The opinion of the court was delivered by: SOLOMON
SOLOMON, Senior District Judge, Sitting by Designation:
Plaintiff, Petra Williams, individually and as a shareholder of The Federal Bearings Co., Inc. (Federal) and The Schatz Manufacturing Company (Schatz), filed actions against these two corporations and against certain of their officers and directors to require them to distribute substantial portions of the corporations' accumulated surpluses to the shareholders and to repay to the corporations excess compensation these officers and directors received from 1963 to 1968.
Federal was organized by three brothers, all of whom died before these actions were filed. There are 9,595 shares of stock in Federal which are outstanding. Plaintiff owns 1,328 shares, and 6,437 shares are owned by other descendants of the founders or trusts for the benefit of the descendants. Only 1,830 shares are owned by outside parties.
There are 3,380 shares of Schatz common and preferred stock. Plaintiff owns 332 shares, Federal owns 1,629, and the other 1,419 are either owned by relatives of the founders or are in the names of estates or trusts for the benefit of those relatives. James E. Neighbors, Jr., is the legal or beneficial owner of one-sixth of all of the stock, and it is anticipated that he will later acquire as much as one-fourth of the stock. His sister owns an equal amount.
For a number of years before plaintiff filed these actions, she was concerned about the activities of the trustees and their sale of the stock of Federal and Schatz without having first offered the stock to her. She had other grievances. She was dissatisfied with the size of the dividends and thought that much of the accumulated surpluses should be distributed to the stockholders.
In October 1966, she consulted Edwin Cohen, an attorney in Louisville, Kentucky. His records reveal that he researched the law and made other inquires about her complaints. Some time later, Mr. Cohen and other attorneys who became associated with Mr. Cohen investigated the salaries that were paid officers and directors, many of whom were related to plaintiff and all or most of whom owned less stock than she did. Plaintiff was not on the payroll of either corporation.
Both before and after these actions were filed, plaintiff had frequent doubts about the desirability of continuing these cases. The record shows that Mr. Cohen spent many hours reassuring her.
More than a year after Mr. Cohen undertook to represent plaintiff, he concluded that the cases should be filed in New York and that he should associate himself with a New York lawyer. At first Cohen wrote to, and later went to see, a well-known New York lawyer who specializes in plaintiffs' cases. This lawyer refused to participate in the cases.
Later, Cohen succeeded in getting Benedict Ginsberg to join him in the prosecution of the cases. Mr. Ginsberg handles commercial cases primarily. He had never handled a minority stockholder action.
In May 1968, plaintiff, with Mr. Ginsberg and Mr. Cohen as her attorneys, filed two actions -- one against Federal and some of its directors, and the other against Schatz and some of its directors. Both complaints were simple and similar. They sought a return of excess compensation paid to or for the named directors, and in separate counts asked for the distribution in dividends of accumulated surpluses.
Mr. Ginsberg recently estimated that he and the associates in his office (not Mr. Cohen) spent 83 hours in the research and preparation of these two complaints and the minor amendments made to them. Mr. Ginsberg estimated that he personally spent 48 hours in this endeavor.
In late 1968, the depositions of Bennett, Bahret, Recknagel, and Ernestine Neighbors were taken. In 1969, the depositions of James Neighbors, Jr., and Fichter were taken. The deposition of Bennett was the longest; it was 134 pages. The other five depositions combined totaled 184 pages.
Mr. Ginsberg estimated that he spent 94 hours preparing for and taking these depositions and that members of his office spent 67 hours, or a total of 161 hours.
In February 1971, the parties filed pretrial orders, which recited that on April 17 and again on December 9, 1970, the attorneys appeared before the court and agreed that:
1. The actions complain only of acts committed by the defendants within six years prior to the service of the complaints; and
2. The fictitious defendants named in the complaints would be deleted.
Plaintiff in the pretrial order added the following contentions:
1. The defendants succeeded in controlling the corporations through personal stock ownership and the ownership by trusts which the individual defendants controlled;
2. The defendants paid themselves excessive amounts as salaries, bonuses and benefits;
3. Excessive earnings were retained, and the surplus so created might subject the corporations to penalties under the Internal Revenue Code; and
4. The financial status of the corporations demanded the declaration of greater dividends.
The so-called "amendments" added little, if anything, to the complaints.
The defendants, in accordance with the Federal Rules of Civil Procedure and the Local Rules of the Southern District of New York, set forth with great specificity the grounds upon which they sought to defeat plaintiff's claims.
For his efforts in connection with these pretrial hearings, Mr. Ginsberg seeks compensation for 83 hours for himself and 55 hours for the two associates in his office.
In December 1972, plaintiff submitted a partial set of proposed findings. In the Schatz case, the proposed findings were three pages long and consisted of 10 items of undisputed facts which described the parties and set forth the amounts of common and preferred stock which each of them owned.
Defendants submitted their proposed findings of fact. They were 79 pages long and consisted of 85 separate items. Defendants' proposed findings complied with the federal and local rules ...