of the Bankruptcy Act, 11 U.S.C. § 649 and Northern District of
Illinois Local Bankruptcy Rule X-18. But beyond this,
insufficient evidence has been presented to support the
expenditure of an additional 80 hours by them on the bankrupt
In summary, the Court believes that a $6,000 fee was
unreasonable in light of the financial situation of Cybern and
the fact that most of its cash reserves were called upon to pay
the fee, even to the point of delaying deposit of the check in
order to accumulate sufficient funds to cover it.
Accordingly, the Court holds that $4,800 of the $6,000 will not
be allowed as attorneys' fees and shall be returned to the
The Court now turns to the question of the fees for the
attorneys of the trustee. The Court of Appeals in Cybern 1,
supra, ordered counsel to submit a final application along
with the required affidavits and supporting material. 478 F.2d
at 1343-1344. Counsel has filed his amended petition for fees
which seeks compensation of $30,000 for 584 3/4 hours.*fn3
Counsel has agreed to return anything in excess of $22,500. The
trustee, Harry Ash, has waived his fee entirely.
The petition counsel has presented, insofar as it relates to
the time spent prior to the allowance of interim fees, is
identical to the one before the Court of Appeals in Cybern I.
A summary of activities has been added as an attempted
explanation of the expenditure of time, counsel having
explained that no other records are available. Hearings have
been held thereon and all other documents required by the Court
of Appeals have been filed.
The government and certain creditors have objected to the
requested $30,000 fee. At the outset it is important to
remember that the total estate is approximately $60,000; thus,
the attorneys are requesting one-half of the estate in fees.
Also, the Court of Appeals in its per curiam opinion, see In
re Cybern Education, Inc., 478 F.2d 1340 (7th Cir. 1973),
denied an interim award of $22,500 as being unreasonable. Since
that time, very little has occurred, in the way of compensable
matters, other than the drafting of a relatively simple plan.
Between September 18, 1970 and November 7, 1970, when the
decision to terminate was made, 159.5 hours were billed. From
November 7, 1970 to July 28, 1971 when the final collection was
made, 244.25 hours were billed. Since that last collection
date, counsel lists 181 additional hours which they would add
to the billable total.
In determining the amount of fees to be awarded, the following
factors must be considered. One prime consideration is the
economy of administration. See Realty Associates Securities
Corp. v. O'Connor, 295 U.S. 295, 55 S.Ct. 663, 79 L.Ed. 1446
(1935); Official Creditors Committee of Fox Markets, Inc. v.
Ely, 337 F.2d 461 (9th Cir. 1964), cert. denied, 380 U.S. 978,
85 S. Ct. 1342, 14 L.Ed.2d 272 (1965). See also In re Solar
Mfg. Corp., 215 F.2d 555 (2d Cir. 1954) (the court awarded
$29,000 for a $290,000 estate). The basic test is
reasonableness and one must view economy of administration in
First consideration must be for the debtor and its creditors,
not for the attorneys. See In re A. Herz, Inc., 81 F.2d 511
(7th Cir. 1936). The attorneys are officers of the Court and
are expected to work for and benefit the estate, not
themselves. From this it naturally follows that the amount of
attorneys fees requested must bear a reasonable relationship to
the amounts involved and collected for the estate. See Texas
Bank & Trust Co. of Dallas v. Crippen,
235 F.2d 472 (5th Cir. 1956); Finn v. Childs Co., 181 F.2d 431 (2d
Cir. 1950); In re Imperial 400 Nat., Inc., 274 F. Supp. 351
Another major factor is the complexity of the debtor's affairs,
the novelty and difficulty of the questions involved, and the
results achieved. See In re Coast Investors, 388 F.2d 622 (9th
Cir. 1968); In re Imperial 400 Nat., Inc., supra. In the
instant case, the debtors' affairs consisted of the following.
See also Cybern I, supra. On September 15, 1970, the trustee
was authorized to conduct the business. At the initial meeting
it was determined that the debtor had little cash, very little
tangible assets and few projects. The only future items were
several possible new contracts, the largest of which was for
$47,000 with Xerox. Also $10,000 of the accounts receivable
were collected soon after. From that date until November 1970,
$50,000 more was collected, over one-half coming from the
United States government and the University of Illinois. A
decision to cease operations was made in November 1970, and
operations ceased in February 1971. At an early stage, in order
to maintain operations, $15,000 was borrowed from a
shareholder, Mr. McGraw.
In April 1971, the trustee sold the assets of a division of the
company, Cine-Probst, to its manager for $4,500. He also sold
the New York office furniture for $1,350. On June 17, 1971, the
Washington office furniture was sold for $2,137, and a
sub-lease of the premises was arranged. On July 30, 1971, he
sold certain intangibles for $30,000 through the efforts of Dr.
Tucker, an employee, who received a $6,000 commission. In sum,
the trustee and attorneys were directly responsible for sales
of tangible assets totalling $8,987, $24,000 net for the sale
consummated by Dr. Tucker, collection of $60,000 in receivables
(over one-half paid by two parties), obtaining a $15,000 loan,
and determining that they could not continue under Chapter X.
Thus the total monetary benefit to the corporation may be set
at $108,000.*fn4 This hardly justifies an attorney award of
Another factor is the expertise of counsel and the relative
skill required. In re Imperial 400 Nat., Inc., supra. First,
no suits were brought to enforce any of Cybern's rights. In
light of the fact that at the outset of the trustee's
activities it appeared that there were several binding
commitments, this is not fully understandable. It appears that
they did not investigate the possibility of a wrongful taking
of a corporate opportunity by Dr. Tucker, through a project
carried on in his name. The trustee allowed the president of
the company to handle the Xerox negotiations, which were by far
the most important to the company since it involved the largest
project ($47,000) and the prospect of an immediate cash inflow
of $15,000. Neither the trustee nor his attorney made contact
with Xerox, despite the fact that the president of the bankrupt
had been in charge while the company suffered. In effect, it
appears that they simply let the existing management continue
The trustee filed 22 one-page reports. The final plan was very
simple and no complex legal work appears to have been involved.
Indeed, the evidence indicates that proper forms were not
prepared, nor were records adequately kept.
Certain other factors related to counsel's expenditure of time
should be noted here. The record indicates that counsel's sole
inquiry into the fee to Gesas and Manos was one conversation
with them and some brief correspondence. Neither counsel nor
the trustee, Ash, carefully examined the fee. Granted that Ash
had the benefit of long acquaintance with them (Gesas and Manos
had been attorneys for Mr. Ash, as Trustee, in several hundred
this did not relieve the trustee and counsel of the obligation
to fully investigate and take appropriate action under § 60(d).
Additionally, much of the time spent by counsel was on
non-legal duties more appropriately done by the trustee, who
himself is a lawyer. For example, one day each was spent
regarding the disposition of furniture in the New York and
Washington offices, which only resulted in a small sum for the
debtor; such work cannot support lawyers' rates.
The final factor to be considered is the labor expended and the
wage sought to be applied. Counsel seeks compensation of
$30,000 for 584.75 hours, or over $50 per hour. It should be
noted that the prevalent wage in private employment is not
controlling, since the trustee is an officer of the court, and
that time itself is not a major factor. See In re McGrath Mfg.
Co. of Omaha, Nebraska, 95 F. Supp. 825 (D.Neb. 1951); London v.
Snyder, 163 F.2d 621 (8th Cir. 1947). In the instant case, in
addition, the petition is lacking in several respects.
The Court of Appeals stated in Cybern I, supra, that the
petition must be specific. In the present case, the initial
petition has been refiled in almost its original form. The late
entries are somewhat more specific, yet hardly complete. For
example, counsel lists 126.5 hours "Conference" on certain
dates yet no mention is made of with whom the conferences were
held or in what regard. In addition, there are various entries
entitled "correspondence," without addressee or topic.
Under all the circumstances, the Court believes that a request
for $30,000 does not have sufficient justification or support.
A request for one-half of an estate is not for the benefit of
the debtor or the creditors, but is for the attorneys' benefit,
and cannot be allowed. The Court believes that $10,000 will
adequately compensate counsel in light of the supportable hours
and for the amount of time which should reasonably have been
spent on this estate.
In this Court's prior opinion, Cybern II, supra, the Court
left open the question of surcharging the trustee's attorney
for the amount of profit he derived from the use of the
difference between the interim fee he originally took on
October 20, 1971 and his fee herein. He returned the money on
January 15, 1974. Since it does not appear that the estate lost
income by reason of this interim payment, nor that Gillogly
particularly profited by receiving the advance, the Court
concludes that a surcharge on this account is unnecessary.
The Court believes that the plan that has been submitted should
be confirmed, amended to provide that the amount available for
distribution is increased by the $4,800 to be paid by Gesas and
Manos to the trustee. The trustee and his attorney are ordered
to prepare all necessary documents and to arrange for a speedy
It is so ordered.