119 F. Supp. 524 | D. Del. | 1954
In 1948, the Securities and Exchange Commission approved
A capsule recapitulation of United’s-, recent history under the Act is appropriate. In August 1943, the SEC issued am order in proceedings brought under § 11 (b) ’(2) of the Act directing United to.change its existing capitalization to one' class of stock and to take such action as-, would terminate its existence as a holding company.
A third plan (the “retirement plan”),, with respect to which the instant appli
Various stockholders opposed this plan. A preference stockholders committee, through counsel,
The applicable standards which the Commission set for itself to gauge the amount of compensation due the applicants are identical with those set in the Engineers Public Service Company fee decision,
Phillips and Davis
1. Fees in the aggregate amount of $46,000 and reimbursement of expenses totaling $42,201.14 were requested by Phillips. The SEC awarded him a fee of $2,000 and $370.84 for expenses. The
The record shows Phillips’ activities pertaining to the retirement plan consisted of opposition to United’s plan before the SEC, profert of a substitute plan of his own, a motion in this court for a change of venue in the enforcement proceedings, a brief and argument in this court opposing enforcement, and a mo-, tion for stay of enforcement of the court approved plan in the Court of Appeals and argument thereon. Success did not attend any of these efforts to which Phillips approximates devotion of 300 hours. For a'part of the proceedings before the SEC,
2. The second of the SEC’s-Rules of Practice
, 3. Likewise, I sustain, the SEC' in its findings
4. There remains Phillips’ allocated fee request of $6,0,00 and $370.84 of expenses directly attributed to his retirement plan services. All of the prorated expenses were allowed by the SEC. I, too, approve $370.84 disbursement as being equitable. Of the $6,000 request, $2,000 was awarded for fees. The reasons for this are given in the Commission’s words:
Although Davis originally applied for a $5,000 fee, he appeared in these proceedings to defend and urge approval of the $2,000 SEC allowance for the 20 days devoted to the matter. He worked
5. United’s management, with more than token resistance, opposes any .-allowances to Phillips or Davis. The attack is two-prónged. The source of Phillips’ authority to act as an attorney-in-fact, i. e., the 1947 proxies he held, is impugned as bereft of relationship to the retirement plan. However, the SEC decided
6. The second United objection assumes the conclusion it seeks to prove. Citing the New England Power Association
Boehm & Fischman; Hays, St. John, Abramson & Schulman; Kurland & Wolf son; Preference Stockholders Committee and Secretary
7. Soon after the SEC hearings began on the retirement plan, a Preference Shareholders Committee
The entire reasoning of the Commission is wrapped in these words:
The opinion reflects motivating factors: lack of success in attacking the management plan and in advocating the voluntary exchange proposal before the Commission and failure before the courts. An overtone critical of the quality of counsel’s services may or may not have been intended by the reference to failure to present affirmative testimony opposing the plan and to the cross-examination as being “ineffectual”. Whether the Commission felt such testimony was available and appropriate, yet, unwisely omitted, or whether it simply recites the omission without criticism to indicate limited scope of services is not. clear. Since the record is devoid of any evidence to support the former thesis, I adopt the latter interpretation. Tagging the cross-examination “ineffectual” may criticize it as weak, useless, or inefficient but in context may only mean it did not succeed in disturbing the direct testimony. The term “ineffectual” was also used to describe Phillips’ services emphasizing lack of success. There, the additional finding of an inartistic, delaying participation by Phillips connotes inefficiency and dims the significance attaching to “ineffectual”. I therefore conclude the Commission did not disparage the quality of counsel’s services in its decision but rather reiterated counsel’s failure to win the case or any part of it. Thus, the entire basis of the Commission’s decision as to Committee counsel is this lack of success, which in the opinion is made synonymous with absence of “demonstrable benefit to the estate”. Compensation was awarded counsel solely on their representative class status-with nothing allowed for services as; such.
For three reasons I conclude the SEC allowance to counsel must be modestly increased to accord with substantial evidence and appropriate legal1 standards. A. Resolving all doubts in favor of the administrative decision pertaining to counsel’s services before the Commission, I yet find it erroneous as a standard and contrary to the evidence for SEC to have refused compensation for service in this court. Committee counsel carried the bulk of the burden in this; court both by brief and appearance. While not ultimately persuaded by their arguments, I gave them serious consideration and benefited from their presentation. . They .were competent services of industrious counsel which benefited the-estate in the judicial phase by supplying
Committee members, through counsel, press their original requests for allowances of $1,000 for the Chairman, $750 for each of the two members, and $1,500 for the Secretary. SEC awarded $250 to each. Approximately six meetings entailing 100 hours were held. Other than this, I am given no details of their individual contributions to the litigation but have pressed upon me their high professional status. No evidence runs counter to the SEC evaluation finding that the Committee services were worth $1,000 in all, and I approve that award.
United’s objections to compensation of the Committee and its counsel are not well founded. The formation of the Committee is charged as unnecessary because the same counsel were already in the case representing individual clients. However, this overlooks both the salutary effect upon the estate of representation under Eule U-62’s stringencies and SEC’s encouragement of this type of practice in.prior decisions.
Cross Objections to Allowances of Satisfied Fee Eeeipients
Committee counsel’s brief
Phillips sponsors objections to allowances to United’s counsel. The charge is breach of Eule U-62’s prohibition of trading in securities of the corporation undergoing reorganization. The Commission considered this accusation and rejected the premise on which it is based, saying:
In referring to the briefs and memoranda filed on the investment plan in United’s reorganization, Circuit Judge Miller said:
The Order of SEC providing for the payment of $2,000 as a fee and $370.84 reimbursement of expenses to Randolph Phillips is affirmed.
The Order of SEC providing for the payment of a $2,000 fee to John F. Davis, Esq., is affirmed.
The order of SEC relating to Boehm & Fischman; Hays, St. John, Abram-son & Schulman; and Kurland & Wolf-son is reversed; a payment of a $5,000 fee and $1,690.58 reimbursement of expenses, less any amounts previously received under the SEC Order, should be directed after remand to the SEC.
The Order of SEC relating to the payment of fees and expenses to the three members and secretary of the Preference Stockholders Committee; to Whitman, Ransom, Coulson & Goetz; to Southerland, Berl & Potter; to John J. Burns, Esq.; and to Townsend, Elliott & Mun-son is affirmed.
An Appendix is attached identifying the principals, their objections, and some details of their activities.
Appropriate orders may be submitted.
A. Claimants Dissatisfied With Their Awards:—
Requested Awarded
Briefs Appearances Hours Fees Expenses Fees Expenses
S. Boehm & Fischman; Hays, St. John, Abramson & Schulman; SEC and 2 Kurland & Wolfson 4 courts 2058 $50,000 $1,690.58 $2,000 $1,690.58
Activities: Appeared before Examiner and the Commission; filed a declaration under Rule U-62; attacked the proposed plan on ten or more separate grounds, most of which the Commission paused to discuss in its opinion; argued for redemption price of $55; prepared and submitted a proposal for a voluntary exchange of stock; cross-examined witnesses; filed a brief; divided oral argument between Mr. Boehm and Mr. Heilbron; filed objections and opposed enforcement in District Court orally and by brief; noticed appeal and secured transmission of record to Court of Appeals; applied for, argued and briefed stay of enforcement
Requested Awarded
Appearances Hours Fees Expenses Fees Expenses
2. Randolph Phillips SEC and 2
courts 2300 $46,000 $42,201.14
For activities from Dec. 1942 to Feb. 1950
300 $6,000 $370.84 $2,000 $370.84
re excluding '43, ’44, retire- ’47 proxy fights ment and pertaining only plan to the retirement plan
Activities ? Appeared before the Commission, opposed United’s plan, prepared, presented and testified for his own plan for retiring the preferred at the liquidation price plus certain other rights; cross-examined witnesses; filed briefs, prepared, filed, and argued in the District Court a motion for change of venue and a brief opposing enforcement; moved for, argued and briefed stay in Court of Appeals.
B. Contented Claimants Whose Awards Are Objectionable To Other Applicants:—
Objector Reasons Awarded Hours
1. Randolph Phillips United a) Breach of fid. duty b) Obstructed plan $2,000 ($370.84) Approx. 300 re retirement
c) Non-lawyer Over 1300 in all
2. John F. Davis United a) No benefit to estate $2,000 Approx. 20 days
3. Boehm & Fischman, United etc. a) Improper motives in forming Com'ee $2,000 2058
b) Comm. unnecessary
c) No benefit
4. The Three Mem- United bers and Secretary of Pref. Comm. a) Strangeis to United b) No services $250 each Approx. 100 hours
5. Whitman, Ransom, Phillips etc. a) Breach of U-62 & fiduciary duties $55,000 ($927.53) 931% — Partners 1541% — Associates
6. Southerland, Berl, Phillips etc. a) Breach of U-62 & fiduciary duties $2,000 $472.39) Not specified
7. John J. Burns Phillips a) Breach of U-62 & fiduciary duties $3,400 Not specified
8. Townsend, Elliott Boehm & Munson a) No benefit; indiv. client $5,000 ($793.35) Approx. 300 — Mostly senior member
b) Ended service after Comm, phase
. Holding Company Act Release (HCAR) 8409, August 9, 1948.
. In re United Corporation, D.C.Del., 82 F.Supp. 196.
. HCAR 11290, June 4, 1952.
. The United Corporation, 13 S.E.C. 854 (1943) .
. The United Corporation, 17 S.E.C. 404 (1944) ; 19 S.E.C. 190 (1945); HCAR. 5859 (June 11, 1945).
. Subsequently, United filed a fourth plan, providing, among other things, for the transformation of United from a public utility holding company to an investment company. This plan, as amended, has been approved by the SEO, HOAR 10614 (June 15, 1951) and HOAR 10643 (June 26, 1951).
. Boehm & Eischman; Hays, St. John, Abramson & Schulman; and Kurland & Wolf son.
. Townsend, Elliott & Munson.
. These were the three fee applicants whose requests the Commission wholly denied and who brought no objections to this court.
. Randolph Phillips, who, although not a lawyer, presented his own case for the greater part of the proceedings. Phillips for a time also retained counsel, applicant John E. Davis.
. Whitman, Ransom, Coulson & Goetz, John J. Burns, and Southerland, Berl & Potter were counsel for the United management.
. HOAR 11096 (March 26, 1952), p. 4.
. Phillips appeared at the Commission hearings, cross-examined various witnesses- during several days absence of his counsel, Davis, testified in support of his plan, and prepared and submitted several exhibits thereto.
. HOAR 11290, pp. 21-24, supra, n. 3.
. 15 U.S.C.A. following § 78(u).
. HOAR 11290, p. 12.
. At the beginning of' its hearings, the SEC could have profitably stifled alii nascent misconceptions-, by a- forthright-announcement of the status-in which eachi one appearing would: he. heard.
. HOAR No. 11290;. pp,. 12--19..
. Throughout the findings as to Phillips, the Commission is careful to confine its decision of disallowance to the effect Phillips’ other activities had on “these proceedings”, No adjudication is actually made of the intrinsic worth of the earlier services in other phases of United’s reorganization. The sprinkling of broad language in the opinion which would seem to justify Phillips’ fears of a final adverse ruling on the compensability of his other activities is not a part of the Commission’s holding, nor could it be in these retirement plan proceedings.
. This leaves Phillips free to seek fees for activities not evaluated here when the proper occasion arises. Application has already been filed with SBC by Phillips for reimbursement of expenses in the proceedings relating to United’s plan to become an investment company.
. HCAR 11290, p. 14.
. HCAR 1129Q, pp. 18-19.
. HOAR 11290, p. 19, footnote 22.
. HOAR 8751.
. Committeemen were Carl Sherman, Stephen B. Gibbons, and John M. Chapman, who devoted an aggregate of 100' hours and hold some six meetings. Joseph Rogers was Secretary and lists 75 Ihours of activity. Committee members requested $2,500 in fees and were each .allowed $250 as was the Secretary who requested $1,500. ' United protests any award to them.
. The Kurland firm entered the case only after this court had approved the plan and was engaged to assist in prosecuting an appeal upon the illness of Heilbron of the Hays firm. A total of 53 hours was expended in filing the record in the Court of Appeals and preparing two briefs supporting the motion to stay.
. HOAR 11290, pp. 9-10.
. “The only amounts that were allowed either to Mr. Phillips or to Mr. Boehm represented not compensation for services but compensation for being there * * * Transcript, April 28, 1953, page 88.
. Illustrative of the restrictions, those subject to the Rule may not buy or sell any stock or securities of the concerned corporations and have an affirmative obligation to represent the class throughout the proceedings so long as reasonable opportunity of success remains. Individual shareholders may sell their stock, cease participation at any time, and trade in the securities at will.
. New England Power Association, HOAR 8751; Midland Utilities Co., HOAR 8982. .
. Supplemental Memorandum In Behalf Of Application For Allowances By The Preference Stockholders Committee And Its Counsel, May 15, 1953, p. 25.
. HOAR 11290, p. 6, n. 8.
. “In the Eleotric Case, we noted that securities transactions had been effected by a few of the fee claimants in pending cases which in general had been sporadic in character, did not appear to have been based upon the use of inside information and were not part of a concerted scheme to affect the course of the reorganization, that some of the transactions resulted in losses, and that the profits on the other transactions appeared to be relatively trivial in amount in relation both to the fees claimed and to our estimate of the reasonable compensation to be allowed for the services rendered.” HCAR 11290, p. 5, n. 7.
. “As a result, the $5,000 amount which they [Burns and his associate] sought was reduced with the staff recommendation to $3,400 and that recommendation was adopted by the Commission.” Tr., April 28, 1953, p. 86.
. Downing v. S.E.C., D.C.Cir., 203 F.2d 611, 621.