In Re Mullins

187 B.R. 523 (1995)

In re Walter Clayton MULLINS t/a Jill Mining Co., Debtor.

Bankruptcy No. 7-80-00727-HPA-11.

United States Bankruptcy Court, W.D. Virginia, Abingdon Division.

September 7, 1995.

John M. Lamie, Abingdon, Virginia, for debtor.

Daniel K. Read, Jessee & Read, Abingdon, Virginia, for heirs of debtor.

Jo S. Widener, Bristol, Virginia, for Estate of James E. Nunley.

Robert T. Copeland, Copeland, Molinary & Bieger, Abingdon, Virginia, Disbursing Agent/Escrow Agent.

MEMORANDUM OPINION

H. CLYDE PEARSON, Bankruptcy Judge.

Before the Court is the Application under Rule 2016 for attorney's fees of the Estate of James E. Nunley, Deceased, who was the Debtor's original counsel in this case. The Application seeks compensation in the sum of $50,000.00. Due to the fact that counsel is now deceased, the Court considers it necessary to carefully review the Application and the entire file herein; that, having done so, the Court concludes that the fee requested should be enhanced. In view of the standards outlined by the Fourth Circuit Court of Appeals, hereafter, it is clearly necessary to review the file and elicit therefrom and recite facts surrounding this attorney's services rendered and his standing and ability in the field of bankruptcy law, as well as other areas of the law in which he practiced, in determining a reasonable fee.

A general overview of the case is essential and necessary for proper resolution of the merits in fixing a reasonable fee.

A brief history is as follows:

This Chapter 11 petition was filed in this Court by Mr. Nunley over 15 years ago on June 27, 1980 and has remained open since its filing. It began when Walter Clayton Mullins, the Debtor, who, also, is now deceased, came to Mr. Nunley's law office in Bristol, Virginia, seeking legal representation, assistance and guidance. This attorney, apparently, had been highly recommended by persons in the area familiar with his professional standing, ability, and practice. Seated across the desk from Mr. Nunley was a physically and financially broken coal miner who had lost all of his worldly goods except a heavily mortgaged home, upon which were Internal Revenue Service ("IRS") and judgment liens. In fact, the IRS was threatening to seize and sell the home in satisfaction of delinquent tax liabilities. The Debtor may also have owned a couple of old motor vehicles and a questionable interest in a cause of action arising out of his mine operations in the coal fields of Southeastern Kentucky against a subsidiary of Bethlehem Steel Corporation ("Bethlehem").

Mr. Mullins' apparent review of the facts was to the effect that Bethlehem had trespassed upon and, apparently, taken over the land leased to Mr. Mullins from lessor — one Mr. Johnson. Not only had Bethlehem taken over the land but had, in effect, destroyed the coal operation and the property of Mr. Mullins, leaving him and his partner with approximately one-half million dollars in debts and no income or other property except the heavily mortgaged home and the few items of personal property.

A review of the file and the schedules filed with Debtor's petition reflects that his financial condition was such that he had no funds with which to pay or advance toward Mr. Nunley's fee. The schedules reflect that the parties agreed that Mr. Nunley would be paid, at some point in time, the sum of $500.00 and, in addition, would receive "a surcharge for favorable results." This Court construes the language as creating a contingent fee arrangement for any successful recovery that might be forthcoming in processing this Chapter 11 case and litigation of Mr. Mullins and the landlord against Bethlehem Steel in the state courts of Kentucky.

The history of this case is extensive. It has been pending in this Court for these many years, due in large measure to the diligence and urging by Mr. Nunley in his appearances before this Court that this case, for the benefit of the Debtor and creditors, should continue on the court docket. Its remaining on the docket has also, in no small measure, been due to the patience of this Court, which, over the years has declined to adopt the practice that the closing of the cases is the most important aspect of the work of this Court. It is a case that began as a dismal and hopeless undertaking to a highly successful conclusion. Its history and conclusion was sufficiently dramatic that it merited the attention of The Wall Street Journal and was reported as a front-page story in the March 23, 1995 issue. See attached Appendix "A."

In further reviewing the facts and circumstances concerning the fixing of a reasonable fee, it appears necessary in the evaluation of this attorney's service, in which no fee has ever been paid even to this date, that Mr. Nunley, himself, while setting his usual example to all members of the legal profession, personally related to Mr. Mullins' dilemma while seated across his desk.

This Debtor, apparently, was a person, who like himself, was the product of being born and reared in a small mining town in Letcher County, in the coal fields of Southeastern Kentucky. There, he and other members of his family were fed, clothed and supported by the sweat of a coal miner's brow. This was fortunate for Mr. Mullins because he had consulted an attorney to handle his case who would do so with every ounce and particle of his ability without demanding an up-front fee that his client could not pay. Obviously, this was because of his great concern for the financial circumstances of his client and the fact that he, himself, could relate to his client's financial problems.

His professionalism was imbedded further in his practice because he had risen from obscurity to the position of prominence in the legal profession.

When Mr. Nunley reached the enlistment age during World War II, he emerged from the coal fields and entered the service of his country as a member of the United States Marine Corps and served with great honor and distinction during that War. Upon his honorable discharge, he decided his future course would be to serve his fellow man in the legal profession; and by virtue of the available financial assistance of the GI Bill that provided educational benefits to discharged veterans, he proceeded to do so.

Following his pre-law studies, he entered the University of Richmond Law School where he graduated and was admitted to the Bar of Virginia. While enrolled, he served in various positions of leadership in the law school. Upon graduation, he established a solo practice in the City of Bristol, Virginia. There, he distinguished himself not only in the field of the general practice of law and as a substitute judge, but became known throughout the area as an able attorney. He was known among the legal profession, and the public generally, as one of the premier bankruptcy practitioners in the State of Virginia. As in law school, in the beginning of his practice he worked part time at night to support his young family while establishing his practice during the day.

In reviewing Mr. Mullins' case and deciding what approach to take, Mr. Nunley's legal skills, ability, and wisdom were very apparent. Although Mr. Mullins was an individual and had been doing business in the name of Jill Mining Company, it was apparent to Mr. Nunley that a Chapter 11 case was the appropriate and necessary approach, under the facts and circumstances, in order to propose a Plan to the creditors. In those days a Chapter 11 case was foreign terminology to most members of the bar of this State. A Chapter 11 would preserve the ongoing litigation and permit Mr. Mullins and the other parties to pursue the same in the State Courts of Kentucky in the hopes of a recovery. If recovery was successful, this would enable the creditors in this case to be paid, which, otherwise, would receive nothing in a Chapter 7 liquidation. The Chapter 11 case would permit Mr. Mullins to pursue and maintain control of the litigation in Kentucky in a manner that would ultimately prove successful and beneficial to all creditors.

The litigation in Kentucky proceeded over the period of approximately 15 years moving through the state and, indeed, the federal courts of Kentucky and, ultimately, to the Supreme Court of the United States. The final decision resulted in a recovery by all parties, including this Debtor, from Bethlehem Steel Corporation of approximately 40 million dollars. Mr. Mullins' estate recovered approximately 2 million dollars as his portion.

It appears further from a review of the file of this case that the proposed Plan, decided upon and prepared by Mr. Nunley, provided for the payment of all creditors in full of the principal amount of their claim without interest. The fact that Mr. Nunley agreed to take the case under a contingent fee arrangement, depending upon the outcome and success of the litigation in Kentucky, permitted the case to go forward to a successful conclusion. The creditors in this case, whose claims have been filed and allowed, have now been paid 100 percent of all their claims, which totaled in excess of $200,000.00.

The Plan which Mr. Nunley proposed, and was accepted and approved by the creditors and confirmed by order of this Court, provided for payment of 100 percent, but, as heretofore stated, did not provide for interest on the claims. Mr. Nunley could foresee that the litigation in Kentucky could be protracted and of long endurance. This provision alone has benefited the estate of the Debtor herein and the heirs and beneficiaries of Mr. Mullins' estate to the extent of approximately $300,000.00, in addition to the original surplus funds. This, of course, was fair and accepted and agreed to by the creditors, which at the time, obviously, realized that they would receive nothing unless there was a recovery from the litigation. The Plan was confirmed.

A review of the file further reflects that Mr. Nunley, on numerous occasions, appeared in this Court and, apparently, in the Kentucky courts in connection with this case from the date it was filed in 1980 until his untimely death in 1986. He, obviously, spent untold hours in connection therewith. For a period of six years, he shepherded the case in this Court by frequent appearances, persuading this Court that it was necessary for the benefit of the Debtor and the creditors that the case remain open, and would regularly update the Court on the progress of the Kentucky litigation. He usually appeared with competence and composure in representing his client and persuaded the Court to keep the case on the docket. In all of these matters, his position was sound and correct throughout. The success of the case in this Court and, indeed, in the Kentucky litigation, was due in large measure to the knowledge and ability that this attorney possessed in the applicable bankruptcy laws and his efforts and ability to pursue the Chapter 11 case in the manner in which he did, enabling Mr. Mullins' cause of action to go forward, ultimately, to a successful conclusion, paying creditors in full on all their claims.

A review of the case file further reflects that Mr. Nunley was in court frequently. Many appearances related to secured creditors' efforts to foreclose upon the residence as well as many other motions and proceedings. The file is replete with copies of communication and letters from creditors, attorneys, and other parties to Mr. Nunley, which had to be responded to and dealt with, requiring many hours of his time and attention. He filed numerous motions and pleadings over the six-year period dealing with various phases of the case. At one time it was converted to Chapter 13 and later reconverted to Chapter 11.

A recitation of the foregoing facts and circumstances is necessary under the special facts and circumstances of this application in consideration of fixing a reasonable fee for this attorney.

The law applicable to fixing attorneys' fees is generally viewed and considered in light of the Fourth Circuit Court of Appeals' decision in Barber v. Kimbrell's, Inc., 577 F.2d 216 (1978) at 226, where the Fourth Circuit adopted the standard of the Fifth Circuit in the case of Johnson v. Georgia Highway Express, 488 F.2d 714 (1974). The opinion adopts a 12-point standard for fixing fees as set forth therein. The court stated:

It is well established that the allowance of attorneys' fees "``is within the judicial discretion of the trial judge, who has close and intimate knowledge of the efforts expended and the value of the services rendered. And an appellate court is not warranted in overturning the trial court's judgment unless under all of the facts and circumstances it is clearly wrong.'" Lea v. Cone Mills Corp., 467 F.2d 277, 279 (4 Cir.1972), quoting United States v. Anglin & Stevenson, 145 F.2d 622, 630 (10 Cir. 1944) cert. denied, 324 U.S. 844, 65 S.Ct. 678, 89 L.Ed. 1405 [(1945)]. Yet, as this statement clearly implies, appellate review, while necessarily limited in scope, is nonetheless available to insure that the trial court's discretion has not been abused. We cannot afford effective appellate review unless we have before us the district court's reasons for finding a particular award appropriate.

The Johnson citation in the Barber v. Kimbrell's, Inc. case includes the 12 elements to be considered as follows:

These include: (1) the time and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to properly perform the legal services rendered; (4) the attorney's opportunity costs in pressing the instant litigation; (5) the customary fee for like work; (6) the attorney's expectations at the outset of the litigation; (7) the time limitations imposed by the client or circumstances; (8) the amount in controversy and the results obtained; (9) the experience, reputation and ability of the attorney; (10) the undesirability of the case within the legal community in which the suit arose; (11) the nature and length of the professional relationship between attorney and client; and (12) attorney's fees awards in similar cases.

In addition to the 12 elements that are considered in arriving at a reasonable fee in this case, the most significant element here is No. (8), which notes the amount in controversy and, more importantly, the results obtained. In Barber v. Kimbrell's, Inc., the district court had, in fact, enhanced the fee of the attorneys in that case, which was then before the Fourth Circuit. The case law is replete with decisions where courts have felt compelled to enhance the fee for the meritorious services rendered by counsel in the case.

The following are various cases which have allowed the Court to enhance fees due to the facts and circumstances of the case: Johnson v. Georgia Highway Express, 488 F.2d 714 (1974); Barber v. Kimbrell's, 577 F.2d 216 (4th Cir.1978); In re Warrior Drilling, Inc., 9 B.R. 841 (Bankr.N.D.Ala.1981); In re McLean, 6 B.R. 327 (Bankr.E.D.Va.1980); In re Penn-Dixie Industries, 18 B.R. 834 (Bankr. S.D.N.Y.1982); In re KDT, Nos. 82-B-11453/515 (Bankr.S.D.N.Y.1984) cited in 2 Collier ¶ 330.05.

In Penn-Dixie, the Court allowed compensation substantially in excess of usual charges based upon the excellent results achieved following the Chapter 11 successful reorganization. The Court stated that 11 U.S.C. § 330 had made the issue of economy in fixing fees inapplicable.

In the case of KDT, the Court increased and enhanced the fee award by $100,000.00 from the requested amount of $575,000.00 because the trial court found that counsel for the creditors to be "a critical element of the successful negotiation of a consensual Plan of Reorganization."

A brief analysis of the 12 factors, as they relate to the facts here, clearly reveals that fee enhancement is appropriate in this case. The time and labor expended was substantial and continuous for the period of six years from 1980 until Mr. Nunley's death in 1986. This case is rare indeed as to the novelty and difficulty of questions raised and dealt with. Without the able representation of this counsel, the creditors and Debtor would have suffered irreparably. The skill and ability demonstrated by Mr. Nunley in this case is rare indeed. He devoted undue hours to the case without any compensation or payment upon his fee, with only the expectation and apparent confidence he had in the ultimate recovery. His assessment of the Kentucky litigation's success was obviously 100 percent accurate as history and hindsight has now shown. The result obtained was extraordinary and was beyond anyone's expectation when begun. The capable legal ability of Mr. Nunley and, certainly, the attorneys handling the litigation in Kentucky, obviously, convinced him that the claim of his client was meritorious and worthy of his efforts and undivided attention.

As heretofore stated, the Application herein requests a fee of $50,000.00 to Mr. Nunley's Estate and was submitted by counsel who, apparently, did not have the benefit of or an opportunity to fully review the court file in this case. This Court has reviewed in detail the entire court file in order to fix a proper and reasonable fee. This Court, from such review, has concluded that, without question, the success of this case for the benefit of the Debtor and creditors, with creditors receiving payment in full of their claims, was the direct result of Mr. Nunley's efforts. The Plan — which was prepared, presented, approved and confirmed — permitted the litigation to successfully go forward in Kentucky, thereby enabling all creditors of Mr. Mullins to be paid in full. After payment of all creditors' claims and administrative expenses, the personal estate of Mr. Mullins will realize approximately 1.5 million dollars.

Accordingly, it is the opinion and conclusion of the Court, after careful review of all the facts, that a reasonable fee due Mr. Nunley's estate, under the facts, circumstances, and authorities herein, is the sum of $100,000.00, which is only a small percentage of the amount recovered for the estate herein, and which is fair and equitable and, without question, earned in large measure, due to the distinguished service that Mr. Nunley rendered to his client in this case. An appropriate Order will be entered.

APPENDIX A