Muskegon Boiler Works v. Tennessee Valley Iron & R., 274 F. 836

Muskegon Boiler Works v. Tennessee Valley Iron & R.

274 F. 836 | M.D. Tenn. | 1921

SANFORD, District Judge.

The Special Commissioner has reported the reasonable fee of plaintiffs’ solicitors, Messrs. Campbell and Higgins to be $40,000; to which report exceptions have been hied. After careful consideration of the arguments and briefs of counsel, my conclusions, briefly stated, are:

[1, 2j One jointly interested with others in a common fund who brings and prosecutes a suit for its preservation and administration, as in a general creditors’ suit, is equitably entitled to reimbursement of his costs, including reasonable fees of his counsel, to be paid either out of the fund itself or by proportionate contribution from those receiving the benefit of the litigation. Trustees v. Greenough, 105 U. S. 527, 532, 26 L. Ed. 1157; Central Railroad & Bkg. Co. v. Pettus, 113 U. S. 116, 122, 5 Sup. Ct. 387, 28 L. Ed. 915; Hobbs v. McLean, 117 U. S. 567, 582, 6 Sup. Ct. 870, 29 L. Ed. 940; Harrison v. Perea, 168 U. S. 311, 325, 18 Sup. Ct. 129, 42 L. Ed. 478; Central Trust Co. v. Ingersoll (6th Circ.) 87 Fed. 427, 429, 31 C. C. A. 41; Burden Co. v. Ferris Co. (5th Circ.) 87 Fed. 810, 31 C. C. A. 233; Central Trust Co. v. Light Co. (2d Circ.) 233 Fed. 420, 421, 147 C. C. A. 356; Buell v. Lumber Corporation (D. C.) 201 Fed. 762, 768; 22 Cyc. 1361. Such counsel fees may, however, be awarded directly to the plaintiffs’ solicitors. Railroad v. Pettus, 113 U. S. 116, 5 Sup. Ct. 387, 28 L. Ed. 915, supra; Harrison v. Perea, 168 U. S. at page 325, 18 Sup. Ct. 129, 42 L. Ed. 478. This is substantially the established rule in Tennessee. Moses v. Ocoee Bank, 1 Lea (Tenn.) 398; Elec. Light Co. v. Gas Co., 99 Tenn. 371, 388, 42 S. W. 19. Such reasonable fee includes compensation for services rendered by counsel for the plaintiff after the appointment of a receiver, in discharge of his duty, acting in behalf of all creditors standing in a similar position to the plaintiff, to prosecute the suit to final distribution and to defend and otherwise protect the fund. Burden Co. v. Ferris Co. (5th Circ.) 87 Fed. at page 812, 31 C. C. A. 233, supra. Such fees, however, are to be based only on the fund applicable to claims of creditors of the same class as the plaintiff, and the fund on which others have liens superior to such claims cannot be subjected to such payments. Buell v. Lumber Corporation (D. C.) 201 Fed., supra, at page 769.

[3] A difficult question arises, however, as to the controlling principles in fixing the fees of plaintiff’s solicitor when he represents not only the plaintiff in the general suit, but also intervening creditors of the same class, under special employment, and is to receive fees front his separate clients in addition to the general fee allowed by the court. The exceptant here insists that the amount of reasonable fees to- which plaintiffs’ solicitors would otherwise be entitled are to be diminished by the amount of the fees which they have received or will receive *838from such separate clients. No authority, however, is cited supporting this contention, in this precise form. And I think it clear upon principle that as the plaintiffs' solicitors as counsel for such separate clients are necessarily charged with some special duties in reference to the claims of such clients, including the filing of their claims, attention to their proper allowance, and, ordinarily the receiving and paying over thereof, their reasonable fees for conducting the general proceedings in behalf of all general creditors should not be diminished by the full amount of the fees which they are to receive from individual clients, including compensation for services rendered such clients specially, as distinguished from those rendered to all creditors generally. On the other hand, however, it is clear that in determining the reasonable compensation of plaintiff’s solicitors, the amount of the individual claims as to which they have been specially employed under contracts for separate fees, is to be taken in consideration. This question is ruled by Central Railroad v. Pettus, 113 U. S. at page 127, 5 Sup. Ct. 387, 28 L. Ed. 915, supra, in which it was held that in fixing the general compensation of plaintiff’s solicitors, there should be excepted from the amount of the claims with reference to which such compensation should be fixed, the claims of the plaintiffs and other unsecured creditors who had special contracts with such solicitors for fees or had settled with them. While this case did not involve the matter of claims as to which no special contract or settlement had been made as to the amount of the fees, the principle upon which the decision is based applies, in my judgment, with equal force, to all claims which plaintiffs’ solicitors specially represent and as to which they are to receive separate fees from their individual clients. So also as shown in 22 Cyc. 1361, note 24, it was held in Ohio Valley Bank v. Cummings & Co., 21 Ohio Cir. Ct. R. 782, that in fixing the fees of plaintiffs’ attorneys chargeable to the general fund the court should take into consideration the fact that the attorneys represented general creditors who were “also liable to them for fees in the matter.” This conclusion also appears to be sound upon principle, independently of authority, since the solicitors for the plaintiff, representing also individual creditors who have employed them specially owe a duty to them in looking after the suit, the contesting of unauthorized claims and the like, as well as a general duty in behalf of all creditors in whose behalf the suit is filed; and the services which they render in the prosecution of the suit are rendered in the discharge of their twofold duty to general creditors in the conduct of the suit and to their individual clients. Thus, in the present case, it is conceded that plaintiffs’ solicitors are in some instances to receive and have received from individual clients a ten per cent. fee. "Clearly it was not contemplated that the services to be rendered such clients, on a ten per cent, basis, should be merely the filing of the individual claims and matters arising in reference to them alone, without any general attention to the case to such extent as was necessary to protect the interests of such individual clients. And if plaintiffs’ solicitors had represented not only the plaintiffs in the general creditors’ suit but also all the other general creditors in the case, they would, in *839conducting the suit, have been discharging practidalJy the same duty as plaintiffs5 solicitors which they owed to their individual clients, constituting the entire body of creditors; and manifestly if they were first to be paid a reasonable fee for their entire services out of the general fund and then were to receive the same aggregate amount of fees from their individual clients separately, they would receive in effect double compensation for the same services. It is impossible to lay down any general rule in this matter, as each case must rest upon its own facts, further than to say that the relative amount of duty dicliarged in behalf of general creditors and of separate clients would seem to depend approximately upon the pro rata amount of the creditors whom the solicitors represent specially as compared with the total amount of the claims which they represent generally; and this is, I take it, the reason underlying the ruling in Central Railroad v. Pettus.

I therefore conclude, in accordance with the rule stated in Central Railroad v. Pettus, and for the reasons above stated, that while the amount of fees to which plaintiffs’ solicitors would otherwise be entitled is not to be diminished, ipso facto, by the amount of fees which they are to receive from all their clients separately, the amount of the claims of separate clients from whom they are to receive or have received special compensation is to be taken into consideration by way of a general deduction in determining the total fund on the basis of which their fees should be fixed.

The following are the chief considerations in support of the claim of the plaintiffs’ solicitors: (a) This suit brought into court a very large fund for the benefit of general creditors, which otherwise would probably in large measure have been ■ dissipated. (b) The plaintiffs’ solicitors gave careful, constant, able and efficient attention to the conduct of the suit and to the details of the many matters arising therein from time to time, (c) The litigation has been of very great benefit to general creditors.

The principal considerations tending to a reduction in the amount of fees of plaintiffs’ solicitors are, on the other hand, these: (a) The litigation appears to have been a friendly litigation instituted, not as an antagonistic suit, but, as it inferentially appears, with the approval and consent of the defendant company itself; the. defendant’s counsel having in fact suggested the selection of plaintiffs’ solicitors, furnished them with the bulk of the information on which the bill was filed, and the defendant having admitted the allegations of the bill and consented to the appointment of a. receiver, (b) There were no difficult or complicated matters litigated in the suit itself, other than the suits defended by Mr. DieW'itt, one of tire receivers, who acted as their counsel; the conduct of the suit having principally involved attention to details of the claims filed, the presentation of a claim against the government and negotiations and settlements between different classes of creditors as to their claims and plan of reorganization, and the investigation of accounts and matters connected with the making of the special master’s report, most of which were settled outside of court and did not involve any active litigation in the court. The *840principal disputed matters as to which the plaintiffs' solicitors gave attention outside of court was the claim against the government in behalf of the special class of creditors known as the government creditors, as to which there was a special employment of counsel, including these solicitors, by the government creditors directly interested, (c) While plaintiffs’ solicitors gave diligent attention to these matters, the fundamental and principal work connected therewith, as shown by the testimony, was done by Mr. DeWitt, who gave close and most unremitting attention to these details of these matters, and by ■the special master, who gave painstaking attention to the many claims and accounts in connection with the making of his report, (d) Furthermore the plaintiffs’ solicitors not only represented the creditors filing the bill, whose claims aggregate a very large sum, but also many other creditors, whose claims aggregated a very large percentage of all general creditors, with some of whom plaintiffs’ solicitors had special contracts as to fees, and from whom, as it appears, that they have received, or are to receive separately, large compensation, either in money or in stock in the reorganized corporation, in some cases equal to ten per cent.

After careful consideration of these and other matters appearing in the record, I conclude, under all the cii*cumstances_, bearing in mind the rule stated in Central Railroad v. Pettus, that as insisted in the first exception to the Special Commissioner’s report, the reasonable fee for plaintiffs’ solicitors to be awarded as a charge upon the fund as part of the costs of the cause, does not exceed the sum of $20,000 in the aggregate; that is, $10,000 to each of the two solicitors. The first exception to the Special Commissioner’s report will accordingly be sustained.

The second exception, to the effect that this compensation should he diminished by the sums received or to be received by plaintiffs’ solicitors from their individual clients, must be overruled.

I may add that I have not overlooked the fact that the plaintiffs’ solicitors, both at the bar and in their brief, offer to abate their claim for fees to the extent of the claim of the exceptant, that is, as I construe it, to abate their claim proportionately to the amount of the ex-ceptant’s claim to the total general claims. This does not, however, affect the action to be taken. The exception operates, in law, in my judgment to the benefit of all general creditors alike. And even .if this were not so, I am of opinion that when the question of the reasonableness of fees allowed as part of the costs, is brought to the attention of the court, it should, independently of any exceptions to the master’s report, and in the discharge of its own duty, fix and allow such fees only as are in its judgment reasonable and proper.

A decree will be entered in accordance with this opinion.

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