Petition for Writ of Certiorari — Noback v. Trancisco Industries, Inc.

Supreme Court brief2002

Ask Donna

What actually matters in this document.

Text

U1 s® 632 ANS Y 2001

No.

In the

SUPREME COURT OF THE UNITED STATES :

ROGER A. NOBACK, pro se

Petitioner,

versus

TRANSCISCO INDUSTRIES, INC., (Debtor)

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

PETITION FOR A WRIT OF CERTIORARI .

ROGER A. NOBACK, pro se for Petitioner

Suite 1525

53 W. Jackson Boulevard

Chicago, IL 60604

Telephone: 312/663-0800

Fax: 312/663-9608

139

l. In determining the amount of a reasonable fee, under | | U.S.C.

§330(a)(1)'! or otherwise, can application of a logically foolish

principle, which seeks to establish and measure a proportion between

two quantities which are not measured by the same measure, constitute

the exercise of judicial discretion and excuse a lower court’s refusal and

failure to properly apply any of the at least 4 categories of principles

mandated by the established authority of the U.S. Supreme Court, the

U.S. Congress, the American Bar Association Code of Professional

Responsibility, and F.R.C.P. 52, incorporated in contested matters

under 11 U.S.C. §101 et. seq. by F.R.B.P. 9014?

yA Is it an abuse of judicial discretion for the appellate courts to

deny Applicant’s requests to prove that all or substantially all of the

assertions of fact in the district court’s order denying Applicant's

appeal were false and copied verbatim or substantially verbatim from

the over 100 false assertions of fact without appropriate citations in the

record in the debtor’s brief when the district court instead permitted

Applicant to identify a sample of 8 of such false assertions of fact in its

order and such court admitted that 7 of such sample of 8 false assertions

of fact (87.5%) were in fact false and copied verbatim from the false

assertions of fact without appropriate citations to the record in debtor's

brief and when it is common sense and a truth of high school

mathematics that such fact makes it highly likely that all or substantialy

all of the assertions of fact contained in the district court’s order were

false?

: As in effect prior to October 22, 1994, §702(b) (1)

of The Bankruptcy Reform Act of 1994, Pub. L. No. 103-394

(enacted on October 22, 1994).

MUNN SALIRE SIMI isi ip ac wielee a ]

Pra Ded bis 5 od ob aeS Halves vibistese's « 12

Sai och kee saw ckdeed ne oR wet e capac sine ess 13

A A a a ein oe beds Fewer ee ve ce ones 13

IME, ca dv ned cece ciees cet viwten ets O80 eve segs 14

SSN cna s ese v ew sey cdwsn 0's oS40p aM oRPe eS ew ne eee 15

ae ou dob as beac dc cc cs S wens CV OG I eee 15

NE wae be Senne Tee eee ssewneseuneess 15

ee as Gis bon binders hae vores #t 16

EE, Von dian eb4s dea buveadaveneh ss 20

ER Se el eae ee a ee eee 29

Summary Argument for Writ ................---5555055: 30

l. ne sae cee k nabs Appendix |

2. Er eee eee Appendix 1

3. Locke, John, An Essay Concerning Human Understanding

OS RES SETS a el ae Appendix 2

4. DG Ls ue piia cgay erases uve Appendix 2 3

z Weber, Max, Economy and Society.......... Appendix 2

6. Bonbright, James C., The Valuation of Property

Se eg cada Ws aw yew Visw.y Vos 44 6s Appendix 3

7. Keynes, John Maynard, A Treatise on Money .. Appendix 3

8 Hand, Judge Learned, The Spirit of Liberty .. . Appendix 3

9. Orwell, G., Politics and the English Language . Appendix 3

Transcript of Hearing April 19,1993 ............... Appendix 4

Transcript of Hearing February 9, 1996 ............. Appendix 8

. Order filed February 2,1999..................... Appendix 12

Amended Order filed February 2, 1999 ...... pas Appendix 14

a ee eee Appendix 27

i Ee ape ee Appendix 29

Authonti

Statutes

DORE OUND wiv hinvese es cnlen iced Reckecenee aa a 2

[Ril Os | rer, rrr: per eee ee re 2

fhit ok +: an errr errs rete tree Pree e

Ll) Ste | | >. Bea pene MMM eben. Pee Dome mare ey 3,4

Salt ae (> Zr neepe © Serre feet eh syle 3,4

50 OER GEE oi iA a tt en pee %

glk Con Seat veer ne reer ere i, 29

Pub. L. No. 103-394 (The Bankruptcy Reform Act

of 1994, enacted on October 22, 1994) §702(b)(1) ...... i

Rules and Orders

American Bar Association Code of Professional

Responsibility, Disciplinary

ee eS 5 6 0 55 Sook Ps Ge hia bs Ro irs Eee 21

Bankruptcy Rule 219(c) under

ett PR GE TTS Ss dss et A es 28

jG” Se area pr epee Myer Ones won ere fees 10, 24

3 fe. ee Ee aE ese Sere oe rey aT oor rrr re pees 7 24

Pie Be Pe FOLE «0. cvcccviswdscerdetetives Tienes i, 16, 21, 22, 24

os doin oh chew end tea) 1 00 ede cine sa hen eee ree 21, 24

Guidelines for compensation and expense

reimbursement of professionals of the

United States Bankruptcy Court for the

Northern District of California ..............-.. 000005 10, 24

Cases

Blum v Stenson, 104 S.Ct. 1541 (1984) 0.0.0. 21, 23

Carpenters Local 1273 of United Bhd. of Carpenters

& Joiners of America v Hill, 398 F.2d 360(9th Cir 1968) ....... 26

Fuchstadt v United States, 434 F2d 367 (2nd Cir 1970) .............. 26

Golf City, Inc. V Wilson Sporting Goods, Co., Inc.,

I a ys Goa ves Cneenaiueaees 25

Hensley v Eckerhardt, 103 S.Ct. 1933 (1983) ............. 20, 21,23, 25

In re Emons Industries, Inc., 76 B.R. 59

Clay. SB.ILY. FOGF) ik E ORE RNS 28

In re Great Sweats, Inc. 113 B.R. 240

ee EE hc. fakes caenseuee cae 17, 20, 23

In re Heck’s Properties, Inc., 151 B.R. 739

I ID 5 rk rs ca as Sa ucla y Eien de eee es 28

In re Hotel Hollywood 95 B.R. 130 (9th Cir. BAP 1988) ............. 24

In re Kitchen Factors, 143 B.R. 560

(9th Cir. BAP 1992) ....... cece reece rere erent teres: 13

In re Lifschultz Fast Freight, Inc., 140 B.R. 482

(Bkey. N.D. Il. 1992) ......... cece cere reer eet eens 28

In re Nucorp Energy, Inc., 764 F 2d 655 (9th CT veces sdt 0 o> 24, 28

In re Pettibone Corp., 74 B.R. 293

(Bkcy. N.D.IM. 1987) ..... 00. e eee reenter eens 28

Johnson v Georgia Highway Express, Inc., 488 F2d 714

(Sth Cir: 1974) 0. eee e cere eee en eee ereerereceererees 21

Matter of Continental Illinois Securities Litigation

~ 962 F2d 566 (7th Cir. 1992) ..... 2... eee 23, 24

Matter of First Colonial Corp. of America, 544 F 2d 1291

(Sth Cir 1977)... 0. cece cee cece ener erence nese ecees 21

Northcross v Board of Educ. Of Memphis City Schools,

611 F2d 624 (CA 6 1979) ..... 6c eee eee eee eens 23

Pennsylvania v Delaware Valley Citizens’ Council, -

106 S Ce DOBBCIGES) «0. ccc cc de bviveer erent: 21, 23, 28

Stanford Dailey v Zurcher 64 FRD 680 (N.D. Ca. 1974)........-.---. 28 .

United States v Burr, 25 Federal Cases 30

(No. 14,692)(C.Va. 1807)... 26... 19

United States v Forness, 125 F2d 928

(ad Cit 1942) oc. cc cece cece teen ec ee cee r ee eeeeeenee 26

Unsecured Creditors’ Committee v Puget Sound Plywood,

924 F2d 955 (9th Cir 1991) ©... 2... cece eee eee ee eee 17, 20

Vili

Velasquez v City of Abilene, 725 F2d 1017 (5th Cir 1984) ...........

islativ

Fe ae Pee R eh aaeesed

Administration of Bankrupt Estates, In the matter of

Inquiry into the Administration of Bankruptcy

Estates, 71st Cong., 3d Sess. (Comm. Print

of House Comm. on the Judiciary 1931) ....................

Advisory Committee Note to Bankruptcy Rule 219(c)

under Bankruptcy Act of 1898 ...........................

omy WN EINE oo rs ee ee

iershetees a. ester. he toa SEE EEE AAG ROA Ee en oe

Report of the Commission of the Bankruptcy Laws of the

i i Se aR ac nen ee

Report on the Study and Investigation of the Work, Activities,

Personnel and functions of Protective and reorganization

+ etpanaeaaine si onaand GT eee ef ee Re

Senate Report No. 94-1011 (1976)

[U.S.Code & Admin. News 1976] ...............................

——

H.Rep. No. 94-15581 (1976)........... 23

S.Rep. No. 94-1011 (1976). ........... 23

U.S. Code Cong. & Admin. News (1976)...... 23

aw Revi icl

Broude, Cramdown and Chapter 11 of the

Bankruptcy Code: The Settlement

. Imperative, 39 Bus. Law. 441 (1984) ....................... 6

Coogan, Confirmation of a Plan Under

the Bankruptcy Code,

pee RR OE Ge. 6

Holmes, Oliver Wendell, Jr., “The Path of the Law”,

SPO Ee UI FRE. i hikiby eas FRAG i oo ood clckedvias 18

Klee, All You Ever Wanted to Know About

Cram Down Under the New Bankruptcy Code,

a ee er a re 5

LoPucki, L., Bargaining Over Equity’s Share in the

Bankruptcy Reorganization of Large, Publicly | Held Companies,

ote ee tn rn are a ne ee 1, 6, 8, 27

LoPucki, L., Patterns in the Bankruptcy Reorganization of Large, Publicly

Held Companies, 78 Cornell L.Rev. 597 (1993) ................. “Lg

Pound, R., “Justice According to Law”, 13 Col L. Rev. 696 (1913) ..... 19

Texts

Aristotle, Categories, [The Works of Aristotle Vol.1,W.D. Ross translation in

Great Books of the Western World, Vol. 8, Encyclopedia Britannica, Inc.

CO SUE Sie 6s «vce sncicdunsdahe es eteceeneeeuns 17, Appendix 1

Aristotle, Prior Analytics, [The Works of Aristotle Vol.I1, W.D. Ross translation

in Great Books of the Western World, Vol. 8, Encyclopedia Britannica, Inc.

| PRE PPE eet er Se ep Vere ee 18

Bonbright, James C., The Valuation of Property (McGraw-Hill Book Company,

Inc. 1937 - Published under the auspices of the Columbia University Council

for Research in the Social Sciences) .................5.. 17, Appendix 3

Cardozo, Benjamin N., The Growth of the Law,

(Yale University Press 1924)... 0.2.0... 00.00 cece cece ee 18, 19

Cardozo, Benjamin N., The Nature of the

Judicial Process (Yale University Press 1921) ............... 18

Collier on Bankruptcy (Matthew Bender 15th Ed. Rev. 1997) ......... 24

Dewing, Financial Policy of Corporations,

(Ronald Press, 5th Ed. 1953, 4th Ed. 1934) .................. 6

Ethics in the Courts: Policing Behavior in the Federal

Judiciary (National Legal Center for

the Public Interest 1990) ................ ese e cece e eee eens 26

Euclid, Elements, Book Ten, in Great Books

of the Western World, Vol. 11, Encyclopedia

Britannica, Inc. Chicago 1952 .................. 17, Appendix |

Frank, Judge Jerome, Courts on Trial (Princeton

University Press 1949 and 1973) ................00.05. 18, 19

Hand, Judge Learned, The Spirit of Liberty,

[Alfred A. Knopf 1960] ...........---.-00-5-5 17, Appendix 3

Herzog and King, Collier Bankruptcy Practice Guide (Matthew Bender 1990)

PS fe at Le EE Py ee hts eee he wd 5

Holmes, Oliver Wendell, Jr., Collected Legal Papers

(Harcourt Brace and Company 1920) ...........---.ss0ee: 18

Keynes, J.M., A Treatise on Money

[Harcourt, Brace and Company 1930]............ 17, Appendix 3

Llewellyn, K. The Bramble Bush, p. 62

(Oceana Publications 1930) ......... 6.6. - 6c eee e eee eee es 19

Locke, John, An Essay Concerning Human Understanding.in Great Books of the

Western World, Vol. 35, Encyclopedia Britannica, Inc. Chicago 1952 ... 17,

Appendix 2

Moore’s Federal Practice 3D (Matthew Bender) ...............-: 19, 25

Orwell, G., Shooting an Elephant and other essays

(Harcourt, Brace & World, Inc. 1950)............ 17, Appendix 3

Posner, Richard A., The problems of jurisprudence

(Harvard University Press 1990) ....... 2.06... 0 eee eee ees 18

Pound, Roscoe, An introduction to the philosophy

of law (Yale University Press 1954) ....... 2.0.6.0 00s eee: 18

Shaman, J., Judicial Conduct and Ethics 3rd Ed. (Matthew Bender 2000)

~ Tuohy and Warden, Greylord: Justice, Chicago Style

(G.P. Putnam’s Sons 1989) ....... 6... fice cece 26

Weber, Max, Economy and Society (English Translation

published by University of California Press 1978) .. 17, Appendix 2

Webster's New International Dictionary of the English Language (G.& C.

i cca b eh inw in poe pennanean 17, Appendix 2

Wigmore on Evidence (Little, Brown and Co. - updated to present) ..... 19

Wright and Miller, Federal Practice and Procedure: Civil 2d (West

NS ergs ak ni ci ia MIR a Sk ag de 25, 26

None of the opinions and orders entered in Applicant's fee application

proceedings and his appeal thereof have been reported in the official or

unofficial reports.

5 Peat uriadicti

The Ninth Circuit’s Memorandum was filed March 23, 2001 and its

Order was filed May 11, 2001 denying petitioner’s petition for

rehearing and rehearing en banc. Supreme Court jurisdiction of this

petition is conferred by 28 U.S.C. §1254(1).

Statute 11 U.S.C. §330(a)(1)

“(a)After notice to any parties in interest and to the United States

trustee and a hearing, and subject to sections 326, 328, and 329 of this

title, the court may award to a trustee, to an examiner, to a professional

person employed under section 327 or 1103 of this title, or to the

debtor's attormney--

(1) reasonable compensation for actual, necessary services

rendered by such trustee, examiner, professional person, or attorney, as

the case may be, and by any paraprofessional persons employed by such

trustee, professional person, or attorney, as the case may be, based on

the nature, the extent and the value of such services, the time spent on

such services, and the cost of comparable services other than in a case

under this title;...”

STATEMENT OF THE CASE

The debtor’s reorganization was one of the most successful

Chapter 11 reorganizations of a publicly traded debtor in history, from

the standpoint of the stockholders, according to a study” funded by the

National Science Foundation (“National Science Foundation Study’”’),

in which the stockholders retained at least 90% of the reorganized

debtor's common stock valued at $15,750,000, (see Fact §5.b, d.), and

Roger A. Noback (“Applicant’’), as counsel for the Official Equity

Security Holders’ Committee of the debtor, billed hourly fees of

. The National Science Foundation Study is contained in a series of 5 law

review articles, ni without limitation, the wows Bargaining Over Equity’s

t Reon of Lars \ id Companies, 139 U. Pa.

L. Rev. 125 (1990) ("Pennsylvania Report”) Patterma_in_ the Bankruptcy

Reorganization of Large, Publicly Held Companies, 78 Cornell L.Rev. 597 (1993)

("Cornell Report”).

approximately $340,000, approximately 2% of such amount recovered

by the stockholders. The shaded portion at the left of the following bar

graph illustrates the minuscule proportion that Applicant's requested

hourly fees bear to the amount recovered by the stockholders:

p ras $$ $$ $_

The bankruptcy court for the Northern Distnct Court of

California denied substantially all such hourly fees requested by

Applicant and the district court denied Applicant's appeal of such

award and denied Applicant’s motion for sanctions [ER-53 #139 DC:

ER-55A (pp. 3-225)] against the debtor and debtor's counsel for, inter

alia, intentionally making over 100 false assertions of fact without

appropriate citations to the record in debtor's appellee's brief [ER-45

#97DC]. The Ninth Circuit Court of Appeals affirmed.

STATEMENT OF FACTS

l. Debtor's case was a complex Chapter |! reorganization case

of a publicly traded debtor listed on the AMEX [Debtor's Reply

Memorandum filed February 18, 1992 (9-12) [ER-3 #327(4-7)],

Applicant's Reply filed January 29, 1996 #1425).

a. Three official committees were appointed in the case

under 11 U.S.C. §1102(a) by the U.S. Trustee, an arm of the U.S.

Justice Department, to represent the committees’ respective

constituencies under 11 U.S.C. §1103(c): an Official Unsecured

Bondholders’ Committee (“OBC”) to represent the holders (“junk-

bondholders” or “bondholders”’) of the convertible, subordinated notes

(“Junk Bonds,” or “Bonds”);’ an Official Unsecured Creditors”

Committee (“OCC”) to represent the other unsecured creditors,

including the banks; and an Official Equity Security Holders’

Committee (“OEC”) to represent the non-insider stockholders, who

owned approximately two-thirds or more of the outstanding shares of

common stock of the debtor.*

’ [““Bondholders’ Solicitation Section” (8:22-26) of Joint Disclosure Statement

filed August 27, 1992: “Cash Distribution After Subordination” section of Exhibit A to

“Creditors’ Solicitation Section” of such disclosure statement. }.

Comments by United States Trustee (4:17 and First paragraph of Exhibit A)

filed January 22. 1992 #258. OEC's Partial Objections filed August 6. 1992 (24:13-16

and p. 2 of Attachment to Appendix 3 thereto [ER-9 #519(44)}. Applicant's Declaration

b. By Order filed March 4, 1992 (p. 8) [ER-4 #346] the

court approved the OEC’s Amended Application filed December 19,

1991 (6:25-7:10) [ER-1 #224] to retain Applicant as the OEC's

counsel at an hourly rate basis of efficiency of $1 00/hr. The bankruptcy

counsel for the debtor, the OCC and the OBC each charged an average

effective rate of efficiency of approximately $200/hr. during the case

[fee applications filed thereby at or about March 1, March 27, 1992.

May 27 and 28, October 22-28, 1992 and February 8, 1993).

2. The three official committees and the debtor each filed

competing plans, and the court approved the amended disclosure

statements describing such 4 competing plans by Order filed October

13. 1992 (2:3-8) [ER-18 #608] as containing “adequate information”

under 11 U.S.C. $1125 [including such approval of the OEC’s Third

Amended Disclosure Statement filed October 8, 1992 [ER-16 #601]

describing the OEC’s Second Amended Plan of Reorganization filed

October 8, 1992 [ER-17 #600] and the Second Amended Joint

Disclosure Statement filed August 27, 1992 describing the 3 competing

plans of the OBC, OCC and the debtor] (Transcript, September 17,

1992, 2:12 p.m, (13:8-10) {ER-15 #627(5)]. Pursuant to such Order

filed October 13, 1992 [ER-18 #608], such disclosure statements and

plans were distributed to the holders of claims and interests (stock) in

the only solicitation of holders with ballots to accept or reject competing

plans in the case under 1 | U.S.C. §§1125, 1126 and 1129(a)(8)(A); a

confirmation hearing was scheduled for December 1, 1992 and

objections to such plans were scheduled to be filed November 12, 1992.

The court specifically held at the September 10 and 17, 1992

hearings that the OEC’s Second Amended Plan filed September 17,

1992 (and refiled verbatim on October 8, 1992) [ER-14 #1537, ER-17

#600] was legally adequate and did not contain provisions which would

make it unconfirmable under 11 U.S.C. $1129 and $1123. [Transcript,

September _17, 1992, 2:12 P.M. (6:18-7:8) [ER-15 #627(3-4)},

Transcript, September 10, 1992, 10:52 A.M. (pp. 22-23, 45-46, 56-60,

65:17-21) {ER-11 #626(3-11)}] According to the ballots of such

and Offer of Proof filed February 8, 1996 (1 1:24-12:4). Appointment of OCC filed

August 16, 1991; Appointment of OBC filed October 4, 1991; and Appointment of

OEC filed October 4, 1991, as amended by filings up to January 8, 1992.

holders, the OEC’s plan was a good plan which was well done since the

OEC’s constituency, the non-insider stockholders, overwhelmingly

voted to accept the OEC’s plan and reject the debtor's plan under | |

U.S.C. §$1125, 1126 and 1129(a)(8)(A) and 50% of the bondholders

voting voted to accept the OEC’s plan. [Applicant's Motion to

Reconsider filed October 4, 1993 (24:5-25:20) {ER-37 #1128(33-34)}]

Debtor admitted that “shareholders voted to accept the OEC plan.”

[Debtor's Response filed October 18, 1993 (9:7) {ER-38 #1133}]

3. The court, by Order filed November 12, 1992 [ER-21],

terminated both the solicitation of holders which commenced in

October, 1992 and the confirmation hearing on such 4 competing plans

of reorganization scheduled for December 1, 1992 before any OEC or

other objections to such plans of reorganization were filed or required

to be filed, and the OEC thereby did not file any objection to any plan

filed by the debtor, the OBC or the OCC.

Such order also authorized the plan proponents to amend their

plans and disclosure statements for hearing on the adequacy of such

disclosure statements under 11 U.S.C. §1125 on January 14, 1993, as

such order was successively amended to extend the dates for such

hearing and corresponding document filing because of the inadequacy

of the time permitted for the preparation of such amended documents.

At such January 14, 1993 hearing the court held that neither the Third

Amended Joint Disclosure Statement filed December 22, 1992, which

described the three competing plans of the OBC, OCC and the debtor

and was amended January 4 and 5, 1993, nor the OEC’s Fourth

Amended Disclosure Statement filed. December 22 and amended

December 30, 1992 [ER-22 #714] contained “adequate information”

under 11 U.S.C. §1125; denied approval of both such disclosure

Statements; and deferred indefinitely further hearings on disclosure

statements. [see Fact §4.]

4. The court adopted and approved the OEC’s objections to the

amended joint disclosure statements which described the 3 competing

plans of the OBC, OCC and the debtor.‘

l. The court approved and adopted fourteen of Applicant’s specific objections

contained in the OEC's Partial Objections filed August 6. 1992 [ER-9 #519} to the

However, the bankruptcy court refused to hear Applicant's

objections to the Joint Disclosure Statement filed August 27, 1992

(which was distributed to holders of claims and interests in the only

contested solicitation of accsptances and rejections of plans in the case)

which identified material misrepresentations of the debtor's financial

condition contained in such Joint Disclosure Statement prepared by

creditor committee counsel which were disproven by the correct facts

stated in the debtor’s 10K report filed with the SEC and which made the

debtor appear in worse financial condition than it was, which therefore

favored acceptance and confirmation of the two creditor committees

plans as against the OEC’s plan on behalf of the non-insider

stockholders.

5. The OEC’s actions in the case implemented the

recommendations of distinguished authorities on Chapter 11

reorganizations of publicly traded debtors for parties representing

stockholders and thereby created the circumstances which forced the

other plan proponents to withdraw their competing plans and assent to

a consensual plan of reorganization favorable to the stockholders.°

Original Joint Disclosure Statement filed July 21, 1992. (Transcript, August 13, 1992

(38:14-39:13) [ER-10 #629(3-4)}.

Applicant billed $7,510 for 75.1 hours of work in preparing such objection

to such Joint Disclosure Statement. an average of $535 (5.35 hours) for each of such

14 approved objections and approximately 11 minutes per page for the over 400 pages

of such Joint Disclosure Statement documents. [§14.a.-g. of Applicant's Supplement

to Application filed April 9. 1993 {ER-32 #909 (52-55)}].

= The court adopted the two principal objections in the OEC’s First Partial

Objections filed January 7. 1993 [ER-25 #723] ("OEC First Partial Objection”) to the

Third Amended Joint Disclosure Statement filed December 22. 1992 (which was

amended January 4 and 5. 1993). The OEC was the only party to make such objections

for the benefit of the court and the holders.

Applicant billed $4550 for 45.5 hrs. of work on such objection. an average

of approximately $1500 (15 hours) for each of the 3 pnncipal objections approved or

adopted by the bankruptcy court or acknowledged by the debtor and approximately 6.8

minutes for each page of such approximately 400 page Joint Disclosure Statement

documents. [§31 of Applicant’s Supplement to Application filed April 9, 1993 (pp. 77-

80) {ER-32 #909(80-83)}].

. Herzog and King, Collier Bankruptcy Practice Guide (Matthew Bender 1990)

[Collier] §90.04[9(2). (3), (7) and §90.10[5)}{a}. [e}. (6}{a]. pp. 90-93. Klee. All You

Ever Wanted to Know About Cram Down Under the New Bankruptcy Code. 53

a. The OBC plan and the OCC plan each extinguished or

virtually extinguished the interest of the stockholders, and the OBC

supported its extinguishment of the interest of the stockholders bv filing

a valuation that the debtor was insolvent as a going concern.

b. The OEC’s financial advisor valued 100% of the

common stock of the debtor, as a going concern under the OEC’s

proposed strategic business plan and management, at an estimated

average value of $17,500,000 [Declaration of Thomas J. Furlong filed

January 7, 1993 [ER-23 #726 (4:1-4)] (“OEC’s Valuation”)}] Ninety

percent (90%) of such amount equals the $15,750,000 amount set forth

in the first paragraph of “Statement of the Case.”

Amer.Bank.L.J. 133, 148-149 (1979), Broude, Cramdown and Chapter 11 of the

Bankruptey Code: The Settlement Imperative, 39 Bus. Law. 441, 453+

(1984\"Broude"), Coogan, Confirmation of a Plan Under the Bankruptcy Code. 32

Case W.Res.L.Rev. 301, 362 (1982), Dewing, Financial Policy of Corporations. p.

1335-6 (Ronald Press, 5th Ed. 1953) ["Dewing"], 124 Cong. Rec. 34,004 (comments

of the Senate sponsor of the bill enacted as the Bankruptcy Code), Penns:beania Report

p. 195-196 (1990)

[§0. of Applicant’s Motion filed October 4, 1993 (2:24-6:9, 16:10-19:19) {ER-37

#1128 (11-15, 25-28)}; Applicant's Reply filed January 29, 1996 (1-14) {ER-42

# 1425(5-18), §1.B.1. and 2. and C.2. of Applicant’s Declaration and Offer of Proof

(7:23-8:28, 11:10-4) and §§2 and 9 of Exhibit 32 thereof (p.2-5). Applicant's

Supplement to Application filed April 9. 1993 ((11:18-17:10, 19:20-21:2, 23:14-27:15:

28:5-16, 58:24-59:11, 61:14-18) {ER-32 #909(14-20, 22-24, 26-31, 61-62. 64}.

Applicant's Application filed May 28, 1992 (13:7-15:6, 26:11-22) {ER-5.6 #434,

#447}, §2 of Exhibit D-2 to the Declaration of George L. Green filed June 11. 1993.

Exhibit B to the OEC's Third Amended Disclosure Statement filed October 8. 1992

{ER- 16 #601(31-33)}}

(Transcript, February 20, 1992, 10:34 AM. (5:4-17), “Bondholders’

Solicitation Section” of Joint Disclosure Statement filed August 27, 1992. including

(6:7-9). “Bondholders’ Solicitation Section” of Joint Disclosure Statement filed

December 22, 1992. as amended by filing January 5, 1993. Applicant's Reply filed

January 29, 1996, Endnote 10 (13:23-14:13) {ER<42 #1425(17-18), §1.A.1. and

endnote | of Applicant’s Declaration and Offer of Proof filed February 8. 1996 (1:8-

15). OBC’s Notice of Motion and Motion for Order... filed October 14, 1992 [ER-19

#604] and Declaration of Shawn Bookin filed as pages 19 and 20 thereof, OEC’s

Fourth Amended Disclosure Statement filed December 30, 1992 (3:25-4:5) [ER-22

#714), “Creditors Solicitation Section” of Joint Disclosure Statement filed August 27,

1992 and of Joint Disclosure Statement filed December 22, 1992, as amended January

4 and 5. 1993 including Exhibits A and B thereto.]

C. In contrast, the debtor did not implement the

recommendations of such distinguished authorities, did not file a

valuation of the debtor as a going concern, and the debtor admitted the

debtor was insolvent under its proposed business operations and

management." .

d. Among other things, in the opinion of such

distinguished authorities, the OEC’s Valuation [the Declaration of

Thomas A. Furlong filed January 7, 1993 {ER-23 #726}] is the

“settlement imperative” lever and “club” which had a very strong

tendency to cause the creditor committees to withdraw their respective

plans and assent to the plan of reorganization confirmed in the case.

Promptly upon filing of the OEC’s Valuation, the OEC called for the

court to establish a settlement mechanism to implement the settlement

forces unleashed by the actions implemented by the OEC, including the

OEC Valuation, the court proceeded to adopt the OEC's

recommendation by calling the settlement conference recommended by

the OEC (and only the OEC) and at such settlement conference the

OBC and OCC assented to the plan favorable to the stockholders which

was confirmed, as the OEC and such distinguished authorities

predicted. [OEC’s First Partial Objection filed January 7, 1993 (18:1-

20:9) [ER-25 #723]; Notice of Settlement Conference filed February

11, 1993 [ER-30 #792]; Transcript, March 5, 1993, 9:19 p.m, (2:3-

20, 11:2-6) [ER-31 #901(3-4)); Declaration of George L. Green filed

. {[’ Debtor's Solicitavon Section” of Joint Disclosure Statements filed August

27. 1992 (13:26-14:2) and December 21, 1992]; Debtor's Reply Memorandum filed

February 18, 1992 (4:26-5:1). Applicant’s Reply filed January 29, 1996 (4:20-24) {ER-

42 #1425(8)}

[Applicant’s Declaration and Offer of Proof filed February 8.1996 (pp. 4, 22-

26 and §2 of each of Exhibits C and D-2 to Exhibit D to Exhibit 31), Applicant’s Reply

filed January 29, 1996 (10:16-11:19) {ER-42 # 1425(14-15)}; Applicant’s Amended

Reply filed October 27, 1993 (11:6-24) [ER-41 #1160(11, 17-22)] and Exhibits A and

B thereto: §13.10 of the Joint Disclosure Statement filed June 22, 1993 (101:3-102:19)

and Exhibits A and B thereto]

[Debtor’s Objection dated September 4, 1992 (5:25-6:4) filed as Exhibit | to

Stipulation filed April 1, 1997 and confirmed by Order filed April 2, 1997, OCC’s

Qbiection filed August 6, 1992 (4:5-11) and OBC’s Objection filed August 10, 1992

(2:5-8) and Objection filed September 8, 1992 (2:9-11), Transcript, September 10,

1992, 10:52 a.m, (22:19-23:5) [ER-11 #626(3-4))}

March 11, 1993 (8:19-13:3); Applicant's Supplement to Application

filed April 9, 1993 (80:11-81:11) {ER-32 #909(83-84)}

€. Under the plan confirmed in the Transcisco case. the

stockholders retained at least 90% of the reorganized debtor's

outstanding common stock and the per share price of the stock went

from $0.125 during the case to over $6 on September 3, 1996, when all

of the stock of the debtor was purchased by another company with a net

worth of over $700,000,000. Such $6/share price evidences the validity

of the $17,500,000 valuation of the OEC’s financial advisor. [Fact $9

hereof: Joint Disclosure Statement filed June 22, 1993 (70:14-72:14):

Applicant’s Reply filed September 30, 1996 (5:26-6:6, 6:22-28, 7:23-

28. Exhibits 3 and 4) [ER-44 #1469 (1-3, 5, 42-44)] and the second

and third paragraphs of p.1 of the document attached as Exhibit 2

thereto), Supplement to Debtor's Response filed September 23, 1996

(2:17-19)}.

According to the National Science Foundation Study, typically

the stockholders receive only at most a token (0-10%) percentage

Hara ete-asieaenot ppp Stone stock [Patterns

78 Comell iol Review $75, 61 1 and 618 (1993) (“Cornell Report”)}

If the OEC had not filed its valuation of the debtor as a going

concern during the case to the effect that the debtor’s stock had an

estimated average value of $17,500,000 (the value later reflected by the

above described $6 per share purchase price), the debtor would have

been considered insolvent under the only other valuation of the debtor

filed in the case and the debtor’s admission that the debtor was

insolvent under its proposed management and business operations.”

f. Nevertheless, at the January 14, 1993 hearing on

disclosure statements, the bankruptcy court revoked, sua sponte, the

According to the Cornell Report (page 611). in two-thirds of the

reorganizations of insolvent debtors'studied in the National Science Foundation Study

the stockholders retained 10*o or less of the reorganized debtor's common stock. In the

table on page 618 of the Comell Report, in only one other reorganization case of an

insolvent debtor did the stockholders receive a higher percentage of the common stock

of the reorganized debtor than in the Transcisco case, a result obtained by transferring

substantially all the debtor's assets to creditors [Cornell Report, note 55. page 611;

Pennsylvania Report, Table [I]. page 142.]

right of the OEC to retain professionals at the expense of the estate, for

the reason that the OEC implemented the recommendations of

distinguished authorities on Chapter | | reorganizations by preparing

and filing the OEC’s Valuation and based also on a series of false

findings of fact which are disproven by the court's own earlier orders

and rulings in the case and which the district court constructively

admitted were false, as referenced in Fact §10 and Argument §2 hereof.

By such revocation and findings the record evidences that such court

adopted a tactic as old as rhetoric itself [Aristotle, The Art of Rhetoric.

Section 5, Chapter 1.12 (Penguin Books 1991. Transl. By H. Lawson-

Tancred)] and slandered the OEC and Applicant to cover up its own

improper actions toward the OEC and the non- -insider stockholders

during the case (including without limitation its refusal to hear about the

material misrepresentations in the Joint Disclosure Statement referenced

in Fact $4).

6. The bankruptcy court expressly ruled that it would not make

any’ finding in the case, and did not make any finding, regarding whether

the debtor was solvent or insolvent, as a going concern, as admitted by

the debtor [Debtor’s Appellee’s Brief filed August 31, 1998 (11:16-19)

{ER-45 #97DC(16)}] in the district court on appeal], and therefore the

court made no finding regarding the value of the debtor's common

stock. the “amount at stake” for the stockholders, at the January 14,

1993 hearing or otherwise.'°

7. The court found that Applicant's fee applications were

adequate and complied with applicable regulations, ° *] think the papers

adequately address the situation.” [Transcript of Proceedings, April 19,

1993, (5:8-9) [ER-33 #955(3)]. Applicant's Supplement to application

filed April 9, 1998 [ER-32 #909] was his final fee application (“Final

Fee Appioation ) heard April 19, 1993 covering services performed

filed October 14, 1992 IER- 19 ¥604) ¢ Seanen ronan com Mates ") and attached

Valuation by Shawn Bookin, the OBC’s financial advisor, at pp. 19-20 thereof (see

Fact §9.a. hereof); Declaration of Thomas J. Furlong filed January 7, 1993 [ER-23

#726(3~4)] as OEC’s opposition to the OBC’s Pre-emptive Cramdown Motion (pp. 3-

4), Transcript, January 14, 1993 (56:20-58:1 1, 64:8-65:5, 80:19-81:3) [ER-27 #763(9-

15)}; Order [ER-39 #1137) and Findings of fact and conclusions of law each filed

October 20, 1993. {ER-40 #1138}]}

during the 8.5 month period ending January 14, 1993. Applicant's

Applications filed June 1 [ER-7 #445] and May 28, 1992 [ER-5 and 6,

#434, #447], respectively, constitute Applicant's interim fee

applications (“Interim Fee Applications”) heard June 15, 1992 covering

services performed during the 8 months ended April 30, 1992.]''

a. Such fee applications set forth over 100 discrete

categories of service performed by Applicant on behalf of the OEC and

the ‘number of hours billed for each such category as — by

FRBP. 2016 and the court’s tuidelines for comp 5

uduiinineinanednmneantiee June 3, 1991 and amended

August |, 1992 (“Compensation Guidelines”) in §3 “Project Billing”

under the first heading “The Narrative”, and accordingly Applicant

produced and filed fee applications which reasonably complied with the

Compensation Guidelines and were adequate for the bankruptcy court

to compute a “reasonable fee” determined by multiplying a reasonable

number of hours times the corresponding reasonable hourly rate for

cach such category.

A leek endpiaeble ewerd are e the aw we for suuaid for the OBC,

the most active creditor committee opposing the OEC and the debtor.

Whose constituency was subordinated to the banks (see Fact $1.a.) but

senior to the stockholders.'* The bankruptcy court approved

7 Applicant’s Supplement to application filed April 9, 1998 (2:1-12, 3:15-17)

[ER-32 #909(5-6)] expressly completely restated the Application filed March 29, 1998

(#898). except for the time records attached as Exhibits A and B, which were

incorporated by reference into the Supplement to application filed Apnil 9, 1993.

Among other things. a companson with the OBC was relevant since the

OBC's plans extinguished the stockholders’ interest and were supported by a going

concem valuation demonstrating the debtor was insolvent under the management and

business plan proposed by the OBC (see Fact §5ia.).

Also, by approving substantially all OBC counsel's fees (which were higher

than the combined fees of bankruptcy counsel for the debtor and OCC) the court

accepted the principle that the more “junior” class had to expend more time and money

for services to solve the problems of each class of more “senior” interests while the

senior interests can. relatively speaking. ignore those lower down the chain and not

substantially all (over 95%) of the fees requested by the OBC’s counsel

in the case. OBC counsel billed approximately four times the dollar

amount of fees and twice the number of hours for preparation of

essentially one plan and disclosure statement during the 15 month

period ending December 31, 1992 (approximately 1430 hours and

$286,000) as Applicant billed for the preparation of three different

plans and the disclosure statements describing them during the 151:

month period ending January 14, 1993 (approximately 770 hours and

$77,000).'? [Manatt firm’s Amended First Application filed March 27,

1992 as revised docket no. 370 (page 28, ll. 23-25); Second Application

filed May 27, 1992 as docket no. 426 (18:20): Third Application filed

October 28, 1992 as docket no. 624 (17:25): Fourth Application filed

February 8, 1993 as docket no. 781 (18:13, 20-21).] [Applicant's

Supplement to Application filed April 9, 1992 {ER-32 #909(12-30, 74-

80)}: $3., $4, $28, $29; Applicant's Application filed May 28, 1992

{ER-5 #434} (11:19-15:6, 28:20-24)(29:3-4).] Counsel for the OBC

sought aggregate fees for all services in the case through December 31.

1992 of approximately $445,000 in comparison to Applicant's

aggregate requested hourly fees of $340,000 for the 15.5 months enced

spend as much time on them in reliance on the priority position accorded them by 11

U.S.C. 1129(b) and (in the case of contractually subordinated holders) 11 U.S.C.

§510(a):

“(a junior class has to be)...vigilant for opportunities to maximize values and

ensure that...(those senior classes are)....not satisfied at the expense of

the...(junior class).”" [OBC Counsel's Amended First Application filed March

27. 1992 (3:1-4:24) #370. Order filed November 16. 1992 #664].

Even assuming the grossly erroneous aggregate number of 1500 hours which

the district court’s Order filed January 14. 1999 (10:14-15) falsely asserted Applicant

requested not only for preparing the OEC's disclosure statement but also for prepanng

the OEC’s objections to the other disclosure statements (and which such court's order

copied verbatim from such false assertion of tact without appropnate citations to the

record in debtor's appellee's brief), the dollar amount associated with such falsely

ascribed number of hours is still only $150,000. only 52% of the dollar amount

requested by the OBC’s counsel for preparing only the OBC’s plan and disclosure

statement. [By substituting the weasel-worded phrase “for work related to” for the word

“prepanng™ in such court's Amended Order filed February 2. 1999 (10:6-8) in response

to Applicant's Petition for Rehearing (see Fact §7.b. hereof), such court still did not

correctly amend its false assertion or make its statement relevant (see Fact §8.a. and 10

and Argument §2 hereof].

January 14, 1993.

8. At the final fee application hearing, the bankruptcy court stated

that in awarding fees it would “look at the work that was performed and

what was at stake,” and then proceeded to ignore the ‘amount at stake”

for the stockholders (see Fact §6 and Statement of the Case) and over

90 (over 90%) of the over 100 categories of work performed and

described in Applicant’s interim and final fee applications.

a. Such court awarded a total of only $70,000 of fees

allocable only for the following services [Transcript April 19, 1993

(7:13-8:6)] [ER-33 #955(5-6)}:

i. “Preparation of the...(OEC’s)...plan and

disclosure statement”, which the court found were “not very well done”.

and

ii. “Preparation of...(the OEC’s)...objections” to

the plans and disclosure statements of the OBC, OCC and the debtor.

which the court found were “not very well done” and “not very sound.”

The only reasons given for such an award were scanty, cryptic and

pejorative: the reasons in a.i. and ii. above and Applicant's “gross

inefficiency” (Transcript, April 19, 1993 (6:7) {ER-33 #955(4)].

Such $70,000 award constituted approximately 80% of the

$89,000 (for 890 hours) which Applicant requested for such services

(the 7 categories of services listed in the OEC’s fee applications for

which fees were so awarded are identified in Fact §4 and §7.b. hereof).

b. Such court awarded no fees for any of the over 90

other categories of services described in Applicant's fee applications

(“Denied Categories of Service”) totaling approximately $270,000.

even though such services were within the powers of the OEC under 1 |

U.S.C. §$1103(c), Applicant was instructed to perform such services by

the OEC, and such services were reasonably calculated to advance the

interests of the constituency of the OEC, the non-insider stockholders.

and were therefore “necessary services” under 11 U.S.C. §330(a)(1) as

referenced in Argument §1.c.vi.'*

" Such Denied Categones of Service included without limitation Applicant’ s

services on the following mattrs:

l. Eleven OEC motions, all of which the court approved or adopted, for which

Applicant requested approximately $26.000 in hourly fees, an average of $2,364 per

motion.

Cc. A hearing pursuant to the court’s grant of Applicant's

timely motion for rehearing of the final fee award was delayed pursuant

to Order filed August 9, 1993 and debtor’s agreement until 1996 when

the court essentially repeated the same type of scanty, cryptic, pejorative

findings (Transcript, February 9, 1996 (27-29) [ER-43 #1442(3-5)].

Debtor objected to Applicant’s filings in all of his. fee application

proceedings.

d. The bankruptcy judge, sua sponte, without citation of

any authority, refused to apply “existing rules and precedent” in the

award of a reasonable fee to Applicant because:

“The hours billed by. (Applicant are)...grosslv...

disproportionate to what was at stake...” [Transcnpt, April 19,

1993 (5:21-22, 6:3-8) [#955]

Such court did not state any other rules or law it was applying in

determining Applicant's reasonable fee in substitution for existing rules

and precedent nor provide any policy reasons why existing rules and

precedent should be jettisoned. Such court refused to determine

Applicant’s reasonable fee on an hourly rate basis. On appeal to the

District Court, the debtor and District Court Judge cited the following

statement in In re Kitchen Factors, 143 B.R. 560, 562 (9th Cir. BAP

1992) (“KF”) as the authority for the bankruptcy court’s application of

the foolish principle the bankruptcy court applied to justify the

2. The two simultaneously argued contested matters involving. inter alia.

Applicant's successful defense against the multiple objections to the U.S. Trustee's

appointment of the OEC. in one of the most extensively argued contested matters in the

case. The bankruptcy court was obligated to award a reasonable fee for such services

pursuant to its December 20, 1991 ruling approving Applicant’s engagement to conduct

such defense on a contingent fee basis.

3. The OEC’s monitoring of debtor’s ultimately failed attempts to negotiate a

plan with the creditors in 1992 and making suggestions to debtor of provisions to

include in debtor’s plan in the interest of the non-insider stockholders. one of which

debtor included in its plan filed July 20, 1992 as a result thereof, preparation for the

scheduled December 1. 1992 confirmation hearing, including without limitation the

OEC’s Valuation (see Fact §9.b.) and the OEC Strategic Plan attached as Exhibit 3

thereto: identification of, interviewing and selecting prospective financial advisors for

the OEC: attendance and participation in OEC meetings, attendance at and preparation

for the failed plan settlement conference on September 11. 1992 ordered by the court

before Judge Newsome, preparation of fee applications. aan

bankruptcy court's refusal to apply existing rules and precedent in the

determination of Applicant’s fee [Appellee’s Opening Bnef filed

August 31, 1998 (16:18-21) [ER-45 #97DC(21)], Amended Order filed

February 2, 1999 (4:28-5:3, 5:10-12, 5:25-6:3) {ER-48 #131 DC]:

“In this case the detail of time spent by counsel is not helpful

because it is grossly disproportionate to the amounts at stake.”

The Court of Appeals affirmed “for the reasons stated by the District

Court.” |

9. As reflected in other portions of this statement of facts,

Applicant's filings in his fee application proceedings pointed out

substantial evidence, and demonstrated to the bankruptcy court a variety

of relevant information, which was contrary to the bankruptcy court's

findings, but which the bankruptcy court did not discuss, including

without limitation the following:

a. ~ The court approved or adopted substantially all of the

over 20 motions and objections made by the OEC during the period

Applicant served as counsel to the OEC at the expense of the estate:

b. The court approved the OEC’s Disclosure Statement

filed October 8, 1992 as containing “adequate information” under | |

U.S.C. §1125 for distribution to the holders in the only solicitation for

acceptances and rejections of competing plans in the case:

C. The OEC’s constituency, the non-insider stockholders,

overwhelmingly voted that the OEC’s plan was good by

overwhelmingly voting to accept the OEC’s plan and reject the debtor's

plan under 11 U.S.C. §1125, §1126 and §1129 in the aforementioned

solicitation of holders and the court ruled that the OEC’s plan did not

contain provisions which would render it unconfirmable;

d. The OEC and Applicant implemented the

recommendations of distinguished authorities on Chapter 11

reorganizations for parties representing the stockholders in a Chapter

11 case of a publicly traded debtor; and

€. Applicant's requested fees were substantially less than

the fees approved by the court for the OBC’s counsel during

comparable periods and on comparable types of work, and the OEC’s

fees constituted less than 2% of the amount obtained by the

shareholders in the confirmed plan of reorganization.

10. Applicant asserted in his petition for rehearing of the district

court’s judgment and order filed January 14, 1999 that all or

substantially all of the assertions of fact contained in such order were

false and copied verbatim or substantially verbatim from the over 100

false assertions of fact without appropriate citations to the record

contained in debtor’s appellee’s brief, and Applicant asked permission

to identify such false assertions of fact in such order, but the district

court permitted Applicant to identify a sample of only 8 of such false

assertions of fact. The district court admitted in its Order Denying

Appellant's Petition for Rehearing accompanying its Amended Order

filed February 2, 1999 that 7 of the permitted sample of only 8 (87.5%)

of the false assertions of fact in the district court's order filed January

14, 1999 were false and copied verbatim from the false assertions of

fact contained in debtor’s appellee's brief, but such court did not grant

the requested petition or request on the grounds that it was immaterial

that such sample of assertions was false. However, it 1s common sense

and a truth of high school mathematics that the fact that such sample of

assertions was false made it extremely highly likely that all or

substantially all of the assertions of fact contained in the court's order

filed January 14, 1999 and Amended Order filed February 2, 1999 were

false and copied verbatim or substantially verbatim from the myriad

false assertions of fact without appropriate citations from the record in

debtor's brief, The Court of Appeals denied comparable requests filed

by. Applicant to identify such false assertions of fact without

appropriate citations to the record, and the other false assertions of fact

by the bankruptcy court and the debtor, after Applicant informed such

court that the district court constructively admitted that all or

substantially all of the assertions of fact in its order were false as

referenced above in this Fact section. [Applicant's Motion filed April

25, 2000 to file his Requested Enlarged Brief filed April 14, 2000,

Petition for rehearing filed April 12, 2001 and such court's Orders filed

May 26, 2000 and May 11, 2001}.

ARGUMENT

l. In the determination of Applicant’s reasonable fee, the

bankruptcy judge and District and Circuit Courts on appeal applied a

logically foolish principle, which improperly seeks to establish and

measure a proportion between two quantities which are not measured

by the same measure and therefore cannot rationally be applied to anv

facts or circumstances (and which was made up “out of thin air’).

cannot constitute the exercise of judicial discretion. cannot justify the

substitution of an arbitrary alternative basis of compensation for a

requested hourly rate basis of compensation which was previously

approved by the court, and cannot excuse a lower court's refusal and

failure to properly apply any of the at least 4 categories of principles

mandated by the established authority of the U.S. Supreme Court, the

U.S. Congress, the American Bar Association Code of Professional

Responsibility, and F.R.C.P. 52, incorporated by reference in contested

matters by F.R.B.P. 9014.

a. As set forth in Fact §$8.d., the bankruptcy judge. sua

sponte, without providing citation of any authority or policy reasons for

its action, refused to apply “existing rules and precedent” in the award

of a reasonable fee because:

“The hours billed by...(Applicant are)...grosslv...

disproportionate to what was at stake...” [Transcript, April 19,

1993 (5:21-22, 6:3-8) [#955] ,

and such court did not substitute any other rules therefore.

On appeal, the District Court and Court of Appeals sanctioned such

refusal on such basis.

i. Such principle enunciated by the bankruptcy

court and the principle enunciated by the KF court also applied by the

district and circuit courts on appeal each depends for its application

upon the logically and practically impossible establishment and

measurement of a proportion between two- quantities that are not

measured by the same measure, namely, a quantity of work measured

by a unit of time (namely, hours) and a quantity recovered or

recoverable (“at stake”) measured by a unit of economic value (namely

dollars). For this reason, such principles constitute foolish nonsense

which cannot rationally be applied to any facts or circumstances, as a

matter of logic and common sense.

ii. The agreement of the following distinguished

thinkers in disparate fields throughout the past 2,500 vears establishes

that it is fallacious logic and foolish nonsense to establish and measure

a proportion between two such quantities that are not measured by the

same measure, as set forth in the cited texts contained in Appendix |

hereto: Euclid, Elements, Book Ten, “Definitions” |.1., “Propositions”

5-8: Aristotle, Categories, Chapter 7; Locke, John, An Essay

Concerning Human Understanding, Book II, Chapter XIV, §18 and

Chapter XVII, $13; Burke, Edmund, quoted under the definition of

“proportion.” in Webster's New International Dictionary of the English

Language (G.& C. Merriam Company 1928); Weber, Max, Economy

and Society (English Translation published by University of California

Press 1978) Vol. I., p. 86; Bonbright, James C., The Valuation of

Property (McGraw-Hill Book Company, Inc. 1937 - Published under

the auspices of the Columbia University Council for Research in the

Social Sciences), Vol I, p. 13: Keynes, John Maynard, A Treatise on

Monex [Harcourt Brace and Company 1930], p. 3; Paraphrase of some

of Aristotle’s comments in §7 of the Categories in Orwell, G., Politics

and the English Language; Hand, Judge Learned, The Spin of Liberty,

p. 307 [Alfred A. Knopf 1960]

lil. The inherent logical fallacy, foolish nonsense

and illegality involved in the application of the above mentioned such

principle applied by the bankruptcy, district and circuit courts is also

illustrated by the differing principles established by the 8th and 12th

Johnson factors (see Argument $1.c.i.), the two factors to be taken into

account in exercising “billing judgment” [Unsecur reditors

Committee v Puget Sound Plywood, 924 F2d 955, 959 (9th Cir 1991)

and In re Great Sweats, Inc. 113 B.R. 240, 242 (Bankr. E.D. Va. 1990),

which applied the 8th Johnson factor], each of which establishes and

measures a proportion between two quantities (requested fees and dollar

amount at stake) which are measured by the same measure (namely,

dollars). No Johnson factor calls for establishing and measuring a

proportion between an amount of work measured in hours with an

amount recovered. recoverable or otherwise “at stake” measured in

dollars.

iv. The application of a principle which is foolish

and cannot rationally be applied to any facts and circumstances cannot

constitute the exercise of judicial discretion, and constitutes abuse of

judicial discretion. The application of a logically foolish principle to

excuse the refusal to apply existing rules and precedent (and justify: a

freedom from applying any principles) is an exponentially; more

egregious abuse of judicial discretion.

(1) Logic is an indispensable and

necessary tool in rendering legal judgments:

“if chance and favor are to be excluded, and the affairs of men

are to be governed with the serene and impartial uniformity

which is of the essence of the idea of

law...(W)ithout...(the)...aid...(of logic)...... Satisfactory solutions

of legal problems cannot be reached.”

Cardozo, Benjamin N., The Nature of the Judicial Process (Yale

University Press 1921), p. 36-8; accord: Pound, Roscoe. An

introduction to the philosophy of law (Yale University Press 1954), p.

viii.; Holmes, Oliver Wendell, Jr., “The Path of the Law” in Collected

Legal Papers (Harcourt Brace and Company 1920) {also published in

Harvard Law Review, vol. X, p. 457}, p. 180-1 ["(Logical)... principles

governing other phenomena also govern the law...The language of

judicial decision is mainly the language of logic.”

It is necessary that an opinion be logica! and be expressed logically,

although reliance on logic alone may not be sufficient.

“(M)ost legal questions are resolved

Syllogistically...the...soundness...(of a

syllogism)...depends...upon the truth of the premises.”

Posner, Richard A., The problems of jurisprudence (Harvard University

Press 1990), p. 42-3; accord: Frank, Jerome, Courts on Trial (Princeton

University Press 1949 and 1973), p. 282: Cardozo, Benjamin N., The

Growth of the Law, (Yale University Press 1924), p. 62; Aristotle, Prior

Analvtics, Book II, §18, [The Works of Aristotle Vol.1, W.D. Ross

translation in Great Books of the Western World, Vol. 8. Encyclopedia

Britannica, Inc. Chicago 1952]

(2) The only “discretion” to which

appellate courts are asked to defer when a court is permitted to exercise

its discretion has been described by eminent authorities as judicial

discretion which amounts to

“sound”..."judgment”...““guided by fixed legal principles.” [1

Wigmore on Evidence §16. p. 753 (Little, Brown and Co.

1983); accord: Moore’s Federal Practice 3D, §206.05[1]

[Matthew Bender 1997]; United States v Burr, 25 Federal

Cases 30, 35 (No. 14,692)(C. Va. 1807).

In order for judgment to be sound, and the principle applied to be a legal

principle, the judgment and principle must not be foolish, and the

application of a foolish principle by a court cannot constitute the

exercise of judicial discretion by such court.

Where “the philosophy...(is)...unsound or distorted...the

answers will show the vice, and be perverse.” Cardozo.

Benjamin N., The Growth of the Law, (Yale University Press

1924), p. 27

(3) According to respected jurists and

scholors:

“The major task of the courts is the specific application, in

particular lawsuits, of...general rules to the particular facts of

those suits.” Judge Jerome Frank, Courts on Trial, p. 3

[Princeton University Press 1949 and 1973]

“Rigid legal rules are the mainstay against improper motives

on the part of those who administer justice.” Pound, R..,

“Justice According to Law”, 13 Col L. Rev. 696 (1913),

Llewellyn, K. The Bramble Bush, p. 62 (Oceana Publications

1930)

Maintenance of the existing rules is necessary to allow the realization

of the reasonable expectations of attorney officers of the court who take

representations in reliance on the expectation that the mandated

principles will be rationally applied, not subject to the whim, error or

corruption of judicial officials. When there are effectively no rules, or

they are permitted to be altered at the whim or humor of the individual

judge, there is no way to insure the decision is fair, proper, and

uniformly applied, and an invitation is provided to judicial corruption.

Proper rules help prevent miscarriages of justice in the first place and

provide a realistic prospect for remedy when they occur.

(4) After applying a foolish principle to

justify refusal to apply “existing rules and precedent” the bankruptcy

and appellate courts do not establish or require any new rules or

principles in substitution for the protections of the existing rules and

precedent they have destroved. This conflicts with the decisions of

Courts of Appeals of other circuits, violates one of the central

underpinnings of our American legal system, that we are “A

government of laws and not men” and cries out for this court's reversal

of such a deleterious state of affairs.

v. - Inany event, the court refused to determine the

“amount at stake” for the stockholders (see Fact $6), and hence the

court’s foolish principle was not even operative according to its own

unintelligible terms.'*

b. The “existing rules and precedent” which the

bankruptcy court expressly and improperly refused to apply include.

without limitation the following four categories of principles observed

by Courts of Appeals of other circuits, the first two of which are

required in the exercise of judicial discretion. the third of which is

- The Ninth Circuit court of appeals also supplemented the district court's

logically foolish excuse of the bankruptcy court’s refusal to apply existing rules and

precedent in the award of Applicant’s reasonable fee with a cited legal assertion of its

own, namely its false assertion that the case of Unsecured Creditors’ Committee v Puget

Sound Plywood, 924 F2d 955 (9th Cir 1991) stated that a court was excused from

applying the lodestar approach, solely in a bankruptcy case, where it could “not

realistically quantify to numerical precision” the fee award. Such principle is invalid and

erroneous for a variety of reasons. including without limitation the following:

1. Such principle is invalidated by longstanding Supreme Court authority which

declares that no fee awards. whether in bankruptcy or non-bankruptcy courts. need to

be prepared with mathematical precision [Henslev v Eckerhardt. 103 S.Ct. 1933. 1940

(1983) (“Hensley”), footnote 1 1].

2. Even if this were a valid principle (which it is not). it cannot be invoked in

Applicant's case because the bankruptcy court made no such finding and did not rely

on such alleged principle. nor did the district court on appeal.

: Ee In fact, the Puget Sound court did not adopt any such principle. The Puget

Sound case made clear at p. 960 that it was the defendant. Puget Sound Plywood, Inc..

not the court, which asserted such “numerical precision” statement in its brief. The

court in Puget Sound ignored such “numerical precision” statement in defendant's brief.

Instead. by citing In re Great Sweats. 113 B.R. 240 (Bkcy.E.D. Va. 1990), such court

adopted the longstanding principle of Hensley v Eckerhardt that a court is excused from

using the hourly rate basis for determining a reasonabie fee where the fee application

is defective in a way that does not permit the reasonable number of hours of service to

be determined. Such excuse is not applicable in Applicant’s case because the

bankruptcy court in Applicant’s case found that Applicant’s fee application was

“adequate” [(Fact §7)].

required by F.R.C.P. 52, incorporated in Applicant’s contested matter

fee application proceedings by F.R.B.P. 9014, and the fourth category

is expressly required by 11 U.S.C. §303(a)(1). But for the application

of the logically foolish principle applied by the bankruptcy, district and

circuit courts, application of existing rules and precedent, including

without limitation the principles referenced below. would require that

the bankruptcy court’s fee award be reversed and Applicant awarded all

or substantially all of his requested fees.

i. Courts of Appeal of other circuits require that

the court must explain how each of the 12 "Johnson" factors affects his

decision regarding the amount of fees. [ Johnson v Georgia Highway

Express, Inc., 488 F2d 714, 717 (5th Cir. 1974); Matter of First

Colonial Corp. of America, 544 F 2d 1291 (5th Cir 1977); Hensley v

Eckerhardt, 103 S.Ct. 1933, 1940 (1983), Footnote 9; Blum v Stenson.

104 S.Ct. 1541, 1548 Footnote 13 (1984); Pennsvivania v Delaware

Valley Citizens’ Council 106 S.Ct. 3088, 3098 (1986) (“Delaware

Valley I]. When Congress enacted provisions awarding a “reasonable

fee,” the legislative history cited the 12 Johnson factors applied by the

Johnson case as being the factors to apply [S.Rep. No. 94-101 1, p.6

(1976); H.Rep. No. 94-15581 p.8 (1976), U.S. Code Cong. & Admin

News 1976, p.5908]. The 12 “Johnson” factors “were taken from the

American Bar Association Code of Professional Responsibility,

Disciplinary Rule 2-106 (1980)” Delaware Valley I, p. 3097, footnote

Among other things, the bankruptcy court's statement that

Applicant’s services were performed inefficiently abused judicial

discretion because the court did not apply the 8th and 12th Johnson

factors in making such determination, and neither the district nor circuit

court on appeal made any evaluation according to such 2 Johnson

factors [Fact §8]. An evaluation of the record according to the 8th and

12th Johnson factors in fact proves that Applicant exercised billing

judgment and performed his services efficiently:

(1) According to the 8th Johnson factor,

Applicant's fees constituted only 2% of the dollar value of property the

stockholders received in the confirmed plan of reorganization [Fact §5

and “Statement of the Case”, first paragraph].

(2) According to the 12th Johnson factor,

Applicant’s requested fees in total and on the preparation of plans and

disclosure statements were substantially lower than the fees awarded for

the OBC’s counsel [Fact §6].

The bankruptcy court and the district and circuit courts on

appeal mentioned assertions of fact regarding only one (8.3%) of the

twelve Johnson factors which were relevant to Applicant's fee and

which they were required to evaluate: factor no. 3, the court's pejorative

characterization of the attorney’s skill [Fact §8 hereof]. As to Johnson

factor no. 3, the bankruptcy court did not discuss the contrary

information presented by Applicant (see Fact $9), as required by the

“sufficiency” provisions of F.R.C.P. 52, incorporated by F.R.B.P. 9014

in the contested matters involving Applicant's fee application

proceedings (see Argument §1.v.). Further, the bankruptcy court refused

to determine the reasonable number of hours to perform the particular

services Applicant performed as referenced in his fee application at the

$100/hour rate of efficiency approved by the court, and the court did not

include a discussion of the influence of the other 11 Johnson factors in

such determination of such reasonable number of hours.

The district and circuit courts both expressly ruled, contrary to

the Courts of Appeals of other circuits, that the bankruptcy court was

excused from applying the Johnson factors in determining Applicant's

reasonable fee by the aforementioned foolish principle, over Applicant's

arguments to the contrary [e.g., Amended Order filed February 2. 1999

(6:13-16) “under an alternate method...the bankruptcy judge...(needs

not provide)...reference to lodestar factors;” Order March 23, 2001, p.

2; $1.b.i.(2) of Applicant’s Opening Brief filed July 22, 2001 (pp. 32-

37, 45-47)}.

li. The existing rules and precedent regarding the

“exercise of judicial discretion” in the determination of a reasonable fee

also requires application of another dozen or so principles which

Applicant enumerated in his briefs in the district and circuit courts, but

space exists for only three of such principles to be haphazardly selected

for reference in this petition.

(1) The court must calculate the

"lodestar" by multiplying a reasonable hourly rate for the services

se —

performed by the reasonable number of hours to perform such services

at such hourly rate. [Blum v Stenson, 104 S.Ct. 1541, 1544 (1984)

(“Blum”) {citing Hensley v Eckerhardt, 103 S.Ct. 1933, 1939 (1983)}:

Pennsvivania v ware Vallev Citi ; il 106 S.Ct. 3088.

3098 (1986)("Delaware Valley I") (citing Blum).'*®

(2) If a court decides to eliminate hours

of service adequately documented by the attorney in his fee application

for specific items of activity, it must identify those hours for the activity

and articulate its reasons for their elimination. Failure to do the

foregoing constitutes reversible error. [Northcross v Board of Educ. Of

Memphis City Schools, 611 F2d 624, 637 (CA 6 1979), cited in

Henslev. p. 1938)’

r Courts in various circuits outside the Ninth Circuit have followed the

common sense statement in Hensley, p. 1939 and excused the use of an hourly rate

methodology to determine a “reasonable fee” where the fee application was defective

in a way that did not permit determination of a reasonable number of hours for the

services for which compenstation is sought [e.g.. In re Great Sweats. 113 B.R. 240.

(Bkcy E.D.Va. 1990)] and also have excused use of an hourly rate methodology by

application of the 8th and Sth Johnson factors when the requested fees exceeded the

amount recovered and reasonably recoverable by the constituency the fee applicant

represented and the court then substituted a customary “percentage of recovery”

methodclogy. (Great Sweats and In re WHET. Inc.. 2 B.R. 770 (Bankr. D. Mass.

1988)]. However, in such cases the courts still apply the applicable Johnson factors in

determining the amount of a reasonable fee.

Such exceptions to the hourly rate methodology do not apply in Applicant's

case because. inter alia. the bankruptcy court in Applicant's case expressly found that

Applicant's fee application was adequate (Fact §7) and Applicant's requested fees were

less than 2%. of the dollar amount obtained bv the stockholders in the confirmed plan

of reorganization. °

Such cases illustrate that. outside the Ninth Circuit, if an alternative

methodology is substituted for an hourly rate methodology in determining a reasonable

fee. such alternative methodology must still satisfv the principles inherent in the exercise

of judicial discretion. such as the application of the Johnson factors. and the award

cannot be arbitrarily determined. as it was by the bankruptcy court in Applicant's case.

[Matter of Continental Illinois Securities Litigation 962 F2d 566, 570 (7th Cir. 1992)).

y Applicant's fee applications sufficiently documented his hours of service to

require the court to identify the hours in each category it was eliminating and its reasons

for such elimination [see Fact §7.]. Applicant’s fee applications carefully and

painstakingly grouped his activities into over 100 discrete categones with a number of

hours accumulated for each discrete category. as required by F.R.B.P. 2016 and the

“(R)ather than disallowing specific items of unreasonable

activity the judge slashed broad categories of activity by

arbitrary percentages. That won’t do...” [Matter of Continental

Illinois Securities Litigation 962 F2d 566, 570 (7th Cir. 1992)]

(3) Fees are to be awarded for preparation

of fee applications. One of the categories of services referenced in

Applicant’s fee application which the court did not award any fees for

was Applicant’s preparation of his three fee applications [$16,500

requested in Applicant’s Supplement to Application filed April 9, 1993

(31:10-16)], which in and of itself is a complete and utter abuse of

judicial discretion [In re Nucorp Energy, Inc., 764 F 2d 655 (9th Cir

1985)], which the foolish principle excused in Applicant's case.

iii. Applicant's fee application proceedings were

heard as contested matters under F.R.B.P. 9014, and such rule applies

the provisions of F.R.C.P. 52 to the determination of such matters by

virtue of incorporating F.R.B.P. 7052. Because contested matters under

F.R.B.P. 9014 proceed by motion or objection, the provision of

F.R.C.P. 52 excluding its application to motions is not effective when

applied by F.R.B.P. 9014. [Advisory Committee Note to F.R.B.P. 9014

(last sentence of second paragraph); Collier on Bankruptcy (Matthew

Bender 15th Ed. Rev. 1997) §7052.02 (p. 7052-5) and §9014.02; In re

Hotel Hollywood 95 B.R. 130 (9th Cir. BAP 1988)]

F.R.C.P. 52 requires that the bankruptcy court find the facts

specially and state separately its conclusions of law thereon to justify its

award and further requires that findings be sufficiently prepared. To be

sufficient, findings must be prepared and stated properly.

“(F)indings of fact must include as much of the subsidiary

facts as is necessary to disclose to the reviewing court the steps

Compensation Guidelines (see Fact §7 hereof). The court effectively mocked its own

guidelines as well as the fee application process by never referring to any category of

service for which no fees were awarded, the inapplicability of any category. or the

inapplicability of any hours listed for any category in its award of applicant’s fees.

Instead the court awarded fees for only approximately 7 (7%) of such over 100

categones of service, denied any compensation for the other over 90 categories of

service, and awarded $70,000 (80%) of the $89,000 (for 890 hours) requested by

Applicant for such 7 categories of service for which fees were awarded (see Fact §8

hereof).

by which the trial court reached its ultimate conclusion on each

factual issue.” [Wright and Miller, Federal Practice and

Procedure: Civil 2d Vol. 9A §2579, p. 538-9] “The trial court

complies with the mandate of the Rule when...findings of fact

and conclusions of law... reveal an understanding analysis of

the evidence, a resolution of the material issues of “fact” that

penetrate beneath the generality of ultimate conclusions, and an

application of the law to those facts.” Moore’s Federal

Practice, §52.05[1], p. 52-101.

The review by the district and circuit courts must be reversed because

the district court declined to apply F.R.C.P. 52 as argued by Applicant,

instead applying only the principles required by the exercise of judicial

discretion [Amended Order filed February 2, 1999 (4:11-14)], and the

circuit court affirmed for the reasons stated by the district court.

(1) The findings must give assurance

“that the trial court took care in ascertaining the facts.” Golf City, Inc.

V_Wilson Sporting Goods, Co., Inc., 555 F2d 426, 437 (1977). In

cases dominated by extraordinary fact-oriented issues, the lower court

should discuss substantial contrary evidence presented by the appellant.

Golf City, supra, p. 435; Velasquez v City of Abilene, 725 F2d 1017,

1020-21 (5th Cir 1984). Fee award determinations by their nature are

dominated by fact-oriented issues {Hensley _v Eckerhart, 103 S.Ct.

1933, 1941 (1983)] which in Applicant's case are extraordinary for the

reasons set forth in the Fact sections hereof and because the bankruptcy

court expressly relied on the entire extensive record of the bankruptcy

case, without citing specific portions of it (e.g., 2.5 years until

confirmation of a plan and over 1500 documents, many over 200 pages

in length) [Transcript, January 14, 1992, 2:35 p.m. (81:12-13)}.

The bankruptcy court’s findings are insufficient under F.R.C.P.

52 incorporated by F.R.B.P. 9014 because, inter alia, the bankruptcy

court did not discuss the substantial evidence presented by Applicant in

his fee application proceedings which was contrary to the bankruptcy

court’s findings that Applicant was incompetent and inefficient,

including without limitation the evidence referenced in Fact $10.

(2) When the court is determining dollar

amounts requested in the action, such as damages, “the amount allowed

for each item should be stated briefly and clearly.” Fuchstadt v United

States, 434 F2d 367, 370 (2nd Cir 1970): Wright and Miller, Vol. 9A,

p. 544; 7 1 . 1

of America vy Hill, 398 F.2d 360, 363 (9th Cir 1968). This

independently imposes under F.R.C.P. 52 the requirement referenced in

Argument §1.c.iii. which is otherwise also imposed in the exercise of

judicial discretion. The bankruptcy court violated this by lumping

together disparate categories of services and assigning one lump sum

fee for all, in the aggregate.

(3) The requirement to make findings

properly has as its most “important purpose - that of evoking care on

the part of the trial judge in ascertaining the facts.” Judge Frank, United

States _v Fomess, 125 F2d 928, 942-3 (2nd Cir 1942). Such

requirement also helps guard against judicial corruption by evoking

such care and helps expose and provide a remedy for it when it occurs.

This court recognizes that federal judges are not immune to corrupt

impulses and action:

“Our society today is faced ‘with an “ethics

crisis”....a...corruption... In the last 10 years more federal

judges have been indicted, tried, and convicted of felonies,

imprisoned and subsequently impeached and removed from

office, than at any time in preceding 190 years...the record is

not statistically as serious in the state courts...” [Chief Justice

Warren Burger, in Ethics in the Courts: Policing Behavior in

the Federal Judiciary (National Legal Center for the Public

Interest 1990), page ix]'*

The periodic investigations and studies of the bankruptcy administration

” And the record in state couris today is not good [see examples of conduct in

Tuohy and Warden, Greviord: Justice, Chicago Style (G.P. Putnam’s Sons 1989), all

of which took years of FBI investigation, mole stings and set ups to uncover and vears

more to prosecute.] Other noted commentators and judges have comparable opinions

[Chief Judge Richard Posner, Court of Appeals of the Seventh Circuit quoted on p. 22

of Boot, M., Out of Order: A Trogance. co; , ince Ct

(Basic Books 1998), Robert H. Bork (former

ix of C

“se

Jul of Order, Arrogance. corruption and ico Ce [

ic} ics 3rd Ed. (Matthew Bender 2000), p. v-vi, Chicago Tribune.

September 20, 2000. Section 1. p. 5}

system under the several bankruptcy enactments in this century.

including the enactment of the Bankruptcy Code of 1978, have all

reported special concern about, and the need to protect against.

corruption in the bankruptcy administration system. '9 This court can

take judicial notice of the special concern registered by Chief Justice

Burger about the special risks inherent in administration of the

bankruptcy system by judges who were not Article III judges and that

the Federal Rules of Bankruptcy Procedure, including F.R.B.P. 7052

and 9014, promulgated during Chief Justice Burger's tenure, reflect that

concerns mandate that in bankruptcy cases there be no exceptions to the

application of F.R.C.P. 52 incorporated by F.R.B.P. 9014.

(4) The bankruptcy court also failed to

comply with F.R.C.P. 52 because it did not state any conclusions of law

by which it made its award of a reasonable fee. Its made up foolish

principle was only applied to excuse its refusal to apply existing rules

and precedent in the determination of a reasonable fee, it never

articulated or applied principles which it proposed to substitute for

existing rules and precedent in the determination of a reasonable fee.

(5) While courts of appeal of other

s [Administration of Bankrupt Estates, In the matter of Inquiry into the

Administration of Bankruptcy Estates, 71st Cong., 3d Sess. (Comm. Print of House

Comm. on see Judiciary 1931), Doo am a ARO ae Rae

1973, — a No 93-137. Part I oe 93-4, 96, 248), House Report No. 95-

595 §LD. “The Administration of Bankruptcy Cases -C. The Bankruptcy Ring and E.

Historical Problems”, p. 95 et. seq., National Science Foundation Study (particularly

Pennstivania Report 139 U.Pa.L.Rev. 125. 192)

. he Court of Appeals panel's statement that the fee award was correct

“regardless of the particular procedure used to determine the fee in this case” (p.3, top)

is disproven by, inter alia. and illustrates, the requirements of the above principles. The

principles governing the exercise of judicial discretion (and F.R.C.P. 52 incorporated by

F.R.B.P. 9014) require that. in order for the award to be valid, the court awarding a

“reasonable fee” must provide adequate discussion of the foregoing in relation to the

award, including without limitation a discussion of “how” the court determined the

amount of the award and assurance that the methodology for determining the amount

of the fee is “customary” under the Sth Johnson Factor.” Such principles are designed

to expose mistake at the appellate level as well as at the level of the tnal court.

circuits apply F.R.C.P. 52 generally to contested matters [In the Matter

of C.M.SP.&P RR Co. 3F.3d 200 (7th Cir. 1993); Matter of Luce, 960

F.2d 1277 (5th Cir 1992)], the Ninth Circuit creates an exception where

it is needed most and does not apply F.R.C.P. 52 to contested matters

in fee application proceedings [Amended Order filed February 2, 1999

(4:11-12), Order filed March 23, 2001].

iv. Reasonable compensation is payable to

counsel for an official committee under 11 U.S.C. §330 for “necessary

services”, which are defined as services which are performed in the

exercise of the powers of such counsel's official committee under | |

U.S.C. §1103(c) and which are reasonably calculated to advance the

interests of such committee and of the claims or interests represented by

such official committee.*' The services performed by Applicant,

including without limitation those referenced in Fact $9, were

reasonably calculated to advance the interests of the OEC and the

debtor's non-insider stockholders. However, neither the bankruptcy nor

district court stated or applied such principle, and, according to the

district court, the bankruptcy court made the following findings of fact

in Applicant’s fee application proceedings which, however, violated and

were made invalid by the requirement of 11 U.S.C. §330(a)(1) that

Applicant be paid a reasonable fee for “necessary services”: Applicant's

services did not benefit the estate, that Applicant’s fees were high

relative to the estate [such ‘economy, conservation of the estate’

principle was expressly eliminated by enactment of the Bankruptcy

Code of 1978 (Bankruptcy Rule 219(c), Advisory Committee Note

thereto: In re Nucorp Energy, Inc., 764 F. 2d 655, 658 (9th Cir 1985);

In re Lifschultz Fast Freight, Inc., 140 B.R. 482, 487 (Bkcy. N.D. Ill.

a [Senate Report No. 94-1011, p.6 (1976). U.S.Code & Admin. News 1976.

pp 5908. 5913. approving and incorporating the principle of Stanford Dailey v Zurcher

64 FRD 680. 684 (N.D. Ca. 1974), Pennsylvania v Delaware Valley Citizens’ Counsel

for Clean Air. 106 S.Ct. 3088, 3098 (1986), In re Heck’s Properties, Inc., 151 B.R.

739, 745-746 (S.D.W.Va. 1992). Accord: In re Lifschultz Fast Freight, Inc., 140 B.R.

482, 485. 488 (Bkcy. N.D. Ill. 1992), Inre Pettibone Corp,, 74 B.R. 293, 309 (Bkcy.

N.D.IIl 1987) and In re Emons Industries. Inc.. 76 B.R. 59, 61 (Bkey. S.D.N.Y. 1987)]

oe*7

1992)]; and Applicant spent time on “tangents which bore no fruit."~-

2. The appellate courts abused judicial discretion by denying

Applicant’s requests to prove that all or substantially all of the

assertions of fact in the district court's order denying Applicant s

appeal were false and copied verbatim or substantially verbatim from

the over 100 false assertions of fact without appropriate citations to the

record in the debtor's brief for the following reasons: the district court

instead permitted Applicant to identify a sample of 8 of such false

assertions of fact in its order; such court admitted that 7 of such sample

of 8 false assertions of fact (87.5%) were in fact false and copied

verbatim from the false assertions of fact without appropriate citations

to the record in debtor's brief, it is common sense and a truth of high

school mathematics that such fact makes it highly likely that all or

substantialy all of the assertions of fact contained in the district court's

order were false and its decision therefore erroneous; by its express

admission, the district court constructively admitted that substantially

all of the assertions of fact in its order denying Applicant's appeal were

false: and the court of appeals affirmed for the reasons stated by the

district court.”

In addition, the bankruptcy judge improperly applied a principle according to

which he considered that he could deny fees for numbers of hours he considered were

not “necessary” as that term is used in 11 U.S.C. §330(aX 1) (cited in Amended Order

filed February 2. 1999 (7:24-25), 8:6-8). However. the statute is clear that the term

“necessary” refers to the nature and type of the services for which compensation 1s

being requested and that the court’s evaluation of the number of hours for which

payment may be made for types of services which are necessary is limited to the

“reasonableness” of the number of hours. According to 11 U.S.C. §330(aX1)

“reasonable compensation..(is awardable for)...necessary services

rendered...based on...the time spent on such services...”

Under the statutory framework of such section, “services” is a term that is distinct from

the terms “time” or “hours” and clearly refers to a type of service. Otherwise. for

example. the last phrase would read “based on the time spent on such time” which

would not make sense. ;

It cannot be considered “sound judgment” for a court to deny the motion

which. if granted. would identify with certainty whether all or substantially all of the

other assertions of fact, upon which the order denying Applicant's appeal was based.

were false. when such court has constructively admitted that it is highly likely that

substantially all of the assertions of fact upon which it based its decision were false.

Accordingly. such denials by the distnct court and the courts of appeal cannot constitute

Summary Argument for Writ

Argument §1.b. and c. reference at least 5 elements of the Ninth Circuit

Court of Appeal’s decision which seriously conflict with the decisions

of the Courts of Appeals of other circuits and require that this petition

be granted. In addition, the great departure from the accepted and usual

course of judicial proceedings described in this petition requires that

this court exercise its supervisory power to preserve, in the federal court

system, the three most fundmental, all pervasive preconditions for

dispensing justice, each of which was breached and violated in

Applicant's case:

a. All court decisions in every legal subject area require

that judges think logically and apply legal rules in reaching their

decisions in order for such decisions to be just and

b. Such court decisions must not create the appearance of

impropriety or corruption by the court.

When, as here, these combined violations occur simultaneously, the

affront and injury to justice is magnified with an exponential effect, and

compels this court’s grant of this petition. Because these malevalent

judicial activities can be applied to every type of case, they do not

spread by reported case law, but rather in the conferences, assemblies

and hallways where court officials meet, as shortcuts to solve crowded

dockets, busy schedules, or for other more corrupt purposes. For these

and other reasons, this court cannot wait for the case law to develop

first in a variety of courts of appeals. When, because of the steadily

increasing commentary on the malfunctioning of the judicial system, the

black robes of judges are not accorded deference and esteem, the justice

system will no longer function, and it will be too late.

Respectfully submitted: Roger A. Noback, pro se, 53 W. Jackson

Bivd. - Ste. 1525, Chicago, IL 60606; 312/663-0800

the exercise of judicial discretion, and must constitute the abuse of judicial discretion

The exercise of “sound judgment” requires that Applicant's requests be granted.

Whether Applicant filed dozens. hundreds or thousands of pages in

connection with his appeal (see footnote 3 and the associated text to the Amended Order

and the sole footnote to the one page order, each filed February 2, 1999) is irrelevant

since such filings, other than his petition for rehearing. were not directed to the accuracy

of the court’s order, and the court’s admission and constructive admission evidences the

court didn’t read or understand the other filings anyway.

Appendix |

Euclid, Elements, Book Ten, “Definitions” I.1., “Propositions”

5-8 in Great Books of the Western World, Vol. 11, Encyclopedia

Britannica, Inc. Chicago 1952:

y 3

“Book Ten.”

“Definition I.1. | Those magnitudes are said to be

commensurable which are measured by the same measure, and

those incommensurable which cannot have any common

measure.”

“Proposition 5. Commensurable magnitudes have to one

another the ratio which a number has to a number.”

“Proposition 6 If two magnitudes have to one another the ratio

which a number has to a number, the magnitudes will be

commensurable.”

“Proposition 7. “Incommensurable magnitudes have not to one

another the ratio which a number has to a number.”

“Proposition 8. “If two magnitudes have not to one another the

ratio which a number has to a number, the magnitudes will be

incommensurable.”

Aristotle, Categories, Chapter 7 (The Works of Aristotle Vol.I,

W.D. Ross translation in Great Books of the Western World, Vol. 8,

Encyclopedia Britannica, Inc. Chicago 1952}:

“Those things are called relative, which, being either said to be

of something else or related to something else, are explained by

reference to that other thing..All relatives have

correlatives...by “greater,” greater than that which is

less...Sometimes, however, reciprocity of correlation does not

appear to exist. This comes about when a blunder is made, and

that to which the relative is related is not accurately

stated... The reason is that the original statement was

inaccurate...If, then, the statement is made accurate, the

connexion will be reciprocal...lf we express ourselves thus ~

accurately, at any rate the terms are reciprocally

connected... Thus we may perhaps most easily comprehend that

to which a thing is related...All relatives, then, if properly

Appendix 2

defined, have a correlative. I add this condition because, if that

to which they are related is stated as haphazard and not

accurately, the two are not found to be interdependent. Let me

state what I mean more clearly. Even in the case of

acknowledged correlatives, and where names exist for each,

there will be no interdependence if one of the two is denoted.

not by that name which expresses the correlative notion, but by

one of irrelevant significance....Further, if one thing is said to

be correlative with another, and the terminology used is correct,

then though all irrelevant attributes should be removed, and

only that one attribute left in virtue of which it was correctly

stated to be correlative with that other, the stated correlation

will still exist....On the other hand, if, of two correlatives, one

is not correctly termed, then, when all other attributes are

removed and that alone is left in virtue of which it was stated

to be correlative, the stated correlation will be found to have

disappeared.... Thus it is essential that the correlated terms

should be exactly designated;...when the terminology is thus

correct, it is ev " that all correlatives are a y

Locke, John, A ing Hum tanding,

Book II, Chapter XIV, ne and chee XVII, §13 in — Books of

the Western World, Vol. 35, Encyclopedia Britannica, Inc. Chicago

1952:

Chapter XIV, $18: “(N)othing...(is)...a measure of duration but

duration, as nothing is of extension, but extension...”

Chapter XVII, $13: “We can, I think, have no positive idea of

any space or duration which is not made up of, and ~

commensurate to, repeated numbers of feet or yards, or davs

and years, which are the common measures, whereof we have

the ideas in our minds, and whereby we judge of the greatness

of this sort of quantities.”

Burke, Edmund, quoted under the definition of “proportion.”

in Webster’s New International Dictionary of the English Language

(G.& C. Merriam Company 1928):

“Proportion is the measure of relative quantity.”

Weber, Max Economy and Society (English Translation

Appendix 3

published by University of California Press 1978) Vol. L., p. 86:

“Calculation in terms of money...is...the specific means of

rational, economic provision...(and)...has the following primary

consequences:.....(2) The quantitative statement of...the actual

results of every completed action, in the form of an account

comparing money costs and money returns...”

6. Bonbright, James C., The Valuation of Property (McGraw-Hill

Book Company, Inc. 1937 - Published under the auspices of the

Columbia University Council for Research in the Social Sciences), Vol

I, p. 13):

“[In this work]...we are using “value” as a mere colorless

expression for “dollar amount.”

7. Keynes, John Maynard, A Treatise on Money [Harcourt, Brace

and Company 1930], p. 3:

“A Monev-of-Account comes into existence along with Debts,

which are contracts for deferred payment, and Price-Lists,

which are offers of contracts for sale or purchase. Such Debts

and Price-Lists, whether they are recorded by word of mouth or

by book entry on baked bricks or paper documents, can only be

expressed in terms of a Money-of-Account.”

8. Hand, Judge Learned, The Spirit of Liberty, p. 307 [Alfred A.

Knopf 1960}:

“You can’t measure...incommensurables.”

9. Orwell, G.’s paraphrase of some of Aristotle's comments in §7

of the Categories in Orwell, G., Politics and the English Language in

Shooting an Elephant and other essavs, p. 77 (Harcourt, Brace &

World, Inc. 1950)}:

“Our language becomes ugly and inaccurate because our

thoughts are foolish, but the slovenliness of our language

makes it easier for us to have foolish thoughts.”

Appendix 4

Transcript of Hearing April 19, 1993

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

In Re: Case No. 91-3-

2674-TC

TRANSCISCO INDUSTRIES, San Francisco,

California

INC., a Delaware Monday. April

19, 1993

corporation, 11:45 A.M.

Debtor. Hearing re Fee

Applications

of Roger A.

Noback....

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE THOMAS E. CARLSON

UNITED STATES BANKRUPTCY JUDGE

(Filed May 24, 1993)

APPEARANCES:

For Debtor: CRAIG M. PRIM

Murray and Murray

303 Hansen Way,

Suite 200

Palo Alto, CA 94304

(4 15) 852-9000

For Roger A. Noback: ROGER A.

NOBACK

Law Offices of Roger

A. Noback

343 S. Dearborn

Street

Chicago, IL 60604

(312) 663-0800

Appendix 5

Page 5

THE COURT: Okay. I'm not going to grant the continuance, then.

And let me say the following regarding the fees. | ve asked you if

you have any additional comments that aren't in your papers. | think

the papers adequately address the situation.

Let me say the following about the fee application itself. As | say,

what I will do regarding the continuance is I will deny it. Should this

case turn out different from what we expect, should Mr. Noback

arrange substantial infusions of money into the debtor, which form

the basis for the ultimate plan of reorganization, then he can -- |

invite him to move for reconsideration of the order | am going to

enter today regarding the fees.

Let me make the following general comments before | get to the

bottom line. First of all, | want to say something about the way in

which I believe the Court should determine the appropriate fees in

this case. What one normally does under existing rules and precedent

is one looks at the number of hours and the hourly rate that the

attorney charges and various other adjustments, which are basically

minor adjustments up and down, to determine what

an appropriate fee would be. And I think that in this particular case

this is not an approach which is feasible.

The hours spent, the hours billed by Mr. Noback

simply don't bear any relationship to the fees that should be

awarded in this case. And that is so because the -- if, you know,

assuming that this time actually was spent, which I do assume, the

use of time is so grossly inefficient and disproportionate to what

was at stake and what the ultimate product was that it's simply not

an appropriate measure for awarding fees.

MR. NOBACK: Your Honor, this is Roger Noback.

I am having difficulty hearing you --

THE COURT: Okay.

MR. NOBACK: -- speaking into the microphone.

THE COURT: Okay. I'll bring it closer. Is that

ee ee eee

Appendix 6

better?

MR. NOBACK: That is better, thank you.

THE COURT: Okay. The second point is that --

why I don't believe that hours are an appropriate base here is that so

much of the time was spent on tangents which bore no fruit, and

that there is another aspect of this work and that that is that many --

that the bondholders, or the equity committee, engaged in so many

non-meritorious objections to what the other committees and the

debtor were doing that some major adjustment must be made for

that.

The second major point | want to know is that I don't

believe that the work performed, the contribution to the estate by the

equity committee, had any real value to this estate or to the

administration of the case at all and that the minor benefits that were

made were offset by the -- by disruption in the form nonmeritorious

objections. ,

Nonetheless, I do think that there is some basic

activity that was performed here, and that one -- when the committee

is appointed by the Court, by the U.S. Trustee, and when it is -- when

counsel is appointed by the Court and work is performed pursuant to

that, those appointments, it is not necessary for the applicant to show

some benefit to the estate. I think what I should do here is take note |

of what the equity committee did and how well it did it.

And what they basically did here is they came up with

a plan and disclosure statement and they made, they raised various

objections to the way the other parties were proceeding with their

plans and disclosure statement. That's the basic core of work that

was done.

The plan that was put forward by the equity com-

mittee was not very well done. The objections made to the activities

of the other parties and to their plan and disclosure statement were

not very sound.

So I think, though, that given the irrelevance of this

huge number of hours for which compensation is sought

Appendix 7

to the amount of work that was actually performed, | am going to

look at the work that was performed and what was at stake. And as |

say, when I look at that | come up with what the main activity was,

was the preparation of these objections and the preparation of the

plan and the disclosure statement and | don't find those to be very

well done.

And what I think is the appropriate amount of fees

here for all the work done in the case is as follows. The Court has

previously awarded $40,000 in fees and the expenses sought. And

what I am going to do here, is I am going to award an additional

$30,000, plus all the expenses sought. That would leave the attorney

recovering all expenses sought, plus $70,000, which is | think 1s very

ample for what was done in this case considering the quality of the

TE, cecsesecsectens

Appendix 8

Transcript of Hearing February 9, 1996

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

In Re: Case No.

91-3-2674-TC

TRANSCISCO INDUSTRIES, INC., San

Francisco, California

a Delaware corporation, Friday,

February 9, 1996

9:57 A.M.

Debtor.

Chapter

Hearing

re: motions to

reconsider.

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE THOMAS E. CARLSON

UNITED STATES BANKRUPTCY JUDGE

APPEARANCES:

For Debtor: CRAIG M. PRIM

| Murray & Murray

3030 Hansen Way, Suite

200

Palo Alto, CA 94304-

1009

(415) 852-9000

For official Equity: ROGER A. NOBACK

Security Holders’ 53 West Jackson

Boulevard

Committee: Suite 1525

Appendix 9

Chicago,IL 60604

(312) 663-0800

eee eeeee

THE COURT: okav. I want about five minutes. I'll

be back in five minutes and I'll give vou the decision. I just need to

make a couple of notes.

THE CLERK: All nse.

(Recess from 10:37 a.m. until 10:51 a.m.)

THE COURT; Please be seated. All right. I don't

want to hear anv more argument of any kind. I'm just going to give a

ruling here. I'm going to deny all the motions

for recons ideration. There are a couple of other

matters to

be dealt with here in terms of rulings with respect to

evidentiary motions.

I'm going to deny the motion to strike the Pease

declaration that was filed ages ago. It was filed well before the April

hearing - ‘93 hearing at which these fees were determined, and any

objections should have been raised long before this.

Third, I'm going to - per Mr. Prim's request of judicial

economy, if - I think it's probably the best way to say it, | am going to

grant the motion to strike the Newsome and Carroll declarations

simply on the basis that I’m--

MR PRIM: You mean the Aron and Carroll declara-

tions?

THE COURT: Aron, yeah.

MR PRIM: Thank you, Your Honor.

THE. COURT: Sorry. Regarding the declarations, |

had not relied on them in any case, and don't feel it necessary to rely

on them, and I think it's best just to take them out of the record.

Let me sav something about the reasons for denying

the motions for reconsideration. First and foremost, the originally

awarded fees in this case, fees and costs were generous. If there's any

error, they were too high. I note

Appendix 10

that the committee and my - from my knowledge of

the case, and I presided for this case from beginning to end, and in

rather unusual circumstances, pursuant to the consent of the parties, |

did all the settlement conferences in this case, and know very much

about what led to the compromises underlying the plan of

reorganization. The Equity Committee had no meaningful role in

those compromises, and the formulation of the plan that was finally

approved.

Indeed, I would say that while they were operative and

in the case, the Equity Committee was more of a hindrance to the

case than a benefit to the advancement of the case. This wasn't

because they were a party that had to be dealt with, that is inherent in

the multi-party character of a bankruptcy case, but it was because of

the essentially incompetent way in which thev proceeded in the case.

And that is why the Court vacated the order appointing all the

professionals of the Equity Committee previously.

I also note in this regard, and in support of the last

finding, Mr. Noback has shown himself completely unable to follow

the rules and procedural orders of this Court. I'm not striking any of

the papers filed in support of this motion because if there is an

appeal, I want the Appellate Court to see what Mr. Noback does. and

it will be very instructive to them in deciding whether he deserves