Gotbaum success fee reduced to $250,000
Former Hawaiian Airlines trustee Joshua Gotbaum, whose request for an $8 million success fee rankled both the company and its labor unions, had that amount sharply reduced to $250,000 yesterday in a tentative written ruling by federal Bankruptcy Judge Robert Faris.
Faris' decision, issued on the court's electronic filing system, was made in advance of today's scheduled 9:30 a.m. hearing on Gotbaum's fee application. Unless Gotbaum's attorney, Bruce Bennett, can dissuade the judge, Faris' ruling will stand.
In ruling, Faris noted that "there is no going rate for a Chapter 11 trustee operating a business as large and complex as an airline."
But the judge wrote that he looked at the salaries of former Hawaiian Airlines Chief Executive John Adams, Aloha Airlines CEO David Banmiller and the hourly rates charged by bankruptcy attorneys, chief restructuring officers and similar professionals in crafting his decision. He said he also took into account the sacrifices that had been made by Hawaiian's employees.
Faris said the total amount of salary and expenses he was tentatively approving for Gotbaum was nearly $1.7 million. That includes $1.15 million Gotbaum previously received in salary, more than $276,000 in expenses for housing, automobile and other allowances -- most of which he has received -- and the $250,000 success fee.
Gotbaum's final compensation for the 4,995 hours he claims to have worked will equate to $336 an hour, or $876,500 a year, Faris said.
"He deserves significant credit -- not all of the credit, but a fair share of the credit -- for the outcome," Faris wrote. "He also deserves substantial monetary compensation for his hard and successful work."
Still, the $250,000 was a far cry from what Gotbaum had been seeking. And with a $50,000 monthly salary during his tenure as trustee, Faris' ruling in effect provided Gotbaum with a five-month severance payment.
Gotbaum, who flew in to Honolulu yesterday from his Washington, D.C., home, said last night he wanted to refrain from commenting until today's hearing.
Hawaiian Airlines, which had objected to Gotbaum's request and said he was taking too much credit for the reorganization, declined to comment.
Faris, who called the outcome of the case "exceptional," said in his ruling that the trustee should be entitled to reasonable compensation for actual, necessary services and reimbursement for actual, necessary expenses. But he noted that the company's workers made substantial sacrifices because Hawaiian reneged on its promises to give future pay raises, pension plans were dramatically changed and work-rule changes meant that employees would work longer and harder.
"The sacrifices made by labor militate against excessive payments to people at the top of the corporate pyramid," Faris wrote.
Sharon Soper, president of the airline's local unit of the Association of Flight Attendants, said she is ready to drop this issue.
"The judge has ruled, and let's put this to bed and move on," she said. "I'm OK with it. It's certainly a lot less than $8 million. We can put an unhappy chapter behind us now."
All the airline's labor unions, its unsecured creditors and the company's management opposed any success fee for Gotbaum. Their main objections were that he was fairly compensated at $600,000 a year, took too much individual credit for the successful reorganization, spent several months learning the job and that the professionals he used billed more than $30 million.
Only the Office of the U.S. Trustee, which hired Gotbaum, said he should be entitled to a success fee. Its proposal was for about $1.15 million, which was identical to the salary he earned, excluding expenses, during the nearly two years he was on the job.
San Diego-based U.S. Trustee Steven Katzman, who oversees the Hawaii region, is scheduled to appear on a video teleconference today. He declined yesterday to comment on the decision.
However, the local head of Aloha's mechanics union said Faris still gave Gotbaum too much.
"I think justice has been served," noted Dave Figueira, local committee chairman of the International Association of Machinists and Aerospace Workers District 142, which represents clerical workers, customer service and reservation agents, and ramp personnel. "He was well compensated for the time he was working at Hawaiian, and that should have been the end of it. But it's still a victory on our side."