Petition — Baddock v. American Benefit Life Insurance

Supreme Court brief1977

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MAR Y 1977 |

IN THE MICHAEL RODAK, JR., CLERK

SUPREME COURT OF THE UNITED STATES

No. 76-1252

In the Matter of FIRST COLONIAL CORP. OF

AMERICA, Bankrupt

FRANZ J. BADDOCK,

Petitioner.

versus

AMERICAN BENEFIT LIFE INSURANCE

COMPANY

BERT K. ROBINSON

R. BOATNER HOWELL, JR.

ERWIN A. LAROSE

JAMES F. PIERSON, JR..,

Respondents.

Petition for a Writ of Certiorari to the United States

Court of Appeals for the Fifth Circuit

FRANZ JOSEPH BADDOCK

Trustee - Attorney (Petitioner)

P. O. Box 3573

Baton Rouge, La. 70821

Tel.: 343-9194

Franklin Press, Inc. Baton Rouge, La.

Cover Revised March 15, 1977

INDEX

LIST OF AUTHORITIES

PRELIMINARY EXPLANATION

CONCISE STATEMENT OF THE GROUNDS ON WHICH

THE JURISDICTION OF THIS COURT IS INVOKED

CONCISE STATEMENT OF THE CASE

THE QUESTIONS PRESENTED FOR REVIEW

AND THE

DIRECT AND CONCISE ARGUMENT ON EACH

QUESTION, AMPLIFYING REASONS RELIED

ON FOR ALLOWANCE OF THE WRIT

QUESTION #1 DOES THE DECISION CREATING "STANDING"

FOR AMERICAN BENEFIT CONFLICT WITH INNUMERABLE

DECISIONS OF THE: SUPREME COURT, THE UNITED STATES

COURTS OF APPEALS INCLUDING THE FIFTH CIRCUIT,

THE BANKRUPTCY ACT, AND RULES OF BANKRUPTCY

PROCEDURE?

QUESTION #2 IS THE INSTANT DECISION OF THE

UNITED STATES COURT OF APPEALS IN DIRECT CONFLICT

WITH BANGOR PUNTA OPERATIONS, INC. v. BANGOR &

AROOSTOOK RAILROAD COMPANY (1974) 417 U.S. 703,

41 L.Ed.2d 418, 94 S. Ct. 2578?

QUESTION #3 IS THE INSTANT DECISION OF THE

UNITED STATES COURT OF APPEALS IN SQUARE CONFLICT

WITH SEC. 13(d) OF THE SECURITIES EXCHANGE ACT OF

1934 (15 USCA 78m(d)) AND ITS COUNTERPART IN

RULE 13d-l1 OF THE SECURITIES AND EXCHANGE

COMMISSION (17 CFR 240.13d-1)?

QUESTION #4 DID THE UNITED STATES COURT OF

APPEALS COMMIT FUNDAMENTAL ERROR IN DECREEING

THAT “INTERVENTION” PER SE CREATES "STANDING"?

iii

QUESTION #5 IS THE OPINION OF THE COURT OF APPEALS

IN ESSENCE, AN INDIRECT SEVERE ATTACK ON RULE 215(e)

OF THE RULES OF BANKRUPTCY PROCEDURE?

QUESTION #6 IN ORDER TO CREATE "SANDING" FO

AMERICAN BENEFIT, DID THE COURT OF APPEALS REFUSE

TO FOLLOW THE MANDATE OF SEC. 57n OF THE

BANKRUPTCY ACT (11 USCA 93n) ?

QUESTION #7 WHEN AN ATTORNEY IS NOT FO

BY THE COURT THAT HE WILL BE ORDERED 0 “hanunenr

PLENARY LITIGATION, IS JOHNSON v. GEORGIA HIGHWAY

EXPRESS, INC. (5th Cir. 1974) 488 F2d 714, 718

AND ITS EIGHTH FACTOR APPLICABLE HEREIN?

CONCLUSION

SPECIAL REQUEST

PRAYER

CERTIFICATE OF SERVICE

EXHIBITS

LIST OF AUTHORITIES

Decisions of the United States Supreme Court

ALLEN CALCULATORS, INC. v. NATIONAL CASH REGISTER

CO. (1944) 322 U.S. 137, 64 S. Ct. 905

ASPEN MINING & SMELTING CO. v. BILLINGS

(1893) 150 U.S. 31, 14 S. Ct. 4

ASSOCIATION OF DATA PROCESSION SERVICE v. CAMP

(1970) 397 U.S. 150, 90 S. Ct. 827

BANGOR PUNTA OPERATIONS, INC. v. BANGOR &

AROOSTOOK RAILROAD CO. (1974) 417 U.S. 703,

41 L.Ed.2d 418, 94 S. Ct. 2578

BELL v. HOOD (1946) 327 U.S. 678, 66 S. Ct. 773

BIGELOW v. VIRGINIA (1975) 95 S. Ct. 2222

BLUE CHIP STAMPS v. MANOR DRUG STORES, INC.

(1975) 95 S. Ct. 1917

DOREMUS v. BOARD OF EDUCATION (1952)

342 U.S. 429, 72 S. Ct. 394

KATCHEN v. LANDY (1966) 382 U.S. 323,

86 S. Ct. 467

LINDA R.S. v. RICHARD D. AND TEXAS (1973)

410 U.S. 614, 35 L. Ed.2d 536, 93 S. Ct. 1146

O'SHEA v. LITTLETON (1974) 414 U.S. 488,

38 L.Ed.2d 674, 94 S. Ct. 669

PEPPER v. LITTON (1938) 308 U.S. 295,

60 S. Ct. 238

RONDEAU v. MOSINEE PAPER CORPORATION (1975)

95 S. Ct. 2069 (Cited in Note 27)

SCHLESINGER v. RESERVISTS COMMITTEE TO STOP

THE WAR (1974) 418 U.S. 208, 41 L.Ed.2d 706,

94 S. Ct. 2925

SIERRA CLUB v. MORTON (1972) 405 U.S. 727,

31 L.Ed.2d 636, 92 S. Ct. 1361

SUPERINTENDENT OF INSURANCE v. BANKERS LIFE

AND CASUALTY COMPANY (1971) 404 U.S. 6,

30 L.Ed.2d 128, 92 S. Ct. 165

iii

set

UNITED STATES v. CALIFORNIA COOPERATIVE CANNERIES

(1929) 279 U.S. 553, 49 S. Ct. 423

UNITED STATES v. RICHARDSON (1974)

418 U.S. 166, 41 L.Ed.2d 678, 94 S. Ct. 2940

UNITED STATES v. STUDENTS CHALLENGING REGULATORY

AGENCY PROCEDURES (SCRAP) (1973) 412 U.S. 669,

37 L.Ed.2d 254, 93 S. Ct. 2405

WARTH v. SELDIN (1975) 95 S. Ct. 2197

YOUNG v. HIGBEE (1945) 324 U.S. 204, 65 S. Ct. 594

Decisions of the United States Courts of Appeals

ABEL v. CAMPBELL (5th Cir. 1964) 334 F2d 339

BAILES v. COLONIAL PRESS (5th Cir. 1971)

444 F2d 1241

BATH INDUSTRIES, INC. v. BLOT (7th Cir. 1970)

427 F2d 97

CAHN v. NICHOLAS (Sth Cir. 1971) 453 F2d 528

CALDWELL v. ARMSTRONG (10th Cir. 1965)

342 F2d 485

CASTANER v. MORA (lst Cir. 1954) 216 F2d 189

DONALD v. SAN ANTONIO JOINT STOCK LAND BANK

(Sth Cir. 1938) 100 F2d 312 (Cited in Note 38)

EDELL v. DE PIAZZA (5th Cir. 1965) 345 F2d 336

GAR CORP. v. MILSTEIN (2nd Cir. 1971) 453 F2d 709

HARTMAN CORPORATION OF AMERICA v. UNITED STATES

(8th Cir. 1962) 304 F2d 429

HOOPER v. MOUNTAIN STATES SECURITIES CORP.

(Sth Cir. 1960) 282 F2d 195

IMPERIAL BOWL OF MIAMI v. ROEMELMEYER

(Sth Cir. 1966) 368 F2d 323

IN RE ADVOCATE (2nd Cir. 1944) 140 F2d 783

IN RE SUNNINGDALE COUNTRY CLUB

(6th Cir. 1965) 351 F2da 139

IN RE U.S. OVERSEAS AIRLINES, INC.

(3rd Cir. 1969) 419 F2d 932

30-31

IN RE VAN SWERINGEN (6th Cir. 1950) 180 F2d 119

JOHNSON v. GEORGIA HIGHWAY EXPRESS, INC.

(Sth Cir. 1974) 488 F2d 714

KLEIN v. NU-WAY SHOE CO., INC.

(2nd Cir. 1943) 136 F2d 986

KRIS PETROLEUM, LTD. v. STODDARD

(9th Cir. 1955) 221 F2d 801

MANDA v. SINCLAIR (5th Cir. 1960) 278 F2d 629

MATTER OF REALTY FOUNDATION, INC.

(2nd Cir. 1935) 65 F2d 286

MASSACHUSSETTS MUTUAL LIFE INSURANCE CO.

v. BROCK (5th Cir. 1968) 405 F2d 429

MATTER OF YORK (9th Cir. 1975) 527 F2d 1061

MENICK v. HOFFMAN (9th Cir. 1953) 205 F2d 365

OTTEN v. BALTIMORE & O. R.R.

(2nd Cir. 1953) 205 F2d 58

ROGERS v. BANK OF AMERICA NATIONAL TRUST &

SAVINGS ASSOCIATION (9th Cir. 1944) 142 F2d 128

RUTAS..(RANSA) v. UNITED STATES

(Sth Cir. 1968) 373 F2d 213

SKELTON v. CLEMENTS (9th Cir. 1969) 408 F2d 353

STONE v. HUFFSTUTLER (5th Cir. 1955) 227 F2d 217

WELLS v. DICKINSON (6th Cir. 1968) 403 F2d 635

Other Decisions

BATH INDUSTRIES v. BLOT 305 F. Supp 526

(Affirmed in 427 F2d 97 above)

GAR CORP. v. MILSTEIN 324 F. Supp 1062

(Reversed in 453 F2d 709 above)

IN RE GREENBAUM 62 F. Supp 769

MEINHARD v. SALMON 249 N.Y. 458, 164 N.E. 545

62 A.L.R. 1 (Cited in Note 44)

40-41

48, 53

A GROUP OF U. S. DISTRICT COURT DECISIONS CITED

ONLY AS ILLUSTRATIONS OF SIZE OF AWARDS

Other Authorities

THE BANKRUPTCY ACT (11 USCA 1 et seq)

COLLIER ON BANKRUPTCY, 14th Ed.

JURISPRUDENCE by Roscoe Pound

RULES OF BANKRUPTCY PROCEDURE

SEC. 706(k) OF TITLE VII OF THE CIVIL RIGHTS ACT

OF 1964 (42 USCA Sec. 2000e-5(k) )

SECTIONS 6871/73 INTERNAL REVENUE CODE

(26 USCA 6871/73)

SEC. 13(d) OF THE SECURITIES EXCHANGE ACT

(15 USCA 78m(d) )

10-11, 33,

42, 49

43, 55, 56

11, 33,42

35-36

IN THE

SUPREME COURT OF THE UNITED STATES

No.

In the Matter of FIRST COLONIAL CORP. OF

AMERICA, Bankrupt

FRANZ J. BADDOCK,

Petitioner.

versus

AMERICAN BENEFIT LIFE INSURANCE

COMPANY

‘BERT K. ROBINSON

R. BOATNER HOWELL, JR.

ERWIN A. LAROSE

JAMES F. PIERSON, JR..,

Respondents.

Petition for a Writ of Certiorari to the United States

Court of Appeals for the Fifth Circuit

PRELIMINARY EXPLANATION

Without preliminary explanation, this Court could not

fully understand background facts appearing so fantastic and

unbelievable at times, that the reader may well doubt ac-

curacy thereof! The writer assures this Court he is willing

to be disbarred if any material mis-statement of fact occurs

herein!

AMERICAN BENEFIT LIFE INSURANCE COMPANY

(“American Benefit”) is part of a group of entities referred

to herein as the American Benefit Complex! In the view of

Louisiana’s Supreme Court' and its Court of Appeal for the

Fourth Circuit?, American Benefit is identified with an indi-

vidual the subject of an extremely interesting article in NEW

ORLEANS MAGAZINE.’ Neither the individual nor Ameri-

can Benefit appear strangers to litigation!

From what appears through proceedings either presently

pending and/or previously filed in the United States District

Court for the Eastern District of Louisiana:

1. Proceedings were filed against American Benefit by

the U. S. Department of Labor* and by another Complainant.’

2. Proceedings were invoked against the individual by

the Board of Governors of the Federal Reserve System, and

by the individual against the same Board, and Comptroller

of the Currency.* In addition, another Civil Action was filed

against the individual and American Benefit in Henican v.

American Benefit Life Insurance Company et als., Docket

310 So2d 806, 825-826.

299 So2d 481, 484, 486-487.

April 1972 issue at pp’s 56 et seq.

Civil Action No. 74-2637.

Civil Action No. 74-3206.

See: Civil Action No. 75-1044 and Exhibit 1 therein.

OAs wh

No. 69-2898. The proceedings by the Board and Henican,

supra, appear predicated under Titles 12 and 18 of the United

States Code.

3. Further, other Civil Actions against both the indi-

vidual and American Benefit, appear to allege violations of

+ne Securities Act of 1933 (15 USCA 77a. et seq); Securities

"xchange Act of 1934 (15 USCA 78a. et seq); and Regula-

twn 10b-5 of the Securities and Exchange Commission,

namely:

Western Empire Financial, Inc. v. American Benefit Life

Insurance Company et als. Docket No. 73-2691

Bankers Union Life Insurance Company v. American

Benefit Life Insurance Company et als. Docket No.

74-1449

Security-Guaranty Life Insurance Company et al v.

American Benefit Life Insurance Company et als. Docket

No. 74-1450

Aside from the aforesaid litigation appearing quite ex-

tensive in scope, what appears unusual, in the view of the

writer, is the number of Federal Judges who apparently felt

compelled to disqualify themselves! One disclosed he was

indebted unto the bank named by the Board of Governors, —

another, that he was a customer of the same bank, — an-

other, that he was a stockholder in the same bank, — still

another, that as a practicing attorney he acquired a sufficient

knowledge of the substance and background of matters in-

volved to make it improper, in his opinion, for him to sit in

judgment, — while at least three (3) others ordered re-

allotment of cases without disclosing reasons in the orders

directing same. AT LEAST SEVEN (7) DISTRICT JUDGES

ORDERED REALLOTMENT!

In accordance with RULE 23 of this Court:

a) The Consolidated Opinion of the Court of Appeals in 75-

2260 and 75-2644 is annexed as Exhibit “A.”

b) Judgment of the Court of Appeals is dated January 10,

1977 and was entered on the same day. Exhibit “A-1.”

c) Judgment of the District Court appears as Exhibit “G.”

d) Rehearing was DENIED on February 2, 1977.

See: Exhibits “B” “C” and “D.”

e) Statutory provisions believed to confer on this Court juris-

diction to review the judgment in question by writ of

certiorari are: 28 USCA 1254(1), 28 USCA 2101(c), and

Section 24(c) of the Bankruptcy Act (11 USCA 47(c)).

CONCISE STATEMENT OF THE GROUNDS ON

WHICH THE JURISDICTION OF THIS COURT

; IS INVOKED

1. THE COURT OF APPEALS HAS DECIDED IM-

PORTANT QUESTIONS OF FEDERAL LAW IN DIRECT

CONFLICT WITH INNUMERABLE DECISIONS OF THE

SUPREME COURT, ESPECIALLY ON THE QUESTION OF

“STANDING.”

2. THE COURT OF APPEALS HAS ALSO DECIDED

IMPORTANT QUESTIONS OF FEDERAL LAW WHICH

HAVE NOT BEEN, BUT SHOULD BE, SETTLED BY THIS

COURT. _

3. THE COURT OF APPEALS HAS DECIDED FED-

ERAL QUESTIONS IN A WAY IN CONFLICT WITH THE

BANKRUPTCY ACT AND APPLICABLE ORDERS OF

THIS COURT, NAMELY, THE RULES OF BANKRUPTCY

PROCEDURE.

4. THE COURT OF APPEALS HAS SO FAR DE-

PARTED FROM THE ACCEPTED AND USUAL INTER-

PRETATIONS OF THE BANKRUPTCY ACT AND RULES

OF BANKRUPTCY PROCEDURE, AS ENUNCIATED BY

THIS COURT, THE VARIOUS UNITED STATES COURTS

OF APPEALS INCLUDING THE FIFTH CIRCUIT, AND

HAS SO FAR SANCTIONED SUCH A DEPARTURE

THEREFROM, ‘AS TO CALL FOR THIS COURT’S POWER

OF REVIEW.

CONCISE STATEMENT OF THE CASE

(NOTE: The reference “Tr.” is to the page or pages of the

Appendix in the United States Court of Appeals.)

FIRST COLONIAL CORP. OF AMERICA (‘First

Colonial”) is a corporation registered with the Securities and

Exchange Commission, and has registration numbers 0-1792

and 2-23329. Its stock is owned by innumerable parties. Its

capital structure indicates $363,870.00 of preferred stock-

holders, $938,993.00 of common stockholders, and paid-in

surplus of $309,244.00. The opinion of the Fifth Circuit re-

fers to it as an abandoned corporation. IT WOULD BE

MORE FITTING TO REFER TO IT AS A RAVAGED, PIL-

LAGED, DESTROYED, THEN ABANDONED CORPORA-

TION!

In 1970 an involuntary petition in bankruptcy was filed

against First Colonial in the United States District Court for

the Middle District of Louisiana. The writer was one of the

Attorneys for the Petitioning Creditor. On September 8th

of that year, it was adjudged a bankrupt. Thereafter, the

undersigned became its trustee.

The examination in bankruptcy was quite lengthy. In

latter 1971, a comprehensive “Trustee’s Report” was filed,

together with a CPA Report, which indicated there were

possible causes of action in favor of bankrupt, against innu-

merable parties, in the range of several millions of dollars!

In 1972 trustee petitioned for appointment of Attorney

under general retainer, requesting a specialist in the field

(Tr. 60). By Order entered February 29, 1972 (Tr. 65), he

was appointed. On March 7th 1972 he declined appointment

because of the arduous nature of the legal work. Thus, on

March 14, 1972, the Bankruptcy Court vacated its Order (Tr.

66-67). Another Attorney was appointed, and, on discovering

the arduous nature of the legal work, also requested to be

relieved of the assignment, which was thereafter vacated.

Other efforts were made by trustee to procure the law firm

of Milling, Benson, Woodward, Hillyer & Pierson in New

Orleans, since this firm represented the “Bassan Group” of

Creditors holding judgments of approximately $280,000.00

against bankrupt. This firm, also, declined appointment (Tr

62). As the Hon. E. Gordon WEST pointed out in his Reasons

for Judgment (Tr. 29):

“* * * * * T can say, I think without contradiction, that

many lawyers would have shied away from (these cases)

in the face of some of the adversity that was presented

the attorneys in these proceedings.”

Because of these difficulties in obtaining Attorneys under

general retainer, the Bankruptcy Court thereafter elected to

appoint Attorneys for specific purposes! These Orders are

all in the record and all except one are in the Appendix.

Specifically, in reference to these appointments:

1. On March 13, 1972 trustee petitioned for appoint-

ment of Attorney BERT K. ROBINSON (Tr. 68). The spe-

cific purpose for the request was detailed therein. On March

14, 1972 the request was granted and the writer was named

Assistant Attorney in the Order (Tr. 73.) This became the

authorization for filing Civil Action 72-97.

2. On April 4, 1972 trustee petitioned for appointment

of additional counsel, for the litigation which ultimately be-

came Civil Action 72-236 (Tr. 75). On the same date the

Court granted the request for the purposes detailed in the

application (Tr 79) and the writer was named Assistant At-

torney to ERWIN A. LA ROSE. On July 10, 1973, on Motion

of the latter, the Order was revised to name the undersigned

Associate Counsel in the cause.

3. On April 14, 1972 trustee petitioned for the appoint-

ment of additional counsel, for the litigation which ultimately

became Civil Action 72-222 (Tr. 80). On April 18, 1972, the

Court granted the request for the purposes detailed in the

application, and later the writer became Associate Counsel in

this cause (Tr 90). A later Order substituted Attorney R.

BOATNER HOWELL as counsel in this cause (Tr 93-96).

The other Attorney named in the April 18, 1972 Order has

since resigned, and his name may be disregarded.

4. On April 18, 1972 trustee petitioned for appointment

of additional counsel, for the litigation which ultimately be-

came Civil Action 72-233 (Tr. 85). On the same date the

Court granted the request for the purposes detailed in the

application, and R. BOATNER HOWELL became counsel (Tr

88). Later, on application of the latter, the writer became

Associate Counsel in the same cause, replacing Attorney Wil-

liam H. Brown (Tr. 91-92).

Thus, in each and every instance, the Bankruptcy Court

was fully apprised of the specific reason for each request, and

the purpose thereof. All Orders decreed that the Compensa-

tion of each Attorney would thereafter be determined by the

Court.

(NOTE: The necessity for the preliminary statement will now

become apparent.)

As a result of these authorizations, four (4) suits were

filed in behalf of FIRST COLONIAL CORP. OF AMERICA

in the United States District Court for the Middle District of

Louisiana, namely:

1. Civil Action No. 72-97 which was filed against AMER-

ICAN BENEFIT LIFE INSURANCE COMPANY et als.

2. Civil Action No. 72-222 which was filed against

AMERICAN BENEFIT LIFE INSURANCE COMPANY et als.

3. Civil Action No. 72-233 which was filed against vari-

ous entities, some of whom appeared to have close associa-

tion with the American Benefit Complex.

4. Civil Action No. 72-236 which was filed against NA-

TIONAL AMERICAN LIFE INSURANCE COMPANY, which

was, at all times pertinent, under the control of, and part of,

the American Benefit Complex! Stated simply:

(1) CA 72-97 involved a “premium-bribe” on a note of

National Securities, Inc.’ that American Benefit had assumed

the payment thereof. The amount sought to be recovered

from American Benefit et als was $2,350,000.00.

(2) CA 72-222 involved events after a former President

of First Colonial, sold the control thereof. The amount sought

to be recovered from American Benefit et als was $443,672.00.

(3) CA 72-333 involved events before the former Presi-

dent sold control of First Colonial. The amount sought in re-

covery was $2,481,149.20.

(4) CA 72-236 involved activities of National American

Life Insurance Company primarily during the period before

control of First Colonial was sold. The amount sought to be

recovered from National American Life Insurance Company

was (subject to certain recoveries in 72-233) $2,040,831.97.

These four (4) suits were integral parts of an overail

pattern of suits, whereby First Colonial was to be made

whole, after the events by which it had been victimized and

defrauded. They were predicated on alleged massive viola-

7. See: S.E.C. v. National Securities, Inc., et al 393 U.S. 453 89 S.

Ct. 564.

tions of: The Bankruptcy Act (11 USCA 1 et seq); The Se-

curities Act of 1933 (15 USCA 77a. et seq); The Securities

Exchange Act of 1934 (15 USCA 78a. et seq); The Investment

Companies Act of 1940 (15 USCA (80a-1 et seq); and Regu-

lation 10b-5 of the Securities and Exchange Commission.

Thirty-one (31) Defendants were involved in the litigation!

Apparently in retaliation® and perhaps for profit, the

American Benefit Complex struck with full fury against the

Bankruptcy Administration!

Through one maneuver, the Complex’ purchased all the

Claims of Ordinary Creditors that had TIMELY FILED

Proofs of Claim with the Bankruptcy Court, for about 75¢

on the Dollar. Thus, re Claims TIMELY FILED in the aggre-

gate of $493,963.08, the American Benefit Complex purchased

these Claims for only $401,005.00, then demanded FULL pay-

ment plus additional interest from the estate!

In this, apparently the American Benefit Complex over-

looked Section 57n. of the Bankruptcy Act (11 USCA 93n.)

which provides:

“When in any case all claims which have been duly al-

lowed have been paid in full, claims not filed within the

time hereinabove prescribed may nevertheless be filed

within such time as the Court may fix or for cause shown

extend and, if duly proved, shall be allowed against any

SURPLUS remaining in such case.” (Emphasis ours)

8. One report reached trustee to the effect that his body would

wind up in a Louisiana swamp if he failed to follow orders!

9. Through its National American Life Insurance Company.

As a result thereof, trustee made a compromise settle-

ment and paid National American $460,000.00 for these Claims

and a lien Claim held by the latter—which settlement was

approved by the Bankruptcy Court, and all terms thereof are

reflected in Tr. 132-141! If the Supreme Court has wondered

how the TIMELY FILED Claims came to be paid, it now has

the answer!

This will also explain to the Supreme Court why there

was not the customary “hearing” on Attorneys’ Fees in this

case. The reason therefor lies squarely as the responsibility

of the American Benefit Complex! Having purchased all of

the TIMELY FILED Claims of Ordinary Creditors, and these

purchased Claims having been paid, there were no listed

Creditors within the meaning of Sec. 58a(8) of the Bank-

ruptcy Act (11 USCA 94a(8)) and RULE 203(a)(6) of the

Rules of Bankruptcy Procedure, at the time the Attorneys’

Fees were determined! Additionally, the Attorney for Na-

tional American Life Insurance Company had notified the

Bankruptcy Court in writing that his company (that had

purchased the Claims) disclaimed any interest in the fixing

of the fees!

Unfortunately, the other maneuver of the American

Benefit Complex was tragically successful! After the plenary

suits had been pending for approximately 2 years, and had

withstood all attacks thereon such as Motions to Dismiss,

etc., AND—

1. After trustee had consummated a $5,000.00 recovery

against one Defendant—

2. AND a $75,000.00 settlement with another—

3. AND a $600,000.00 agreement of settlement with

another’°—

4. AND when the bankrupt estate was in the midst of

negotiating a $250,000.00 settlement with another—All under

reservation of ALL rights against the remaining Defendants,

INCLUDING AMERICAN BENEFIT—

THE UNITED STATES DISTRICT COURT PERMITTED

THE AMERICAN BENEFIT INTERESTS TO “TAKE

OVER” ALL FOUR (4) OF THE PLENARY SUITS

FILED IN BEHALF OF THE BANKRUPT ESTATE!

The Orders directing trustee to abandon these suits ap-

pear as Exhibits “H” and “I’”’ annexed hereto. In more than

25 years of practice within the field of bankruptcy, the writer

has been unable to discover any comparable precedent!

Trustee filed ten (10) pages of objections with the Court

(Tr 102-111) and the three (3) other Attorneys representing

the bankrupt estate voiced intense opposition to the Hon. E.

Gordon WEST (Tr 120-122). In addition, trustee filed Pro-

ceeding No. 74-117 of the Middle District (Tr. 112-119) in the

hope that His Honor would at least permit appointment of a

Federal Court Receiver to take over the suits, rather than

the other interests. These efforts failed completely!

The only remedies available were applications to the Fifth

Circuit under 28 USCA 1651, which were taken on June 17,

10. Which was formally approved by a majority of the Creditors

AND the Bankruptcy Court.

1974, and again on July 8, 1974. For reasons undisclosed, the

Fifth Circuit denied both applications!’** Appeal would have

been ineffective for two reasons: First, the bankrupt estate

could not have furnished supersedeas under RULE 8 FRAP

and RULE 805 RBP.** Further, the time lag between com-

mencing Appeal and disposition by the Fifth Circuit, was an

insurmountable barrier.’*

(NOTE: The necessity for the preliminary statement will

now become even more apparent.)

On June 20, 1974, AMERICAN BENEFIT LIFE INSUR-

ANCE COMPANY petitioned the Civil District Court for the

Parish of Orleans, to appoint a “receiver” for the First Co-

lonial Corp. of America.’ The fact that First Colonial, ac-

cording to the bankruptcy records, never had an office in

New Orleans, had never been domiciled in that city, and was

without an agent for service of process in 1974, appears not

to have deterred American Benefit from requesting the ap-

pointment.

On July 1, 1974, the Court entered its Amended and

Supplemental Order to Abandon the plenary suits.'* This was

11. Numbers 73-3287 and 73-3616.

12. The Supreme Court may care to note that since the Orders to

Abandon were under the signature cf the Bankruptcy Judge, any Appeal

to the Fifth Circuit would have had to be preceded by an Appeal to the

District Court under Rules 801 et seq RBP.

13. For example, although the present Appeals were commenced in

1974, the Fifth Circuit did not render its opinion until 1977! However,

after the plenary suits were taken over, they were disposed of, in the

cpinion of trustee, in 1974.

14. No. 575-038, Division “A,” Docket No. 5.

15. Exhibit “I.”

followed, on July 2, 1974, by the Court allowing the state-

court appointed “receiver’’* to be substituted as Party-

Plaintiff in Civil Action 72-236.'’ According to the Docket

Sheet of this suit, the substituted Plaintiff and National Ameri-

can Life Insurance Company (the only Defendant therein)

filed a Joint Motion for DISMISSAL, on the same date of

July 2, 1974.°* Thus, a $2,040,831.97 suit against an entity

within the American Benefit Complex was eliminated!

On July 11, 1974, the Court granted the Motion of the

state-court appointed “receiver” to be substituted as Party-

Plaintiff in the remaining Civil Actions 72-97, 72-222, and

72-233.'°

Specifically in reference to Civil Action 72-97, the Master

made reference in his Report to a Stipulation of Settlement

by and between the substituted receiver/plaintiff and Ameri-

can Benefit Life Insurance Company et als, and said:

Page 15:

“. . . Specifically, the Stipulation provides ..... dis-

charge of all liability due or to become due under OR IN

CONNECTION WITH that certain note executed by Na-

tional Securities, Inc. .... .

Page 16:

“In the event that the novations above described were

16. Named in the NEW ORLEANS MAGAZINE article referred to

in Note 3.

17. Exhibit “K.”

18. Exhibit “L.”

19. Exhibit “J.”

not effective, then the Stipulation further specifically

provides that the note . . . should be marked “paid in

full.” (Emphasis ours)

Because of such stipulations, the Master recommended

dismissal of the Action, and on December 2, 1974, the District

Court entered summary judgment in favor of American Bene-

fit et als. Thus, another suit, this time directly against Ameri-

can Benefit, in the amount of $2,350,000.00, was eliminated!

The appointment of a state-court receiver for a corpora-

tion which is in bankruptcy, appears to be an additional “act

of bankruptcy” under the Act!* Pretermitting this, the

status accorded the receiver by the Master, in his Report in

CA 72-222, is significant:

Page 27:

“Based on the above findings of fact, it is clear that

either American Benefit Life Insurance Company or (the

individual referred to in Notes 1, 2, 3, and 6 herein), or

both, are the real parties at interest as plaintiffs in this

litigation. It follows that if plaintiff makes a recovery

..., the recovery would inure to the benefit of Amer-

ican Benefit, or both.

The fact that American Benefit acquired its snares

in the plaintiff, First Colonial, under a Reinsurance

Agreement .. . does not alter the fact that a recovery

would be a windfall profit to American Benefit.

Page 29:

“If Alabama National policyholders are to receive

20. Sec. 3a(5) of the Bankruptcy Act (11 USCA 21a(5).

a benefit, it is so indirect and so much subject to the

control of American Benefit, that it is ridiculous to argue

that it is the Alabama National policyholders, rather

than American Benefit, who will receive the benefit of

any recovery in this action.

What would be done with any money recovered

herein is clearly subject to the discretion of American

Benefit Life Insurance Company ..... ” (Emphasis

and in parentheses ours)

On the basis of Bangor Punta Operations, Inc. v. Bangor

é Aroostook RR Co., (1974) 417 U.S. 703, 41 L.Ed. 2d 418,

94 S.Ct. 2578, the Master recommended dismissal against all

of the defendants with prejudice! Thus, another suit directly

against American Benefit, in the amount of $443,672.00, was

eliminated!

Civil Action 72-233 suffered substantially the same fate

as 72-222. In his Report the Master said:

Page 5:

“At the conclusion of the hearing on July 29, 1974,

the Special Master stated that after consideration of the

various pleadings filed, and the opposition thereto, the

motions for summary judgment based upon the Bangor

Punta defense would be maintained.”

Thereafter, it appears that all or substantially all of the

remaining Defendants in CA 72-233 moved for summary

judgment in their favor, which motions and judgments were

in due course GRANTED. Thus, the last suit seeking recov-

eries of $2,481,149.20 in behalf of First Colonial, was elimi-

nated!

The substituted Plaintiff appears not to have filed any

Appeal to the Fifth Circuit in 72-233, and, of course, he could

not have appealed in 72-97 or 72-236, since these actions

were voluntarily dismissed! Trustee says nothing further in

this statement of the case!

THE QUESTIONS PRESENTED FOR REVIEW

AND THE

DIRECT AND CONCISE ARGUMENT ON EACH

QUESTION, AMPLIFYING REASONS RELIED

ON FOR ALLOWANCE OF THE WRIT ARE:

QUESTION #1 DOES THE DECISION CREATING

“STANDING” FOR AMERICAN BENEFIT CONFLICT

WITH INNUMERABLE DECiSIONS OF THE SUPREME

COURT, THE UNITED STATES COURTS OF APPEALS

INCLUDING THE FIFTH CIRCUIT, THE BANKRUPTCY

ACT, AND RULES OF BANKRUPTCY PROCEDURE?

In law school, Dean Roscoe Pound expounded a principle

which he later set forth in one of his works:

“In this stage of matured legal system, the watchwords

are equality and security. The idea of equality is de-

rived partly from the insistence of equity and natural

er Partly, also, it is derived from the insistence

of the strict law that the same remedy shall always be

applied to the same state of fact. Accordingly, as used

here, equality includes two things: (1) Equality of opera-

tion of legal precepts, and (2) equality of opportunity

to exercise one’s faculties and to employ one’s sub-

stance.” (Emphasis ours) (Roscoe Pound, JURISPRU-

DENCE V. 1 Page 422)

The writer respectfully submits that this principle has

been shredded into oblivion, for ——

In order to create “standing” for American Benefit, the

Fifth Circuit has disregarded, abrogated, and nullified man-

datory requirements thereof, as enunciated by the United

States Supreme Court through the words of:

First: The late Mr. Justice JACKSON in Doremus v.

Board of Education (1952) 342 U.S. 429 72 S.Ct. 394, 397-

398:

“It is not a question of motivation but of possession of

the requisite financial interest that is, or is threatened

to be, injured ....” (Emphasis ours)

Second: Mr. Justice DOUGLAS in Association of Data

Processing Service Organizations, Inc., v. Camp 397 U.S. 150

90 S.Ct. 827, 829-830:

“(2) Generalizations about standing to sue ae largely

worthless as such. One generalization is, however, neces-

sary and that is that the question of standing in the

federal courts is to be considered in the framework of

Article IMI which restricts judicial power to “cases” and

“controversies.”

“The question of standing . . . concers, apart from the

“case” or “controversy” test, the question whether the

interest sought to be protected by the complainant is

arguably within the zone of interests to be protected or

regulated by the statute or constitutional guarantee in

question.

“Apart from Article III jurisdictional questions, prob-

lems of standing, as resolved by this Court for its own

governance, have involved a “rule of self-restraint.”’

Barrows v. Jackson, 346 U.S. 249, 255, 73 S.Ct. 1031,

1034, 97 L.Ed. 1586.” (Emphasis ours)

Third: Mr. Justice STEWART in Sierra Club v. Morton

405 U.S. 727, 31 L.Ed.2d 636, 92 S.Ct. 1361, 1364, 1368:

“Whether a party has sufficient stake in an otherwise

justiciable controversy to obtain judicial resolution of

that controversy is what has traditionally been referred

to as the question of standing to sue. Where the party

does not rely on any specific statute authorizing invoca-

tion of the judicial process, the question of standing de-

pends upon whether the party has alleged such a “per-

sonal stake in the outcome of the controversy,’ Baker

v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L. Ed.2d

663, as to ensure that “the dispute sought to be adjudi-

cated will be presented in an adversary contex and in a

form historically viewed as capable of judicial resolu-

tion.” Flast v. Cohen, 392 U.S. 83, 101, 88 S.Ct. 1942,

1953, 20 L. Ed.2d 947.”

“. . @ mere “interest in a problem,” no matter how

long standing the interest and no matter how qualified the

organization is in evaluating the problem, is not sufficient

by itself to render the organization “adversely affected”

or “aggrieved” ..... ” (Emphasis ours)

Fourth: Mr. Justice MARSHALL in Linda R. 8. v.

Richard D. and Texas 410 U.S. 614, 35 L. Ed.2d 536, 93 S.Ct.

1146, 1148-1149:

“Before we can consider the merits of appellant’s

claim or the propriety of the relief requested, appellant

must first demonstrate that she is entitled to invoke the

judicial] process. She must, in viher words, show that

the facts alleged present the court with a “case or con-

troversy” in the constitutional sense and that she is a

proper plaintiff to raise the issues sought to be litigated.

The threshold question which must be answered is wheth-

er the appellant has “alleged such a personal stake in

the outcome of the controversy as to assure that concrete

adverseness which sharpens the presentation of issues

upon which the court so largely depends for illumination

of difficult constitutional questions.” Baker v. Carr, 360

U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962).

“[{1-3] Recent decisions by this Court have greatly

expanded the types of “personal stake[s]” which are

capable of conferring standing on a potential plaintiff.

(Authorities omitted) But as we pointed out only last

Term, “broadening the categories of injury that may be

alleged in support of standing is a different matter from

abandoning the requirement that the party seeking re-

view must himself have suffered an injury.” Sierra Club

v. Morton, 405 U.S. 727, 738, 92 S.Ct. 1361, 1368, 31 L.Ed.

2d 636 (1972). Although the law of standing has been

greatly changed in the last 10 years, we have steadfastly

adhered to the requirement that, at least in the absence

of a statute expressly conferring standing, federal plain-

tiffs must allege some threatened or actual injury result-

ing from the putatively illegal action before a federal court

may assume jurisdiction. See, e. g., Moose Lodge No.

107 v. Irvis, 407 U.S. 163, 166-167, 92 S.Ct. 1965, 1968,

32 L.Ed.2d 627 (1972); Flast v. Cohen, 392 U.S. 83, 101,

88 S.Ct. 1942, 1953, 20 L.Ed.2d 947 (1968): Baker v.

Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663

(1963). Cf. Laird v. Tatum, 408 U.S. 1, 13, 92 S.Ct.

2318, 2325, 33 L.Ed.2d 154 (1972).

“(4] Applying this test to the facts of this case, we

hold that, . . . appellant has failed to allege a suffi-

cient nexus between her injury and the . . . action which

she attacks to justify judicial intervention. To be sure,

appellant no doubt suffered an injury ..... But the

bare existence of an abstract injury meets only the first

half of the standing requirement. “The party who in-

vokes [judicial] power must be able to show .. . that

he has sustained or is immediately in danger of sustain-

ing some direct injury . . .” Massachusetts v. Mellon,

262 U.S. 447, 488, 43 S.Ct. 597, 601, 67 L.Ed. 1078 (1923)

(emphasis added). See also Ex parte Levitt, 302 US.

633, 634, 58 S.Ct. 1, 82 L.Ed. 493(1937). As this Court

made plain in Flast v. Cohen, supra, a plaintiff must show

“a logical nexus between the status asserted and the

claim sought to be adjudicated. . . . Such inquiries into

the nexus between the status asserted by the litigant and

the claim he presents are essential to assure that he is a

proper and appropriate party to invoke federal judicial

power.” 392 U.S., at 102, 88 S.Ct., at 1953.”

(Footnotes omitted) (Emphasis ours)

Fifth: Mr. Justice STEWART in United States v. Stu-

dents Challenging Regulatory Agency Procedures (Scrap)

412 U.S. 669, 37 L.Ed.2d 254, 93 S.Ct. 2405, 2416:

“(4) Of course, pleadings must be something more than

an ingenious academic exercise in the conceivable. A

Plaintiff must allege that he has been or will in fact be

perceptibly harmed by the challenged . . . action, not

that he can imagine circumstances in which he could be

affected .. .” (Emphasis ours)

Sixth: Mr. Justice WHITE in O’Shea v. Littleton 414

U.S. 488, 38 L.Ed.2d 674, 94 S.Ct. 669, 675-676:

“[1-6] We reverse the judgment of the Court of

Appeals. The complaint failed to satisfy the threshold

requirement imposed by Art. III of the Const.tution that

those who seek to invoke the power of federal courts

must allege an actual case or controversy. Flast v. Cohen,

392 U.S. 83, 94-101, S.Ct. 1942, 1949-1953, 20 L.Ed.2d

947 (1968); Jenkins v. McKeithen, 395 U.S. 411, 421-425,

89 S.Ct. 1843, 1848-1851, 23 L.Ed.2d 404 (opinion of

Marshall, J.). Plaintiffs in the federal courts “must al-

lege some threatened or actual injury resulting from the

putatively illegal action before a federal court may as-

sume jurisdiction.” Linda R. S. v. Richard D., 410 U‘S.

614, 617, 93 S.Ct. 1146, 1148, 35 L.Ed.2d 536 (1973).

There must be a “personal stake in the outcome” such

as to “assure that concrete adverseness which sharpens

the presentation of issues upon which the court so largely

depends for illumination of difficult constitutional ques-

tions.” Baker v. Carr, 369 U.S. 186, 204, S.Ct. 691, 703,

7 L.Ed.2d 663 (1962). Nor is the principle different where

statutory issues are raised. Cf. United States v. SCRAP,

412 U.S. 669, 687, 93 S.Ct. 2405, 2415, 37 L.Ed.2d 254

(1973). Abstract injury is not enough. It must be alleged

that the plaintiff “has sustained or is immediately in

danger of sustaining some direct injury” as the result of

the challenged statute or official conduct. Massachusetts

v. Mellon, 262 U.S. 447, 488, 43 S.Ct. 597, 601, 67 L.Ed.

1078 (1923). The injury or threat of injury must be both

“real and immediate,” not “conjectural” or “hypotheti-

cal.” Golden v. Zwickler, 394 U.S. 103, 109-110, 89 S.Ct.

956, 960, 22 L.Ed.2d 113 (1969); Maryland Casualty Co. v.

Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510,

912, 85 L.Ed. 826 (1941), United Public Workers v.

Mitchell, 330 U.S. 75, 89-91, 67 S.Ct. 556, 564-565, 91

L.Ed. 754 (1947). Moreover, if none of the named plain-

tiffs purporting to represent a class establishes the requi-

site of a case or controversy with the defendants, none

2 ee ae

may seek relief on behalf of himself or any other member

of the class. Bailey v. Patterson, 369 U.S. 31, 32-33, 82

S.Ct. 549, 550-551, 7 L.Ed.2d 512 (1962); Indiana Em-

ployment Division v. Burney, 409 U.S. 540, 93 S.Ct. 883,

35 L.Ed.2d 62 (1973) See 3B Moore’s Federal Practice,

Par. 23.10-1, n. 8 (2d ed. 1971).” (Footnotes omitted).

Seventh: Mr. Chief Justice BURGER in Schlesinger v.

Reservists Committee to Stop the War. 418 U.S. 208, 41 L.

Ed.2d 706, 94 S.Ct. 2925, 2932-2935:

“We reaffirm that standing to sue may not be predi-

cated upon an interest of the kind alleged here which is

. necessarily abstract . . . . Concrete injury, wheth-

er actual or threatened, is that indispensable element of

a dispute which serves in part to cast it in a form tradi-

tionally capable of judicial resolution. It adds the es-

sential dimension of specificity to the dispute by requiring

that the complaining party have suffered a particular in-

jury caused by action challenged as unlawful. This per-

sonal stake is what the Court has consistently held en-

ables a complainant authoritatively to present to a court

a complete perspective upon the adverse consequences

flowing from the specific set of facts undergirding his

grievance. Such authoritative presentations are an inte-

gral part of the judicial process, for a court must rely

on the parties treatment of the facts and claims before

it to develop its rules of law. Only concrete injury pre-

sents the factual context within which a court, aided by

parties who argue within the context, is capable of mak-

decisions. ose *# # # &

First, concrete injury removes from the realm of specu-

lation whether there is a real need to exercise the power

of judicial review in order to protect the interests of the

complaining party.

“The desire to obtain [sweeping relief] cannot be

‘

accepted as a substitute for compliance with the

general rule that the complainant must present facts

sufficient to show that his individual need requires

the remedy for which he asks.”” McCabe v. Atchison,

T. & S. F. R. Co., 235 U.S. 151, 164, 35 S.Ct. 69, 72,

59 L.Ed. 169 (1914).

Second, the discrete factual context within which the

concrete injury occurred or is threatened insures the

framing of relief no broader than required by the precise

facts to which the court’s ruling would be applied.

To permit a complainant who has no concrete injury

to require a court to rule on important . . . issues in the

abstract would create the potential for abuse of the ju-

dicial process... .

“Tt is one thing for a court to hear an individual’s

complaint that certain specific . . . action will cause that

person private competitive injury, Association of Data

Processing Service Organization, Inc. v. Camp, 397 U.S.

150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970) .. . but it is

another matter to allow a citizen to call on the courts to

resolve abstract questions. The former provides the set-

ting for a focused consideration of a concrete injury. In

the latter, .. . it can be only a matter of speculation

whether the claimed violation has caused concrete injury

to the particular complainant.

To support standing there must be concrete injury

in a form which assures “the necessary specificity” called

for by Flast, 392 U.S., at 106, 88 S.Ct., at 1955, and “that

concrete adverseness . . . upon which the court so large-

ly depends for illumination of difficult constitutional ques-

tions.” Baker v. Carr, supra, at 204, 82 S.Ct., at 703.

“. . . the essence of standing

“is not a question of motivation but of possession of

the requisite . . . interest that is, or is threatened

to be, injured . . . Doremus v. Board of Education,

342 U.S. 429, 435, 72 S.Ct. 394, 397, 96 L.Ed. 475

(1952).

This same theme as to the inadequacy of motivation to

support standing is suggested in the Court’s opinion in

Sierra Club, supra.

“But a mere ‘interest in a problem,’ no matter how

longstanding the interest and no matter how qualified

the organization is in evaluating the problem, is not

sufficient by ‘tself to render the organization ‘ad-

versely affected’ or ‘aggrieved’ . . . 405 U.S., at 739,

92 S.Ct., at 1368.

Respondents’ motivation has indeed brought them sharp-

ly into conflict which petitioners, but as the Court has

noted, motivation is not a substitute for the actual in-

jury needed by the courts and adversaries to focus liti-

gation efforts and judicial decision making.

Such a generalized interest, however, is too abstract to

constitute a “case or controversy” appropriate fcr ju-

dicial resolution.

[7] Closely linked to the idea that generalized citizen

;

interest is a sufficient basis for standing was the District

Court’s observation that it was not irrelevant that if

respondents could not obtain judicial review of petitioners’

action, “then as a practical matter no one can.”

The assumption that if respondents have no standing to

sue, no one would have standing, is not a reason to find

standing. See United States v. Richardson, 418 U.S., and

179, 94 S.Ct., at 2947.

(Emphasis ours) (footnotes omitted)

Eighth: Mr. Chief Justice BURGER in United States v.

Richardson 418 U.S. 166, 41 L.Ed.2d 678, 94 S.Ct. 2940,

2948:

“[6] As our society has become more complex, our

numbers more vast, our lives more varied, and our re- —

sources more strained, citizens increasingly request the

intervention of the courts on a greater variety of issues

than at any period of our national development. The ac-

ceptance of new categories of judicially cognizable injury

has not eliminated the basic principle that to invoke

judicial power the claimant must have a “personal stake

in the outcome,” Baker v. Carr, supra, at 204, 82 S.Ct.,

at 703, or a “particular, concrete injury,”’ Sierra Club,

supra, 405 U.S., at 740-741, n. 16, 92 S.Ct., at 1369, or “a

direct injury,” Ex parte Levitt, supra, 302 U.S., at 634,

58 S.Ct., at 1; in short, something more than “generalized

grievances,” Flast, supra, 392 U.S., at 106, 88 S.Ct.

1956. Respondent has failed to meet these fundamental

tests; accordingly, the judgment of the Court of Appeals

is reversed.”

Ninth: Mr. Justice POWELL, concurring in Richardson,

supra, 94 S.Ct. at pages 2954-2955:

“. . ve risk a progressive impairment of the effective-

ness of the federal courts if their limited resources are

diverted increasingly from their historic ro’e .. .

“The irreplaceable value of the power articulated by

Mr. Chief Justice Marshall lies in the protection it has

afforded the constitutional rights and liberties of indi-

vidual citizens and minority groups against oppressive or

discriminatory government action. It is this role.....

that has maintained public esteem for the federal courts

and has permitted the peaceful coexistence of the count-

er-majoritarian implications of judicial review and the

democratic principles upon which our Federal Govern-

ment in the final analysis rests. * * * * * * *

“To be sure, standing barriers have been substantially

lowered in the last three decades.

Even in the absence of specific statutory grants of

standing, economic interests that at one time would not

have conferred standing have been re-examined and found

sufficient. (Authorities omitted.)

“The concept of narticularized injury has been dra-

matically diluted. E g., United States v. SCRAP, 412

U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973).

“The revolution in standing doctrine that has oc-

curred, particularly in the 12 years since Baker v. Carr,

supra, has not meant, however, that standing barriers

have disappeared altogether. As the Court noted in

Sierra Club “broadening the categories of injury that

may be alleged in support of standing is a different matter

from abandoning the requirement that the party seeking

review must himself have suffered an injury.” 405 U.S.,

at 738, 92 S.Ct., at 1368. Accord, Linda R. S. v. Richard

D., 410 U.S. 614, 617, 93 S.Ct. 1146, 1148, 35 L.Ed.2d 536

(1973). Indeed, despite the diminution of standing re-

quirements in the last decade, the Court has not broken

with the traditional requirement that, in the absence of a

specific statutory grant of the right of review, a plaintiff

must allege some particularized injury that sets him apart

from the man on the street.” (Footnotes omitted) (Em-

phasis ours) =

Tenth: Mr. Justice BLACKMUN in Bigelow v. Virginia

(1975) 95 S.Ct. 2222, 2230:

“[4-6] Of ccurse, in order to have standing, an indi-

vidual must present more than “allegations of a subjective

chill. There must be a “claim of specific present objec-

tive harm or a threat of specific future harm.” Laird v.

Tatum, 408 U.S. 1, 33 L.Ed.2d 154, 92 S.Ct. 2318, 2326.”

Eleventh: Mr. Justice POWELL in Warth v. Seldin

(1975) 95 S.Ct. 2197, 2205-2206:

“{1, 2] We address first the principles of standing

relevant to the claims asserted ..... In essence the

question of standing is whether the litigant is entitled to

have the court decide the merits of the dispute or of par-

ticular issues. This inquiry involves both constitutional

limitations on federal court jurisdiction and prudential

limitations on its exercise. E. g., Barrows v. Jackson,

346 U.S. 249, 255-256, 73 S.Ct. 1031, 1034-1035, 97 L.Ed.

1586 (1953). In both dimensions it is founded in con-

cern about the proper—and properly limited—role of the

courts in a democraic society. See Schlesinger v. Reserv-

ists Comm. to Stop the War, 418 U.S. 208, 221-227, 94

S.Ct. 2925, 2932-2935, 41 L.Ed.2d 706 (1974); United

States v. Richardson, 418 U.S. 166, 188-197, 94 S.Ct. 2940,

2952-2956, 41 L.Ed.2d 678 (1974) (Powell, J., concur-

ring).

[3-7] Im its constitutional dimension, standing im-

ports justiciability: whether the plaintiff has made out a

“case or controversy” between himself and the defendant

within the meaning of Art. III. This is the threshold

question in every federal case, determining the power

of the court to entertain the suit. As an aspect of jus-

ticiability, the standing question is whether the plain-

tiff has “alleged such a personal stake in the outcome of

the controversy” to warrant his invocation of federal

court jurisdiction and to justify exercise of the court’s

remedial powers on his behalf. Baker v. Carr, 369 U.S.

186, 204 82 S.Ct. 691, 703, 7 L.Ed.d 663 (1962). The

Art. III judicial power exists only to redress or otherwise

to protect against injury to the complaining party, even

though the court’s judgment may benefit others collater-

ally. A federal court’s jurisdiction therefore can be in-

voked only when the plaintiff himself has suffered ‘some

threatened or actual injury resulting from the putatively

illegal action . . .” Linda R. S. v. Richard D., 410 U.S. 614,

617, 93 S.Ct. 1146, 1148, 35 L.Ed.d 536 (1973). See Asso-

ciation of Data Processing Service Organizations, Inc. v.

Camp, 397 U.S. 150, 151-154, 90 S.Ct. 827, 829-830, 25

L.Ed.d 184 (1970).

[8,9] Apart from this minimum constitutional man-

date, this Court has recognized other limits on the class

of persons who may invoke the courts’ decisional and

remedial powers. First, the Court has held that when the

asserted harm, is a “generalized grievance” shared in

substantially equal measure by all or a large class of

citizens, that harm alone normally does not warrant exer-

cise of jurisdiction. E. g., Schlesinger v. Reservists Comm.

to Stop the War, supra; United States v. Richardson,

supra, Ex parte Levitt, 302 U.S. 633, 634, 58 S.Ct. 1, 82

L.Ed. 493 (1937). Second, even when the plaintiff has

alleged injury sufficient to meet the “case or contro-

versy” requirement, this Court has held that the plain-

tiff generally must assert his own legal rights and inter-

ests, and cannot rest his claim to relief on the legal

rights or interests of third parties. EZ. g., Tileston v. UII-

man, 318 U.S. 44, 63 S.Ct. 493, 87 L.Ed. 603 (1943). See

United States v. Raines, 362 U.S. 17, 80 S.Ct. 519, 4

L.Ed.2d 524 (1960); Barrows v. Jackson, supra. Without

such limitations—closely related to Art. III concerns but

essentially matters of judicial self-governance—the courts

would be called upon to decide abstract questions. See,

e. g., Schlesinger v. Reservists Comm. to Stop the War,

418 US., at 222, 94 S.Ct., at 2932. Essentially, the stand-

ing question in such cases is whether the constitutional

or statutory provision on which the claim rests properly

can be understood as granting persons in the plaintiff’s

position a right to judicial relief.” (Emphasis ours)

In order to create “standing” for American Benefit as a

mere stockholder in bankrupt, the Fifth Circuit not only

abrogates all of the authorities of the United States Supreme

Court previously cited, but its own decisions as well, namely:

Stone v. Huffstutler (5th Cir. 1955), 227 F.2d 217; Manda v.

Sinclair (Sth Cir. 1960), 278 F.2d 629; Edell v. DePiazza (5th

Cir. 1965), 345 F.2d 336; Imperial Bowl of Miami v. Roemel-

meyer (Sth Cir. 1966), 368 F.2d 323; Cahn v. Nicholas (5th

Cir. 1971), 453 F.2d 528—ALL of which are in dire conflict

with the instant decision on the issue of “standing.”

In addition, the instant decision is in direct conflict with

the established rules of other Circuits, namely: Castaner v.

Mora (ist Cir. 1954), 216 F.2d 189; Matter of Realty Founda-

tion, Inc. (2nd Cir. 1935), 65 F.2d 286; In re Advocate (2nd

Cir. 1944), 140 F.2d 783; In re U. S. Overseas Airlines, Inc.

(3rd Cir. 1969), 419 F.2d 932; In re Sunningdale Country Club

(6th Cir. 1965), 351 F.2d 139; Wells v. Dickinson (6th Cir.

1968), 403 F.2d 635; In re Van Sweringen (6th Cir. 1950),

180 F.2d 119; Hartman Corporation of America v. United

States (8th Cir. 1962), 304 F.2d 429; Rogers v. Bank of Amer-

ica National Trust & Savings Association (9th Cir. 1944), 142

F.2d 128; Skeleton v. Clements (9th Cir. 1969), 408 F.2d 353;

In re Greenbaum (E.D. Pa. 1945), 62 F. Supp. 769.

IN DIRECT CLASH WITH ALL OF THE FOREGOING

AUTHORITIES, THE INSTANT DECISION IS PERHAPS

THE ONLY ONE OF ITS KIND IN THE UNITED STATES,

ALLOWING “STANDING” IN BEHALF OF A STOCK-

HOLDER OF A BANKRUPT CORPORATION!

Against this formidable array of authorities, the courts

have engrafted one exception, illustrated by such cases as:

Abel v. Campbell (5th Cir. 1964), 334 F.2d 339; Rutas...

(RANSA) v. United States (5th Cir. 1967), 373 F.2d 213;

Menick v. Hoffman (9th Cir. 1953), 205 F.2d 365; Caldwell

v. Armstrong (19th Cir. 1965), 342 F.2d 485.

Such cases, usually predicated under Sections 6871/73

of the Internal Revenue Code,”' stand for the proposition

summed up by Judge WISDOM in Abel, supra:

“Because the . . . liability survives the adjudication in

bankruptcy, the bankrupt has standing to attack... .

and a right to appeal an averse judgment as would an

ordinary creditor under Chapter 6 of the Bankruptcy

Act ...” (Emphasis ours) 334 F.2d 339, 341

Even with the wildest stretch of imagination, the writer

21. 26 USCA 6871/73.

cannot surmise ANY applicability of these exceptions to the

case at bar!

First: American Benefit does not allege that IRS or any

other taxing authority, has made any assessments of taxes

against First Colonial, and indeed they have not!

Second: American Benefit does not contend that IRS or

any other taxing entity, has filed any Proof of Claim for taxes

with the Bankruptcy Court. Indeed, they have not!

Third: American Benefit does not contend that the

trustee is refusing to pay any tax or other liability which

American Benefit would have to discharge in default of such

payment, and indeed there is not any refusal to pay!

Fourth: Even IF IRS or other taxing authorities had

made such assessment ...

Even IF such entities had filed Proofs of Claim

with the Court...

Even IF the trustee were refusing to pay .. .

it is impossible to surmise how this could be to the detriment

of American Benefit! They do not contend that they had the

Status of parties against whom any such transfer of assess-

ments of liabilities could be had!

In the Abel, Rutas, Menick, and Caldwell cases, supra,

and in others of similar category, the courts appear to make

a distinction between a “Bankruptcy Fund” concept, and a

“Non-Bankruptcy Fund” concept, namely:

In Abel, Rutas, and Menick, supra, there was a “Bank-

ruptcy Fund,” and in Caldwell there was a “potential” fund

of the same nature. Only where there was danger of forced

payment out of the “Non-Bankruptcy Fund” did the courts

allow standing to the bankrupt to complain!

Pretermitting the question whether a stockholder should

have the status of a bankrupt, inherent weakness of the posi-

tion of American Benefit is reflected in the drastic extension

of “standing” enunciated by the Fifth Circuit, for:

A) Every time either a trustee or the Bankruptcy Court

would determine matters pertaining to Ordinary

Creditors ...

B) or Secured Creditors...

C) or Priority Creditors ...

D) or Compromise and Settlement under the Act...

E) or Taxes on which the stockholder would NOT be

liable...

F) or sought to dispose of property, real or personal .. .

... then a stockholder would have standing to complain

and appeal, since the “Bankruptcy Fund” would be affected.

ETC. ETC. ETC. ETC. In fact, it is difficult to visualize

ANY action that the Bankruptcy Court or trustee might take,

on which a stockholder could not complain and appeal, IF that

stockholder is recognized as having standing and/or interest

in the “Bankruptcy Fund” to complain and appeal! Section

70 of the Bankruptcy Act (11 USCA 110) vests title to the

assets in the trustee—NOT a stockholder of the bankrupt!

See also: Sec. 58a. (11 USCA 94a.) and RULE 203(a) RBP!

QUESTION #2 IS THE INSTANT DECISION OF THE

UNITED STATES COURT OF APPEALS IN DIRECT CON-

FLICT WITH Bangor Punta Operations, Inc. v. Bangor &

Aroostook Railroad Company (1974), 417 U.S. 703, 41 L.Ed.

2d 418, 94 S.Ct. 2578?

In all due deference to the decision of the Fifth Circuit,

it would be most difficult to surmise a more emphatic con-

flict therewith! As previously pointed out herein, the Special

Master recommended that the District Court dismiss two (2)

of the suits taken over, because American Benefit was then

deemed to be the real party in interest as party Plaintiffs,

and any decision in their favor would have done violence to

the “anti-windfall” rule enunciated!?? In the instant matter,

this was also the view of the District Judge (Tr. 26, 30)

and Bankruptcy Judge (Tr. 208). Thus, in essence, the Fifth

Circuit has reversed not only the District Judge, and Bank-

ruptcy Judge, but by implication, the Special Master. Yet,

to employ an expression attributable to Law Professor Ed-

ward Henry WARREN: There is not a “weak, meek, peep”

mention of Bangor, supra, in the Opinion of the Fifth Circuit!

Just “how” that Court reconciled its decision with Bangor, is

something of a mystery!

Ironically, American Benefit has employed the “anti-

windfall” doctrine of Bangor in defense of an action brought

against them in the United States District Court for the

Eastern District of Louisiana.** The writer quotes directly

from the brief of American Benefit filed therein:

“The reasoning behind this principle is that such a share-

22. Part III of Bangor, supra. 94 S.Ct. at pages 2585-2586.

23. Bankers Union Life Insurance Company v. American Benefit Life

Insurance Company, et als, Docket No. 74-1449 — referred to previously.

ee ee

poem me

holder would realize a windfall if the corporation re-

covered in the action . . . to permit such an action could

result in the shareholder recouping a large part of the

purchase price notwithstanding the fact that he had

received al] that he bargained for and could result in the

shareholder reaping a profit from wrongs done to others.”

(Emphasis ours)

In the words of Mr. Justice POWELL in Warth, supra:**

“(3-7) In its constitutional dimension, standing imports

justiciability .. .”

Thus, having been prevented from avoiding the “anti-windfall”

doctrine through the “front door,” that is, through take-over

of the plenary suits, American Benefit is now attempting to

gain access through the “back door,” that is, gain control of

any residue which may result from the termination of the

Bankruptcy Proceedings!

QUESTION #3 IS THE INSTANT DECISION OF THE

UNITED STATES COURT OF APPEALS IN SQUARE CON-

FLICT WITH SEC. 13(d) OF THE SECURITIES EX-

CHANGE ACT OF 1934 (15 USCA 78m(d)) AND ITS COUN-

TERPART IN RULE 13d-1 OF THE SECURITIES AND

EXCHANGE COMMISSION (17 CFR 240.13d-1)?

Copies of stock certificates in the record show a Mid-1970

transfer date of the First Colonial stock to American Benefit.

The Special Master found that the latter procured its shares

as of March 31, 1970. Thus: American Benefit could have

requested, under their impressive power, permission from the

Bankruptcy Court, AS FAR BACK AS 1970, to assume all

24. 9 S.Ct. at page 2205.

—_--

responsibilities to the bankrupt estate and its Creditors and

ALL stockholders — terminate the bankruptcy proceeding —

and take over as the majority stockholder (with all respon-

sibilities being theirs thereafter).

AMERICAN BENEFIT DID NOT DO THIS! WHY? The

writer submits the answer may lie within the formidable

terms of Sec. 13(d) of the Securities Echange Act of 1934

and its counterpart in Rule 13d-1 of the Securities and Ex-

change Commission, which Section requires filing with the

SEC “within ten days after such acquisition” of the following

pertinent information:

“(A) the background and identity of all persons by whom

or on whose behalf the purchases have been or are to

be effected;

“(B) the source and amount of the funds or other con-

sideration used or to be used in making the purchases, .. .

“(C) IF the purpose of the purchase or prospective pur-

chases is to acquire control of the business of the issuer

of the securities, any plans or proposals which such per-

sons may have to liquidate such issuer, to sell its assets

to or merge it with any other persons, or to make any

other major changes in its business or corporate struc-

ture;

“(D) the number of shares of such security which are

beneficially owned, . . . and

“(E) information as to any contracts, arrangements, or

understandings with any person with respect to any secu-

rities of the issuer. . . ” (Emphasis ours)

According to the record before the Fifth Circuit, Amer-

ican Benefit had not filed any report under Sec. 13(d) with

the SEC for approximately 2 years after acquisition of their

stock, and, within the information presently available to the

writer, may not have filed any report up to the present time.

Yet, because of this ownership of stock, American Benefit has:

1. Procured the appointment of a state-court “receiver”’

for First Colonial Corp. of America.*°

2. Then, in cases wherein it was deemed to be the real

party in interest, suffered or permitted DISMISSAL of Ac-

tions filed in behalf of First Colonial Corp. of America, in

the aggregate amount exceeding $7,000,000.00 of dollars, of

which $4,834,503.97 had been sought directly against Ameri-

can Benefit and/or an entity within the American Benefit

Complex!

Such actions could, conceivably, be of benefit to Ameri-

can Benefit or the American Benefit Complex! However,

could they be of ANY possible benefit to First Colonial Corp.

of America? WERE THESE ACTIONS EVER REPORTED

BY AMERICAN BENEFIT TO THE SECURITIES AND EX-

CHANGE COMMISSION?

Additionally, the status of the “ownership” by American

Benefit, of the First Colonial stock, has proved to be quite

interesting. Before the Fifth Circuit, American Benefit said

that**

“ . . the Alabama National receivership is the owner of

25. See Note 14, supra.

26. Art. 6 of their PETITION FOR ALLOWANCE.

the majority stock in First Colonial Corp. of America.”

(Emphasis ours)

As previously pointed out, however, the Master found in his

Reports that American Benefit acquired its shares in First

Colonial under a Reinsurance Agreement which was filed

in the record. REFERENCE TO THIS REINSURANCE

AGREEMENT SHOWS THAT AMERICAN BENEFIT PAID

NOT A DIME FOR THIS STOCK! Was the Securities and

Exchange Commission ever apprised of this fact?

It is argued, however, that American Benefit is now

absolved of any necessity to file reports because of a recent

decision of the United States Supreme Court!?’ The writer

respectfully disagrees. In this decision Mr. Chief Justice

BURGER was careful to point out:**

“The narrow issue before us is whether this record sup-

ports the grant of injunctive relief, a remedy whose basis

“in the federal courts has always been irreparable harm

and inadequacy of legal remedies.” Beacon Theatres,

Inc. v. Westover, 359 U.S. 500, 506-507, 79 S.Ct. 948,

954, 3 L.Ed.2d 988 (1959).”

Additionally, the drastic difference in the fact situation be-

tween the instant case and Mosinee, supra, should not be

overlooked!

In Bath Industries, Inc. v. Blot 305 F. Supp 526, 537-539,

affirmed on appeal in 427 F2d 97 (CA 7th 1970), and GAR

Corp. v. Milstein 324 F. Supp 1062 (1971), reversed in 453

27. RONDEAU V. MOSINEE PAPER CORPORATION (1975), 95

S.Ct. 2069.

28. 9 S.Ct. at page 2075

F2d 709 (CA2d 1971), stock owners were enjoined from ex-

ercising privileges of ownership because of non-filing or in-

adequate filing of Schedule 13D! There appears nothing in

the language of Mr. Chief Justice BURGER which would in

any manner conflict with either Blot or Milstein, supra!

Although the failure of American Benefit to file under

Sec. 13(d) and/or Rule 13d-1 was raised before the District

Court (Tr. 10-13) and in briefs before the Fifth Circuit—

again—there is not a “weak, meek, peep” of mention of Sec.

13(d), or Rule 13d-1, or Blot, or Milstein, in the opinion of

the Fifth Circuit! Because of this, the writer presumes that

his position on these issues are correct!

QUESTION #4 DID THE UNITED STATES COURT OF

APPEALS COMMIT FUNDAMENTAL ERROR IN DECREE-

ING THAT “INTERVENTION” PER SE CREATES “STAND-

ING”?

In all due deference to the Court of Appeals, this error

borders on the fantastic, for, insofar as Dean POUND’s

“equality of operation of legal precepts” is applicable, every

Federal District Judge hereafter has it within his power to

abrogate and nullify the Supreme Court decisions in Doremus,

Sierra Club, Linda, (SCRAP), Littleton, Schlesinger, Richard-

son, Bigelow, and Warth, all cited supra, through the simple

expedient of allowing “Intervention”!

Suffice to say the instant decision is in direct and em-

phatic conflict with Rogers v. Bank of America National Trust

é& Savings Association (9th Cir. 1944), 142 F.2d 128, 129

wherein the Court said:

“(4) The bank argues that because it was served with

notice of the hearing . . . filed objections, and took an

active part therein, it is now entitled to review the order

resulting. None of the cases . . . suggest that merely

because a person is allowed to participate in a hearing...

he may petition for review even though he has no direct

interest in the order to be reviewed. Such a conclusion

would be directly contrary to (the Bankruptcy Act) and

cannot be supported.” (Emphasis and () ours)

The only authority cited by the Fifth Circuit in support

of its proposition is Klein v. Nu-Way Shoe Co., Inc., (2nd Cir.

1943), 136 F.2d 986. The proposition appears to be that Inter-

vention, if not appealed, per se creates standing!

Careful review of Klein, supra, shows it does NOT stand

for the proposition cited. The “appeal” referred to therein

was a referenced appeal from an order appointing a Federal

Receiver, viz:

“* * * * * Judge Bondy, after a hearing and after receiv-

ing briefs, rejected the contention and on April 16, 1942

made Lipton a Federal Receiver in Bankruptcy for the

corporation. No appeal was taken from this determina-

tion.” 136 F.2d 986, 988 (Emphasis ours)

—NOT an appeal from an Order Allowing Intervention!

Further, insofar as Klein could be interpreted to mean

that trustee should have appealed from the Order allowing

American Benefit to Intervene, Klein would be overruled by

the later Second Circuit decision of Otten v. Baltimore & O.

R.R. (2nd Cir. 1953), 205 F.2d 58, holding squarely that an

Order allowing Intervention is not appealable! To the same

effect is Kris Petroleum, Ltd. v. Stoddard (9th Cir. 1955), 221

F.2d 801. On the basis of these authorities, Moore’s Federal

Practice states the rule:**

“# * * * * it is clear that a district court order allowing

intervention is not a final order and is not appealable as

such.” (Emphasis ours)

Further, it should be pointed out that the instant decision

is in direct conflict with ALLEN CALCULATORS, INC. V.

NATIONAL CASH REGISTER CO. (1944) 322 U.S. 137, 64

S.Ct. 905° wherein this Court said:

“(3,4) The appe!!et had standing to invoke the discre-

tion of the district couri to permit it to intervene... .”

(64 S.Ct. at 907)

Thus, it is the PREREQUISITE of “standing” which af-

fords the right to Intervene—NOT that Intervention “creates”

standing! Were it otherwise, all Bankruptcy Judges could

create “standing” in violation of the Bankruptcy Act and

Rules of Bankruptcy Procedure, and all District Judges could

create “standing” in total disregard of ALL Supreme Court

authorities previously cited—BY THE SIMPLE EXPEDIENT

OF ALLOWING INTERVENTION, as against which any ad-

verse party could NOT Appeal! THE WRITER RESPECT-

FULLY SUBMITS THIS IS NOT THE LAW!

In fairness to the Bankruptcy Judge, it should be pointed

out that within the time frame that American Benefit de-

sired to intervene, the Court was considering an offer of

setthment from a former President of First Colonial, and

American Benefit desired to be heard. Out of an abundance

29. V. 3B, Par. 24.15, Page 24-561.

30. Rehearing denied 322 US. 7i., 64 S.Ct. 1257.

of precaution, the Bankruptcy Judge permitted them to inter-

vene, and INTERVENTION WAS ALLOWED THE SAME

DATE IT WAS FILED (Tr. 99-101).

Since this matter is now on Appeal, out of an abundance

of precaution (trustee being without right of prior appeal

from the Order), insofar as the Order of the Bankruptcy

Court allowing American Benefit to Intervene may be con-

strued as an Order allowing Intervention for all purposes,

the writer requests that such Order be declared ineffective

for the purpose of creating “standing” for American Benefit!

QUESTION #5 IS THE OPINION OF THE COURT OF

APPEALS, IN ESSENCE, AN INDIRECT SEVERE AT-

TACK ON RULE 215(e) OF THE RULES OF BANKRUPTCY

PROCEDURE?

Insofar as certain language of the opinion may demon-

strate an indirect severe attack by that Court on RULE 215(e)

BRP, the only available remedy is protection from this Court.

RULE 215(e) is among the New Rules of Bankruptcy

Procedure formulated by this Court and promulgated in its

ORDER of April 24, 1973. It provides:

“(e) Employment of Trustee or Receiver as Attorney of

Accountant. The court may authorize the trustee or re-

ceiver to act as an attorney or accountant for the estate

if such authorization is in the best interest of the estate.”

A trustee is required to provide neither legal nor account-

ing work in behalf of the bankrupt estate.*1 Hence, RULE

215(e) is a companion measure to RULE 215(c) which allows

31. Sec. 47 of the Bankruptcy Act—11 USCA 75.

an Attorney employed by a general creditor of the estate, to

represent the estate. Collier on Bankruptcy provides suggested

Forms for the Application and Order.*? While admittedly the

practice of employing a trustee to act as Attorney is reserved

for unusual cases, the practice was well recognized within the

Fifth Circuit long PRIOR to the advent of the New Rules!*

In the instant case, neither American Benefit nor any Creditor

registered the slightest protest against the practice.

In spite of this, strange, harsh, unnecessary, and errone-

ous observations appear in the Opinion!

First, that: ©

“the district court directed the trustee to settle all

of the bankrupt’s claims for $600,000.00.” (Opinion, 70)

In this clearly erroneous observation, the Fifth Circuit

violated its own decision in Massachusetts Mutual Life Insur-

ance Co. v. Brock, 405 F.2d 429, 422, which said:

“(9) With respect to the overall result and the total of

the fees sought, we are fortunate in having facts and

circumstances not in the record in this case which we

may consider .. . We judicially know from our own court

records .. . IT IS PERMISSIBLE FOR US TO TAKE

THESE .. . PROCEEDINGS INTO CONSIDERATION.

(citing United States Supreme Court decisions)” (Em-

phasis and in() ours)

Thus, IF the Fifth Circuit had followed its own precept

32. 14th Ed. V. 5, Pages 4-29 through 4-32.

33. In the Matter of ORBIT LIQUOR STORE (5th Cir. 1971), 439

F.2d 1351.

a ae

a SS ee

in Brock, supra, (and those of United States v. California Co-

operative Canneries (1929), 279 U.S. 553, 555, 49 S.Ct. 423,

424 and Aspen Mining & Smelting Co. v. Billings (1893), 150

U.S. 31, 38, 14 S.Ct. 4, cited in Brock) it could easily have

determined that the plenary suits were “taken over” rather

than being “SETTLED” by trustee, for, CA 72-222 WAS ON

APPEAL IN NO. 75-3007!5%* Additionally, the Fifth Circuit

ordered that the Appeal of Attorney Robinson be heard on

the ORIGINAL RECORD,* in connection with which the

Fifth Circuit instructed the District Court to forward the

entire record in CA 72-97 and a related proceeding!

Further, trustee implored the Court of Appeals to delimit

the bankruptcy record to those matters pertinent to all

Appeals, while the American Benefit interests wanted the

Appeals based on the ENTIRE RECORD! American Benefit

prevailed and the Fifth Circuit denied the request of trustee,

thereby ordering the Appeals heard on the ENTIRE BANK-

RUPTCY RECORD!**

THUS, AT ALL TIMES PERTINENT, THE FIFTH CIR-

CUIT HAD BEFORE IT THE RECORDS IN CA 72-97, CA

72-222, AND THE ENTIRE BANKRUPTCY RECORD,

THROUGH WHICH ITS ERROR COULD EASILY HAVE

BEEN DETERMINED! The Court of Appeals had only to

refer to Pleading No. 251 filed 6/18/74 to determine that

the Bankruptcy Court authorized settlement with ONE party

34. See: Exhibit O annexed.

35. See: Exhibit M annexed.

36. See: Exhibit N annexed.

37. See: Par. 3 of Exhibit E annexed.

only, in the amount of $600,000.00 plus interest, reserving

to trustee ALL rights against ALL other parties (Tr. 52) —

NOT an authorization to settle “all of the bankrupt’s claims

for $600,000.00.” ! ! ! Were there any reasons why the Fifth

Circuit could not have referred to or noticed these matters?

Second: The Opinion (Pages 79-80) states that one of the

Attorneys “merely stated that he had expended” a minimum

of 3,992 hours of legal work, and that:

“| one person acts as both trustee and attorney for the

trustee AND FAILS TO CLEARLY DISTINGUISH IN

HIS PETITION FOR COMPENSATION BETWEEN

THE TASKS HE PERFORMED AS ATTORNEY AND

THOSE PERFORMED AS TRUSTEE.” (Emphasis ours)

Again, in all deference to the Fifth Circuit, it had before

it TWO (2) of the plenary suits, the ENTIRE bankruptcy

record AND the APPENDIX which included the entire Docket

Sheet of the bankruptcy proceeding (Tr. 42-59) AND which

Appendix also included that Attorney's Petition for Compen-

sation which not only specified his legal services, but detailed

them in 18 lengthy Exhibits numbered i through xviii thereto

annexed! (See: Tr. 150-174)

In spite of all this, the Court of Appeals makes the above

charge, yet fails to SPECIFY even one (1) single item of

discrepancy appearing in these records!

Fourth: The most unjustified language appears on Page

78 of the Opinion wherein the Court states:

“ . . the possibility that some officers of the court may

be furnishing services to the estate in more than one

capacity—which could lead to the award of duplicative

fees or compensation for non-legal services if overlooked.”

Needless to say, in the field of bankruptcy practice, it

is a hideous charge that an Attorney abused and violated his

trust in charging a bankrupt estate for non-legal services.

The charge is so brutally unfair, un-deserved, and unjust in

the case of Mr. Robinson (the Fifth Circuit admits on Page

707 he explained how he spent each hour), that the writer

utilizes this particular Attorney for illustration:

A. Mr. Robinson is a former law clerk to the Hon. E.

Gordon WEST, and one of the most able trial lawyers in the

area.

B. He has NEVER acted as trustee in any bankruptcy

proceeding, and certainly did NOT act as trustee in reference

to First Colonial.

C. At great personal sacrifice, he consented to act as

trial counsel in the plenary Civil Action 92-97, at the request

of the Bankruptcy Court and trustee, and served in that

capacity with diligence.

D. As previously pointed out, on request of the Fifth

Circuit, the District Court forwarded 12 BOXES OF REC-

ORDS to the Court of Appeals containing the ENTIRE AC-

TIVITIES of Mr. Robinson, pertaining to First Colonial.

Thus, it is clear that the Fifth Circuit had before it for

more than a year prior to the rendition of the Opinion, ALL

of Mr. Robinson’s activities. Yet, in that Opinion, there is

not an iota of mention of “which” services (if any) could

possibly constitute “services to the estate in more than one

capacity” ! !! !!! It is somewhat ironic that the Attorneys

for the bankrupt estate (none of whom have ever been

charged with alleged violations of the Banking Laws, or the

laws dealing with Securities) should find themselves charged

with possibility of abuse of trust, in a case where the Fifth

Circuit fails or declines to support the charge with even a

single specification!

The writer respectfully submits that the Court of Ap-

peals abused its great power, in the instant case! Because the

Fifth Circuit said (Opinion, 76):

“Since we hold that the bankruptcy judge and the dis-

trict court failed to employ the requisite standards and

procedures in awarding attorneys fees, we do not examine

the soundness of their findings of fact. Nor do we reach

the question of whether the amounts awarded were rea-

sonable.”

the writer is at a loss to understand “why” it was necessary

for the Fifth Circuit to insert considerable harsh, unneces-

sary, and erroneous observations in its decree! !! A judgment

of reversal ordering the District Court to employ requisite

standards and procedures could have been accomplished

merely on the basis of the language immediately quoted

above! !!

Finally, the Court of Appeals makes this startling ob-

servation (Opinion, 74):

“ a trustee-attorney’s personal interest in the amount

of compensation he receives in exchange for his services

as attorney leads him to take a position adverse to that

of the bankrupt and its shareholders whose interests he

is charged with protecting in his role as trustee. Where

the trustee serves as his own attorney there is no dis-

interested trustee to ensure that the attorney is paid

only for professional services necessary to the adminis-

tration of the estate. In this situation it is unseemly,

to say the least, for a trustee-attorney to urge on ap-

peal, first, that the compensation he was awarded for

furnishing legal services to the bankrupt estate should be

increased, and second, that the bankrupt and its share-

holders have no standing to object to the amount of that

compensation because the Bankruptcy Act makes safe-

guarding their interests his responsibility.”

Suffice to say that parts of the above appear in direct

conflict with what Mr. Chief Justice BURGER said in Schle-

singer, supra: (94 S.Ct. at Page 2935)

“The assumption that if respondents have no standing to

sue, no one would have standing, is not a reason to find

standing. See United States v. Richardson, 418 U.S., at

179, 94 S.Ct. at 2947.”

Thus, the observation of the Court of Appeals could

hardly justify “standing” in behalf of American Benefit!

The traumatic element, however, is that the Fifth Circuit

made its observation in a case where there was NOT A

SINGLE FINDING OF FACT concerning any abuse of trust.

Unlike in Matter of York (9th Cir. 1975) 527 F.2d 1061 where

there were express findings of substantial abuse, the Fifth

Circuit has denounced ALL trustees who act in the capacity

of Attorneys for an estate, by saying in effect:

BEWARE! IF YOU ARE APPOINTED ATTORNEY

UNDER RULE 215(e), YOU WILL BE DEEMED TO

HAVE AN INTEREST ADVERSE TO BANKRUPT AND

ITS SHAREHOLDERS IF YOU APPEAL AN AWARD

OF FEES, EVEN THOUGH:

A) DETERMINATION OF AMOUNT REMAINS UN-

DER CONTROL OF COURT, AND

B) EVEN THOUGH THE LOWER COURTS FAIL TO

EMPLOY REQUISITE STANDARDS AND PRO-

CEDURES IN THE DETERMINATION THEREOF!

Obviously, IF RULE 215(e) of the Rules of Bankruptcy

Procedure is to be saddled with the implications mentioned,

that privilege should be reserved to the United States Supreme

Court that promulgated the rule—not an Appellate Court!

The only alternatives for a trustee-attorney would appear:

Either accept the erroneous standards and forego rights of

Appeal, or face a charge of adverse interest! — AND ABUSE

OF TRUST!

QUESTION #6 IN ORDER TO CREATE “STANDING”

FOR AMERICAN BENEFIT, DID THE COURT OF AP-

PEALS REFUSE TO FOLLOW THE MANDATE OF SEC.

57n OF THE BANKRUPTCY ACT (II USCA 93n)?

As previously pointed out in the Statement of the Case,

Sec. 57n of the Act mandates that:

“When in any case all claims which have been duly

allowed have been paid in full, claims not filed within the

time hereinabove prescribed may nevertheless be filed

within such time as the Court may fix or for cause shown

extend and, if duly proved, shall be allowed against any

SURPLUS remaining in such case.” (Emphasis ours)

This mandate is especially ACUTE here, for:

First: $280,000.00 of ““Bassan” Claims (Tr. 136-7) were

not reflected in the books and record of bankrupt, even though

they were based on “judgments” of a federal district court:

Second: The records also failed to reflect two (2) $100,-

000.00 notes owing to bankrupt because (in the explanation

of its CPA) they had neither been entered in the records nor

disclosed to the CPA!

Third: Instead, the books disclosed commensurate liabil-

ity OF bankrupt to two (2) parties, each in the amount of

$100,000.00, which liabilities were satisfied prior to bank-

ruptcy! (Apparently the books were “rigged.’’)

Fourth: The books reflect “purchase” of 20,000 shares

of stock, while the Discovery suggests, instead, the 20,000

shares were already owned by the corporation, and borrowed

for an individual’s personal use as security on a loan from a

Texas bank!

Fifth: In addition to executing a $250,000.00 note for

stock which was not purchased, bankrupt also issued a

SECOND note in the same amount!

Mention of these factors is for purpose of showing that

the books and records of First Colonial can NOT be relied

upon, in determining liabilities! ONLY A PROPHET COULD

SAY HOW MANY CLAIMS (if any) ARE STILL OUT-

STANDING, AND MIGHT BE FILED UPON RE-OPENING

OF THE PERIOD FOR FILING! (Indeed trustee has won-

dered if, at some future date, the SECOND $250,000.00 NOTE

might not show up as a Claim against the estate!)

In spite of these deficiencies, and without any express

finding that there are NOT any further Claims to be filed

against the estate, the Court of Appeals nevertheless concludes

that First Colonial “is not insolvent.” (Opinion, 73)

The net effect of this is that, pretermitting any claim

which American Benefit might have to the residue (if any),

American Benefit, as a stockholder, is to have “standing” to

take part in the further Bankruptcy Administration of the

corporation—an unheard of ruling totally without precedent!

QUESTION #7 WHEN AN ATTORNEY IS NOT FORE-

WARNED BY THE COURT THAT HE WILL BE ORDERED

TO “ABANDON” PLENARY LITIGATION, IS Johnson v.

Georgia Highway Express, Inc. (5th Cir. 1974), 488 F.2d 714,

718 AND ITS EIGHTH FACTOR APPLICABLE HEREIN?

Pretermitting the fact that the Court of Appeals utilized

a Civil Rights case as the criteria for awards of Attorneys’

Fees in a bankruptcy case (for which the writer does not inter-

pose objection ‘per se), it is obvious that the Court’s own con-

cept of a bankrupt estate as:

“a trust in the possession of persons completely under

the control of the court in so far as they deal with the

property subject to its jurisdiction.” (Emphasis ours)*

makes Johnson, supra, inapplicable to the instant case, for a

thorough reading of Johnson, and of the Section of the Civil

Rights Act under which it is based, fails to disclose any

comparable authorization whereby a Federal District Court

might order a Plaintiff to “ABANDON” Litigation under the

Act! Therefore, the writer submits, it is basically unfair to

38. Donald v. San Antonio Joint Stock Land Bank (5th Cir. 1938),

100 F.2d 312, 314.

39. Sec. 706(k) of Title VII of the Civil Rights Act of 1964, 42 USCA

Sec. 2000e-5(k).

apply the 8th factor in Johnson (Opinion, 80-81) to a case

where the Attorneys have been DENIED full access to the

Judicial Process!

_ The Court of Appeals attempts to overcome this in saying

(Opinion, 81) that the Bankruptcy Judge “discounted” the

possibility of failure of the plenary suits. Again, pretermitting

this highly inaccurate statement of events, THAT IS NOT

THE QUESTION! The question is whether the Bankruptcy

Court should have as a matter of fairness and justice, fore-

warned the Attorneys BEFORE they were mis-led into ex-

pending their time and efforts on the plenary litigation, that

they would be ordered to ABANDON same without opportu-

nity of securing full compensation for services! HAD SUCH

DISCLOSURE BEEN MADE, BANKRUPT COULD NOT

HAVE OBTAINED A SINGLE ATTORNEY!!!

Under the strongest emphasis at the writer’s command,

he assures this Court that the plenary proceedings were insti-

tuted in complete good faith on the directives from PEPPER

V. LITTON (1938), 308 U.S. 295, 306-307, 60 S.Ct. 238, 245,

that in event of bankruptcy of a corporation its trustee was

charged with enforcing rights “designed for the protection

of the entire community of interests in the corporation —

creditors as well as stockholders.” (Emphasis ours) AND

on the companion Superintendent of Insurance v. Bankers

Life and Casualty Company (1971), 404 U.S. 6, 30 L.Ed.2d

128, 92 S.Ct. 165, 169, as well as the directives from the Fifth

Circuit in Hooper v. Mountain States Corp., (5th Cir. 1960),

282 F.2d 195, 206-207 and Bailes v. Colonial Press (5th Cir.

1971), 444 F.2d 1241, that a trustee-in-bankruptcy of a cor-

poration was the property party to institute suits in behalf of

the estate, even if those suits involved alleged violations of

the Securities Acts! Since Hooper,.supra, was itself one of the

foundation cases for Superintendent, supra,*® all Attorneys

truly believed that institution of the plenary suits in behalf

of the entire community of interests, was proper under the

directives of both the United States Supreme Court and Court

of Appeals for the Fifth Circuit! Indeed the writer would

suggest that THIS WAS ALSO THE VIEW OF THE BANK-

RUPTCY COURT, for, “why” would a Bankruptcy Court

authorize the suits if they were not?

However, the Fifth Circuit not only unduly restricts the

awards of fees by the 8th factor in Johnson, supra, but it

applies inapplicable criteria, such as that in York, supra, 527

F.2d 1061.

York, by its own admission,*! deals with “claims for

compensation for services in bankruptcy proceedings” (Em-

hasis ours) and hence is largely inapplicable to cases where

plenary litigation must be invoked outside the confines of,

and jurisdiction of, the bankruptcy court.

Where a trustee and/or his attorney deal in existing prop-

erties, that is, existing bankruptcy assets which would be

available for the creditors and bankrupt, were it not neces-

sary to have any Proceeding under the Act—then the rule

announced in York, and in innumerable other cases within

the same category, is the proper criterion for determining

fees! However, a moment’s reflection will show the utter

inapplicability of such standard to the case at bar! Where

a trustee must employ outside specialists to invoke PLENARY

Litigation (that is, controversies at law and in equity, as

40. 92 S.Ct. at Page 168.

41. 527 F.2d 1061, 1068.

distinguished from proceedings under the Act within the

meaning of Sec. 23a thereof—11 USCA 46a), and where

recoveries are due entirely to the efforts of such Attorneys,

it would create a DOUBLE-STANDARD to say that such

services are not worth the usual and accepted amounts! It

is one thing for the legal services to be limited by the amounts

recovered, but it is an entirely different thing to say that the

recoveries could NOT be used for payment of the Attorneys’

Fees incurred. How could a bankrupt estate ever procure

competent counsel for PLENARY Litigation, IF the rule an-

nounced by the Fifth Circuit were invoked—especially in a

case where the Attorneys’ efforts were delimited by an Order

to ABANDON?

Perhaps the clearest response to the Fifth Circuit is to

affirm that:

NOT A DIME OF FUNDS FOR ATTORNEYS’ FEES

RE THE PLENARY LITIGATIONS IS BEING SOUGHT

AGAINST ANY PRE-EXISTING BANKRUPTCY AS-

SET!

Instead, the Attorneys’ Fees are being sought SOLELY AND

ONLY OUT OF THE $680,000.00 THAT THE DISTRICT

COURT “PERMITTED” THESE ATTORNEYS TO RE-

COVER! Indeed, part of this $680,000.00 has already been

utilized in the discharge of Claims of the Ordinary Creditors!

But that is an entirely different thing from these Attorneys’

Fees encroaching on the conventional bankruptcy assets, that

is, the ordinary bankruptcy assets liquidated by the trustee!

There is a cluster of cases, primarily involving the Securi-

ties Acts, wherein the Courts have allowed substantially in

excess of $100.00 per hour to the Attorneys involved:

—

Newman v. Stein (SD NY 1973, 58 F.R.D. 540 — $193.00

per hour.

Gerstle v. Gamble-Skogmo, Inc. (ED NY 1973), 366 F.

Supp. 638 — $220.69 per hour.

State of Illinois v. Harper & Row Publishers, Inc. (ND

Ill. 1972), 55 F.R.D. 221 — $119.50 per hour.

Arenson v. Board of Trade of Chicago (ND Ill. 1974),

372 F. Supp. 1349 — $140.00-$500.00 (Average

$358.00)

Newmark v. RKO General, Inc. (SD NY 1971), 332 F.

Supp. 161 — $187.50 per hour.

Donson Stores, Inv. v. American Bakeries Co. (SD NY

1973), 60 F.R.D. 417 — $200.00 per hour.

Oppenlander v. Standard Oil Co. (D.C. Colo. 1974), 64

F.R.D. 597 — $190.00 per hour.

HOWEVER, as is pointed out in Collier on Bankruptcy:*

“The allowance of fees to an officer’s attorney or ac-

countant depends largely upon the facts of the individual

case. In view of the fact that the elements determining

an allowance are multifarious and vary with each case,

decisions as to the amount of allowance as such have

little, if any, value as precedents.”

THIS IS CERTAINLY TRUE HERE, for, the Court could

read what comes before, and what follows the above quota-

tion — in fact this Court could read the entire 16 Volumes of

Collier and still not find a similar situation substantially iden-

tical to that faced by the Attorneys representing First Colonial

42. 14th Ed V. 3A, Par. 62.12, Page 1483.

Corp. of America. Where would one discover such interference

with Bankruptcy Administration? Where would one discover

a “take-over” of plenary suits by American Benefit interests?

Where would one discover a District Court ordering the aban-

donment of plenary litigation over the emphatic protest of

trustee and ALL his Attorneys?

NONE of the Attorneys herein have sought the high

awards in excess of $100.00 per hour previously awarded in

other cases, supra. Indeed there is NO request to allow similar

awards here! Rather, the writer suggests that the best criteria

for determining Compensation is that stated in Collier:*

“Economy is the most important principle, as has been

repeatedly stressed by the United States Supreme Court.

However, “economical” is by no means synonymous with

“parsimonious” and should not exclude a compensation

THAT IS UNDER ALL THE CIRCUMSTANCES OF

THE CASE fair and reasonable. To reserve as much as

possible for distribution to the creditors is one postulate,

but there is another, perfectly compatible with the for-

mer, not to discourage needlessly able and competent

lawyers from accepting a retainer in bankruptcy by deny-

ing them reasonable remuneration. A misunderstood

economy in this respect may lead to evils far greater than

the sacrifice imposed on the individual creditor by rea-

son of an equitable allowance for meritorious and diligent

counsel.” (Emphasis ours) (footnotes omitted)

This, is the criterion which should have been applied by

the Fifth Circuit Court of Appeals!

43. 14th Ed. V. 3A, Par. 62.12(5), Pages 1483-85.

a ee

CONCLUSION

Insofar as this Court may have the impression that this

petition for certiorari seeks to abort further hearing on Attor-

neys’ Fees, this conclusion should dispel it. Not a single word

appears in this entire petition to suggest that further hearing

should be avoided! Rather, the prime issue is over “standing”

of American Benefit!

In a case where Ordinary Creditors sold a Half Million

Dollars of Claims to an entity then in the American Benefit

Complex, at a substantial discount, the question might be

asked “WHY” would such entity pay $401,005.00 (Tr. 132)

for Claims against a bankrupt corporation? When large

plenary suits in behalf of First Colonial were “taken over”

then disposed: of in a manner which, in net end result, dis-

charged liabilities sought against American Benefit, the ques-

tions might be asked “HOW” was this of benefit to First

Colonial’s other shareholders and “WHY” the Securities and

Exchange Commission failed or refuse to act? If Mr. Justice

REHNQUIST referred to certain actions as “IN TERROREM”

tactics in Blue Chip Stamps v. Manor Drug Stores, Ine.

(1975), 95 S.Ct. 1917, 1929, the writer wonders how this

Justice would describe the actions mentioned herein! Per-

haps some future Legal Archeologist will discover what hap-

pened to First Colonial and “WEEP”! However, he will find

that the bankrupt estate and its Attorneys tried to uphold the

mandate of Justice CARDOZO’s famous words:

“Many forms of conduct permissible in a workaday world

for those acting at arm’s length are forbidden to those

bound by fiduciary ties. A trustee is held to something

stricter than the morals of the market place. Not honesty

alone, but the punctillo of an honor the most sensitive,

is then the standard of behavior. As to this there has

developed a tradition that is unbending and inveterate.”’**

The writer respectfully submits that American Benefit

has NEITHER the “requisite financial interest’ referred to in

Doremus, supra, NOR the “zone of interests to be protected”

within the meaning of Camp, supra, NOR the “personal stake

in the outcome” referred to in Sierra Club, Littleton, Richard-

sun, and Warth, supra, NOR the “direct injury” specified in

Linda, supra, NOR the “concrete injury” referred to in Schle-

singer, supra! At most, American Benefit has ONLY a mere

“interest in a problem” within the view of Sierra Club, supra,

OR “an ingenious academic exercise in the conceivable” with-

in the rule of (SCRAP), supra, OR an “abstract” interest

within the intendment of Schlesinger and Warth, supra!

SPECIAL REQUEST

As previously explained, when the trustee was ordered

to ABANDON all plenary suits, there was not any effective

appellant remedy available. Further, in spite of Pepper v.

Litton, Superintendent, Hooper, and Bailes, supra, the Dis-

trict Court cast a cloud of doubt on trustee’s right to repre-

sent interest of “‘stockholders.”” Now, that doubt has been

dispelled by the Fifth Circuit referring in its Opinion (703)

to bankrupt’s shareholders among the interests that the writer

is “charged with protecting in his role as trustee.” (Emphasis

ours)

According to the books and records of bankrupt, the

original owner of the stock now held by American Benefit

44. Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 62 A.L.R.1—quoted

from 299 So.2d 481, 487.

Aso fala tA

paid only $53,000.00 into the corporation, with funds appar-

ently borrowed “interest free” from the company while Amer-

ican Benefit paid not a dime therefor! THE MINORITY

SHAREHOLDERS, HOWEVER, PAID IN THE SUBSTAN-

TIALLY LARGER AMOUNT OF ABOUT $900,000.00!

Thus, because the plenary suits were ordered ABAN-

DONED, there are no funds out of which these minority

shareholders could be satisfied. (The estate has only $173,-

000.00 at present.) THERE IS, HOWEVER, A WAY IN

WHICH THIS INJUSTICE CAN NOW BE RECTIFIED!

In filing their Petition to Intervene in the Bankruptcy

Proceeding of First Colonial, American Benefit has, on the

highest authority, submitted itself to the Jurisdiction of the

Bankruptcy Court! Katchen v. Landy (1966), 382 U.S. 323,

86 S.Ct. 467, Collier on Bankruptcy, 14th Ed. V. 2, Par.

23.08, pages 532-560. Thus, the trustee now has benefit of

RULES 713, 719, and 720, of the Rules of Bankruptcy Pro-

cedure to assert a Counterclaim against American Benefit and

its individual counterpart for the amounts claimed in Civil

Actions 72-97 and 72-236! !!

American Benefit failed to appeal the adverse determina-

tions made in the plenary suits that American Benefit and/or

its individual counterpart were the real parties at interest

through the substituted Plaintiff! Obviously, it is now bound

by these decrees!

There is a powerful precedent in allowing trustee to Coun-

terclaim for the amounts claimed in Civil Actions 72-97 and

72-236, and that precedent can be found in the case of Young

v. Higbee, 324 U.S. 204, 65 S.Ct. 594 (1945), which itself

arose under the Bankruptcy Act. In this case parties dismissed

proceedings for a consideration tc themselves, where the basis

of the proceedings, if successfu' would have benefitted an

entire class. The words employed by the late Mr. Justice

BLACK are so forceful, that they are quoted herein (65 S.Ct.

at pages 598, 599):

“The situation which enabled them to traffic in the inter-

ests of others was created by a statute passed to protect

the interests of all of them. The statute neither compels

them to appeal nor to prosecute an appeal already taken

contrary to their own interests; it does impose upon them

the duty of good faith to all other stockholders whose

interests they temporarily control. . . . This control of

the common rights of all . . . imposed oa (them) a duty

fairly to represent those common rights.

“THEY CANNOT AVAIL THEMSELVES OF THE

STATUTORY PRIVILEGE OF LITIGATING FOR THE

INTERESTS OF A CLASS AND THEN SHAKE OFF

THEIR SELF-ASSUMED RESPONSIBILITIES TO

OTHERS. .. . To hold that the Chandler Act permits

this, would be to say that Congress . . . had subsientially

modified the whole body of law imposing the most rigor-

ous responsibilities for fair dealing upon those who repre-

sent the rights of others.” (Emphasis and parenthesis

ours) (footnotes omitted)

Parallel with the instant case is striking! In Higbee,

supra, there was no certainty that the Appeal Proceedings

would have been successful! IN SPITE OF THIS, THE PAR-

TIES WERE HELD LIABLE FOR ABORTING THEM. Thus,

by the same reasoning, the American Benefit interest had not

the right to enter Stipulations which caused the Dismissals of

Civil Actions 72-97 and 72-236! In Bell v. Hood, 327 USS.

678, 66 S.Ct. 773, 777, this Court spoke of federal courts using

“any available remedy to make good the wrong done.” (Em-

phasis ours) Trustees asks that this concept be held applicable

here, and that the right to Counterclaim for the amounts

claimed by trustee in Civil Actions 72-97 and 72-236 be rec-

ognized!

PRAYER

WHEREFORE APPELANT/TRUSTEE-IN-BANKRUPT-

CY OF FIRST COLONIAL CORP. OF AMERICA PRAYS:

(1) That this Court issue a Writ of Certiorari to the

United States Court of Appeals for the Fifth Circuit, to review

the Opinion and Judgment complained of.

(2) That after all due proceedings had, that the Judg-

ment of the United States Court of Appeals for the Fifth

Circuit, insofar as it decrees “standing” in American Benefit

as a stockholder in First Colonial, be REVERSED.

(3) That this Court recognize right of trustee to Coun-

terclaim against American Benefit and its individual counter-

part, under RULES 713, 719, and 720 of the Rules of Bank-

ruptcy Procedure, within the jurisdiction of the Bankruptcy

Court, for the amounts claimed by trustee in Civil Actions

72-97 and 72-236 of the United States District Court for the

Middle District of Louisiana.

(4) That this Court decree determination of the awards

for attorneys’ fees be made free of the restrictions of Johnson

and its eighth factor, supra.

(5) And for any and all other relief herein deemed

necessary by this Court.

Respectfully submitted,

BY TRUSTEE

FRANZ JOSEPH BADDOCK

P. O. Box 3573

Baton Rouge, LA 70821

(Tel.: 343-9194)

en thy ea et A nae ite AOE

CERTIFICATE OF SERVICE

I certify that I have this date, by prepaid mail, for-

warded a copy of the foregoing Petition for Certiorari to

Attorneys Floyd J. Falcon, Jr., and Joe T. Pilcher, Jr., being

Attorneys for AMERICAN BENEFIT LIFE INSURANCE

COMPANY, c/o P. O. Box 3778, Baton Rouge, Louisiana

70821, and on the same date I have hand delivered a copy

thereof to Mr. W. P. Wray, Jr., Attorney for BERT K.

ROBINSON, c/o the latter’s office on the 6th Floor of

Fidelity National Bank Building, Riverside Mall, Baton Rouge,

Louisiana 70801.

BATON ROUGE, Louisiana, this March 4th, 1977.

FRANZ JOSEPH BADDOCK

Petitioner

LIST OF EXHIBITS

Consolidated Opinion of Court of Appeals in

75-2260 and 75-2644

Judgment

Notice of Order re denial of rehearing on

individual application

Notice of denial of rehearing on trustee’s

application for EN BANC hearings (apparently

no separate or@er was entered)

Order of denial of rehearing on individual

application

Order entered by Court of Appeals on

July 14, 1975

Notice to counsel re Judgment of U.S.

District Court

Judgment of U.S. District Court

Order to Abandon Property dated June

28, 1974

Amended and Supplemental order to Abandon

Property dated July 1, 1974

Order Granting Motion to Substitute

Party-Plaintiff

Order Allowing Substitution of Party

Joint Motion for Dismissal

Page

M Order of Court of Appeal allowing Robinson

Appeal to be heard on original record 109

N Letter from Clerk of Middle District transmit-

ting 12 boxes of records to Court of Appeals 110

QO Notice from Clerk of Court of Appeals

re 75-3007 112

SPER et ene ee

EXHIBIT A

In the Matter of FIRST COLONIAL CORP.

OF AMERICA, Bankrupt.

AMERICAN BENEFIT LIFE INSURANCE

COMPANY et al., Appellants-Cross-Appellees,

Vv.

Franz J. BADDOCK, Trustee,

Appellee-Cross-Appellant.

In the Matter of FIRST COLONIAL CORP.

OF AMERICA, Bankrupt.

Bert K. ROBINSON, Appellant,

Vv.

AMERICAN BENEFIT LIFE INSURANCE

COMPANY et al., Appellees.

Nos. 75-2260, 75-2644.

United States Court of Appeals,

Fifth Circuit.

Jan. 10, 1977.

Priority fees were awarded by a bankruptcy judge, and

the United States District Court for the Middle District of

Louisiana at Baton Rouge, E. Gordon West, J., dismissed

appeals for lack of standing, and, in the alternative, affirmed

the orders. The bankrupt and the owner of most of its out-

standing stock appealed, and a trustee who also served as

an attorney for the trustee cross-appealed. The Court of Ap-

peals, Clark, Circuit Judge, held that under circumstances

of the case the general rule that the trustee is the proper

party to proceed on behalf of the whole community of inter-

ests of the bankrupt was inapplicable, and the shareholder had

standing to appeal. There was such standing also because the

bankruptcy judge had granted motion of such shareholder to

intervene without qualifying its right to participate. Where,

of four attorneys for the trustee, only one explained how

he spent each hour in rendition of service, information was

insufficient to support any award except to such attorney.

The bankruptcy judge had a duty to hold an evidentiary hear-

ing on his own motion, and was also obliged to hold such a

hearing because the intervening shareholder requested it. The

bankruptcy judge abused his discretion in determining the

size of the fees, and the District Court abused its discretion

in affirming the determination.

Reversed in part, vacated in part, and remanded.

Appeals from the United States District Court for the

Middle District of Louisiana.

Before COLEMAN, CLARK and TJOFLAT, Circuit

Judges.

CLARK, Circuit Judge:

These appeals challenge awards of priority fees made

by the bankruptcy judge’ to the attorneys for the trustee

and a petitioning creditor from the bankruptcy estate. In No.

75-2644, Robinson, an attorney for the trustee, complains

that the bankruptcy judge should have been more generous.

In No. 75-2260, American Benefit Life Insurance Company

[American Benefit], which owns fifty-five precent of the out-

standing stock of the bankrupt, First Colonial Corporation

1. In this context the term “bankruptcy judge” means the referee

of the court of bankruptcy. R. Bankruptcy Pro. 901(7).

of America [First Colonial], attacks the fees awarded to all of

the attorneys on the grounds that they are excessive.? Both

appellants also argue that the bankruptcy judge failed to ap-

ply the requisite standards and follow proper procedures in

determining the amounts of the fee awards. Baddock, the

trustee in bankruptcy, who also served as an attorney for the

trustee, cross-appeals in No. 75-2260, contending that he de-

serves a larger fee. When these objections were raised before

the district court, he dismissed the appeals for lack of stand-

ing and, in the alternative, affirmed the orders of the bank-

ruptcy judge. We reverse.

First Colonial was adjudged bankrupt September 8, 1970,

on the basis of an involuntary petition filed by Baddock and

Pierson earlier that year.* The examination was lengthy and

complex. Because it appeared that First Colonial possessed

viable causes of action against several corporations and private

individuals, Baddock, in his capacity as trustee in bankruptcy,

petitioned the bankruptcy judge for the appointment of an

attorney to prosecute the plenary suits. When he encountered

difficulty in obtaining the services of a single attorney willing

to handle all of the claims, Baddock sought the appointment

of several attorneys for specific purposes. The bankruptcy

judge subsequently approved the applications of four attor-

neys recommended by Baddock—Robinson, Howell, La Rose,

and Baddock himself—to serve as attorneys for the trustee.

After approximately two years of discovery and pre-trial

maneuvering, the plenary suits were consolidated for trial.

On June 28 and July 1, 1974, shortly after the trial had begun,

the district court directed the trustee to settle all of the bank-

rupt’s claims for $600,000. Although the trustee and his attor-

2. On July 14, 1975, a panel of this court dismissed the appeals of

Fournet, the receiver for First Colonial, de la Barre, on behalf of First

Colonial, and Brookout, the receiver for Alabama Life Insurance Com-

pany, for lack of standing and failure to file an appeal bond.

3. First Colonial was abandoned by its officers and board of direc-

tors in 1969.

neys strenuously objected because they believed that a much

larger recovery would result if the cases proceeded through

trial, the district court concluded that further prosecution of

the suits would not benefit the creditors and that failure to

accept the settlement promptly would delay, and possibly

place in jeopardy, receipt by the estate of an asset sufficient

to satisfy all of the claims timely filed by creditors.

On July 7, 1974, American Benefit moved for permission

to intervene in the bankruptcy proceeding. No one expressed

opposition at that time, and the bankruptcy judge immediately

granted the request without affixing any limitations on its

right to participate. During the early fall of 1974, the four

attorneys for the trustee and the two attorneys for the peti-

tioning creditor petitioned for awards of priority fees as com-

pensation for work performed in connection with the plenary

suits.‘ On November 18, American Benefit filed written op-

position to the petitions and asked that the bankruptcy judge

hold a hearing on the issue of the amount of compensation

to be allowed each attorney. Without responding to this

request, the bankruptcy judge granted the five petitions for

compensation on December 13.5 With the exception of the

4. Section 62 of the Bankruptcy Act, 11 U.S.C.A. § 102 (1953), author-

izes the award of compensation from the bankrupt estate to officers

(including attorneys for the trustee and petitioning creditors) who assist

in the administration of the estate. Section 64, 11 U.S.C.A. § 104 (1953),

gives costs and expenses incurred in connection with the administration

of the estate priority over other debts of the bankrupt.

5. The awards were as follows:

ATTORNEYS FOR HOURS AMOUNT AMOUNT HOURLY

THE TRUSTEE CLAIMED REQUESTED AWARDED RATE

Baddock 3922.0 $159,680 $125,000 $31.31

Howell 1211.5 121,150 100,000 82.54

LaRose 300.0 10,500 10,500 35.00

Robinson 1704.2 226,605 125,000 73.35

ATTORNEYS FOR THE

PETITIONING CREDITOR

Baddock and Pierson (none] 25,000 5,000

* Their hourly rate cannot be computed because they did not state the

number of hours they worked in this capacity.

name of the petitioning attorney, the date of his appointment,

and the amount awarded, the five orders are identical. They

contain no explanation of the basis for the awards. American

Benefit moved for a stay of the orders pending appeal. On

December 31, the bankruptcy judge denied the motion on

the ground that American Benefit lacked standing to appeal.

Robinson and American Benefit then attacked the awards in

the district court. After a brief hearing, the district court

ruled on April 23, 1975, that (1) since none of the parties were

creditors they had no standing to appeal from the fee awards,

and (2) alternatively, if they had standing, that the bank-

ruptcy judge had not erred in determining the size of the

awards. Robinson and American Benefit challenge these two

rulings in their appeals.

STANDING

[1] Section 39(c) of the Bankruptcy Act, 11 U.S.C.A. §

67(c) (1968), provides that a “person aggrieved” by an order

of a bankruptcy judge may appeal from the order to a district

court. Section 25(a) of the Act, 11 U.S.C.A. § 48(a) (1953),

6. The order awarding compensation to Robinson reads as follows:

ORDER FOR PAYMENT OF COMPENSATION TO

ATTORNEY FOR TRUSTEE

Upon the annexed application of Bert K. Robinson, and if ap-

pearing therefrom that he has duly performed extensive and most

valuable professional services as an attorney for the trustee pursuant

to an order of this Court, made and entered on April 18, 1972, and.

after due consideration, good cause appearing therefor, and notice

(which would otherwise be required by § 58a(8) of the Bankruptcy

Act and Rule 203(a)(6) of the Rules of Bankruptcy Procedure) and

hearing being deemed unnecessary because all creditors herein have

been paid and fully satisfied.

IT IS ORDERED that the compensation for the services ren-

dered by such attorney be and it hereby is fixed at the sum of One

Hundred Twenty-Five Thousand and No/100 Dollars ($125,000.00).

IT IS FURTHER ORDERED that the trustee herein pay said

attorney the sum so fixed, in full payment of his services as such

attorney.

states that an “aggrieved party” may appeal to a court of

appeals from a district court order entered in connection

with a bankruptcy proceeding. The rule in this circuit is that

only those who have a “direct and substantial interest in the

question appealed from” are “aggrieved” within the meaning

of Section 25(a). In re American Bonded Mortgage Co., 453

F.2d 528, 530 (5th Cir. 1971); Edell v. Di Piazza, 345 F.2d 336

(5th Cir.), cert. denied, 382 U.S. 931, 86 S.Ct. 322, 15 L.Ed.2d

342 (1965). Since the term “person aggrieved” in Section

39(c) is less restrictive than the term “aggrieved party” in

Section 25(a), if Robinson and American Benefit can estab-

lish their right to appeal under Section 25(a), it would follow

both that the district court erred in holding that they had no

standing to appeal from the orders of the bankruptcy judge

and that they possess standing to challenge the district court’s

order in that court of appeals.

[2] Since Robinson’s fee was set by the bankruptcy judge,

he obviously had a direct financial interest in the size of the

award. Under Edell v. Di Piazza, supra, this interest is suf-

ficient to permit him to appeal] from the order fixing the

amount of his fee. We have entertained similar appeals by

attorneys for a trustee in bankruptcy in the past. See In re

Bemporad Carpet Mills, Inc., 434 F.2d 988 (5th Cir. 1970).

[3] Unless American Benefit possesses standing to chal-

lenge the other fee awards, only the reasonableness of the

fee awarded to Robinson would be properly before us. The

attorneys for the trustee, and the trustee himself, contend

that American Benefit is not an “aggrieved party” within the

meaning of Section 25(a). They argue that to permit Amer-

ican Benefit to appeal would be to allow any shareholder to

challenge dispositions of assets affecting only the bankruptcy

fund, and that such a rule would seriously interfere with the

trustee’s administration of the estate. Although the attor-

neys and the trustee are correct in stating that in the usual

case the bankrupt and its shareholders do not have an interest

in the disposition of the assets of the estate because Section

70 of the Bankruptcy Act, 11 U.S.C.A. 3 110 (1963 & Supp.

1976), vests title to those assets in the trustee, see e. g., Edell

v. Di Piazza, supra, this is hardly the usual case. In Massa-

chusetts Mutual Life Insurance Co. v. Brock, 405 F.2d 429

(5th Cir. 1968), cert. denied, 395 U.S. 906, 89 St.Ct. 1748, 23

L.Ed.2d 220 (1969), we recognized that the interests of the

bankrupt and the interest of those administering the estate

diverge when the amount of the latter’s compensation is at

issue. In such circumstances it is the duty of the district

court to ‘exercise its discretion for the double purpose of fair-

ly treating the trustee and his counsel while at the same

time doing equity to the debtor and creditors.” Jd. at 433.

This duty cannot be adequately discharged unless represen-

tatives of the various interests are permitted to bring them

to the attention of the court.

[4] The possibility that we might create a dangerous

precedent by allowing American Benefit’s appeal is over-

drawn. Here we have: (1) an involuntary bankruptcy pro-

ceeding in which (2) ail claims timely advanced by creditors

have been satisfied, and in which (3) the bankrupt is not

insolvent. Thus the size of the awards of attorneys’ fecs

directly affects the amount of residual assets available for

return to the bankrupt and its shareholders upon the termina-

tion of the proceeding. In addition to these three factors,

(4) the bankrupt has been abandoned by its officers and

board of directors, and (5) the trustee has a personal finan-

cial stake in the disposition of a substantial portion of the

controversy which is adverse to that of the bankrupt. In these

circumstances, we refuse to allow the trustee to rely upon

the general rule that he is the proper party to proceed on

behalf of the whole community of interests of the bankrupt.

See In re York International Building, Inc., 527 F.2d 1061,

1077 (9th Cir. 1973).

Rule 215(e) of the Rules of Bankruptcy Procedure pro-

vides that the court may authorize the trustee to act as his

own attorney where such authorization is in the best inter-

ests of the estate. There is, therefore, no inherent impro-

priety in such an arrangement. But the rule does not resolve

the problems that may arise when a trustee-attorney’s per-

sonal interest in the amount of compensation he receives in

exchange for his services as attorney leads him to take a

position adverse to that of the bankrupt and its shareholders

whose interests he is charged with protecting in his role as

trustee. Where the trustee serves as his own attorney there

is no disinterested trustee to ensure that the attorney is

paid only for professional: services necessary to the adminis-

tration of the estate. In this situation it is unseemly, to say

the least, for a trustee-attorney to urge on appeal, first, that

the compensation he was awarded for furnishing legal services

to the bankrupt estate should be increased, and second, that

the bankrupt and its shareholders have no standing to object

to the amount of that compensation because the Bankruptcy

Act makes safeguarding their interests his responsibility.

[5, 6] In addition to refusing to permit Baddock to use

tis position as trustee to prevent American Benefit from

contesting the size of his attorneys’ fee, we also hold that

American Benefit has standing to appeal from all of the fee

awards because the bankruptcy judge granted its motion to

intervene without qualifying its right to participate in the

proceeding. Rule 724 of the Rules of Bankruptcy Procedure

reaffirms the principle that Rule 24 of the Federal Rules of

Civil Procedure governs intervention in bankruptcy proceed-

ings. See generally Securities and Exchange Commission v.

United States Realty & Improvement Co., 310 U.S. 434, 459,

60 S.Ct. 1044, 1055, 84 L.Ed. 1293, 1305 (1940). To the extent

that the Rules of Bankruptcy Procedure are inconsistent with

provisions of the Bankruptcy Act, those portions of the statute

are superseded. 28 U.S.C.A. § 2075 (Supp.1976). Since an

intervenor is bound by future orders, 3B J. Moore & Lucas,

Moore’s Federal Practice * 24.16[6], at 24-671 (2d ed. 1975),

it may appeal from an appealable order unless the interven-

tion has been specially limited to forbid it. Securities and

Exchange Commission v. United States Realty & Improvement

Co., 310 U.S. at 460, 60 S.Ct. at 1055, 84 L.Ed. at 1306; Texas

v. Anderson, Clayton & Co., 92 F.2d 104, 106 (5th Cir.), cert.

denied, 302 U.S. 747, 58 S.Ct. 265, 82 L.Ed. 578 (1937); 7A C.

Wright & A. Miller, Federal Practice & Procedure, § 1920, at

611 (1972). It follows that American Benefit had standing to

challenge in the district court all of the orders of the bank-

ruptcy judge awarding fees to the attorneys for the trustee,

and that it has standing to appeal in this court from the dis-

trict court’s order approving the awards. Klein v. Nu-Way

Shoe Co., 136 F.2d 986 (2d Cir. 1943). Thus all five of the

fee awards have been properly brought before us for review.

ATTORNEYS’ FEES

[7] Because the lower court “has a far better means of

knowing what is just and reasonable than an appellate court

can have,” Trustees v. Greenough, 105 U.S. 527, 537, 26 L.Ed.

1157, 1162 (1881), district courts and bankruptcy judges have

broad discretion in determining the amount of attorneys’

fees to award as compensation for services performed in con-

nection with bankruptcy proceedings, and their exercise of

that discretion will not be disturbed by an appellate court

absent a showing that it was abused. Jn re Bemporad Carpet

Mills, Inc., 434 F.2d at 989; Massachusetts Mutual Life Insur-

ance Co. v. Brock, 405 F.2d at 432; Calhoun v. Hertwig, 363

F.2d 257, 261 (5th Cir. 1966), cert. denied, 386 U.S. 966, 87

S.Ct. 1047, 18 L.Ed.2d 116 (1967); See 3A J. Moore & L. King,

that much of the work for which the attorneys for the trustee

desire compensation was performed before a special master

appointed by the district court to hear the plenary suits, and

not before either the bankruptcy judge or the district court,

does not change the scope of review. But in awarding attor-

neys’ fees under these conditions the bankruptcy judge and

the district courts “should be particularly diligent in setting

forth the facts that support [their] conclusion.” Lindy

Brothers Builders, Inc. v. American Radiator & Standard Sani-

tary Corp., 487 F.2d 161, 166 n. 9 (3d Cir. 1973).

[8] We are especially reluctant to interfere in this case

since the bankruptcy judge and the district court are in agree-

ment. Blanch v. Rankin, 291 F.2d 217, 219 (5th Cir. 1961);

Campbell v. Green, 112 F.2d 143, 144 (5th Cir. 1940). But

bankruptcy judges and district courts may abuse their dis-

cretion either by failing to apply proper legal standards and

follow proper procedures in making the determination, Mas-

sachusetts Mutual Life Insurance Co. v. Brock, 405 F.2d at

432; Johnson v. Georgia Highway Express, Inc., 488 F.2d 714,

720 (5th Cir. 1974); Lindy Brothers Builders, Inc. v. Amer-

ian Radiator & Standard Sanitary Corp., 487 F.2d at 166,

or by basing the award upon findings of fact that are clearly

erroneous. Monson v. First National Bank of Bradenton, 497

F.2d 135, 137 (5th Cir. 1974); see Massachusetts Mutual Life

Insurance Co. v. Brock, 405 F.2d at 432. Since we hold that

the bankruptcy judge and the district court failed to employ

the requisite standards and procedures in awarding attorneys

fees, we do not examine the soundness of their findings of

fact. Nor do we reach the question of whether the amounts

awarded were reasonable.

[9] In order to establish an objective basis for deter-

mining the amount of compensation that is reasonable for an

attorney’s services, and to make meaningful review of that

determination possible on appeal, we held in Johnson v. Geor-

gia Highway Express, Inc., 488 F.2d at 717-19, that a district

court must consider the following twelve factors in awarding

attorneys’ fees:

(1) The time and labor required; (2) The novelty and

difficulty of the questions; (3) The skill requisite to per-

form the legal service properly; (4) The preclusion of

other employment by the attorney due to acceptance of

the case; (5) The customary fee; (6) Whether the fee

is fixed or contingent; (7) Time limitations imposed by

the client or other circumstances; (8) The amount in-

. volved and the results obtained; (9) The experience, re-

putation, and ability of the attorneys; (10) The “unde-

sirability” of the case; (11) The nature and Iength of

the professional relationship with the client; (12) Awards

in similar cases.

Although Johnson involved a suit brought under 42 U.S.C.A.

$ 2000e et seq., the guidelines we established there are equally

useful whenever the award of reasonable attorney’s fee is

authorized by statute.? See Miller v. Mackey International,

Inc., 515 F.2d 241, 242 (5th Cir. 1975) (federal securities) ;

Wars v. Kelly, 515 F.2d 908,912 (5th Cir. 1975) (school deseg-

regat'on); Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70

(9th Cir 1975), cert. denied, 425 U.S. 951, 96 S.Ct. 1726,

48 L.Ed.2d 195 (1976) (labor); see also Jacobowitz v. Double

Seven Corp., 378 F.2d 405, 408 (9th Cir. 1967) (bankruptcy).

But see In re Delta Food Processing Corp., 374 F.Supp. 76,

81 (N.D. Miss. 1974) (bankruptcy).

Proper application of these guidelines in the bankruptcy

context requires that at least two additional considerations

be kept in mind.

[10, 11] First, the strong policy of the Bankruptcy Act

that estates be administered as efficiently as possible demands

recognition. See In re Bemporad Carpet Mills, Inc., 434 F.2d

at 990; Texas Bank & Trust Co. v. Crippen, 235 F.2d 472, 476

(Sth Cir. 1956). Indeed it has been suggested that “[e]conomy

is the most important principle” to be considered in awarding

fees to the attorneys for the trustee. 3A J. Moore &. L. King,

7. Section 64 »(1) of the Bankruptcy Act, 11 U.S.C.A. § 104 (Supp.

1976) and Rule 219(c)(1) of the Rules of Bankruptcy Procedure provide

that the amount of compensation awarded for the provision of legal

services to a bankrupt estate must be reasonable.

This does not mean that the bankruptcy judge should be par-

simonious—that would be a false economy which would dis-

courage competent counsel from offering their services to

trustees in bankruptcy—but rather that he should award an

amount which is “at the lower end of the spectrum of rea-

sonableness.”” Jacobowitz v. Double Seven Corp., 378 F.2d at

404. Since attorneys assisting the trustee in the administra-

tion of a bankruptcy estate are acting not as private persons

but as officers of the court, Official Creditors’ Committee of

Fox Markets, Inc. v. Ely, 337 F.2d 461, 465 (9th Cir. 1964),

they should not expect to be compensated as generously for

their services as they might be were they privately employed.

In re York International Building, Inc., 527 F.2d at 1069;

Herzog, Fees and Allowances in Bankruptcy, 36 Conn.B.J.

374, 376-77 (1962).

[12] Second, there are a number of peculiarities of bank-

ruptcy practice—such as the award of ad interim allowances

and the possibility that some officers of the court may be

furnishing services to the estate in more than one capacity—

which could lead to the award of duplicative fees or com-

pensation for non-legal services if overlooked. The Bankruptcy

Act forbids such a result. 11 U.S.C.A. §§ 102, 104 (1953 &

Supp.1976); R. Bankruptcy Pro. 219.

[13, 14] Determining a reasonable attorneys’ fee is a

three-step process. In the first phase, the bankruptcy judge

or district court must ascertain the nature and extent of the

services supplied by the attorney. To this end, each attorney

seeking compensation should be required to file a statement

which recites the number of hours worked and contains a

description of how each of those hours was spent. In re Meade

Land & Development Co., 527 F.2d 280, 283-84 (3d Cir. 1975).

If there are disputed issues of fact, an evidentiary hearing

must be held to facilitate their resolution. Perkins v. Standard

Oil Co., 399 U.S. 222, 223, 90 S.Ct. 1989, 1990, 26 L.Ed.2d

534, 538 (1970); Lindy Brothers Builders, Inc. v. American

a ee

Radiator & Standard Sanitary Corp., 487 F.2d at 169-70.

Once the nature and extent of the services rendered have

been determined, the bankruptcy judge must assess the value

of those services. Because judges are familiar with the fees

charged by the legal profession and experienced at gauging

the quality of legal work, no expert opinion evidence is re-

quired on this issue, though such evidence may be accepted.

Montalvo v. Tower Life Building, 426 F.2d 1135, 1150 (5th

Cir. 1970); Campbell v. Green, 112 F.2d at 144. When both of

these steps have been completed, and the amount of com-

pensation that is reasonable has been determined, the bank-

ruptcy judge must briefly explain the findings and reasons

upon which the award is based, including an indication of

how each of the twelve factors listed in Johnson affected his

decision. See In re Orbit Liquor Store, 439 F.2d 1351, 1353-54

(5th Cir. 1971).

[15] The bankruptcy judge deviated from the prescribed

standards and procedures in three significant respects. First,

he neglected to require sufficient documentation of the amount

of time spent and the type of work done in each hour for

which compensation was requested. Of the four attorneys

for the trustee, only Robinson explained how he spent each

hour. Baddock merely stated that he had “expended a mini-

mum of 3,992 hours,” and La Rose noted only that he had

worked “in excess of 300 hours.” In their joint petition for

compensation for work performed as attorneys for the peti-

tioning creditor, Baddock and Pierson did not even estimate

the total number of hours they spent. This information is

insufficient to support the award of fees to all of the attor-

neys except Robinson. Jn re Orbit Liquor Store, 439 F.2d at

1353, In re Meade Land & Development Co., 527 F.2d at

283-84; Lindy Brothers Builders, Inc. v. American Radiator &

Standard Sanitary Corp., 487 F.2d at 167. The deficiency is

particularly serious where, as here, one person acts as both

trustee and attorney for the trustee and fails to clearly dis-

tinguish in his petition for compensation between the tasks

he performed as attorney and those performed as trustee.

In re Orbit Liquor Store, 439 F.2d at 1354.

[16] Second, although American Benefit specifically re-

quested that an evidentiary hearing be held concerning the

petitions for priority fees, the bankruptcy judge failed to do

so. In addition to his duty to hold such a hearing on his own

motion because the petitions for compensation did not ade-

quately develop the factual basis for the awards, he was

obliged to hold one when the intervenor requested it. Cf. Ross

v. Bernard, 396 U.S. 531, 541 n. 15, 90 S.Ct. 733, 740 24

L.Ed.2d 729, 737 (1970); 3B J. Moore & J. Lucas, Moore’s

Third, the bankruptcy judge failed to justify the awards with

findings and reasons and did not explain how the twelve fac-

tors enumerated in Johnson affected his decision. Indeed, we

are left to wonder whether the Johnson factors were con-

sidered at all and whether there is a rational basis for awards

that differ so markedly when viewed from the hourly rate

perspective.*

[17] Because these deficiencies raise serious questions

about the validity of the awards, and because they survived

review in district court uncorrected, we hold that the bank-

ruptcy judge abused his discretion in determining the size of

the fees, and that the district court abused its discretion in

affirming that determination.

[18, 19] Because the question is likely to recur, we now

resolve the issue of how factor 8 of the Johnson guidelines

should be applied on remand. The attorneys for the trustee

contend that the plenary suits were improperly compromised

for a fraction of their value, and that therefore the bank-

ruptcy judge and the district court should have considered

the amount of the recovery which might have been obtained

had the cases gone to trial, rather than the money actually

8. See note 5, supra.

received from the settlement, as the “results obtained” for

the purpose of awarding attorney’s fees. This argument is

without merit in today’s case. After consulting with all of the

interested parties, the bankruptcy judge found that the $600,-

000 settlement offer, which was payable immediately, was

more valuable to the creditors of the estate than the poten-

tial yield of the plenary suits, once the latter had been dis-

counted by the possibility of failure and the inevitable delay

in receipt of the judgment even in the event of victory. Find-

ings of fact by a bankruptcy judge will not be reversed unless

they are clearly erroneous. R. Bankruptcy Pro. 810; Cle-Ware

Industries, Inc. v. Sokolsky, 493 F.2d 863, 869 (6th Cir. 1974).

The attorneys have not met this standard. In addition, ser-

vices directed toward enhancing the value of the estate be-

yond the amount required to discharge the bankrupt’s obliga-

tions to creditors and to cover the costs of administration

benefit the bankrupt personally and are not compensable from

the estate, See In re Orbit Liquor Store, 439 F.2d at 1354;

In re Eastwood, 239 F.Supp. 847, 851 (D.Or. 1965). Accept-

ing the position advanced by the attorneys for the trustee

would place the court in the position of compelling an involun-

tary client to accept and pay for as a “benefit” something it

has not requested that is uncertain in amount, and that has

not actually been conferred upon it. Neither Congress in enact-

ing Section 62 of the Bankruptcy Act, 11 U.S.C.A. § 102

(1953), nor this court in deciding Johnson v. Georgia Highway

Express, Inc., supra, intended such a result.

As this case demonstrates, the determination of what

constitutes reasonable compensation for services furnished by

an attorney in a bankruptcy proceeding can be a distasteful

task. See Finn v. Childs Co., 181 F.2d 431, 435 (2d Cir. 1950).

But this possibility does not excuse bankruptcy judges and

district courts from conducting the thorough investigation

that is necessary if they are to make their determinations

properly. They must apply standards and follow procedures

which are sufficient to enable them to ascertain what the

nature and extent of the services provided by an atttorney

were, and to accurately assess the value of those services.

Where, as here, the standards and procedures employed are

not capable of fulfilling these functions, the amount of com-

pensation that is reasonable for the services rendered can-

not be determined, and appellate review of the award becomes

a meaningless gesture. Accordingly, we reverse the portion

of the district court’s order which holds that the appellants

and the cross-appellant lack standing to appeal, vacate the

order insofar as it approves the fee awards, and remaind the

remainder of this case to the district court with directions to

return it to the bankruptcy judge. The district court shall

instruct the bankruptcy judge to (1) require the attorneys

to submit a statement of the number of hours worked and

a description of how each hour was spent, (2) hold an evi-

dentiary hearing in which both the attorneys and American

Benefit may participate to resolve all issues of disputed! mate-

rial fact, and (3) redetermine the amount of fees to be

awarded in light of the guidelines set forth in Johmson v.

Georgia Highway Express, Inc., supra, as they are augmented

by this opinion for application in the bankruptcy conttext.

REVERSED IN PART, VACATED IN PART, AND

REMANDED.

October Term, 1976

Nos. 75-2260 and 75-2644

D. C. Docket No. BK 70-334

In the Matter of FIRST COLONIAL

CORP. OF AMERICA, Bankrupt.

AMERICAN BENEFIT LIFE INSURANCE

COMPANY et al., Appellants-

Cross-Appellees

Vv.

Franz J. BADDOCK, Trustee,

Appellee-Cross- Appellant.

In the Matter of FIRST COLONIAL

CORP. OF AMERICA, Bankrupt.

Bert K. ROBINSON, Appellant.

AMERICAN BENEFIT LIFE INSURANCE

COMPANY et al., Appellees.

Before COLEMAN, CLARK and TJOFLAT, Circuit Judges

JUDGMENT

These causes came on to be heard on the transcript of

the record from the United States District Court for the Mid-

die District of Alabama, and were argued by counsel;

ON CONSIDERATION WHEREOF, It is now here

ordered and adjudged by this Court that the judgment of the

said District Court in these causes be, and the same is hereby

reversed in part and vacated in part, and that these causes

be and the same are hereby remanded to the said District

Court in accordance with the opinion of this Court;

It is further ordered that each party bear their own

costs of printing briefs on appeal in this Court with all of the

parties to share equally in the costs of printing the appendix.

January 10, 1977

Issued as Mandate:

°cXHIBIT B

UNITED STATES COURT OF APPEALS

Fifth Circuit

Office of the Clerk

February 2, 1977

TO ALL PARTIES LISTED BELOW:

NO. 75-2260—In the Matter Of: First Colonial IV

Corp. of American, Bankrupt.

American Benefit Life Ins. Co., ET AL.

v. Franz J. Baddock, Trustee

Dear Counsel:

The enclosed order has this day been entered on petition ( )

for rehearing on behalf of Franz J. Baddock.

See Rule 41, Federal Rules of Appellate Procedure for issu-

ance and stay of the mandate.

Very truly yours,

EDWARD W. WADSWORTH, Clerk

By Susan M. Gravais

Deputy Clerk

smg

cc and enclosure to:

Mr. Floyd J. Falcon, Jr.

Mr. Joe T. Pilcher, Jr.

Mr. W. P. Wray, Jr.

Mr. R. Boatner Howell, Jr.

Mr. Franz J. Baddock

EXHIBIT C

UNITED STATES COURT OF APPEALS

Fifth Circuit

Office of the Clerk

February 2, 1977

TO ALL COUNSEL OF RECORD

NO. 75-2260—In the Matter of: First Colonial IV Corp.

of America, Bankrupt. American Benefit

Life Insurance Co., ET AL. v. Franz J.

Baddock, Trustee

Dear Counsel:

This is to advise that an order has this day been entered

denying the petition( ) for rehearing, and no member of the

panel nor Judge in regular active service on the Court ‘1av-

ing requested that the Court be polled on rehearing en banc

(Rule 35, Federal Rules of Appellate Procedure, Local Fifth

Circuit Rule 12) the petition( ) for rehearing en banc* has

also been denied.

See Rule 41, Federal Rules of Appellate Procedure for issuance

and stay of the mandate.

Very truly yours,

EDWARD W. WADSWORTH, Clerk

By Susan M. Gravais

Deputy Clerk

/smg

ec: Mr. Floyd J. Falcon, Jr.

Mr. Joe T. Pilcher, Jr.

Mr. W. P. Wray, Jr.

Mr. R. Boatner Howell, Jr.

Mr. Franz J. Baddock

* on behalf of Franz J. Baddock, Trustee in Bankruptcy

IN THE UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 75-2260

In the Matter of: FIRST COLONIAL IV CORP.

OF AMERICA, Bankrupt.

AMERICAN BENEFIT LIFE INSURANCE

COMPANY, ET AL.,

Appellants-Cross Appellees,

versus

FRANZ J. BADDOCK, Trustee,

Appellee-Cross Appellant.

‘Appeal from the United States District Court for the

Middle District of Louisiana

ON PETITION FOR REHEARING

(FEBRUARY 2, 1977)

Before COLEMAN, CLARK and TJOFLAT, Circuit Judges.

PER CURIAM:

IT IS ORDERED that the petition for rehearing filed

on behalf of Franz J. Baddock in the above entitled and num-

bered cause be and the same is hereby denied.

ENTERED FOR THE COURT:

/s/ CHARLES CLARK

United States Circuit Judge

EXHIBIT E

IN THE UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 75-2260

In the Matter of: FIRST COLONIAL CORP. OF AMERICA, |

Bankrupt.

AMERICAN BENEFIT LIFE INSURANCE

COMPANY, ET AL.,

Appellants,

versus

-FRANZ J. BADDOCK, Trustee,

Appellee.

Appeal from the United States District Court

for the Middle District of Louisiana

(July 14, 1975)

Before GEWIN, GOLDBERG and DYER, Circuit Judges

BY THE COURT:

Upon consideration of the motions of Franz J. Baddock,

as Trustee of First Colonial Corp. of America,

IT IS ORDERED:

1. That the motion to dismiss the appeal of Amer-

ican Benefit Life Insurance Company for lack of standing

is carried with the case.

2. That the motions to dismiss the appeals of John

G. Bookout, as Receiver for Alabama National Life In-

surance Company, John B. Fournet, as Receiver for First

Colonial Corp. of America, and F. D. V. de la Barre,

in behalf of First Colonial Corp. of America, are sev-

erally granted for lack of standing, and for failure to

file a bond for costs or appeal.

3. That the motion to delimit the record on appeal

to exclude matters allegedly irrelevant to the issues on

appeal is denied with the caveat that the Court will

strictly adhere to the provisions of Rule 30(b) F.R.A.P.

4. That the motion to expedite the appeal is denied.

5. That the motion for delay in complying with

the provisions of Rule 10(b) and 1l(a) F.R.A.P., is

granted and the times specified in the rules shall be

extended to 20 days from the date of this Order.

Mwh

EXHIBIT F

UNITED STATES DISTRICT COURT

Middle District of Louisiana

Office of the Clerk

IN THE MATTER OF BANKRUPTCY

FIRST COLONIAL CORP. OF AMERICA NO. 70-334

NOTICE TO COUNSEL

Pursuant to Rule 77 (d) of the Federal Rules of Civil

Procedure, you are hereby notified of the entry on the docket

as of this day the Court’s (Judge West) orders in the cap-

tioned matter rendered on April 18, 1975, dismissing the

appeals of all. parties pertaining to the attorneys’ fees fixed

by the Bankruptcy Judge and affirming the orders of the

Bankruptcy Judge establishing said fees.

April 23, 1975

CHARLES H. BANTA, CLERK

By Mary Ann Hair

Chief Deputy

at sotees ae ee ee Oe

—— te =

“ oon

EXHIBIT G

UNITED STATES DISTRICT OF COURT

Middle District of Louisiana

MINUTE ENTRY:

APRIL 18, 1975

WEST, J.

IN THE MATTER OF BANKRUPTCY

FIRST COLONIAL CORP. OF AMERICA NO. 70-334

This cause came on for hearing this day upon the several

motions of Bert K. Robinson, Esq., to dismiss all appeals

taken by various parties concerning the attorney fees fixed

by the Bankruptcy Judge to be paid to the said Bert K.

Robinson. Present for the hearing were:

Bert K. Robinson, Esq.

Attorney for the Trustee

Floyd Falcon, Jr., Esq.

Attorney for American Benefit Life

Insurance Company

B. B. Taylor, Esq.

John Voortman, Esq.

Attorneys for Norris Grain Company

F. D. V. DelaBarre, Esq.

Seeking to appear for First Colonial Corp.

of America.

The motions to dismiss the appeals were based upon

several grounds, i.e., lack of standing, failure to properly

designate the record on appeal, and on the merits.

All counsel present were given the opportunity to be

heard but no serious opposition to the established fees was

voiced in court. All counsel apparently preferred to have the

matter submitted on the briefs previously filed.

After due consideration of this record, and the briefs

filed herein, it is the opinion of this Court, for the reasons

stated in open court, that the parties contesting the attorney

fees set by the Bankruptcy Judge do not have standing to

pursue these appeals and that thus:

IT IS ORDERED that the appeals concerning the attor-

ney fees established for Bert K. Robinson, Esq. be, and they

are hereby DISMISSED.

In the alternative, and in the event it should be deter-

mined on appeal that there is standing to appeal, this Court

has carefully considered the merits of these claims, and for

the reasons orally read into the record at the hearing on these

motions, the Court finds no error, manifest or otherwise, in

the fixing of the fees of Bert K. Robinson, Esq. by the Bank-

ruptcy Judge, and therefore:

IT IS FURTHER ORDERED that on the merits these

appeals be, and they are hereby DISMISSED, and the pre-

vious orders of the Bankruptcy Judge fixing these fees be,

and they are hereby AFFIRMED.

In addition to the above motions, many other similar

motions have been filed by other parties to these proceedings.

Appeals to this Court were taken by R. Boatner Howell, Jr.,

Franz Baddock, James F. Pierson, Jr., and Bert K. Robinson,

all seeking an increase in the compensation awarded them

by the Bankruptcy Judge. After due consideration of the

merits of those appeals, the Court finds no error in the fixing

of their fees by the Bankruptcy Judge, and therefore:

oe Ry

IT IS ORDERED that those appeals be, and they are

hereby DISMISSED.

For the reasons stated orally in open Court, on the

question of standing to appeal and/or on the merits, and

without the need for further oral argument:

IT IS ORDERED that all appeals pending before this

Court concerning the attorney fees for Bert K. Robinson, Esq.,

R. Boatner Howell, Jr., Esq., Franz Baddock, Esq., James F.

Pierson, Jr., Esq., Erwin A. Larose, Esq., or any other attor-

ney for whom a fee was fixed by the Bankruptcy Judge in

these proceedings, and particularly, but not by way of limita-

tion, all such appeals filed on behalf of First Colonial Corpora-

tion of America, John B. Fournet, American Benefit Life

Insurance Company, John G. Bookout, and Alabama National

Life Insurance Company, be, and they are hereby DIS-

MISSED, and the judgment of the Bankruptcy Judge estab-

lishing said fees is hereby AFFIRMED.

This order, for appellate purposes, shall be considered

a final judgment, and is intended to dispose of all motions

pending in this matter pertaining to the establishment of attor-

ney fees by the Bankruptcy Judge.

E. GORDON WEST

United States District Judge

EXHIBIT H

UNITED STATES DISTRICT COURT

Middle District of Louisiana

IN THE MATTER OF IN BANKRUPTCY

FIRST COLONIAL CORPORATION BK 70-334

OF AMERICA

ORDER TO ABANDON PROPERTY

(Certain Causes of Action)

The Court having been apprised of the commencement

of trial of the consolidated plenary proceedings in which the

Trustee is a party litigant in the U. S. District Court for this

Middle District of Louisiana; and the Court having also been

informed of the desire of many of the parties litigant to com-

promise and settle some of the complex issues presented in

said suits; and the Court having already (on June 18, 1974)

authorized the Trustee to compromise and settle his claims

against Robert E. Wilder, one of the major litigants in said

suits, upon certain terms and conditions which would uw!ti-

mately yield to this estate the sum of $600,000 (together with

interest thereon at the rate of 7% per annum from June 12,

1974, until paid); and it appearing that any and all uncer-

tainty and delay with respect to the Trustee’s receipt of said

sum can and would be removed were the Trustee to divest

himself of title to those causes of action which he has asserted

against others of the aforesaid parties litigant; and it appear-

ing doubtful that even the most successful prosecution of his

causes of action against those remaining litigants would yield

any benefits for the general creditors of this estate; and the

Court having counselled with the attorney for the assignee of

all those general creditors whose claims have been filed and

with the Trustee and his attorneys and with other parties

in interest as to the advisability of this order; and it appear-

ing that time is of the essence and that the exigencies of

6 tt,

ee ee ——

the matter and other considerations (including the approval

and recommendation of the aforesaid attorney for the as-

signee of all those general creditors whose claims are on file)

justify and compel eschewal of any advance notice or hearing

upon this order; and due deliberation having been had hereon:

IT IS ORDERED, ADJUDGED AND DECREED, pur-

suant to the provisions of Rule 608 of the Rules of Bank-

ruptcy Procedure, that Franz Joseph Baddock, Trustee of

the estate of First Colonial Corporation of America, in Bank-

ruptcy—upon his receipt of the sum of $600,000 in cash

(together with interest thereon at the rate of 7°¢ per annum

from July 3, 1974, until paid) from the Clerk of the U. S.

District Court for the Middle District of Louisiana, and upon

the other terms and conditions hereinafter specified—be and

he is hereby authorized and directed to abandon and disclaim

all of his right, title and interest in and to all claims and

causes of action which were asserted or might have been

asserted by him as such Trustee in Civil Actions Nos. 72-97,

72-222, 72-233, 72-236, 73-115 and (insofar as the Trustee

may have any such rights therein) Civil Action 74-6 (for-

merly Civil Action No. 69-45 on the docket of the U. S. Dis-

trict Court for the Northern District of Alabama)—all pend-

ing in said U. S. District Court for said Middle District of

Louisiana—together with such promissory notes, take-out let-

ters (commitments), and other evidences of indebtedness

upon which these particular causes of action may be founded,

provided, however, that such disclaimer shall not extend to

any other assets of this estate whatsoever, and further pro-

vided that such disclaimer shall not include (and there shall

be specifically excepted therefrom and reserved to the Trustee)

the Second Cause of Action which the Trustee asserted in

Civil Action No. 72-222 against Gulf Union Corporation and

DAWL Corporation (which matter is the subject of an order

herein entered by this Court on June 24, 1974, approving a

compromise and settlement with respect thereto, in considera-

tion of the payment of the sum. of $75,000, with interest

thereon, to the Trustee).

IT IS FURTHER ORDERED, ADJUDGED AND DE-

CREED that the Trustee shall not assert or reassert in this

bankruptcy proceeding any claim or cause of action which

has been asserted or might have been asserted by him in any

of the aforesaid civil actions, provided, however, that there

shall be excepted from this prohibition (and there shall be spe-

cifically reserved to the Trustee) the Trustee’s right to urge in

this bankruptcy proceeding (1) any and all defenses he may

have with respect to the purported mortgage or secured claim

of National American Life Insurance Company upon the Jack-

son, Tennessee, Dormitory property or the proceeds of the

sale thereof, to the extent that such defenses may have arisen

out of transactions related thereto, including the so-called

“Gulf Union—First Colonial—National American” transac-

tion, and (2) any and all defenses and objections arising out

of related matters which he might have with respect to the

proof or allowance or amounts of the respective unsecured

claims purportedly purchased by National American Life

Insurance Company.

IT IS FURTHER ORDERED, ADJUDGED AND DE-

CREED that National American Life Insurance Company

shall release the Trustee from any and all claims and causes

of action which said National American Life Insurance Com-

pany has asserted or might have asserted against the Trustee

and/or this estate in Civil Actions Nos. 72-233 and 72-236,

and such causes of action shall be dismissed with prejudice,

provided, however, that there shall be specifically reserved

to said National American Life Insurance Company any and

all of its rights to assert in this bankruptcy proceeding (1)

its purported mortgage or secured claim upon the Jackson,

Tennessee, Dormitory property or the proceeds of the sale

thereof, and (2) the respective unsecured claims purportedly

purchased by it.

IT IS FURTHER ORDERED, ADJUDGED AND DE-

CREED that upon the Trustee’s receipt of the aforesaid sum

of $600,000 (with such amount of interest as may have

accrued thereon at the date of payment thereof) and his

effecting the aforesaid disclaimer (which he is to present

and file in the respective proceedings simultaneously with

such payment), then, but not before then:

1. All stay orders heretofore entered by this Court with

respect to proceedings in the aforesaid Civil Action No.

74-6 (formerly Civil Action No. 69-45 on the docket of

the U. S. District Court for the Northern District of

Alabama), and

2. The order herein entered by this Court on June 18,

1974, authorizing and directing the Trustee to accept the

offer in compromise and settlement which had been sub-

mitted to him on June 3, 1974, by Robert E. Wilder,

shall be deemed to have been hereby recalled and vacated—

except insofar as said Wilder has obligated himself in con-

nection with such offer to pay to the Trustee interest on the

sum of $600,000 at the rate of 7“¢ per annum from June 12,

1974, to the date of the Trustee’s receipt of payment of such

amount—and the complaint filed by the Trustee seeking an

order directing American Benefit Life Insurance Company

and John G. Bookout, Commissioner of Insurance for the

State of Alabama and Receiver of Alabama National Life

Insurance Company, to show cause (which order has not

been acted upon by this Court) shall, upon a motion to be

filed by said ‘Trustee, be dismissed with prejudice (because

the issues raised thereby will have become moot upon the

Trustee’s disclaimer of his cause of action in Civil Action No.

73-115).

IT IS FURTHER ORDERED, ADJUDGED AND DE-

CREED that ali books and records of the bankrupt shall

remain under the jurisdiction of the U. S. District Court for

this Middle District of Louisiana.

IT IS FURTHER ORDERED, ADJUDGED AND DE-

CREED that, upon the substitution of a party or parties in

the place and stead of the Trustee as a party litigant in any

of the aforesaid actions, the Trustee and his attorneys shall

be and they hereby are authorized and directed to surrender

to such successor(s) in interest, upon their (such succes-

sor’s(s’)) receipting therefor, (1) any and all evidentiary ma-

terials which have been introduced by and on behalf of the

Trustee in the trial of the disclaimed causes of action and (2)

any and all additional evidentiary materials scheduled for such

introduction and described in existing pretrial orders entered

in said proceedings.

Baton Rouge, Louisiana, June 28, 1974.

HARVEY H. POSNER

Bankruptcy Judge

I certify that this is a true

copy of the original.

HARVEY H. POSNER

Bankruptcy Judge

Oe ree we em

100

EXHIBIT I

UNITED STATES DISTRICT COURT

Middle District of Louisiana

IN THE MATTER OF: IN BANKRUPTCY

FIRST COLONIAL CORP. OF AMERICA BK 70-334

AMENDED AND SUPPLEMENTAL ORDER

TO ABANDON PROPERTY

(Certain Causes of Action)

At Baton Rouge, Louisiana, within said District on this

the 1st day of July, in the year 1974.

Pursuant to the provisions of Rule 608 of the Rules of

Bankruptcy Procedure.

IT IS ORDERED THAT the “Order to Abandon Prop-

erty” entered herein on June 28, 1974, be and it is hereby

revised and amended to read as follows:

The Court having been apprised of the commencement

of trial of the consolidated plenary proceedings in which the

Trustee is a party litigant in the U. S. District Court for the

Middle District of Louisiana and the Court having also been

informed of the desire of many of the parties litigant to com-

promise and settle some of the complex issues presented in

said suits; and the Court having already (on June 18, 1974)

authorized the Trustee to compromise and settle his claims

against Robert E. Wilder, one of the major litigants in said

suits, upon certain terms and conditions which could ulti-

mately yield to this estate the sum of $600,000.00 (together

with interest thereon at the rate of 7°- per annum from

June 12, 1974, until paid); and it appearing that any and all

uncertainty and delay with respect to the Trustee’s receipt

101

of said sum can and would be removed were the Trustee to

divest himself of title to those causes of action which he

has asserted against others of the aforesaid parties litigant;

and it appearing doubtful that even the most successful

prosecution of his causes of action against those remaining

litigants would yield any benefits for the general creditors of

this estate; and the Court having counselled with the attorney

for the assignee of all those general creditors whose claims

have been filed and with the Trustee and his attorneys, and

with other parties in interest as to the advisability of this

Order; and it appearing that time is of the essence and that

the exigencies of the matter and other considerations (includ-

ing the approval and recommendation of the aforesaid attor-

ney for the assignee of all those general creditors whose claims

are on file) justify and compel eschewal of any advance notice

or hearing upon this Order; and due deliberation having been

had hereon:

IT IS ORDERED, ADJUDGED AND DECREED, pur-

suant to the provisions of Rule 608 of the Rules of Bank-

ruptcy Procedure, that Franz Joseph Baddock, Trustee-in-

Bankruptcy cf the estate of First Colonial Corp. of America,

in Bankruptcy, upon his receipt of the sum of $600,000.00

in cash (together with interest thereon at the rate of 7°

per annum from July 3, 1974, until paid) from the Clerk of

the U. S. District Court for the Middle District of Louisiana,

and upon the other terms and conditions hereinafter specified,

be and he is hereby authorized and directed to abandon and

disclaim all of his right, title and interest in and to all claims,

actions and causes of action which were asserted or might

have been asserted by him as such Trustee in Civil Actions

Nos. 72-97, 72-222; 72-233, 72-236, 72-115 and (insofar as the

Trustee may have any such rights therein) Civil Action 74-6

(formerly Civil Action No. 69-45 of the docket of the U. S.

District Court for the Northern District of Alabama)—all

pending in said U. S. District Court for said Middle District

of Louisiana—together with such promissory notes, take-out

102

letters (commitments), and other evidences of indebtedness,

together with any and all collateral by which they may be

secured (hereinafter specifically identified) or upon which

these particular causes of action may be founded; provided,

however, that such disclaimer shall not extend to any other

assets of this estate whatsoever, and further provided that

such disclaimer shall not include (and there shall be speci-

fically excepted therefrom and reserved to the Trustee) the

Second Cause of Action which the Trustee asserted in Civil

Action No. 72-222 Against Gulf Union Corporation and DAWL

Corporation (which matter is the subject of an Order herein

entered by this Court on June 24, 1974, approving a com-

promise and settlement with respect thereto, in consideration

of the payment of the sum of $75,000.00 with interest thereon,

to Trustee.)

IT IS FURTHER ORDERED, ADJUDGED AND DE-

CREED that the collateral which may seceure such promis-

sory notes, take-out letters (commitments), and other evi-

dences of indebtednesses, or upon which the foregoing partic-

ular causes of action may be founded (and which collateral

Trustee is herewith ordered to disclaim), is identified as:

A) Certain Certificates for 5500 shares of 50¢ par value

stock of NATIONAL AMERICAN LIFE INSUR-

ANCE COMPANY standing in the names of “Charles

and Doris P. Coburn.”

B) Certain Certificates for 891 shares of the Common

stock of FIRST COLONIAL CORP. OF AMERICA

standing in the name of “Chester J. Coco.”

C) Certain Certificates for 259 shares of the common

stock of FIRST COLONIAL CORP. OF AMERICA

standing in the name of “Robert A. Mayer.”

Upon receipt by Trustee of the sum of $600,000.00 in cash

(together with interest thereon as is herein specified) from

the clerk of the U. S. District Court for the Middle District

103

of Louisiana, the said Franz Joseph Baddock, Trustee, is

hereby authorized and directed to forthwith file in the fore-

going numbered causes, a certified copy of this Amended and

Supplemental Order, which shall of itself constitute an aban-

donment and disclaimer by the Trustee, of all items herein

specified; provided further, that said abandonment and dis-

claimer by the Trustee shall become effective only (1) upon

receipt by the Trustee of the sum of $600,000.00 plus interest

as herein specified from the Clerk of the U. S. District Court

for the Middle District of Louisiana, and (2) the dismissal

with prejudice of the Counter Claim asserted by National

American Life Insurance Company against Trustee, in Civil

Action 72-236.

IT IS FURTHER ORDERED, ADJUDGED AND DE-

CREED that the Trustee shall not assert or reassert in this

bankruptcy proceeding any claim or cause of action which

has been asserted or might have been asserted by him in any

of the aforesaid civil actions; provided, however, that there

shall be excepted from this prohibition (and there shall be

specifically reserved to the Trustee) the Trustee’s right to

urge in this bankruptcy proceeding (1) any and all defeuses

he may have with respect to the efficacy of the purported

mortgage or secured claim of National American Life Insur-

ance Company upon the Jackson, Tennessee, Dormitory prop-

erty or the proceeds of the sale thereof, to the extent that

such defenses might have arisen out of that particular trans-

action, and (2) any and all defenses and objections which

he might have with respect to the proof or allowance or

amounts of the respeviive unsecured claims purportedly pur-

chased by National American Life Insurance Company, but

witheut (in reference to (2)) the raising of matters which

were or might have been raised in Civil Action No.’s. 72-222,

72-233 and 72-236.

IT IS FURTHER ORDERED, ADJUDGED AND DE-

CREED that National American Life Insurance Company

104

shall release the Trustee from any and claims and causes of

action which said National American Life Insurance Com-

pany has asserted or might have asserted against the Trustee

and/or this

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