Quigley Company, Inc.

UNITED STATES BANKRUPTCY COURT 	FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
: 	Chapter 11
QUIGLEY COMPANY, INC., 	: 	Case No. 04-15739 (SMB)
:
:
Debtors. 	:
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MEMORANDUM DECISION AND ORDER REGARDING UNITED
STATES TRUSTEE’S OBJECTIONS TO FEE APPLICATIONS
A P P E A R A N C E S:
SCHULTE ROTH & ZABEL LLP
Attorneys for Debtor
919 Third Avenue
New York, NY 10022
Michael L. Cook, Esq.
Lawrence V. Gelber, Esq.
Of Counsel
CAPLIN & DRYSDALE, CHARTERED
Attorneys for the Official Committee of Unsecured Creditors
One Thomas Circle, NW
Suite 1100
Washington, D.C. 20005
Elihu Inselbuch, Esq.
Ronald E. Reinsel, Esq.
Rita C. Tobin, Esq.
Of Counsel
TOGUT, SEGAL & SEGAL, LLP
Attorneys for the Legal Representative for Future Asbestos
Personal Injury Claimants of Quigley Company, Inc.
One Penn Plaza
New York, New York 10110
Scott E. Ratner, Esq.
Of Counsel
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OFFICE OF THE UNITED STATES TRUSTEE
201 Varick Street, Room 1006
New York, New York 10004
Greg M. Zipes, Esq.
Andrew Velez-Rivera, Esq.
Of Counsel
STUART M. BERNSTEIN
United States Bankruptcy Judge:
The principal question presented by the final fee applications in this case is whether
counsel are entitled to compensation for the work they did in proposing or supporting a plan that
failed, inter alia, for lack of good faith. The United States Trustee (“UST”) filed objections on
this and several other grounds to the final fee applications submitted by Schulte Roth & Zabel
LLP (“Schulte”), attorneys for the debtor Quigley Company, Inc. (“Quigley”), Caplin &
Drysdale, Charted (“Caplin”), attorneys for the Official Committee of Unsecured Creditors (the
“Committee”) and Togut, Segal & Segal LLP (the “Togut Firm”), attorneys for Albert Togut in
his capacity as Legal Representative for Future Asbestos Personal Injury Claimants (the “Legal
Representative”). For the reasons that follow, the UST’s principal objection is overruled, and the
final fee applications submitted by Schulte and the Togut Firm are allowed. The UST’s
objection to the final fee application of Caplin is sustained in part, its fee request will be reduced
by $20,600.00, and allowed in the reduced amount provided that Caplin supplies the
Certification required by the Court’s Amended Guidelines for Fees and Disbursements for
Professionals in Southern District of New York, (“Amended Guidelines”), at ¶ B(1)1 that covers
all fees and disbursements sought in the final fee application.
1 	The Amended Guidelines were first adopted as General Order M-447 (Bankr. S.D.N.Y. Jan. 20, 2013), and
now may be accessed through a hyperlink (http://www.nysb.uscourts.gov/sites/default/files/2016-1-a-
Guidelines.pdf) in Bankr. S.D.N.Y.R. 2016-1(a). They are not materially different from the fee guidelines that were
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BACKGROUND
A. 	Introduction
The background facts are set forth at length in the Court’s Post–Trial Findings of Fact
and Conclusions of Law, dated Sept. 8, 2010, denying confirmation of Quigley’s Fourth
Amended and Restated Plan of Reorganization (the “Fourth Plan”). See In re Quigley Co., 437
B.R. 102 (Bankr. S.D.N.Y. 2010) (the “Confirmation Decision”). The Court assumes familiarity
with the Confirmation Decision, and limits the background discussion to the facts relevant to the
current disputes.
Quigley had been engaged in the business of manufacturing refractory products that used
asbestos. Pfizer, Inc. (“Pfizer”) acquired Quigley in 1968, and remains Quigley’s sole
shareholder. As a result of the acquisition, Quigley fell under the protection of most of Pfizer’s
liability insurance and both shared a substantial amount of insurance payable on a first come,
first pay basis. In September 1992, Quigley sold substantially all of its operating assets, and did
not operate any business between the date of the sale and just before it filed its chapter 11
petition on September 3, 2004 (the “Petition Date”).
Over the years, hundreds of thousands of asbestos-related personal injury claims were
asserted against Quigley and Pfizer. Most if not all of the claims asserted against Pfizer were
based on exposure to Quigley’s products, and covered by the shared insurance. Quigley and
Pfizer were represented by the same counsel who resolved many of the claims through a
in effect throughout the case. Accordingly, references to the Amended Guidelines include the pertinent
corresponding provisions in the previous guidelines that governed fee applications at the time those applications
were made.
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settlement that covered the claims against both. Historically, Quigley paid 77% of the
settlement, and Pfizer paid 23%.
As the tide of continuing litigation depleted the insurance used to pay claims, Pfizer
developed its global strategy described in the Confirmation Decision. The object of the global
strategy was for Quigley to file chapter 11 and confirm a plan under 11 U.S.C. § 524(g) that
would release Pfizer and its affiliates from present and future liability for products manufactured
by Quigley. To accomplish this, Pfizer first resurrected the non-operating Quigley, hired
independent management and transferred Pfizer’s claims handling business to Quigley. Next,
Pfizer entered into settlements (the “Pfizer Settlement Agreements”) with approximately 175,000
asbestos claimants (the “Settling PI Claimants”) for an aggregate amount of roughly $450
million. Half of the settlement was payable no later than December 1, 2005, and the remaining
50% was payable only after Quigley’s confirmation order became final.
Although Pfizer had historically settled its liability and Quigley’s liability at the same
time, the Pfizer Settlement Agreements only covered Pfizer. Nevertheless, the Settling PI
Claimants agreed, in substance, that if the assets in the Asbestos PI Trust (the “Trust”) created
under the plan were insufficient to pay 100% of the value under the Trust Distribution
Procedures (“TDP”) schedule, the Settling PI Claimants would only receive 10% of the payment
otherwise due from the Trust. Since the Trust assets would unquestionably be insufficient, the
Settling PI Claimants effectively agreed to take a 90% haircut and retain a “stub” claim against
Quigley.
Meanwhile, Quigley’s financial situation worsened as a result of mounting litigation and
diminishing insurance to meet it. The Quigley board (two of the three members were
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independent of Pfizer) met several times during the summer of 2004 to review Quigley’s options.
They considered several alternatives including continuing to operate until the insurance ran out,
immediately liquidating under chapter 7, and filing a chapter 11 case with the financial support
of Pfizer. The Quigley board opted for the last alternative. Quigley filed the chapter 11 petition
on the Petition Date and immediately and successfully moved for an injunction that stayed all
litigation against Quigley and Pfizer that would have eroded the remaining pool of shared
insurance. The injunction was subsequently modified in scope but in its various forms managed
to preserve the remaining insurance for use in connection with a plan.
B. 	The Plans
Quigley filed its initial plan and disclosure statement on March 4, 2005 (ECF Doc. ##
288, 289), the day exclusivity expired. The draft plan was incomplete. It omitted the total
amount of Pfizer’s contribution as well as many schedules, documents and agreements that had
yet to be prepared but eventually would be included as part of the plan. As evidenced by the
placeholder exhibit dividers in the first plan, these included the Schedule of Shared Asbestos-
Related Insurance Policies, the Schedule of Asbestos-Related Insurance Settlement Agreements,
the AIG Assignment Agreement, the Amended Bylaws of Reorganized Quigley, the Amended
Certificate of Incorporation of Reorganized Quigley, the Asbestos-Related PI Claims Services
Agreement, the Pfizer Insurance Relinquishment Agreement and the Product Transfer and
Services Agreement. Quigley subsequently filed its first amended plan and disclosure statement
on August 15, 2005 (ECF Doc. ## 419, 420), a second amended plan and disclosure statement on
September 23, 2005 (ECF Doc. ## 471, 472) and a third amended plan and disclosure statement
on October 6, 2005. (ECF Doc. ## 504, 505.) Each of the amended plans and disclosure
statements were accompanied by exhibits reflecting the continued negotiation and preparation of
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critical plan documents, including the Asbestos PI Trust Distribution Procedures (ECF Doc. ##
423, 507), the Asbestos PI Trust Agreement (ECF Doc. ## 473, 506) and updated financial
information and projections. (ECF Doc. ## 475, 508, 509, 510.)
By order dated January 23, 2006, the Court approved Quigley’s disclosure statement.
(ECF Doc. # 593.) The order provided that each asbestos personal injury claim would be
estimated at $1.00 for voting purposes, but all objections to the manner of tabulating the votes
were preserved. The votes were solicited on the third amended plan, and based on the $1.00
estimation, the plan was accepted by 85% in number and amount of the class of asbestos
personal injury plaintiffs. The vote met the confirmation requirement that at least 75% of those
voting cast a vote in favor of the plan. See 11 U.S.C. § 524(g)(2)(B)(ii)(IV)(bb).
The Ad Hoc Committee of Tort Victims (“AHC”) challenged the proposed methodology
for estimating and tabulating the votes. The Court sustained the objection, concluding that the
votes of Settling PI Claimants should be valued at 10% of the TDP scheduled value to reflect the
90% subordination incorporated into the Pfizer Settlement Agreements. In re Quigley Co., 346
B.R. 647, 657-58 (Bankr. S.D.N.Y. 2006). Once the votes were re-valued, they were insufficient
to accept the plan. Id. at 658-59. The Settling Claimants subsequently agreed to waive the 90%
subordination, Pfizer agreed to increase its contribution following negotiations to reflect the
increased amount the Trust now had to pay and Quigley filed the Fourth Plan and accompanying
Fifth Amended Disclosure Statement on May 18, 2007. (ECF Doc. ## 1097, 1098.) Quigley
thereafter filed modified versions of the Fourth Plan and Fifth Amended Disclosure Statement
together with additional exhibits. (ECF Doc. ## 1124, 1125, 1174, 1175, 1178, 1179, 1180,
1181, 1182, 1257, 1258, 1379, 1380.)
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The AHC and the UST objected to Quigley’s motion to approve the Fifth Amended
Disclosure Statement. Many of the objections dealt with the adequacy of disclosure and were
either resolved or overruled at the disclosure statement hearing. In re Quigley Co., 377 B.R. 110,
115 (Bankr. S.D.N.Y. 2007) (the “Disclosure Statement Ruling”). The AHC also argued that the
Fifth Amended Disclosure Statement described a plan that was unconfirmable as a matter of law
and should not be approved based on the classification and treatment of the non-Settling PI
Claimants.
The Court overruled the legal objections, concluded that the Fourth Plan was not
unconfirmable on its face, and identified various factual disputes regarding the Pfizer Settlement
Agreements, including good faith and improper voter manipulation, which could only be
resolved through a trial. Id. at 119. During the next two years, the parties engaged in discovery,
prepared for trial and presented a host of disputes to the Court relating to discovery, confirmation
and the confirmation trial.
C. 	The Confirmation Trial
The confirmation hearing began in September 2009, covered fifteen trial days and ended
in December 2009. Following extensive post-trial briefing, the Court denied confirmation. The
problem with the Fourth Plan was two-fold. First, it was proposed in bad faith. The entire
bankruptcy was instigated by Pfizer primarily for the purpose of obtaining a discharge of its
derivative liability for Quigley’s products. The Pfizer Settlement Agreements incentivized the
Settling PI Claimants to vote for any plan regardless of how it dealt with their claims because the
second payment under the Pfizer Settlement Agreements depended on confirmation; “[i]n a
nutshell, Pfizer bought enough votes to assure that any plan would be accepted.” Confirmation
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Decision, 437 B.R. at 127. The same bad faith resulted in the designation of the votes cast by the
Settling PI Claimants. Id. at 130-32.
Second, the Fourth Plan failed to satisfy the financial requirements for confirmation
including the “fair and equitable” test, id. at 133-40, the “funding” requirement under 11 U.S.C.
§ 524(g)(2)(B)(i)(II) and the related issue of feasibility, Confirmation Decision, 437 B.R. at 140-
43, the best interest of creditors test, id. at 146, and the equal treatment of creditors. Id. at 146-
48. The financial issues were intertwined with and depended on difficult and disputed
calculations concerning, inter alia, the present value of (1) the projected future asbestos-related
claims that would be asserted against Quigley, (2) Pfizer’s contribution to the Fourth Plan and
(3) Pfizer’s projected future liability for asbestos products manufactured by Quigley.
D. 	The Confirmation of the Fifth Plan
Pfizer, Quigley and the AHC appealed, and the AHC moved to dismiss the case and
dissolve the preliminary injunction, as modified, that had protected Pfizer since the inception of
the case. The UST separately moved to dismiss the case. While these motions were pending,
Pfizer settled with the AHC as well as other claimants, and Quigley filed a Fifth Amended and
Restated Plan of Reorganization (“Fifth Plan”) on April 6, 2011. (ECF Doc. # 2264.) Pfizer
increased its contribution to rectify the various financial deficiencies outlined in the
Confirmation Decision. Claimants who had not settled with Pfizer received an enhanced
distribution that reflected the amount of Pfizer’s projected liability to these claimants. Lastly, the
Fifth Plan separately classified the claimants who had entered into the Pfizer Settlement
Agreements, thereby removing the taint that the Pfizer Settlement Agreements had on the vote.
After some further modifications, (see ECF Doc. ## 2391, 2405), the Court approved Quigley’s
Sixth Amended and Restated Disclosure Statement. (ECF Doc. # 2458.) The Court thereafter
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confirmed the Fifth Plan on July 3, 2013 (ECF Doc. # 2671) over one objection, and the District
Court affirmed the confirmation order pursuant to 11 U.S.C. § 524(g)(3)(A) on July 30, 2013.
(See ECF Doc. # 2681.)
E. 	The Fee Requests
Eight professionals filed their last interim and final fee applications in early August 2013.
The professionals who had been in since the beginning had filed a total of twenty-six interim fee
applications during the case. The UST objected to the final applications submitted by Schulte,
Caplin and the Togut Firm. (See Objection of the United States Trustee to Final Fee
Applications and Requests for Reimbursement of Out-of-Pocket Expenses, dated Sept. 10, 2013
(“UST Objection”) (ECF Doc. # 2700).) Following a hearing, the Court reserved decision on
those applications and granted the remaining five final applications.2 (See Omnibus Order
Granting Applications for Allowance of Interim and Final Compensation and Reimbursement of
Expenses, dated Sept. 30, 2013 (ECF Doc. # 2721).)
The following table summarizes the final applications that were the subject of the UST’s
objection:
Applicant 	Retained As 	Fees ($) 	Expenses ($)
Schulte 	Counsel to Quigley 	21,080,652.90 	519,770.21
Caplin 	Counsel to the Committee 	5,406,992.75 	215,502.69
The Togut Firm 	Counsel to the Legal
Representative
3,651,454.50 	48,133.13
2 	All of the fees and disbursements in this case have been paid (or will be paid) by Pfizer. The fee awards
will not affect the amount available for distribution to present or future creditors.
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The UST made two objections common to all three applications and requested substantial
reductions. First, the applicants supported a plan that could not and did not meet the good faith
test, (UST Objection at 3), and consequently, the plan-related services (other than those
pertaining to the confirmed Fifth Plan) did not provide a benefit to the estate and were
unreasonable. (Id. at 12.) Furthermore, the inability to confirm the plan should have been
apparent to counsel early on. (Id. at 13.) The UST raised a related objection to the
$2,806,644.50 billed by Schulte in the “Litigation” category between May 1, 2009 and
December 31, 2009, a period that roughly corresponded to the run up to and conduct of the
confirmation trial. (Id. at 16.)
Second, the UST computed the fees billed to plan-related work through the approximate
date of the first plan and disclosure statement and compared those sums to the fees billed to all
plan-related work during the entire case. The UST argued based on this comparison that “[t]he
fees charged for plan and disclosure statement issues increased markedly during the pendency of
this case with no justification. While the plan was amended a number of times, it does not
appear that any amendment to the plan required the significant time billed by each of these
professionals.” (Id. at 3, 14-15.) For example, Schulte billed $679,465.00 under the “Plan and
Disclosure Statement” category through the approximate date of the filing of the original plan,
and billed $8,691,055.50 to the category for the entire case. (Id. at 15.) According to the UST,
Schulte spent too much time revising plans where the only change was the amount of Pfizer’s
contribution, (id.), and Schulte did not secure the increases that Pfizer agreed to make. (Id.) The
UST maintained that the fees billed by Schulte in the “Plan and Disclosure Statement” category
should be reduced by 50%, or by $4,345,527.75, (id. at 15-16), and the fees billed in the
“Litigation” category should be reduced by 10%, or $280,664.00. (Id. at 17.)
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The UST directed the same two common objections, with variations, at Caplin and the
Togut Firm. 3 As to the first, their plan-related services up through the Fourth Plan were not
reasonable and did not benefit the estate. (Id. at 18, 24.) Moreover, Caplin’s fees in the “Plan
and Disclosure Statement” category could not be explained by negotiations or motion practice
with Pfizer because the Committee was a “neutral party” whose main task was to ensure that the
calculations and distributions were correct, and this role fell primarily on the Committee’s
experts and not counsel. (Id. at 18.) As to the second common objection, Caplin billed
$93,170.00 for “Plan and Disclosure Statement” work through the approximate filing date of the
first plan and $2,323,332.00 to the category for the entire case, (id. at 19), and the Togut Firm
billed $57,591.50, and $1,999,047.00, respectively, for the same periods. (Id. at 25.) The UST
recommended that the Court reduce the “Plan and Disclosure Statement” work billed by Caplin
by 75%, or $1,742,499.00, (id. at 20), and the Togut Firm’s comparable fees by 50%, or
$999,523.50. (Id. at 25.)
The UST also raised several specific objections that are discussed below.
DISCUSSION
Bankruptcy Code § 330 authorizes a bankruptcy court to award reasonable compensation
to a fee applicant based on actual, necessary services, and to reimburse it for his actual,
necessary expenses. 11 U.S.C. § 330(a)(1) (2012). The relevant criteria include (1) the time
spent on the services; (2) the rates charged for the services; (3) whether the services were
necessary to the administration of the estate, or beneficial at the time they were rendered toward
the completion of the case; (4) whether the services were performed within a reasonable amount
3 	The UST did not object to the fees incurred by Caplin and the Togut Firm participating in the confirmation
trial.
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of time in light of the complexity, importance, and nature of the problem, issue, or task; and (5)
whether the compensation is reasonable based on the customary compensation charged by
comparably skilled practitioners in non-bankruptcy matters. 11 U.S.C. § 330(a)(3). Conversely,
the Court should not allow compensation for fees that are not reasonably likely to benefit the
estate or necessary for the administration of the estate. 11 U.S.C. § 330(a)(4).
The fee applicant bears the burden of proof on its claim for compensation. Zeisler &
Zeisler, P.C. v. Prudential Ins. Co. of Am. (In re JLM, Inc.), 210 B.R. 19, 24 (B.A.P. 2d Cir.
1997); In re Keene Corp., 205 B.R. 690, 695 (Bankr. S.D.N.Y. 1997). Under the fee-shifting
statutes, there is “[a] strong presumption that the lodestar figure—the product of reasonable
hours times a reasonable rate—represents a ‘reasonable’ fee.” Pennsylvania v. Del. Valley
Citizens’ Council for Clean Air, 478 U.S. 546, 565 (1986); accord Blum v. Stenson, 465 U.S.
886, 897 (1984) (“When . . . the applicant for a fee has carried his burden of showing that the
claimed rate and number of hours are reasonable, the resulting product is presumed to be the
reasonable fee” to which counsel is entitled.). The same presumption applies under Bankruptcy
Code § 330(a). See In re Apex Oil Co., 960 F.2d 728, 731 (8th Cir. 1992) (“In determining what
constitutes ‘reasonable compensation’ under this section [11 U.S.C. § 330(a)], most courts have
adopted the formula used to calculate fees under various federal fee-shifting statutes.”); In re
ASARCO, LLC, 477 B.R. 661, 672 (S.D. Tex. 2012) (“There is a strong presumption that the
lodestar amount is reasonable.”).
While the lodestar presumption is generally invoked when the applicant seeks a fee
enhancement, see, e.g., In re Brous, 370 B.R. 563, 570-71 (Bankr. S.D.N.Y. 2007), it has also
been applied in the applicant’s favor to support the fee request. See D.A. Elia Constr. Corp. v.
Damon & Morey, LLP (In re D.A. Elia Constr. Corp.), No. 04-CV-975A, 2006 WL 1720361,
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200at *7 (W.D.N.Y. June 19, 2006) (“The Supreme Court has instructed that there is a ‘strong
presumption’ that ‘the lodestar figure—the product of reasonable hours times a reasonable rate—
represents a ‘reasonable’ fee to which the applicant is entitled.”) (quoting Del. Valley Citizens’
Council for Clean Air, 478 U.S. at 565), aff’d sub nom., Bernheim v. Damon & Morey, LLP, No.
06-3389-BK(CON), 2007 WL 1858292 (2d Cir. 2007); In re Hunt’s Health Care, Inc., 161 B.R.
971, 980 (Bankr. N.D. Ind. 1993) (“[T]he fee produced by the resulting lodestar calculation will,
presumptively, be a reasonable one [and a]bsent evidence to the contrary, the presumption of
reasonableness should be respected and the fee generated by the lodestar calculation should be
the fee awarded.”); In re Blackwood Assoc., L.P., 165 B.R. 108, 111 (Bankr. E.D.N.Y. 1994) (If
the fee application “contains all information and detail necessary for a presumption of
reasonableness . . . a prima facie case for the requested fees has been made.”); cf. Fed. Trade
Comm’n v. Capital Acquisitions & Mgmt. Corp., No. 04 C 7781, 2005 WL 3676529, at *3 (N.D.
Ill. Aug. 26, 2005) (applying presumption in favor of receiver’s fee request).
The fee applicant carries its burden of going forward by submitting contemporaneous
time records that, inter alia, provide sufficient detail to enable the Court to determine that the
services were reasonable and necessary. Amended Guidelines, at ¶ A (“All applications should
include sufficient detail to demonstrate compliance with the standards set forth in 11 U.S.C.
§ 330.”); In re 415 West 150 LLC, No. 12–13141 (SMB), 2013 WL 4603162, at *3 (Bankr.
S.D.N.Y. Aug. 28, 2013) (“Proper time record keeping is necessary to enable the court to
determine the reasonableness of the work that has been performed. Generally, fee applications,
standing alone, must contain sufficient detail to demonstrate compliance with § 330.”); cf.
Hensley v. Eckerhart, 461 U.S. 424, 441 (1983) (Burger, C.J., concurring) (To recover attorneys’
fees under 42 U.S.C. § 1988, “the party who seeks payment must keep records in sufficient detail
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that a neutral judge can make a fair evaluation of the time expended, the nature and need for the
service, and the reasonable fees to be allowed.”)
Once the applicant carries its burden of showing the reasonableness and necessity of its
services, and hence, its fees, the burden shifts to the objector to produce evidence showing that
the applicant has requested an unreasonable amount. D.A. Elia Constr. Corp., 2006 WL
1720361, at *7 (“Having satisfied its entitlement to a presumption of reasonableness, the burden
fell upon the debtor to rebut that presumption.”); In re Abel, No. 95–11044, 2001 WL 36160133,
at *3 (Bankr. D. Vt. May 29, 2001) (“A party objecting to a fee application has a responsibility
to challenge with specificity the information presented and to produce evidence controverting
that produced by the applicant.”); Blackwood Assocs., L.P., 165 B.R. at 112 (“A party opposing a
fee application must carry the burden of explaining what therein is unreasonable or, at least, what
would be reasonable under the circumstances. Absent such evidence by the objectant, the
opposition fails. It is not for the Court to supply such evidence or the detail required to support
the objectant’s overly general pleading.” (citations omitted)).
Important to the present dispute, a court does not determine “reasonableness” through
hindsight, Brous, 370 B.R. at 570, or penalize counsel simply because it rendered services
prosecuting an application that failed or opposing one that succeeded. See JLM, 210 B.R. at 25;
In re West End Fin. Advisors, LLC, No. 11–11152 (SMB), 2012 WL 2590613, at *6 (Bankr.
S.D.N.Y July 3, 2012). The test is an objective one, and considers “what services a reasonable
lawyer or legal firm would have performed in the same circumstances.” In re Ames Dep’t
Stores, Inc., 76 F.3d 66, 72 (2d Cir. 1996) (citing In re Taxman Clothing Co., 49 F.3d 310, 315
(7th Cir. 1995) (Posner, C.J.)); accord In re Angelika Films 57th, Inc., 227 B.R. 29, 42 (Bankr.
S.D.N.Y. 1998), aff’d, 246 B.R. 176 (S.D.N.Y. 2000); In re Keene Corp., 205 B.R. at 696; In re
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Drexel Burnham Lambert Grp., Inc., 133 B.R. 13, 23 (Bankr. S.D.N.Y. 1991).
Schulte and the Togut Firm established the presumptive reasonableness of their fee
requests through the twenty-six interim applications, and with a few exceptions discussed below,
so did Caplin. These applications detailed the services that each rendered in connection with the
case. The time entries adequately detail what each firm did, when it did it and how long it took
to do. All of the services were rendered in the case, and on their face, were reasonable and
necessary to the administration of the case. Furthermore, Schulte and the Togut Firm certified in
accordance with the Court’s Amended Guidelines, at ¶ B(1), that the fees and disbursements they
sought were billed at rates and in accordance with practices customarily employed and generally
accepted by their applicant’s clients. (See Final Application Under 11 U.S.C. § 330(a) of Schulte
Roth & Zabel LLP, Counsel to Quigley Company, Inc., for Allowance of Compensation and
Reimbursement of Expenses from September 3, 2004 Through July 2, 2013, dated Aug. 2, 2013,
at Ex. A, ¶ 5 at pg. 44 of 137 (ECF Doc. # 2682)); Final Application of Togut, Segal & Segal
LLP, as Bankruptcy Counsel for Albert Togut in His Capacity as Legal Representative for
Future Asbestos Personal Injury Claimants, for Allowance of Compensation for Services
Rendered Through July 2, 2013; and for Reimbursement of Expenses, Etc., dated Aug. 5, 2013,
at Ex. 3, ¶ 7 (ECF Doc. # 2691-3).) Caplin did not include a Certification, and as noted in the
introduction, its award will depend on compliance with that Certification requirement.4
Moreover, and with the exception of some of Caplin’s time entries that are dealt with later in this
decision, the UST did not challenge the rates, contend that the time entries did not sufficiently
4 	Caplin did certify that it billed its time during the Twenty-Sixth Interim Application period at its standard
hourly rates. (Twenty-Sixth Interim and Final Application of Caplin & Drysdale, Chartered as Counsel to the
Unsecured Creditors Committee for Compensation and Reimbursement of Expenses, dated Aug. 2, 2013, at ¶ 11
(ECF Doc. # 2683).)
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describe what the applicants did, or argue that the applicants failed to provide the services
depicted in the time records.
Consequently, and with the aforementioned proviso regarding Caplin, each of the firms
carried their initial burden of going forward and established the prima facie reasonableness of
their fee requests. The burden then shifted to the UST to come forward with evidence (or legal
argument) demonstrating that the requests were unreasonable.
A. 	The UST’s Common Objections
1. 	The Failed Plan
A Court may disallow fees incurred by a law firm for work relating to a plan if it is patent
that the plan was unconfirmable at the time that the services were rendered. In re Ahead
Commc’ns Sys., Inc., 395 B.R. 512 (D. Conn. 2008), decided by then-District Judge Droney,
aptly illustrates this principle. There, the debtor filed a plan that provided for the distribution of
non-voting stock to GDC, the debtor’s largest creditor. Id. at 515. GDC objected to the debtor’s
plan and the corresponding services in the fee application submitted by the debtor’s attorneys
because the issuance of non-voting stock violated Bankruptcy Code § 1123(a)(6) and (a)(7).5 Id.
In other words, the debtor’s plan was unconfirmable on its face.
The Bankruptcy Court overruled the objection to the fee application, but the District
Court reversed. Judge Droney stated that no reasonable attorney “could have believed that a plan
that creates nonvoting stock, in violation of 1123(a)(6)’s plain meaning, might be confirmable.”
5 	Section 1123(a)(6) requires that “a plan shall provide for the inclusion in the charter of the debtor . . . of a
provision prohibiting the issuance of nonvoting equity securities.” Section 1123(a)(7) requires a plan to “contain
only provisions that are consistent with the interests of creditors and equity security holders and with public policy
with respect to the manner of selection of any officer, director, or trustee under the plan and any successor to such
officer, director, or trustee.”
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Id. at 517 (emphasis in original). The Bankruptcy Court had erroneously concluded that the
confirmability of the plan presented a litigable issue despite these Code violations. Id. at 517-18.
The District Court concluded:
The Court finds that Zeisler reasonably should have known that the Debtor’s Plan
could not be confirmed, and therefore its activities in preparing and filing the plan
were not “beneficial at the time rendered,” nor were they “reasonably likely to
benefit the debtor's estate” as required for an award of fees under 11 U.S.C.
§ 330(a)(3)(c).
Id. at 520.
The authorities cited by the UST confirm this rule; compensation should be denied when
it is clear that the plan was unconfirmable at the time the plan-related services were rendered.
See Rubner & Kutner, P.C. v. U.S. Tr. (In re Lederman Enters., Inc.), 997 F.2d 1321, 1323-24
(10th Cir. 1993) (“[T]he debtor’s inability to successfully develop and complete a plan should
have been apparent to counsel from commencement of the case. Therefore, any work performed
by R & K was not necessary, and the bankruptcy court did not abuse its discretion in refusing to
compensate the law firm for such services.”); In re Universal Factoring Co., 329 B.R. 62, 79
(Bankr. W.D. Okla. 2005) (“Counsel for a debtor or debtor in possession will not be
compensated for time spent in preparation of a plan which has no realistic hope of confirmation.”
(quoting In re Polishuk, 258 B.R. 238, 249 (Bankr. N.D. Okla. 2001)) (internal quotation marks
omitted)); In re Crown Oil, Inc., 257 B.R. 531, 539 (Bankr. D. Mont. 2000) (“While it is not
necessary to have a successful reorganization in order for debtor's counsel to be awarded fees,
fees may be denied when counsel should have realized that reorganization was not feasible and
therefore services in that effort did not benefit the estate.” (internal quotation marks and citations
omitted)); In re Office Prods. of Am., 136 B.R. 983, 990-91 (Bankr. W.D. Tex. 1992) (“The fee
detail does indeed suggest that there was a point in time when the debtor knew or should have
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known that pursuit of this plan flew in the face of § 1129(a), yet the debtor pushed on anyway.
At that point, the services of counsel were no longer ‘necessary,’ as the debtor was no longer at
that point discharging its duties as fiduciary of the estate, was no longer pursuing legitimate
reorganization.”); In re Hunt, 124 B.R. 263, 267 (Bankr. S.D. Ohio 1990) (“An attorney should
not expect to be fully compensated for such unrealistic effort,” where feasibility of plan “was
nonexistent at the time the plan was offered.”); cf. 415 West 150 LLC, 2013 WL 4603162, at *5
(denying fees to a receiver’s attorney for pursuing a contempt motion in bankruptcy court against
the debtor’s principal because the receiver had already obtained an order of contempt against the
debtor’s principal in state court, the bankruptcy court contempt motion did not seek monetary,
injunctive or other relief beyond a declaration of contempt, and hence, “the lack of any
conceivable benefit to the estate should have been obvious from the outset.”); In re 530 West
28th Street, L.P., No. 08-13266 (SMB), 2009 WL 4893287, at *9-10 (Bankr. S.D.N.Y. Dec. 11,
2009) (denying fees to Committee’s counsel, as unreasonable and unnecessary, for opposing a
debtor’s plan that essentially provided all of the relief the Committee had sought in the case).
In contrast to the UST’s authorities, the Fourth Plan raised a litigable issue of good faith. 6
The Court had overruled the AHC’s objection to the disclosure statement, concluded that the
plan was not unconfirmable as a matter of law, and ruled that the issues surrounding the Pfizer
Settlement Agreements, including good faith, involved the resolution of factual issues and
required a trial. Disclosure Statement Ruling, 377 B.R. at 119. Furthermore, Pfizer argued that
6 	There was never a serious question that the Quigley petition, as opposed to the Fourth Plan, was filed in
good faith. Quigley faced endless litigation with rapidly diminishing insurance. Furthermore, while the Court
concluded that Pfizer instigated the Quigley chapter 11 to obtain a release of its derivative liability, that motive,
standing alone, does not constitute bad faith. Bankruptcy Code § 524(g) allows the plan to grant releases to
qualifying affiliates like Pfizer, and as the confirmation of the Fifth Plan showed, the result is consistent with the
Bankruptcy Code. The problem with the Fourth Plan was the way that Pfizer went about doing it.
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the Pfizer Settlement Agreements were essentially plan support agreements permitted under
applicable law that did not expressly require any Settling PI Claimant to vote for the Fourth Plan.
(See Post-Trial Brief and Conclusions of Law of Pfizer Inc. in Support of Confirmation of
Quigley Company, Inc.’s Fourth Amended and Restated Plan of Reorganization, dated Jan. 5,
2010, at 34, 37-38 (ECF Doc. # 2007).) The Court rejected the argument, Confirmation
Decision, 437 B.R. at 131, but the argument was not frivolous.
Even the UST recognized that the outcome was in doubt. In July 2009, only two months
before the confirmation trial began, the UST filed an objection to the latest round of interim fee
applications. The UST argued for a “holdback” because “the overall outcome of this case is in
doubt,” (Objection of the United States Trustee to Applications for the Allowance of Interim
Compensation and Reimbursement of Expenses, dated July 9, 2009 (“UST Interim Fee
Objection”), at 1 (ECF Doc. # 1861), and “the ultimate success of the case is not yet certain.”
(Id. at 4-5.) 	The UST’s expression of doubt implicitly recognized that no one can safely predict
the outcome of litigation, or that Schulte should have known from day one that the plan could not
be confirmed. Cf. O’Connell v. Arthur Anderson LLP (In re Alphastar Ins. Group Ltd.), 383
B.R. 231, 262 (Bankr. S.D.N.Y. 2008) (“Every trial lawyer has won cases he should have lost,
and lost cases he should have won. A party cannot, therefore, plead scienter by alleging that
management knew or should have known that the company would lose a litigation.”)
Accordingly, although Quigley faced a difficult fight, the outcome was in doubt, and I reject the
argument that Schulte’s services rendered in connection with the promulgation and prosecution
of the Fourth Plan would not have been undertaken by a reasonable attorney on behalf of its
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client. This conclusion follows even more strongly in the case of Caplin and the Togut Firm who
did not propose the Fourth Plan but ultimately supported it.7
Furthermore, the UST’s argument that Caplin should be docked 75% of its plan-related
fees (as opposed to the 50% reduction for Schulte in the Togut Firm) is misguided. According to
the UST, Caplin cannot explain time by referring to services rendered in connection with
negotiations or motion practice with Pfizer because the Committee was a “neutral party” whose
main task was to ensure that the calculations and distributions were correct, and this role fell
primarily on the Committee’s experts and not counsel. (UST Objection at 18.) The UST’s
“neutrality” argument may have come from Caplin’s response to the UST’s objection to its
Thirteenth Interim Fee Application. There, Caplin stated that the Committee had “remained
neutral with respect to the Plan while the Ad Hoc Committee and the Debtor have litigated
questions related to the status and voting rights of certain members of the asbestos creditor
constituencies.” (Response of Caplin & Drysdale, Chartered, to the Objection of the United
States Trustee to Applications for the Allowance of Interim Compensation and Reimbursement of
Expenses, dated July 10, 20098 (“Caplin Interim Application Response”), at ¶ 2 (ECF Doc. #
1862).) Caplin continued, however, that the Committee nonetheless played an active role
preparing and reviewing plan documents relating to the personal injury trust, defending the
Committee’s privileges at each deposition, analyzing fact witness expert reports and testimony
for the Committee members, and actively participating in litigation involving the Owens-Illinois
objection and insurer issues. (Id. at 3-4.)
7 	While the UST argues that the Togut Firm’s plan-related fees should be reduced by 50%, she did not seek a
reduction in Togut’s fees as the Legal Representative. But the Legal Representative presumably directed the
activities that his lawyer’s undertook in connection with the plans and disclosure statements.
8 	The document is misdated “2008.”
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Contrary to the UST’s supposition, the Committee was not a “neutral” party that just
called balls and strikes; it represented the interests of all of the existing creditors. It was
appointed by the UST, 11 U.S.C. § 1102(a)(1), to, inter alia, “participate in the formulation of a
plan [and] advise those represented by such committee of such committee’s determinations as to
any plan formulated,” 11 U.S.C. § 1103(c)(2), and was primarily responsible for negotiating the
plan on behalf of its constituency. In re Refco Inc., 336 B.R. 187, 195 (Bankr. S.D.N.Y. 2006);
In re Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey, 85 B.R. 13, 16-17
(Bankr. S.D.N.Y. 1988); 7 COLLIER ON BANKRUPTCY ¶ 1103.05[1][d] (Alan N. Resnick & Henry
J. Sommer eds., 16th ed. rev. 2013); see H.R. REP . NO. 95-595, at 401 (1977), reprinted in 1978
U.S.C.C.A.N. 5963, 6357 (“[The Committees] will be the primary negotiating bodies for the
formulation of the plan of reorganization. They will represent the various classes of creditors
and equity security holders from which they are selected.”) The UST’s suggestion that
Committee played a minimal role in the case is not well taken and lacks merit, a fact confirmed
by an examination of the numerous amendments, updates and revisions to the plans and
disclosure statements filed in the case, as well as Caplin’s own time records.
2. 	The Statistical Comparison
The second prong of the UST’s common objection is that each of the applicants spent an
unreasonable amount of time on plan-related services after the first plan and disclosure statement
were filed. As noted, the UST compared the amount of time billed to the “Plan and Disclosure
Statement” category prior to May 1, 2005,9 and the total fees billed to the category during the
entire case. The comparison showed that Schulte’s total fees were nearly twelve times greater
9 	The initial plan and disclosure statement were filed on March 4, 2005.
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than the fees billed during the earlier period, and Caplin’s and the Togut Firm’s fees were,
respectively, twenty-three times and thirty-four times greater.
The UST’s objection illustrates the axiom that statistics are a group of numbers looking
for an argument. The UST’s objection was fueled by the misperception that after the original
plan and disclosure statement were filed, the later changes “related to increases in Pfizer’s
contributions and did not involve wholesale redrafting of the First Plan and Disclosure
Statement.” (UST Objection at 15.) The UST did not, however, participate in any substantive
plan negotiations. (See Declaration of Michael L. Cook in Support of Schulte Roth & Zabel LLP
Final Fee Application Under 11 U.S.C. §330(a) (Docket No. 2682) and in Response to U.S.
Trustee's Objection (Docket No. 2700, dated Sept. 17, 2013 (“Cook Declaration”), at ¶ 8 (ECF
Doc. # 2706).) Furthermore, the applicants responded to the objection with details of the plan-
related work that they performed after April 30, 2005. In Schulte’s case, this included but was
not limited to continuous negotiations with the AHC, the liability insurers, Pfizer and the
Committee, preparation of revisions and updates of the financial information, participation in
disclosure statement litigation, conducting research regarding numerous legal issues relating to
confirmation, participation in plan-related discovery, preparation for the confirmation hearing,
addressing the silica claims, and preparation for what appeared might be a contested
confirmation hearing relating to the Fifth Plan. (Id. at ¶ 11; see also Declaration of David B.
Killalea in Support of Schulte Roth & Zabel LLP Final Fee Application Under 11 U.S.C.
§ 330(a) (Docket No. 2682), dated Sept. 16, 2013, at ¶¶ 3-4 (ECF Doc. # 2704).) Caplin offered
similar evidence of its plan-related services after April 30, 2005, (Reply of Caplin & Drysdale,
Chartered to the Objection of the United States Trustee to Final Fee Applications and Requests
for Reimbursement of Out-of-Pocket Expenses, dated Sept. 17, 2013, at 13-14 (“Caplin Reply”)
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(ECF Doc. # 2710), and so did the Togut Firm. (Reply of Togut, Segal & Segal LLP to the
Objection of the United States Trustee to Its Final Fee Application, dated Sept. 17, 2013, at ¶¶
13-18 (ECF Doc. # 2707).)
The firms’ time records and responses to the UST Objections demonstrate the substantial
amount of plan-related work that occurred after April 30, 2005. Much of this work was
evidenced by the filing of various plans and disclosure statements, cited above, that included
new, revised and updated exhibits. The increase in activity after April 30, 2005 implies the
opposite of what the UST argues; the first plan and disclosure statement were incomplete
placeholders filed on the date that exclusivity expired, and required substantial additional work.
Based on the foregoing, the UST’s two common objections to the reasonableness of the
Schulte, Caplin and Togut Firm plan-related fees and the Schulte “Litigation” fees are overruled.
B. 	The UST’s Specific Objections
1. 	Schulte
Over the approximately nine years that this case has been pending, fourteen Schulte
attorneys each billed less than six hours to the case. (UST Objection at 17-18.) The aggregate
amount of legal fees attributable to the services of these so-called “transitory” timekeepers was
$15,349.50. The UST contended that absent a satisfactory explanation for using “transitory”
timekeepers, all of this time should be disallowed. (See id. at 18.)
The primary concern with too many attorneys billing too little time is the learning curve.
Every attorney must be brought up to speed to the extent necessary to perform his or her task,
and the theory goes that the cost of this education can be saved or minimized if attorneys already
familiar with the case perform the service instead. This concern diminishes where the
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“transitory” timekeeper provides services on an ad hoc basis within an area of expertise that is
not possessed by the attorneys regularly assigned to the case or the task is so focused that it is
unnecessary to spend time learning the details of the case.
Schulte’s response to the UST objection sets forth the services rendered by these
“transitory” timekeepers. (See Cook Declaration at ¶ 15.) Most were experts in particular fields
(real estate, intellectual property, tax, employment law, environmental law) and dealt with
specific, non-recurring issues that arose in the course of the case. A few of the “transitory”
timekeepers belonged to the litigation or business reorganization departments, and the time-value
of their services totaled $3,353.50. Again, they dealt with discrete issues relating to ethical
disqualification, a specific withdrawal motion, the carve out provisions in the early financing
orders, research relating to the Pfizer Settlement Agreements and the analysis of a specific
document request.
There is a rebuttable presumption in bankruptcy that the staffing decisions made by
attorneys retained by court order “have been made in good faith in view of the attorneys’ legal
and ethical responsibilities as officers of the Court.” In re Cenargo, 294 B.R. 571, 596 (Bankr.
S.D.N.Y. 2003); accord In re Drexel Burnham Lambert Group, Inc., 133 B.R. 13, 23 (Bankr.
S.D.N.Y. 1991). The UST has not identified any evidence to rebut this presumption. And given
the nature of their services and the minimal amount of time attributable to them, the “transitory”
timekeepers did not spend much time coming up to speed. Nor is it evident that the same
services could have been rendered by other, “better-educated” attorneys in less time.
Accordingly, the UST’s objection to the “transitory” timekeepers is overruled.
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2. 	Caplin
a. 	Vagueness
The Amended Guidelines spell out the level of detail for certain services. Time entries
for telephone calls, letters or other communications should identify the parties to and the nature
of the communications. (Amended Guidelines at ¶ A (4)(vii).) “Time entries for court hearings
and conferences should identify the subject of the hearing or conference.” (Id.) These specific
requirements are consistent with the general rule that “[a]ll applications should include sufficient
detail to demonstrate compliance with the standards set forth in 11 U.S.C. § 330.” The UST
argues that vagueness and inaccuracy permeate Caplin’s time records, and its allowed fees
should be reduced by $200,000.00. (UST Objection at 21.)
The first category of vague time records targeted by the UST are the numerous entries
referring to “review of court dockets and calendars” and similar descriptions. For example, one
paralegal (ADK) billed thirty minutes to “review of Court dockets and calendars” on each of
sixty-one separate occasions in the Ninth Interim Fee Application, including on many days
without any docket activity. (Id. at 20-21.) He recorded the same entries on his time records
sixty-six times in the Fifth Interim Fee Application. (Id. at 20 n.7.) Another paralegal (SMS)
made similar time entries on nine occasions (1/10/12, 1/18/12, 1/20/12, 1/23/12, 1/24/12,
1/25/12, 1/26/12, 1/27/12, 1/30/12), but there was no docket activity on those days. The UST’s
supplemental objection annotated the time records she argued were vague. (Supplement to
Objection of the United States Trustee to Final Fee Applications and Requests for
Reimbursement of Out-of-Pocket Expenses, dated Sept. 16, 2013 (“UST Supplemental
Objection”), Ex. A, pp. 4-16 of 24 (ECF Doc. # 2701).)
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According to Caplin, ADK (and presumably SMS as well) performed a daily docket
review in each of Caplin’s many bankruptcy cases, downloaded and reviewed filings, prepared
an oral or written summary for the senior attorneys assigned to each case, and on occasion,
printed and transmitted a copy of the document to an attorney at the firm. (Declaration of Rita
C. Tobin, dated Sept. 17, 2013 (“Tobin Declaration”), at ¶¶ 14-16 (ECF Doc. # 2710-1).)
Obviously, the time records do not describe these services. More important, Caplin doesn’t
explain why the paralegals billed time to these services on days when there were no docket
entries; possibly the time should have been charged to a different Caplin case that involved
docket activity. ADK’s billing rate ranged from $175 per hour to $205 per hour, and the time
value of his 127 entries of one-half hour each is approximately $12,000.00. The nine entries by
SMS aggregate $832.50. Because they also reviewed the dockets on days when there were
docket entries, the Court will disallow $6,500.00, or approximately 50% of their time.
The records also reflect similar although sporadic entries of twelve to eighteen minutes
by Rita Tobin, an attorney. (See UST Supplemental Objection, Ex. A.) According to Ms. Tobin,
she reviewed emails, reports from paralegals and reports from local counsel with a view toward
apprising Caplin’s partner-in-charge, Elihu Inselbuch, Esq., about important issues. (Tobin
Declaration at ¶ 21.) In addition, she was responsible for reviewing all of the paralegal and local
counsel docket reports. (Id. at ¶ 22.)
Nevertheless, several of the time entries relating to docket review included days on which
there was no docket activity (5/29/07, 1/14/08, 1/18/08, 5/13/09, 5/22/09, 6/26/09, 1/13/12). On
another occasion (9/7/2006), she billed one hour to “review documents and documents filed”
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when the only documents filed that day were three affidavits of service.10 Ms. Tobin’s hourly
billing rate ranged from $435 to $505, and the value of the time reviewing the docket on the days
of no or minimal docket activity was roughly $1,200.00. This time is disallowed.11
Aside from the “docket review” activities, the UST highlighted several other vague
entries. The Court concludes that the following entries, sometimes involving large blocks of
time, do not sufficiently detail the activity involved, or in the case of communications, do not
identify the other party to the communication and/or the subject matter of the communications:
Timekeeper 	Date 	Hours 	Value 	Entry
RCT 	1/4/06 	.7 	304.50 	Address Plan issue
PVL 	1/11/06 	.2 	152.00 	Teleconference Levin
RCT 	2/7/06 	1.0 	435.00 	Research Plan issue
RER 	2/27/06 	2.6 	1,508.00 	Review pleadings and plan documents re: meeting
RER 	5/8/07 	1.1 	671.00 	Telephone conference regarding claims estimates,
projections and follow up
PVL 	5/9/07 	.1 	80.00 	Review EI memo
RCT 	5/9/07 	.5 	240.00 	Review emails and respond
PVL 	5/11/07 	.2 	160.00 	Review email (.1); review EI memo (.1)
RCT 	5/16/07 	2.8 	1,344.00 	Review TDP issues (.8); review Plan documents
(2.0).
RCT 	5/16/07 	1.0 	480.00 	Research re Plan issues (1.0).
RCT 	5/17/07 	1.0 	480.00 	Review Plan documents
10 	During the preceding week, the only other documents filed were five three-page stipulations extending
time.
11 	A few of these entries indicate that Ms. Tobin also reviewed local counsel’s recommendations as they
pertained to updating Mr. Inselbuch. The entries do not separate out this service from the review of the docket.
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RER 	5/18/07 	.4 	244.00 	Coordinate regarding plan meeting
PVL 	5/21/07 	.1 	80.00 	Review EI memo
PVL 	5/22/07 	.1 	80.00 	Review DS motion
PVL 	5/24/07 	.3 	240.00 	Confer RER
RER 	6/4/07 	.8 	488.00 	Review descriptions of transactions
RCT 	6/5/07 	.3 	144.00 	Review correspondence
EI 	8/17/07 	.1 	87.50 	Status
PVL 	8/21/07 	.1 	80.00 	Conference with EI and RER.
RCT 	2/1/08 	.6 	318.00 	Memo to RER (.3); review emails
EI 	2/7/08 	.5 	460.00 	Conf RCT re: status12
RER 	3/7/08 	.5 	320.00 	Review discovery requests and follow up. 13
RER 	3/7/08 	2.4 	1,536.00 	Follow up w/RCT re: hearing, review transcripts
and follow up re: committee position.
EI 	3/12/08 	.2 	184.00 	RER call
RER 	3/28/08 	.6 	384.00 	Correspondence and follow up re: confirmation
RER 	7/27/09 	1.9 	1,216.00 	Review and follow up re: plan supplement
documentation.
RER 	7/27/09 	1.2 	768.00 	Review drafts and correspondence and follow up
w/RCT re: PTO
RER 	7/28/09 	.7 	448.00 	Review and follow up re: PTO
RCT 	5/5/10 	.3 	163.50 	Emails re status
RCT 	5/7/10 	1.6 	872.00 	Review and organize files re future events
EI 	6/14/10 	.1 	95.00 	Status inquiry
12 	A conference regarding the status of the case that lasts for one half hour should describe the subjects
discussed in more detail.
13 	Some of the services involve “follow up” or “addressing” issues. The use of such verbs does not explain
the service the timekeeper rendered.
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RER 	7/26/12 	.3 	214.50 	Correspondence re: conf. call w/Debtor and Pfizer
14,277.00
The services in this chart aggregated $14,277.00 in billed time. Based on the vague
descriptions, 50%, rounded to $7,200.00, is disallowed.
b. 	Review of Billing
Although professionals are entitled to reasonable compensation for the time spent
preparing their fee applications, time spent preparing or editing bills is not allowed under the
assumption that lawyers do not charge their clients for preparing time records. In re CCT
Commc’ns, Inc., No. 07–10210 (SMB), 2010 WL 3386947 (Bankr. S.D.N.Y. Aug. 24, 2010); see
415 West 150, LLC, 2010 WL 338647, at *6 n.3. According to the UST, Caplin spent a
significant amount of time reviewing and presumably editing billing statements, and “[b]ecause
of the pervasive nature of these entries, the United States Trustee requests that the Court reduce
C&D’s fee award in this category by $100,000.00.” (UST Objection at 22-23.) Caplin
responded that the time entries referred to the review and editing of time records that contained
privileged material. (Tobin Declaration at ¶¶ 8-11.) The amount of time Ms. Tobin spent
reviewing and editing time records to remove privileged material aggregated nearly $9,000.00,
(see UST Supplemental Objection, Ex. B, pp. 17-24 of 24), and according to Caplin, the total
amount of time to which the UST objected was only $10,710.00. (Caplin Reply at 21 n.10.)
While the time spent preparing, reviewing and editing the bills is not generally
compensable, it is reasonable for the attorney responsible for preparing the fee application to
spend some amount of time reviewing the time records to ensure that the description of a service
does not reveal a secret or confidential communication or waive a privilege. The time records
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are attached to the fee application and made publically available. Although the fee applicant
could seek permission to file a redacted fee application and submit an unredacted copy in
camera, Amended Guidelines, at ¶ C, the time spent reviewing and redacting the time records
would not be any different than the time spent reviewing and editing the time records.
Timekeepers can and should be instructed whenever possible not to describe their services in a
manner that might waive a privilege, but not all timekeepers are attorneys, some timekeepers
may nonetheless include privileged material in their time entries, it may be impossible to record
certain time without revealing confidential material and someone will have to conduct a privilege
review anyway.
Since the time expended by Caplin reviewing and editing the bills was minimal compared
to the amount of time Caplin billed to preparing its own fee applications during the nine year life
of the case ($232,900.00 according to UST Objection at 22), the UST’s objection is overruled.
c. 	Defending Fees
i. 	The Thirteenth Interim Application
The Thirteenth Interim Application of Caplin & Drysdale Chartered, Counsel to
Unsecured Creditors Committee, for Interim Compensation and Reimbursement of Expenses,
dated June 5, 2009 (“Caplin’s Thirteenth Interim Application”) (ECF Doc. # 1837) sought
$423,845.50 in interim fees and $20,929.39 in interim reimbursement of expenses. The majority
of the fees were billed in the “Litigation” category. The UST objected to several applications at
the time, including Caplin’s, and requested a 10% reduction in its fees. (See UST Interim Fee
Objection, at 2, 10.) The UST argued that Caplin was not “particularly active” in litigation
during the fee period, (id. at 9), much of the Committee’s time records reflect “review” of
documents and “attendance” by the Committee at various hearings and depositions, (id. at 9-10),
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some of the time entries were vague or lumped (the UST identified four), (id. at 10), and the
$44,022.00 billed to “Case Administration” largely concerned the review and organization of
documents, making it difficult to determine the reasonableness of fees. (Id. at 10 & Ex. D.)
Finally, the UST argued that Caplin had billed 76 hours in time (representing $15,580.00 in fees)
to “Docket Review & Control,” this activity was part of overhead, and the time charges should
be “categorically denied.” (Id.) (citing In re Fibermark, Inc., 349 B.R. 385, 397 (Bankr. D. Vt.
2003).)
The UST objection provoked a spirited reply. Caplin argued that the objection itself was
too vague to permit a meaningful response, (Caplin Interim Application Response, at 2, 5), and
although the Committee was “neutral” with respect to the plan while Quigley and the AHC
litigated plan issues, the Committee was actively involved in the case and other litigation,
including discovery, review of expert reports and litigation pertaining to the Owens-Illinois
objection and insurer issues. (Id. at 3-4.) Caplin also argued that the vagueness and lumping
objections lacked merit based on the four examples offered by the UST, (id. at 5), the time
records comprising the “Case Administration” category “relate to the identification, tagging and
identification of documents and attorney review of such documents in connection with pre-
confirmation discovery, including document productions, fact depositions, and expert
depositions,” (id. at 5 & Ex. A), the 10% reduction request was arbitrary, (id. at 6), and lastly the
“docket control and review” was not part of overhead, and had to be performed by a paralegal
rather than a clerical employee. (Id. at 7-8.)
The order granting the interim fee awards indicated that the Court disallowed $2,025.00
of the fees sought by Caplin on an interim basis without prejudice and denied $2,116.00 in fees
sought by Schulte on an interim basis with prejudice and an additional $9,375.00 without
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prejudice. (Omnibus Order Approving Interim Fee Applications of Professionals, dated July 20,
2009, Schedule A(1), at nn.1-2 (ECF Doc. # 1869).) The record does not reflect whether these
dispositions resolved the UST Interim Fee Objection, or whether Caplin or Schulte are seeking
the fees disallowed without prejudice in their final application.14 Neither the UST Objection nor
Schulte’s reply papers mentioned the UST Interim Fee Objection, but Caplin stated that the
objections to its interim request have not been decided. (Caplin Reply at 22.) I infer from this
statement that Caplin now seeks the fees denied without prejudice, those fees are the only
unresolved objections raised in the UST Interim Fee Application, and turn to this objection
before considering the fees incurred by Caplin in defending the Thirteenth Interim Fee
Application.
A. 	Vagueness/Excessive Time
The UST’s “excessive time” objection was based on the erroneous premise that the
Committee “has not been particularly active in the litigation during the Fee Period.” (UST
Interim Fee Objection at 9.) Caplin explained that it was actively involved in certain litigations,
and the time records reflect that the Committee was heavily involved in discovery and discovery-
related matters during the fee period. (See Caplin Thirteenth Interim Fee Application, Ex. A at
pp. 9-29 of 50 (ECF Doc. # 1837-1).) Thus, this aspect of the objection is overruled.
As to the general vagueness/lumping objection, the UST argued that “a number of the
time entries of C&D professionals were vague and/or ‘lumped’ together, such that the
reasonableness of the time spent and fees charged for the tasks is difficult to determine.” (UST
14 	The transcript of the fee application hearing appears to be one of the few that was never docketed on ECF.
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Interim Fee Objection at 9.) However, she offered only four examples to support this sweeping
statement:
Date 	Timekeeper 	Category 	Hours 	Entry
2/17/09 	TEP 	Litigation 	7.5 	legal research re: substantive legal
issue
2/19/09 	JPW 	Litigation 	1.7 	research insurance issues
4/1/09 	KCM 	Litigation 	0.4 	review/analyze correspondence
4/13/09 	RCT 	Litigation 	2.2 	TC KCM re discovery and privilege
documents (0.2); review privilege
documents (2.0)
(UST Interim Fee Objection at ¶ 20.)
The first two entries described a total of 9.2 hours of legal research. When compensation
for legal research is sought, the time records should identify the issues researched with enough
specificity to assess their relevancy and necessity to the case.15 In re D’Amico, No. 05–19217,
2009 WL 2982987, at *3 (Bankr. N.D.N.Y. Sept. 14, 2009); Fibermark, 349 B.R. at 397. The
concern increases with the amount of time billed, and an applicant does not sustain its burden
with vague descriptions of legal research involving large blocks of time. These entries describe
the legal research in terms so vague that it is impossible to figure out what the lawyers did,
whether it took them a reasonable amount of time to do it, or whether the research was even
relevant to the case.
Both timekeepers submitted declarations in an effort to cure the deficiency. The first
timekeeper stated that his “research related to the OI objection and potential response.” (Caplin
Interim Application Response, Ex. D (Declaration of Todd E. Phillips), dated July 10, 2009, at ¶
15 	As noted, if the disclosure of work product or other privileged matter is cause for concern, the applicant can
seek permission to file a redacted application.
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2 (ECF Doc. # 1862-4).) The second timekeeper explained that his “research involved legal and
factual matters arising in connection with insurer objections to the Plan.” (Id., Ex. C
(Declaration of James P. Wehner), dated July 10, 2009, at ¶ 2 (ECF Doc. # 1862-3).) These
supplemental responses explained what prompted the research but did not adequately identify the
issues researched or why it took the amount of time billed to do it.
Moreover, the two examples were not isolated instances of inadequately described legal
research projects in the “Litigation” category. The following table charts several other problem
entries:
Date 	Timekeeper 	Hours 	Entry
2/13/09 	TEP 	2.6 	legal research re substantive legal issue
2/18/09 	TEP 	0.5 	Legal research re substantive legal issue
2/23/09 	TEP 	3.0 	Legal research re substantive legal issue
2/25/09 	TEP 	1.5 	Legal research re substantive legal issue
3/9/09 	JPW 	2.2 	Insurance issue research
3/11/09 	JPW 	2.7 	Research insurance issues
The time-value of the legal research identified in the two tables totals $7,344.00. The
Court disallows 50%, rounded to $3,700.00.
The third entry of the four cited by the UST did not identify the correspondence that was
reviewed. It too was vague. However, the timekeeper submitted a declaration that clarified the
entry, stating that he reviewed correspondence, including internal emails relating to TDP issues
as well as the proposed Rabinovitz deposition. (Id., Ex. B (Declaration of Kevin C. Maclay),
dated July 10, 2009, at ¶ 2 (ECF Doc. # 1862-2).) Given the amplification and the amount of
time devoted to the task, no reduction is warranted.
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The fourth entry was not vague, but the timekeeper nevertheless supplied a declaration
amplifying it. (Id., Ex. A (Declaration of Rita C. Tobin), dated July 10, 2009, at ¶¶ 5-6 (ECF
Doc. # 1862-1).) No reduction is warranted.
Although the UST identified a handful of vague entries, she did not support her request
that the Court should reduce the entire interim fee application by 10%, or $42,384.00. The UST
presumably reviewed most or all of the time records in order to make the statement that “a
number of the time entries of C&D professionals were vague and/or ‘lumped’ together, such that
the reasonableness of the time spent and fees charged for the tasks is difficult to determine.”
(UST Interim Fee Objection at 9.) She generally supports such objections by attaching and
annotating the time records with handwritten notations to indicate the problem time entries.
(See, e.g., UST Supplemental Objection, Ex. A & B.) She did not follow this practice in the UST
Interim Fee Objection. The Court has an independent duty to review the fee application, but it
does not have the duty to search for evidence to support the UST’s general objection.
Blackwood Assocs., L.P., 165 B.R. at 112. Caplin’s time records allow the Court to determine
the reasonableness and necessity of the services rendered, and no further reduction is warranted.
B. 	“Case Administration”
The second prong of the UST’s objection to Caplin’s Thirteenth Interim Fee Application
centered on the $44,022.00 billed to “Case Administration.” Caplin explained that the document
review work related to the review of documents in connection with pre-confirmation discovery.
(Caplin Interim Application Response at 5.) This explanation supplied the detail needed to
ascertain the reasonableness of the services and to allow the Court to conclude that they were
reasonable and necessary. Consequently, the UST’s objection is overruled.
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C. 	Billing for Overhead
The final prong of the objection related to the $15,580.00 billed in the “Docket Review
and Control” category. The UST apparently argued for a per se rule that the review of the
docket for updates should not be billed to the estate. I disagree. According to Caplin, no
member of its clerical or administrative staff had the expertise and training to perform the
necessary work using electronic dockets. (See id. at 8.) Moreover, as stated earlier, there is a
presumption that retained professionals staff their matters in an appropriate manner, and the UST
has not offered any concrete argument that justifies rebutting the presumption. Accordingly, this
part of the UST’s objection is also overruled.
ii. 	The Final Fee Application
The UST objects to the fees incurred by Caplin defending the Thirteenth Interim Fee
Application. Caplin billed $18,626.00 to the effort, (see Fourteenth Interim Application of
Caplin & Drysdale Chartered, Counsel to Unsecured Creditors Committee, for Interim
Compensation and Reimbursement of Expenses, dated Oct. 6, 2009, Ex. A, pp. 4-5 of 33 (ECF
Doc. # 1946-1), but the UST only seeks a reduction in the amount of $4,000.00. (UST Objection
at 24.)
There is no per se rule allowing or denying fees incurred defending a fee application in
the face of an objection. The Bankruptcy Code does not speak to the issue. On the one hand, it
is argued that fee applicants, like other litigants, should bear their own legal expenses under the
“American Rule,” CCT Commc’ns, Inc., 2010 WL 3386947, at * 9; In re St. Rita’s Assocs.
Private Placement, L.P., 260 B.R. 650, 652 (Bankr. W.D.N.Y. 2001), the defense of a fee
application is neither reasonable nor necessary to the administration of the estate, Grant v.
George Schumann Tire & Battery Co., 908 F.2d 874, 883 (11th Cir. 1990), and allowing the
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losing applicant to recover its legal fees would encourage meritless fee requests because the
applicant could earn more fees opposing objections to its frivolous request. See In re Riverside-
Linden Inv. Co., 945 F.2d 320, 323 (9th Cir. 1991). On the other hand, the failure to award fees
would dilute the fee award and encourage frivolous objections. E.g., Smith v. Edwards & Hale,
Ltd. (In re Smith), 317 F.3d 918, 929 (9th Cir.2002), cert. denied 538 U.S. 1032 (2003);
Hennigan Bennett & Dorman LLP v. Goldin Assocs. L.L.C. (In re Worldwide Direct Inc.), 334
B.R. 108, 111 (D. Del. 2005); In re Ahead Commc’ns Sys., Inc., No. 02–30574, 2006 WL
2711752, at *5 (Bankr. D. Conn. Sept. 21, 2006). Some have staked out a middle ground,
declining to award fees when the objection was filed in good faith and the objecting party
prevailed. Brous, 370 B.R. at 572; In re Teraforce Tech. Corp., 347 B.R. 838, 867 (Bankr. N.D.
Tex. 2006).
Here, the UST filed her objections to the Thirteenth Interim Fee Application in good faith
but did not prevail for the most part. The UST sought to reduce the overall fee award by 10%,
and the entire $15,580.00 incurred under the category “Docket Review and Control.” This
would have penalized Caplin twice for the latter category of time, and the UST’s objection
should be read to have sought a total reduction of $56,406.55 ($15,580.00 plus 10% of the
balance of the fees). The Court disallowed only $3,700.00, or 6.56% of the total disallowance
sought by the UST.
Nevertheless, a portion of Caplin’s defense was devoted to clarifying vague entries in the
“Litigation” category, and providing context to the entries relating to the review and organization
of documents in the “Case Administration” category. Some of Caplin’s efforts were
unsuccessful and resulted in a disallowance of $3,700.00 in fees. Some of the efforts were
successful but necessary to sustain the request for allowance. Just as a fee applicant is not
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entitled to compensation ex ante for editing vague entries when preparing a fee application, it
should not be entitled to compensation ex post for supplying the necessary clarification after a
party in interest objects.
The Court has reviewed the time records attributable to the defense of the Thirteenth
Interim Fee Application and cannot discern the value of the services devoted to ex post
corrections or clarifications of vague or deficient time records. The Court sustained the UST’s
Interim Fee Objection to only 6.56% of its total fee objection, and the corresponding percentage
of defense fees equals $1,221.78 (6.56% of $18,626.00). The Court will round this up to
$2,000.00 to account for Caplin’s clarification of ambiguous entries that the Court relied on in
overruling the UST’s objection (e.g., to “Case Administration” services), and reduce the request
by that amount.
The foregoing constitutes the Court’s findings of fact and conclusions of law. The
attorney for Quigley is directed to submit a final fee order consistent with this opinion that
conforms to the Court’s form Order Granting Application(s) for Allowance of Interim/Final
Compensation and Reimbursement of Expenses, attached through a hyperlink to Bankr.
S.D.N.Y.R. 2016-1(b).
Dated: New York, New York
October 24, 2013
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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