Memorandum of Decision Re: Fees of Petitioning Creditors

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Judge's Decisions
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re TACTICAL AEROSPACE CORP.,                                   No. 97-12149      Debtor(s). ______________________________________/
Memorandum of Decision
     Creditors Reiner Revocable Trust, Diane Fantl and Janet Richmond filed the involuntary petition which commenced this case. The debtor at first contested the petition, then entered into settlement negotiations, and then consented to an order for relief under Chapter 11. The debtor's Chapter 11 plan was confirmed on August 11, 1998. The petitioning creditors now seek reimbursement for $637.50 in travel expenses and $16,420.01 in legal expenses. The debtor objects.      There are two separate possible bases for the petitioning creditors to recover their fees and expenses. Pursuant to § 503(b)(3)(D) of the Bankruptcy Code, any creditor which makes a substantial contribution to a case is entitled to payment from the estate for its fees and expenses. However, § 503(b)(3)(A) provides for the recovery of fees and expenses of a creditor that files an involuntary petition, without any requirement that the estate benefitted. Much of the debtor's objection seems to be based on the incorrect premise that the application is brought under § 503(b)(3)(D) and that accordingly fees must be disallowed to the extent that the estate did not benefit.      Section 503(b)(3)(A) does not require a petitioning creditor to show benefit to anyone else in order to recover its fees and expenses. There is no requirement of a showing that the outcome of the case was more favorable to creditors than if no case had been filed. 4 Collier on Bankruptcy (15th Ed. Rev.), ¶ 503.10[2][a]. Nor is there any basis for excluding fees incurred in attempting settlement of the involuntary petition. Accordingly, the petitioning creditors are entitled to recover their actual and necessary expenses. They are also entitled to recover reasonable attorneys' fees pursuant to § 503(b)(4).      The amount sought by the petitioning creditors is extremely reasonable. The debtor incurred far more in contesting the petition. However, part of the attorneys' records are unreadable. The court must accordingly reduce the allowed amount by $2,291.00 notwithstanding the overall reasonableness.      The debtor is technically correct in arguing that the attorney's declaration does not disclose what payments were made to him, the source of such payments, and any agreements regarding the sharing of compensation as required by FRBP 2016(a). The objection to $83.00 in interest is also sustained.      For the foregoing reasons, the motion of the petitioning creditors will be granted and they shall recover expenses in the amount of $637.50 and attorneys' fees and costs in the amount of $14,046.01. Provided, however, that the latter amount will be paid 10 days after a declaration meeting the requirements of FRBP 2016(a) has been filed and served on counsel for the debtor. In the unlikely event that the contents of such declaration reveal grounds for reconsideration, the debtor may make an appropriate motion.      Counsel for the petitioning creditors shall submit an appropriate form of order conforming to this memorandum of decision.
Dated: July 18, 1999                                              ____________________________                                                                                  Alan Jaroslovsky                                                                                  United States Bankruptcy