DECISION AND ORDER
Before this court is an application for compensation and/or reimbursement from the Chapter 11 estate of United States Lines, Inc. (“U.S.L.”). ■
Applicant Wisehart & Koch (“Wisehart”), as counsel to the Employee Service Bureau (“ESB”) and certain other former non-union employees of U.S.L., seeks an order pursuant to 11 U.S.C. § 503(b)(3) and (4) (1986) and section 502(g) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(g)(1) (1974),
I.
Section 503(b)(3) and (4) of the Bankruptcy Code, 11 U.S.C. § 503(b)(3) and (4) (1986), permit the court to allow as administrative expenses the actual and necessary expenses incurred by a creditor or his attorney in making a “substantial contribution” to a Chapter 9 or 11 estate.
The threshold test to be met by any section 503 claimant is having made a “substantial contribution in a case under Chapter 9 or 11 ...” This phrase is derived from sections 242 and 243 of the former Bankruptcy Act, 11 U.S.C. §§ 642, 643 (repealed). The principal test under these former sections was the production of a direct benefit to the debtor’s estate, and the legislative history pertaining to section 503 indicates that Congress intended that this benefit test would remain the touchstone of awards.
In re Jensen-Farley Pictures, Inc.,
The “substantial contribution” test is thus satisfied where the services rendered have substantially contributed to an actual and demonstrable benefit to the debtor’s estate, its creditors, and to the extent relevant, the debtor’s shareholders.
See In re McLean Industries, Inc.,
While the policy aim behind these provisions is to promote meaningful creditor participation in the reorganization process,
In re General Oil Distributers Inc., 51
B.R. 794, 805 (Bankr.E.D.N.Y.1985);
Calumet Realty,
As a result, benefits which have been found to be insubstantial under § 503(b)(3) and (4) include those services which would merely deplete the assets of an estate without providing a corresponding greater benefit. Accordingly, services found to be duplicative of duties of the debtor or other court-appointed officers, absent proof that the appointed officer is either unable or unwilling to act, are not to be compensated since they would entail an excessive and undue burden upon the estate.
In re Texaco, Inc.,
Creditors face an especially difficult burden in passing the “substantial contribution” test since they are presumed to act primarily in their own interests.
Jensen-Farley,
Such services generally take the
“form of constructive contributions in key reorganizational aspects, when but for the role of the creditor, the movement towards final reorganization would have been substantially diminished. The integrity of § 503(b) can only be maintained by strictly limiting compensation to extraordinary creditor actions which lead directly to significant and tangible benefits to the creditors, debtor, or the estate.”
In re D.W.G.K. Restaurants,
Furthermore, something more than mere conclusory statements regarding one’s involvement in an act’s resulting “substantial contribution” must be tendered in order to for such involvement to be deemed compensable. Corroborating testimony by a disinterested party attesting to a claimant’s instrumental acts has proven to be a decisive factor in awarding compensation to activities which otherwise might not constitute a “substantial contribution.”
Compare Baldwin-United,
Absent, or in addition to, such corroborating testimony, a court’s own first-hand observance of the services provided may be a sufficient basis on which to find a “substantial contribution”
See Baldwin-United,
With these standards in mind, we turn to the application before us.
II.
Wisehart’s alleged contributions to the estate include:
1) Enhancing Wisehart’s own ability to represent the former employees through knowledge obtained in the process of assisting ESB members in completing individual proofs of claims. (Amended Fee Application ¶ 17);
2) Participation in a consensual resolution respecting the ESB claims leading to a court approved settlement agreement whereby, inter alia, U.S.L. agreed to share one-half the surplus in the U.S.L pension fund, or $3,150,000, with the beneficiaries of the plan, and the employees dropped their claims to the remainder. (The “Settlement Agreement”) (Amended Fee Application 111115, 49, 50);
3) Making a cross-motion and negotiation of a pending equitable reformation of the prior Settlement Agreement increasing, subject to court approval, the value of their settlement in stock rather than cash forms. (Supplemental Fee Application ¶ 8); and
4) Seeking class status for ESB which lead to the Debtor’s de facto class recognition of the employee group. (Amended Fee Application ¶ 13).
Wisehart’s application futher requests payment of twice Wisehart’s lodestar rate based upon a “risk multiple.” (Amended Fee Application 111134-50).
The motion is opposed by the Debtor-in-possession to the extent that Wisehart’s services benefitted primarly ESB members, that its request for compensation in connection with the cross-motion and negotiation of a supplemental agreement not yet approved by the Official Creditors Committee is premature, and that the requested fee doubling Wisehart’s lodestar rate is based upon an unsupportable “risk multiple.” 1 The Debtors do not object to an allowance of $116,025 of fees and $3,902 of expenses. The United States Trustee objects to the application on the ground that Wisehart has not made a “significant contribution” to the case.
We cannot find that Wisehart has conferred a substantial benefit upon the estate by completing the individual proofs of claims. As stated in their fee application, this activity merely put Wisehart in a better position to represent the former employees in connection with their claims (Amended Fee Application 1117). “Those services which are provided solely for the elient-as-creditor, such as services rendered in prosecuting a creditor’s claim are not compensable.”
Richton,
For the same reason, the potential preservation of the U.S.L. cash assets in connection with reformation of the Settlement Agreement is not a “substantial contribution” to the estate. Reformation of the initial agreement was made solely to “rectify perceived inequities to the non-union employees resulting from the union settlements [the result was to] increase the value of the settlement.” (Supplemental Application If 4). Any benefit accruing to U.S.L. from the Supplemental Settlement Agreement having left untouched its cash and cash equivalents is wholly incidental to the benefit conferred to Wisehart’s clients at the expense of other creditors also receiving shares of the same class of stock.
In addition, the compensation requested for work done in connection with the fee application itself is denied. How that preparation conferred a substantial benefit on the estate is not stated. Regardless of the debate regarding allowance of time spent in preparation of fee applications under § 330 of the Bankruptcy Code permitting fees and expenses to be awarded upon a lesser showing of “actual [and] necessary services,” 11 U.S.C. § 330(a)(1) (1986),
compare In re White Motor Credit Corp.,
In light of U.S.L.’s support of Wisehart’s “substantial contribution” in connection with the Settlement Agreement and to claims relating to the Pension Plan (Debt- or’s Brief at 7), and our agreement with the applicant that these services benefitted other creditors as well as the estate, such services were a substantial contribution under section 503(b)(3).
III.
We now turn to the amount of the allowed claim. Section 503(b)(4) limits the recovery for attorneys fees and expenses incurred by a creditor in making a substantial contribution to reasonable fees and expenses.
Based upon the Court’s analysis of Wise-hart’s timesheets the fees associated with the above classification are as follows:
1) Individual Proofs of Claims: $ 1,299.25
2) Cross-Motion and Reformation: 13,967.25
3) Class Status: 5,366.25
4) Fee Application: 15,107.00 2
5) Settlement Agreement: 106,130.25
The above fees represent Wisehart’s lodestar rate. The lodestar rate is the product of the number of hours reasonably expended multiplied by a reasonable hourly rate, and serves as the initial basis from which to fix fees. Seventy-four percent of the requested fees, performed by Wise-hart’s senior partner, were billed at an hourly rate of $265.00, sixteen percent at a rate of $75.00, and the remaining ten percent at a rate ranging from $75.00 to $165.00. By themselves and without a “risk multiple,” the fees are on the high side of the reasonableness spectrum. Com-pensable services thus amount to fees of $106,130.25
Wisehart’s application, however, requests payment of twice Wisehart’s lodestar rate based upon a “risk multiple.” In ordinary fee shifting cases, the decision to use multipliers to adjust the lodestar figure rests in the discretion of the trial court.
Hensley v. Eckerhart,
Even in those cases which do not concern the underlying tensions of § 503(b)(3) and (4), the instances in which a district court may allow such a multiplier has been severely restricted by the Supreme Court in
Blum v. Stenson,
That standard applies under section 330 of the Bankruptcy Code. This “rare and exceptional standard strikes the balance mandated by Congress to fully compensate bankruptcy counsel with a reasonable but not excessive fee.”
Baldwin-United,
In bankruptcy cases, moreover, an additional subjective factor to be considered in the lodestar adjustment is the size of the recovery by general creditors and the burden the estate can safely bear.
Compare General Oil,
Although the U.S.L. estate is an outstandingly successful reorganization in terms of the magnitude of the disaster and the extreme complexity of U.S.L.’s affairs, as the Court stated at the confirmation hearing, the return to creditors is meager at best and highly speculative. A hypothetical unsecured holder of a $100,000 al
That financial status demonstrates that the requested risk multiple of 2.0 is a burden which the estate cannot safely bear. The limited recovery by unsecured creditors demonstrates that to award the requested risk multiple would be unconscionable. The cases cited by Wisehart are easily distinguishable. They were either non-bankruptcy proceedings not involving estate burden considerations,
e.g. Thompson v. Kennickell,
IV.
No additional relief is to be granted pursuant to section 502(g) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(g)(1). To the extent that an ERISA award would result in allowances for insubstantial contributions it is to be disallowed. In any case, a section 502(g) award, given the circumstances of this case, would lead to the same result obtained pursuant to the Bankruptcy Code.
Although section 502(g), 29 U.S.C. § 1132(g)(1), which authorizes the Court to award attorney’s fees, is to be liberally construed in favor of participants in employee benefit plans,
Chambless v. Masters, Mates & Pilots Pension Plan,
Consistent with this view, courts have specifically subordinated ERISA provisions to contrary provisions in the Bankruptcy Code. While ERISA may pre-empt state law in this respect,
see Eisenberg v. Baviello (In the Matter of Baviello),
“it clearly was not intended to affect the operation of other federal law ... ERISA’s specific provision precluding interference with the operation of federal law renders the Bankruptcy Code effective over any ERISA provision to the contrary.”
Goff v. Taylor (In re Goff),
Wisehart has offered this Court no indication that section 502(g), 29 U.S.C. § 1132(g)(1), was to be excepted from section 1144(d).
3
Neither does section 502(g) implicitly repeal 11 U.S.C. § 503(b). The Supreme Court had repeatedly held that repeals by implication are disfavored.
See e.g. T.V.A. v. Hill,
Moreover, even were § 502(g) to be found to apply independently of section 503(b)(3) and (4) of the Bankruptcy Code, Wisehart would not be entitled to a risk multiple or the full amount of fees requested. Section 502(g) gives the court discretion with regard to awarding such fees,
Iron Workers Local No. 272 v. Bowen,
Awards have therefore been granted where “Defendants can probably afford the expenses involved,”
Birmingham v. Sogen-Swiss Int’l Corp. Retirement Plan,
Here, the testimony at confirmation that cash is short and the recovery to creditors is meager are sufficient reasons to limit all of Wisehart’s fees to a total of $106,130.25.
Nor do the other factors applicable under § 502(g) direct an award of additional fees. Those factors include:
(1) The degree of the offending parties’ culpability or bad faith; (2) whether or not an award of attorneys fees against the offending parties would act as a de-terance of others (3) benefit conferred and (4) relative' merits of the parties’ position.
E.g. Schoenholtz v. Doniger, 657 P.Supp. at 910. Here there is no suggestion that U.S.L. acted culpably or in bad faith or that there was anything to deter. Rather, the dispute concerned the issue of whether the surplus in a pension plan belongs to the employer or to the plan beneficiaries — an issue as yet unresolved. While the benefit achieved was half the surplus, a division reflecting the unresolved nature of the issue, the fee awarded under § 503(b)(4) reflects that benefit.
For the foregoing reasons, the application must be and hereby is granted to the extent of allowing Wisehart a priority claim of $106,130.25 and is otherwise denied. It is
SO ORDERED.
Notes
. Wisehart has asked this Court to disallow the U.S.L’s objection to the requested “risk multiple" on the ground that U.S.L., properly represented by counsel, had previously agreed not to oppose the request in connection with a possible settlement of ESB’s motion for reformation (Wise-hart Affidavit ¶. 3). We find no basis for such a disallowance. The alleged settlement has not been presented to or approved by this Court. The fiduciary duty of the debtor-in-possession to object to unreasonable fee allowances cannot be contracted away. A promise by a fiduciary tending to violate his fiduciary duty is unenforceable on grounds of public policy. See RESTATEMENT (SECOND) OF CONTRACTS § 193 (1979).
. While Wisehart’s application limits its request for compensation of fee application preparations to $12,695.00, their timesheets reflect an additional allocation of $2,412.00 to "risk multi-pie research."
. The party claiming the benefit of a statutory exception bears the burden of persuasion.
United States v. First City National Bank,