UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
WANDER TELECOMMUNICATIONS OF No. 97-13900
CALIFORNIA, et al.,
Attorney David Chandler is an experienced bankruptcy attorney. He had a clear idea, when he
commenced these related Chapter 11 cases on behalf of the debtors, as to the best course of action for
the estates. The principal creditor of all three estates, FINOVA Capital Corporation, had foolishly
taken a judgment against the debtors' principal, Gerhard Hanneman, without first exhausting its
security. As a competent Chapter 11 attorney, Chandler was aware of a recent decision of the Court of
Appeals holding that in such circumstances the creditor forfeits its security. If circumstances had
allowed Chandler to prosecute the case as he envisioned, the unsecured creditors might have received a
substantial dividend or payment in full, as FINOVA would have been forced to either settle with the
estate or risk losing its security.
Unfortunately, Chandler was undone from behind. Hanneman proved completely unfit to act as
a fiduciary. Under Hanneman's control, and due to no fault of Chandler, the debtors failed to live up to
their responsibilities as debtors in possession. Because of Hanneman, the court was forced to order the
appointment of a Chapter 11 trustee. This court has learned from experience that appointment of a
Chapter 11 trustee is rarely beneficial for the estate; an extra level of administrative expense is created
without the zeal of a truly interested party. The court strongly suspected, when it ordered the trustee,
that the case was essentially over as far as the unsecured creditors were concerned. Unfortunately, the
court was correct.
With the court's concurrence, the U.S. Trustee appointed Katy S. Meador as Chapter 11
trustee. She retained counsel, and quickly realized that FINOVA had a security interest in most or all of
the estate assets. She decided to adopt a course of action of cooperation with FINOVA. This resulted
in FINOVA's agreement to pay a considerable portion of Meador's fees, as well as those of her counsel.
The trustee proposed a plan which left FINOVA's security interest intact, and refused to prosecute an
action brought by Chandler on behalf of the debtors against FINOVA. Under the plan, which was
confirmed, the unsecured creditors are likely to receive nothing.
Final fee applications of Chandler and Meador are now before the court. Chandler objects to
Meador's application on grounds that she sold the unsecured creditors down the river in order to
ensure that FINOVA would pay her fees. Meador objects to Chandler's application on grounds that he
obstructed her, duplicated her work and tilted at windmills.(1)
Both are correct, and both are wrong.
Chandler is correct in arguing that Meador did not zealously assert the estate's claims against
FINOVA. However, he is unrealistic in any expectation that she would do so. Unlike Chandler, neither
the trustee nor her counsel received a prepetition retainer. If they had adopted Chandler's aggressive
stance with FINOVA, they ran the risk of working for years and receiving nothing for their efforts on
behalf of a silent and resigned class of unsecured creditors. Neither the trustee nor her counsel are in
their demanding professions because of compelling altruism. They cannot be faulted for securing a
source of payment for their fees, nor for choosing to work with FINOVA rather than against it.(2)
Meador is correct in arguing that Chandler's futile efforts to preserve the action against
FINOVA during the plan confirmation process and get her to prosecute the action resulted in no money
for creditors, but that does not mean that the services were of no benefit to the estate. Any informed
unsecured creditor would have cheered Chandler on, knowing that he was its only real hope for a
dividend. That Chandler was unsuccessful does not mean that he should not have tried, nor that he
should be denied compensation for trying.(3)
Meador is certainly not correct in arguing that Chandler obstructed and impeded the
administration of the estate. He tried his best to get Meador to take some risks for the benefit of the
estate. While Meador cannot be faulted for taking her conservative approach to the case, Chandler
cannot be faulted for urging her to do otherwise and such conduct can by no stretch be considered
Both of the fee applications now before the court are for very modest amounts of about
$16,000. The objections of Chandler and Meador are not about the money, but about their diverse
approaches to the case. The court certainly admires Chandler's approach; if the goal of a legal career is
challenge, fulfillment and a sense purpose, then sometimes windmills must be tilted at. On the other
hand, the court's lack of admiration for Meador's approach to the case is not the same thing as lack of
respect for her approach and the decisions she made, understanding that she accepted the role of trustee
with the understanding that she would be paid for her services.
For the foregoing reasons, the objections are all overruled and the fee applications will be
allowed as filed. Each applicant shall submit an appropriate order approving his or her application.
Dated: July 12, 1999 ____________________________
United States Bankruptcy Judge
1. FINOVA also objects to Chandler's fees, based on disingenuous concern for the estate.
Contrary to FINOVA's assertions, Chandler's adversary proceeding had considerable merit. The court
was compelled to dismiss it on grounds of standing, once the trustee refused to adopt it. On the merits,
the court found the action soundly based if not compelling.
2. The court also has no doubt that the trustee and her counsel truly believe that they would not
ultimately prevail in the action against FINOVA.
3. The court knows Chandler well enough to know that compensation for his services was the
thought furthest from his mind when he tried to get the trustee to go after FINOVA. He was motivated
by the challenge of prevailing against a sophisticated and well-represented creditor, and the possibility
of turning a seemingly bleak estate into a source of full payment for unsecured creditors. Not only is
such an attitude in the best traditions of the debtor bar, but it is exactly the reason why the court hated having to appoint a tr