of the Universal Lubricating Systems, Inc., and on August 5, 1941, the proceedings were transferred to one of reorganization, in accordance with the provisions of Chapter X of the Bankruptcy Act. Austin L. Staley, petitioner therein, was Trustee in the bankruptcy proceedings and was substituted, therefore, as Trustee for the debtor in the reorganization proceedings.

 Subsequently, and following various discovery and other proceedings at said No. 3342, the said action or suit, and bill of complaint of the plaintiff for infringement and other relief, and the said answer and amended counterclaim, came on for trial before this member of the Court on October 1, 1946, and continued until the 28th day of February, 1947. By consent, in the early stages of said trial, the bill of complaint, upon which the Stewart-Warner Corporation based its said suit or action, was dismissed, with prejudice, and thereupon the said Austin L. Staley, Trustee, proceeded to the trial of his said counterclaim, as amended, and the reply thereto.

 After approximately four and one-half months of trial, and with a great amount of negotiations between the Trustee and the members of trial counsel who represented the respective party litigants, and through the assistance of the Court, an offer of compromise was submitted by the Stewart-Warner Corporation for the settlement of said proceeding, in the amount of Two Hundred Twenty-five Thousand Dollars ($ 225,000). After due and proper notice to all persons concerned, and after hearing before the Court, an order was entered on the 28th day of February, 1947, approving said compromise settlement and directing the Trustee to accept and receive said amount of Two Hundred Twenty-five Thousand Dollars ($ 225,000).

 Under the provisions of the Plan of Reorganization, it was specifically provided that the Stewart-Warner litigation should not be passed to the Reorganized Company but should be retained and litigated by the Trustee. It was further provided in connection with said litigation as follows:

 'After deducting from the recovery of said litigation, all counsel fees, costs, expenses or other items incidental to the litigation, and also any taxes or other charges of similar or dissimilar nature, which equitably should be deducted therefrom, the remaining proceeds shall be earmarked and paid by the Trustees in the following manner:

 '1. First, he shall pay to the reorganized company the amount needed for the following purpose -- for the retirement of the issued preferred shares of its capital stock, said amount to be earmarked and available only for that purpose.

 '2. If said remaining proceeds, so earmarked, shall be insufficient for a retirement of all of said preferred shares, they shall be distributed equally among said preferred shares, in the nature of a liquidating dividend.

 '3. The balance then remaining in the hands of the Trustee, after such earmarking and distribution -- if there be such balance -- shall be distributed and paid by the Trustee, under the direction of the Court, among the present preferred and common shares of debtor, as a liquidating dividend and in accordance with debtor's provisions as to the priority rights of its preferred shares on liquidation.' See In re Universal Lubricating Systems, Inc., D.C., 59 F.Supp. 171; Id., 3 Cir., 150 F.2d 832, certiorari denied 326 U.S. 744, 66 S. Ct. 58, 90 L. Ed. 444.

 The requisite acceptance having been obtained from creditors, the plan was then confirmed by Judge Gibson's order entered November 23, 1945, and recorded in the Office of the Recorder of Deeds of aLlegheny County on November 23, 1945, in Deed Book Volume 2865, page 360. There was no appeal from that order of confirmation. The order of consummation of the plan was entered by Judge Gibson on May 3, 1946.

 Subsequent to the approval by the Court of the offer of compromise, by way of settlement for the amount of Two Hundred Twenty-five Thousand Dollars ($ 225,000) on the 28th day of February, 1947, the Universal Stockholders' Protective Committee filed a proceeding in court on March 7, 1947. This proceeding requested the Court to amend the orders of confirmation and consummation of the plan which were entered on the 23rd day of November, 1945, and May 3, 1946, respectively. It was requested that the plan be amended by the appointment of a Master for the purpose of determining the value of the holdings of the Preferred Stockholders of the Universal Lubricating Systems, Inc., as of the date of the approval of the compromise settlement, which was February 28, 1947. This proceeding was carefully considered by the Court and an opinion was filed dismissing the petition on May 5, 1947, all of which will more fully appear by reference being had to the opinion filed, which is not officially reported as of this date.

 On the 10th day of April, 1947, a preliminary order was entered by this Court in which it was directed that all attorneys or any other persons who had just claims, by way of reimbursement for expenses or allowance of compensation, out of the fund of Two Hundred Twenty-five Thousand Dollars ($ 225,000) were to file said claims with the Clerk of this Court on or before May 1, 1947. It was further provided that due and proper notice be given by the Trustee to all persons who were known to have any claims of any nature against said fund, and in addition thereto to insert a copy of said preliminary order in the Legal Journal and a newspaper of general circulation in the City of Pittsburgh. It was also provided that all claims regardless of their nature, in connection with the fund of Two Hundred Twenty-five Thousand Dollars ($ 225,000), would be considered by the Court on the 23rd day of May, 1947.

 Due and proper notice was given, and the Court proceeded to hear the various claims involved, either for reimbursement for ...


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