Global Systems & Strategies, Inc.

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Greenbelt
IN RE: :
:
GLOBAL SYSTEMS & STRATEGIES, INC. : Case No. 04-12045PM
: Chapter 11
Debtor :
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MEMORANDUM OF DECISION
Before the court is the First Application of Richard H. Gins, the fourth in a succession of
lawyers for the Debtor, for compensation for services rendered for the period January 14, 2005,
through June 14, 2005 (the “Application”). The Application is opposed by Joseph and Nancy
Pecar (the “Pecars”). The matter came on for hearing before the court on November 15, 2005, at
which time the court heard testimony of the Debtor’s principal and from Mr. Joseph Pecar.
The real adversaries in this case are the Pecars, who are the parents of Jean Tolbert and
who sold this business to Ms. Tolbert and her husband. At this time, no other creditor expresses
any interest in this case. Seldom in the court’s experience has it seen such an outpouring of
vitriol from creditors as found in this case. The court has only seen a part of the cause of this
internecine war that has gone on for many years. There was prior litigation in state court, and,
with the help of a mediator, entered into a settlement. This settlement blew apart when the
Debtor stopped payments on the buyout agreement and ceased making medical insurance
payments as required under that agreement. The court understands that the relationship of the
grandparents to their grandchildren has likewise suffered. Efforts by Magistrate Judge Connelly
to effect mediation were likewise unsuccessful. The court is of the firm opinion that the bad
feelings between the parties will not be expunged in their lifetimes.
Date signed November 17, 2005
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The creditors have engaged in a very aggressive discovery program. The court senses that
far more discovery was undertaken than is necessary in a case of this nature. Nonetheless, these
creditors have a right to proceed and go over points numerous times in the absence of any motion
for a protective order.
The court will review this Application under the standards set forth in such cases as
Harmon v. Levin, 772 F.2d 1150 (CA4 1995), and In re Courtois, 222 B.R. 491 (BC Md. 1998).
These cases direct the court to consider the Johnson factors originally found in the case of
Johnson v. Georgia Highway Express, 488 F.2d 714, 717-19 (CA5 1974), and introduced into
the jurisprudence of the Fourth Circuit by Barber v. Kimbrell’s, Inc., 577 F.2d 216 (CA4 1978).
These factors are as follows:
1. Time and labor expended. The court has examined the Application and finds, to the
extent that it can do so, that Counsel has invested the time in this case, some 110.9 hours said to
be spent. During the applicable period covered by the Application, Counsel first had to bring
himself up to speed and consider the matters covered by the 140 docket entries in this case prior
to beginning of activity by him. Throughout this period, the court believes that Counsel made
every effort to dispose of this very difficult case. He dealt with the injunction and attempted to
satisfy the Pecars’ discovery requests. The mediation effort required a review of the prior
settlement and preparation for the mediation itself. Counsel prepared a Plan and Disclosure
Statement, dealt with a hearing for the Motion for Appointment of a Trustee, and revised the
Disclosure Statement.
2. Novelty and difficulty of questions raised. This is a very difficult case for all parties
involved, whether the principals, their attorneys or the court. As stated above, the court has
seldom experienced such bitterness as exhibited in this case.
3. Skill required to properly perform legal services required. This case requires an
experienced lawyer in bankruptcy, but, even more so, it calls for the exercise of a keen sense of
judgment and interpersonal relations.
4. Preclusion of other employment. This factor is not applicable, other than the
observation that time spent on this case could not be devoted to other clients.
5. Customary fee for like work. Counsel charges $350.00 an hour. This is well within
the range of fees charged in this District for cases of a similar nature by attorneys with similar
experience.
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6. Whether fee is fixed or contingent. While the fee is on an hourly basis, as with any
representation of a debtor, there is a degree of contingency in that the debtor may be unable to
make the payment or the court may not allow the fee sought.
7. Time limitations imposed. The court does not believe that there were any extreme
time limitations imposed in this case.
8. Amount in controversy and results obtaineed. There are more than $1-1/2 million in
claims that were filed. The survival of this business is dependent upon a successful outcome of
this case. It is too soon to appraise fully the results obtained, although the “defensive end” of
work done by Counsel has kept this case on the track to a possible successful outcome under a
Plan ultimately proposed by the Examiner appointed by the Office of the United States Trustee.
9. The experience, reputation and ability of attorney. Counsel has served as a panel
trustee and has more than 34 years of experience of practice in this court. Counsel is well suited
to handle a case of this nature.
10. Undesirability of Case. Considering the animosities involved, and the court assumes
that it goes both ways, this cannot be a very pleasant experience for either counsel.
11. Nature and length of professional relationship with client. This factor has no
applicability.
12. Attorney fee awards in similar cases. In similar cases, the court has allowed
reasonable compensation to counsel for the debtor.
There is one additional factor that affects the court’s disposition of this Application. This
factor often comes up in small business cases such as the one at hand where the principals of the
corporation look to counsel for the corporation for advice and representation. To the extent that
this can be avoided, it should be. As noted in such cases as In re Southern Kitchens, Inc. 216
B.R. 819 (BC Minn. 1998), and In re Mican Homes, Inc., 179 B.R. 886 (BC E.D. Mo. 1995), the
simultaneous representation of the debtor and the debtor’s principals gives rise to a conflict of
interest. In countless legal seminars, the court has heard discussions of the burden on small
debtors to handle the expense of multiple counsel. Indeed, this is often beyond the understanding
of the corporate principals. Nonetheless, it was inappropriate for Mr. Gins to represent the
Debtor and its principal in a Rule 2004 examination. As a result, Counsel made representations
or promises on behalf of a party he did not represent, and this thrown further fuel on the fire.
While the court does not believe that Counsel should be disqualified for this, the court finds it
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inappropriate to allow compensation for this work.
An appropriate order will be entered.
cc:
Richard H. Gins, Esq., 3 Bethesda Metro, Suite 530, Bethesda, MD 20814
Philip J. McNutt, Esq., Hughes & Bentzen, 1667 K Street, N.W. Washington, DC 20006
United States Trustee, 6305 Ivy Lane, #600, Greenbelt MD 20770
James Vidmar, Examiner, Linowes & Blocher,
7200 Wisconsin Avenue, #800, Bethesda, MD 20814
Janet M. Nesse, Esq., Stinson Morrison & Hecker,
1150 18th Street, N.W., #800, Washington, DC 20036
End of Memorandum
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