In re Sonicblue Incorporated

Full title: In re: SONICBLUE INCORPORATED, DIAMOND MULTIMEDIA SYSTEMS, INC., REPLAYTV…

Court: United States Bankruptcy Court, N.D. California

Date published: Jul 20, 2006

Cases No. 03-51775, 03-51776, 03-51777, 03-51778-MM cases Jointly administered (Bankr. N.D. Cal. Jul. 20, 2006)

Opinion

Cases No. 03-51775, 03-51776, 03-51777, 03-51778-MM cases Jointly administered.

July 20, 2006

MEMORANDUM DECISION AND ORDER ON SIXTH INTERIM APPLICATION OF PILLSBURY WINTHROP LLP FOR COMPENSATION AND EXPENSE REIMBURSEMENT

MARILYN MORGAN, Bankruptcy Judge

INTRODUCTION

Before the court is the sixth interim application of Pillsbury Winthrop LLP for compensation and reimbursement of expenses as general bankruptcy counsel for the chapter 11 debtors, SonicBlue Incorporated, Diamond Multimedia Systems, Inc., ReplayTV, Inc., and Sensory Science Corporation. Pursuant to 11 U.S.C. § 330, Pillsbury Winthrop requests approval of professional fees in the amount of $621,623.50 and expense reimbursement of $18,014.59. Having considered the sixth interim application, the report by Stuart, Maue, Mitchell James, Ltd., the court appointed fee auditor, of its review and analysis of the sixth interim fee application, and the response of Pillsbury Winthrop to the audit report, the court allows interim compensation in the amount of $545,345.60 and expense reimbursement of $18,014.59 and defers ruling on $10,723 in fees.

BACKGROUND

The debtors, which designed and marketed consumer electronic products, commenced these jointly administered chapter 11 cases on March 21, 2003 when they were unable to meet their maturing financial obligations. Pillsbury Winthrop LLP was appointed as counsel for the debtors on April 11, 2003. These are liquidating chapter 11 cases. Projecting that they would exhaust their cash reserves by April 20, 2003, the debtors immediately sought and obtained court approval of the sales by auction of their three primary operating businesses, the Go Video, ReplayTV, and Rio product lines, for more than $40 million.

Following the sale of the three operating business lines, the debtors also sold their modem product line, graphics patents portfolio, computer component inventory, and shares of stock in United Microelectronics Corporation (UMC), which are traded on the Taiwan Stock Market. Substantially all assets of the estates have been liquidated except for avoidance actions. The debtors hold in excess of $75 million in funds, most of which are unencumbered. Secured claims have been paid in full from the proceeds of sale. Unsecured creditors assert claims exceeding $400 million, of which more than $130 million are disputed. More than $392,000 in priority claims and $104 million in unsecured claims were disallowed or withdrawn as a direct result of the applicant's services during this application period. The debtors continue to address disputed claims.

SonicBlue has been engaged in concurrent litigation and settlement negotiations with VIA Technologies and S3 Graphics, a common joint venture, over the breach of the investment agreement creating the joint venture. Both VIA and S3 assert claims in the amount of $70 million for breach of the investment agreement by failing to pay certain accounts payable, offering non-ordinary course discounts to accelerate the collection of receivables, failing to turn over receivables collected on behalf of the joint venture, and failing to contribute certain assets to the joint venture. They also assert that they are entitled to liquidated damages if they are enjoined prospectively from enjoying the rights under a patent license between SonicBlue and Intel Corporation, to which the joint venture is entitled under the investment agreement. SonicBlue asserts that VIA and S3 breached the investment agreement by failing to pay assumed obligations, that VIA breached its fiduciary duty in connection with the operations of the joint venture and the settlement of patent litigation with Intel Corporation, and that S3 aided and abetted the breach of fiduciary duty. It seeks compensatory and punitive damages, equitable subordination of VIA's and S3's claims, restitution, and an accounting. The various claims reportedly involve complex, disputed facts. Pillsbury Winthrop has been particularly active in the litigation during this application period. It responded to VIA's and S3's dismissal motions, exchanged initial disclosures, developed a discovery plan, commenced discovery, and engaged in settlement negotiations.

SonicBlue is also engaged in litigation and settlement negotiations with Intel Corporation concerning the parties' respective rights under the patent license, which grants reciprocal rights to use certain graphics patents in the other's portfolio. Intel seeks to terminate the patent license while the debtor seeks to assume it under § 365.

The debtors are winding down their limited remaining operations and are focusing their efforts on addressing claims and recovering avoidable transfers. During this application period, Pillsbury Winthrop has continued to advise the debtors with respect to their limited remaining operations, including compliance with the requirements of the Securities Exchange Commission, the Corporations Code, and the Bankruptcy Code, maintenance of the debtors' intellectual property, and termination of a 401(k) plan. Two consultants remain employed by the debtors to assist in the liquidation of assets and the administration of the estates.

The Official Committee of Unsecured Creditors is actively participating in and monitoring the cases. Although the debtors have completed a draft of a proposed disclosure statement and plan, in consultation with the Committee, they have suspended those efforts in light of the uncertainty regarding the impact of the sizable claims of VIA Technologies and S3 Graphics on the confirmability of and distributions under a plan. Other strategic issues also affect timing, including the possibility of limiting the damages claims through a confirmed plan and more accurately estimating distributions by fixing the amount of claims.

To date, the court has awarded to Pillsbury Winthrop on an interim basis $2,885,088.58 in fees and $245,589.85 in expense reimbursement and has deferred ruling on $73,687.50 in fees related to the preparation of the plan and disclosure statement. By its sixth interim application, Pillsbury Winthrop requests approval of additional fees in the amount of $621,623.50 incurred between February 1, 2005 and September 30, 2005 and expense reimbursement of $18,014.59.

LEGAL DISCUSSION

Section 330 of the Bankruptcy Code provides that the court may award to a trustee, an examiner, or a professional person employed under §§ 327 or 1103 reasonable compensation for actual, necessary services rendered and reimbursement of actual, necessary expenses. In determining the amount of reasonable compensation, the court considers the nature, extent, and value of the professional's services, taking into account all relevant factors, including whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case and whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed. 11 U.S.C. § 330(a)(3). The applicant bears the burden of establishing entitlement to an award and demonstrating that the fees are reasonable. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983).

A. Voluntary Reductions

In this application, Pillsbury Winthrop voluntarily reduced its fees by $6,093.50 for timekeepers whose total billings in the case were less than $1,050. It also voluntarily reduced its request for expense reimbursement by $2,147.42 for word processing, printing, and imaging charges and by $1,017.94 for express courier and messenger services. In response to the audit report by Stuart, Maue, Pillsbury Winthrop has further voluntarily reduced its request for fees by $233.50 for duplicate time entries.

B. Compensation for Preparation of Plan and Disclosure Statement is Premature

To establish its entitlement to compensation, counsel must demonstrate that the services were necessary or reasonably likely to benefit the estate at the time they were rendered. In re Mednet, 251 B.R. 103, 108 (B.A.P. 9^th Cir. 2000). The necessity of the services is dictated in part by the reasonableness of the request in view of the governing law and the probability of success. See Unsecured Creditors' Comm. v. Puget Sound, Plywood, Inc., 924 F.2d 955, 959 (9th Cir. 1991). Counsel further has an obligation to consider the potential for recovery and to balance the effort required against the results that might be achieved. Id. at 961. Within these parameters, the court must examine the circumstances and the manner in which services are performed and the results achieved in order to arrive at a determination of a reasonable fee allowance. Mednet, 251 B.R. at 108.

As the court has previously indicated, it is premature to determine whether the fees incurred in connection with the preparation of the debtors' plan and disclosure statement are reasonable. The court is unable at this juncture to balance the efforts expended against the results achieved. The debtors, in consultation with the Committee, have determined to suspend activity on the plan and disclosure statement pending further progress in the litigation with VIA Technologies, S3 Graphics, and Intel Corporation and on objections to claims. The court reserves ruling on fees in the amount of $10,723 associated with preparation of the plan and disclosure statement, as well as related requests to extend the exclusivity period, pending further progress toward plan confirmation.

C. Time Devoted to Supplemental Employment Application is Excessive

When applying for fees, counsel has a duty to exercise good billing discretion. Hensley v. Eckerhart, 461 U.S. at 436. In determining a reasonable fee allowance, the court must consider whether the services were necessary or beneficial at the time they were rendered. Mednet, 251 B.R. at 108. It must also examine the circumstances and the manner in which the services are performed and the results achieved. Id. Hours that are excessive, redundant, or unnecessary in view of the services performed should not be compensated.

The debtors identified in excess of $63 million in transfers to approximately 348 different creditors in the 90 days preceding the commencement of these cases. Since unsecured creditors would be directly affected by the recovery of avoidable transfers, the Committee desired that the estate pursue the avoidance actions on a contingent fee basis. To retain the representation, Pillsbury Winthrop negotiated with the Committee the terms of a contingent fee arrangement whereby Pillsbury Winthrop and Committee counsel would jointly represent the estate in pursuing avoidance actions. Pillsbury Winthrop submitted a supplemental employment application to obtain court approval of the contingent fee arrangement. Finding that the proposed fee structure was excessive, not reasonable, and not competitive with the terms of comparable representation in similar matters, the court declined to approve the terms. Thereafter, the Committee entertained an alternate proposal by other counsel. The court ultimately approved the retention of Pillsbury Winthrop and Levene, Neale, Bender, Rankin Brill to prosecute avoidance actions on a contingent fee basis after the original terms were modified to be more aligned with the alternate proposal.

The applicant previously sought court approval of $15,681.50 in fees incurred in connection with negotiating the terms of representation, preparing the supplemental employment application, responding to an objection and to the court's concerns, and restructuring the terms. The court found the fees to be excessive and allowed a total of $4,000. Pillsbury Winthrop now seeks an additional $1,227 incurred during this application period in connection with the supplemental employment application. Having previously allowed $4,000, the court disallows the additional fees in this category, the entries for which are set forth below. Date Time-Keeper Description Hours Amount Retention of Professionals TOTAL 2.40 1,227.00

02/02/05 Freeman Review revised Employment Order on preference 0.60 309.00 actions and transmit to Salvucchi and Smith. 02/04/05 Houle Telephone conference with C. Rankin re 0.20 84.00 submission of order on preference employment. 02/09/05 Freeman Telephone conference with R. Bender regarding 0.20 103.00 employment order. 02/09/05 Freeman Review and revise declaration regarding entry of 0.40 206.00 employment order. 03/02/05 Barbarosh Conference call with R. Bender and M. Choi 0.20 105.00 (judge's law clerk) re judge's comments to proposed order. 03/14/05 Barbarosh Analysis of supplemental disclosure to be made 0.20 105.00 in support of employment application. 03/16/05 Barbarosh Analysis re additional disclosures in support of 0.30 157.50 employment application. 03/25/05 Barbarosh Analysis re additional disclosures to be made in 0.30 157.50 support of employment application. D. Time Expended Conducting Research On Automatic Stay Is Excessive

In exercising good billing discretion, hours that are excessive, redundant or unnecessary should be excluded from fee applications. To determine whether the hours are excessive, the court considers whether the services were performed within a reasonable amount of time commensurate with the complexity importance, and nature of the problem, issue or task addressed. § 330(a)(3)(D). In the VIA/S3 Litigation project category, timekeeper A.N. Damonte spent 3 hours on August 4, 2005 to conduct "research re: application of automatic stay to counterclaims," incurring $1,005 in fees. Pillsbury Winthrop prides itself in offering the resources and expertise to provide services in a multiplicity of disciplines. However, rather than consult with a colleague in the bankruptcy department, a litigation associate expended an inordinate amount of time researching a rather routine bankruptcy issue. The entry will be reduced by 2.5 hours, reflecting the disallowance of $837.50 in fees for this task.

E. Time Devoted to Clerical Services Is Not Compensable by the Estate

Section 330 contemplates compensation only for professional services. Services that are clerical in nature are properly chargeable to the firm as an overhead expense and not to the bankruptcy estate. Fees for services that are purely clerical, ministerial, or administrative should be disallowed. Missouri v. Jenkins, 491 U.S. 274, 288 fn.10 (1989); Sousa v. Miguel, 32 F.3d 1370, 1374 (9^th Cir. 1994). Paragraph 18 of the Guidelines for Compensation and Expense Reimbursement of Professionals and Trustees for the United States Bankruptcy Court, Northern District of California ("Fee Guidelines") expressly provides that time spent performing administrative tasks is not compensable.

Some of the services performed by the applicant, such as downloading files, indexing, locating and retrieving, filing, electronically filing, organizing, forwarding or serving documents, conducting PACER searches, preparing proofs of service, scheduling or calendaring, and filing and serving pleadings are clerical in nature. Similarly, oversight of or supervising any of the foregoing activities is also considered clerical. The application includes several entries by a paralegal to "research" documents and to "finalize" pleadings. While the terms connote activities of a substantive legal nature, a review of these entries in context makes it plain that the services are merely clerical. Use of the term "research" generally refers to locating and retrieving documents while "finalize" appears to refer to preparing pleadings for filing and service after an attorney has already drafted them. The time entries for services that are clerical in nature total $6,823.40 and are set forth in Exhibit I to the audit report. In addition, the following entries, which total $10,925, are also for clerical services. Date Time-Keeper Description Hours Amount Case Administration Subtotal Claims Administration/Objections Subtotal 17.90 3,144.50 Compensation of Professionals Subtotal 10.40 1,893.00 Retention of Professionals Subtotal 8.90 1,563.00 VIA/S3 Litigation Subtotal 8.80 3,355.50 TOTAL 10,925.00

04/11/05 Breeden Correspond with OCC Counsel and Northern 0.70 119.00 District ECF Trainer regarding schedule for training. 04/25/05 Breeden Correspond with Marilyn of Northern District 0.40 68.00 Bankruptcy Court regarding software questions related to e-filings. 08/01/05 Breeden Research and review documents for TRG 1.20 204.00 Agreement and Patent Order and forward same to M. Houle on expedited basis. 08/02/05 Breeden Correspond with M. Heath regarding rush 0.40 68.00 document request for M. Houle. 08/05/05 Breeden Research and retrieve pleadings for A. Barron of 0.90 153.00 O'Melveny and Myers on expedited basis. 09/08/05 Breeden Correspond with A. Barron of O'Melveny 1.20 204.00 Myers regarding requested pleadings, locate same and forward request. 09/28/05 Breeden PACER search regarding status of Sobrato 0.90 153.00 administrative claim and retrieval of documents supporting same. 5.70 969.00 02/03/05 Breeden Finalize objection to F. Robin McSurley claim, 0.40 68.00 serve and electronically file with bankruptcy court. 02/18/05 Breeden Receive and organize 22 boxes of client 1.40 238.00 documents relating to vendor invoices for 2002 and 2003 payable. 02/23/05 Walker Follow-up on document copying for claims 0.10 43.00 review. 04/27/05 Breeden Prepare proofs of service, finalize pleadings, 1.90 323.00 serve and e-file notice of motion, motion, stipulation and supporting declaration for order approving stipulation among debtors and U.K. Affiliate. 04/27/05 Breeden Finalize notice to motion approving stipulation 0.90 153.00 among debtors and U.K. Affiliate and forward to administar for service on all creditors. 04/28/05 Walker Instruct P. Breeden regarding finalization of 0.10 43.00 Dehon and Leagas stipulations. 04/29/05 Breeden Assemble exhibits to Stipulation and Order and 0.80 136.00 e-file Stipulation allowing claim of Leagas Delaney and Proposed Order thereon. 05/02/05 Walker Confirm removal from court calendar of Merisel 0.20 86.00 claim objection. 05/02/05 Breeden Voice message to M. McGowan of U.S. 0.10 17.00 Bankruptcy Court regarding status of settled claim of Merisel and removal from court's calendar. 05/02/05 Breeden Finalize stipulation, assemble exhibits and e-file 0.80 136.00 stipulated order and order regarding Dehon, Inc. disputed claims. 05/03/05 Breeden Download signed stipulated order for Dehon, Inc. 0.50 85.00 and forward to claims administrator and OCC. 05/05/05 Breeden Correspond with servicing agent regarding 0.60 102.00 amended notice and forward same for service. 05/05/05 Breeden Conversation with M. McGowan regarding status 0.60 102.00 of Merisel matter still on calendar and report same to M. Walker. 05/16/05 Breeden Download and forward conformed copy of 0.30 51.00 Citicapital Technology Claims order to claims administrator and OCC. 05/16/05 Breeden Download and forward conformed copy of 0.30 51.00 Citicorp Vendor order to claims administrator and OCC. 05/25/05 Breeden Finalize pleadings, assemble exhibits and e-file 1.10 187.00 request for entry of default order and order with bankruptcy court. 05/31/05 Breeden Download entered Astra Datentechnick claims 0.60 102.00 order and forward to claims administrator and OCC. 06/03/05 Breeden Prepare, mark, and download exhibits to 3.10 527.00 Declaration of M. Houle in support of request for default order regarding DMSL motion, finalize request and order, serve and e-file same. 06/08/05 Breeden Finalize exhibits and e-file Stipulation to Allow 0.90 153.00 Claims among Debtors, Creditors Committee and Peery/Arrillaga Limiting Claims and Waiving Defense. 06/16/05 Mayfield Coordinate transfer of data from one vendor to 0.50 82.50 new vendor for processing. 07/05/05 Breeden Research claims database and forward pdf copies 0.80 136.00 of proofs of claims to M. Smith. 08/02/05 Breeden Download and forward signed claims order of 0.60 102.00 State Street Bank to Administar. 09/13/05 Breeden Download and forward Stipulation between 0.40 68.00 Debtors and Right management Allowing and Disallowing Claims to N. Weil at Administar for processing. 09/15/05 Breeden Research, download and forward claims from 0.90 153.00 SonicBlue relating to Tennessee Department of Revenue for M. Walker. 03/05/05 Houle Draft multiple correspondence to P. Breeden re 0.30 126.00 filing and service of Perisho fee application. 03/09/05 Breeden Prepare proof of service for fifth interim fee 1.10 187.00 application of Pillsbury Winthrop, electronically file and serve thereon. 03/09/05 Breeden Finalize, prepare proof of service for final fee 0.90 153.00 application of Perisho Tombar, electronically file and serve thereon. 03/23/05 Breeden Finalize Amended Fee Notice and electronically 1.20 204.00 file same. 03/23/05 Breeden Prepare final version of affidavit from servicing 1.60 272.00 agent regarding amended notice of hearing and electronically file same. 03/31/05 Breeden Finalize pleadings, prepare proof of service, 0.90 153.00 serve and e-file First and Final Fee Application of Mohler Nixon et al. 04/25/05 Breeden Finalize Order and e-file Fee Order of Perisho, 0.60 102.00 Tombar and Loomis. 04/25/05 Breeden Finalize Order and e-file Fee Order of Pillsbury 0.60 102.00 Winthrop. 04/25/05 Breeden Finalize Order and e-file Fee Order of Mohler 0.60 102.00 Nixon. 06/01/05 Breeden Review Judge's fee application calendar and 0.20 34.00 forward proposed dates to M. Houle. 08/19/05 Breeden Prepare fee application memos to S. Urricarriet 1.00 170.00 regarding e-filing and service of sixth interim fee application. 08/19/05 Houle Conference with P. Breeden regarding filing and 0.20 84.00 service of fee application. 09/30/05 Breeden Prepare proof of service, serve, e-file and 1.20 204.00 courtesy copy to chambers of Response to Stuart Maue regarding Pillsbury's Fifth Interim Fee Application, supporting declaration with exhibits. 04/20/05 Breeden Prepare proof of service to Supplemental 2.90 493.00 Declaration Regarding Conflicts, serve and e-file with bankruptcy court. 07/13/05 Breeden Finalize and prepare proof of service, serve and 2.80 476.00 e-file Fourth Supplemental Disclosure Declaration. 07/19/05 Breeden Research supporting employment declaration 0.80 136.00 pleadings for M. Houle. 07/26/05 Houle Draft correspondence to P. Breeden regarding 0.20 84.00 filing of fifth supplemental conflicts declaration. 07/27/05 Breeden Finalize declaration, prepare proof of service, 2.20 374.00 serve and e-file fifth supplemental declaration of William Freeman. 04/07/05 Damonte Assemble and e-file stipulation re: continuance 0.30 100.50 of hearing on motions to dismiss. 06/10/05 Damonte Arrange for service of and e-filing of Opposition 0.70 234.50 to Dismiss. 07/05/05 Loran Fax to A. Boro of aiding and abetting case law. 0.20 102.00 07/06/05 Damonte Telephone call from Clerk's office re: transcript. 0.30 100.50 07/15/06 Damonte E-file and arrange for service of same. 0.30 100.50 07/19/05 Loran Email PDF's of August 2000 letters to VIA's 0.20 102.00 counsel and O'Melveny attorneys, together with transmittal. 08/01/05 Houle PACER search regarding Trepton Group sale for 0.20 84.00 D. Gershon deposition for Intel litigation. 08/01/05 Houle File review regarding sale order regarding 0.80 336.00 preparation for D. Gershon deposition for Intel litigation. 08/02/05 Houle File review regarding Trepton Research Group 0.20 84.00 purchase agreement regarding D. Gershon deposition for Intel litigation. 08/09/05 Houle File review regarding best data purchase 0.30 126.00 agreement for D. Gershon deposition. 08/15/05 Catz Organizing documents to begin drafting 3.50 1,067.50 responses to 120 document requests. 09/03/05 Loran Organize and review working file documents to 1.20 612.00 draft discovery requests. 09/20/06 Loran Schedule telephone conferences with O'Melveny 0.20 102.00 attorneys and Heller attorneys. 09/30/05 Loran Send fax to VIA and S3 attorneys re: extension 0.40 204.00 of time. The applicant asserts in its response to the audit report that the charges attributable to clerical services are minimal, and the tasks could not have been performed or delegated more efficiently. It submits that it is more efficient for a professional to perform a clerical task than for that professional to suspend an activity, delegate and supervise the administrative task, and then resume the professional activity. The court acknowledges that performing a clerical task uninterrupted is frequently more efficient than delegation; however, the professional is not entitled to bill the estate at a professional's hourly rate to perform that clerical task. The maxim prohibiting compensation from the estate for clerical services applies without regard to whether an attorney, a paralegal, or a legal secretary performs the task. For these reasons, fees in the amount of $17,748.40 incurred in connection with the performance of clerical services are disallowed. F. The Court May Disallow Compensation for Participation by Multiple Attorneys in Conferences

Unnecessary duplication of services results in excessive time that cannot be justified and is not compensable. § 330(a)(4). Normally, it is appropriate for only one attorney from a firm to attend a meeting, conference, or hearing. Absent an explanation, participation by multiple attorneys in the same meeting, conference, or hearing constitutes non-compensable duplicative services. Paragraph 16 of the court's Fee Guidelines provides that the court may allow compensation only for the professional with the lowest billing rate but not for the attorney with the higher billing rate.

The applicant has requested compensation for the services of more than one professional who participated in certain conferences. The time entries for these services are set forth below. Date Time-Keeper Description Hours Amount Claims Administration/Objections Subtotal 0.20 86.00 VIA/S3 Litigation 31.30 14,751.50

02/22/05 Walker Telephone conference with D. Reiss regarding 0.20 86.00 claim objection process. 02/07/05 Loran Prepare for and participate in telephone 0.40 204.00 conference with O'Melveny attorneys in preparation for February 8 telephone conference with creditors' counsel. 02/08/05 Loran Prepare for and participate in telephone 0.30 255.00 conference with S. Uhland, D. Gershon, A. Boro, re: adversary proceeding issues. 02/14/05 Freeman Participate in conference call with all hands 0.50 257.50 regarding VIA and Intel. 02/28/05 Freeman Participate in conference call with all parties 0.30 154.50 regarding Intel negotiations. 02/28/05 Loran Participate in telephone conference with 0.30 153.00 creditors' counsel and O'Melveny re: Intel settlement strategy. 03/21/05 Boro Telephone conference with D. Eberhart, 1.50 682.50 S.Uhland, M. Powers of O'Melveny Myers and T. Loran, A. Damonte and J. Catz of Pillsbury to discuss discovery coordination between adversary proceeding and cross-license motion and upcoming Rule 26 meeting in adversary proceeding. 03/21/05 Damonte Conference call with O'Melveny regarding 1.50 502.50 discovery and strategy issues. 03/21/05 Loran Prepare for O'Melveny Myers telephone 2.70 459.00 conference and conference outside of office with A. Damonte, A. Boro, J. Catz re: same; participate in O'Melveny Myers telephone conference. 04/07/05 Boro Telephone conference with S. Uhland of 0.50 227.50 O'Melveny and Myers and T. Loran regarding strategies in litigating adversary proceeding against VIA and joint ventures. 04/07/05 Boro Participate in Rule 26(f) conference with 0.70 318.50 attorneys for VIA and joint venture on initial disclosures, discovery schedule, and mediation. 04/07/05 Boro Telephone conference with S. Uhland of 0.40 182.00 O'Melveny and Myers and T. Loran regarding discovery proposals from Rule 26(f) conference with VIA and joint ventures. 04/07/05 Loran Telephone call with A. Boro, S. Uhland, re: Rule 0.50 255.00 26(f) subjects. 04/07/05 Loran Appear and participate in Rule 26(f) conference. 0.70 357.00 04/07/05 Loran Telephone call with A. Boro, S. Uhland re: 0.40 204.00 results of Rule 26(f) conference. 04/26/05 Loran Appear at telephonic status call and prepare for 0.30 153.00 same. 05/02/05 Barbarosh Participate in all-hands conference call with 0.50 262.50 O'Melveny Myers to discuss VIA strategy. 05/09/05 Loran Telephone call with Marcus Smith, A. Boro, S. 0.60 306.00 Uhland re: letter to Intel. 05/18/05 Freeman Telephone conference with Marcus Smith 0.40 206.00 regarding VIA-Intel negotiations. 05/26/05 Barbarosh Participate in conference call with O'Melveny 0.50 262.50 Meyers re litigation strategy. 05/26/05 Loran Telephone conference with O'Melveny and 0.50 255.00 creditors' attorneys re: Gibson proposal. 06/03/05 Loran Telephone call with M/Powers re: creation of joint database. 0.20 102.00 07/29/05 Loran Prepare for and participate in telephone 0.70 357.00 conference with A. Boro, O'Melveny attorneys re: Intel's Rule 30(b)(6) deposition of Sonicblue. 08/09/05 Loran Prepare for and participate in telephone call with 0.70 357.00 D. Gershon, A. Boro re: "books and records" issues, negotiations. 08/11/05 Loran Conference outside of office with A. Boro, M. 5.30 2,703.00 Smith, A. Wolfe and eight representatives of VIA and S3 to engage in settlement negotiations. 08/17/05 Barbarosh Participate in all-hands call to discuss case. 1.00 525.00 08/17/05 Loran Prepare for and participate in telephone 1.00 510.00 conference with defense group. 08/18/05 Loran Telephone call with S. Uhland and A. Boro re: 1.00 510.00 contested matter discovery. 08/31/05 Loran Telephone call with E. Slizewski and A. Boro re: 0.30 153.00 September 15 settlement meeting. 09/15/05 Loran Attend settlement conference, including client 4.60 2,346.00 telephone calls. 09/15/05 Loran Strategy post-meeting with respect to process for 0.90 459.00 settlement. 09/20/05 Loran Telephone call with A. Boro, M. Smith, S. 0.40 204.00 Uhland, D. Eberhardt, re: settlement strategy. 09/20/05 Loran Participate in part of telephone conference with 0.30 153.00 VIA attorneys. 09/21/05 Loran Telephone conference with VIA and O'Melveny 0.30 153.00 attorneys and prepare for same. 09/22/05 Loran Prepare for and participate in telephone 0.50 255.00 conference with A. Boro, O'Melveny attorneys and VIA attorneys re: draft settlement term sheet. 09/27/05 Freeman Participate in all-hands conference call with 0.30 154.50 Committee and debtor representatives regarding VIA settlement terms. 09/27/05 Loran Telephone conference with creditors re: VIA 0.30 153.00 term sheet. Subtotal For each of the foregoing entries, at least one other professional in the firm who has a lower billing rate participated in the same conference. Where the attorney with the lower billing rate billed fewer hours to the conference than the attorney with the higher rate, the court has disallowed only the number of hours during which there was an overlap in services. The applicant explains that given the complexity of the issues, multiple attorneys are necessary to provide services across a broad spectrum of expertise, and they need to engage in some degree of coordination. However, it has failed to explain adequately the respective roles of the multiple attorneys participating in the various conferences or the necessity of their participation. In one instance, for example, as many as four attorneys participated in a conference, two of whom billed at an hourly rate in excess of $450. The fees attributable to these services total $14,837.50 and are disallowed.

G. Editing Time Records Is Not Compensable

While time expended to prepare a fee application, including drafting the narrative, is compensable, time expended to review and edit time entries is not. Where the time entries require revision to conform to the court's standards, the editing services are administrative functions that are not compensable even if they are performed by a professional. In Re CF I Fabricators of Utah, Inc., 131 B.R. 474, 485 (D. Utah 1991). The applicant incurred $15,448 in fees to review and edit its time records, which entries are set forth below. These services are not compensable from the estate. Date Time- Description Hours Amount Keeper Compensation of Professionals ^th TOTAL 70.10 15,448.00

02/09/05 Breeden Review and edit time entries from October 2004 1.80 306.00 prebills relating to pending fee application. 02/09/05 Breeden Review and edit time entries to November 2004 2.20 374.00 prebills relating to pending fifth interim fee application. 02/14/05 Breeden Review and edit December 2004 prebills for 2.80 476.00 pending fifth interim fee application. 02/14/05 Breeden Edit and revise January prebills in preparation for 1.70 289.00 fifth interim fee application. 03/04/05 Breeden Edit time entries to finalize invoice for fifth 0.80 136.00 interim fee application. 03/07/05 Breeden Multiple edits to Exhibit A final invoice for 1.20 204.00 exhibits and application. 03/07/05 Breeden Correspond with C. Barbarosh regarding write 0.50 85.00 offs and edits to time entries. 03/07/05 Breeden Correspond with E. Van Dette regarding billing 0.50 85.00 partner's requested edits to time entries. 03/08/05 Breeden Analyze revisions to Exhibit "A" to fifth interim 3.20 544.00 fee application and edit application pleading accordingly. 03/08/05 Breeden Numerous correspondence with E. Van Dette 0.60 102.00 regarding revised figures and invoice. 03/08/05 Breeden Numerous correspondence with M. Houle 1.60 272.00 regarding edits to time entries and revised figures. 05/05/05 Barbarosh Review and analyze April 2005 prebill. 0.40 210.00 06/01/05 Breeden Review, edit and revise time entries for February 4.20 714.00 2005 prebills. 06/02/05 Breeden Review, edit and rewrite time descriptions of 4.20 714.00 March 2005 prebills in anticipation of sixth interim fee application. 06/02/05 Breeden Correspond with E. Van Dette regarding 0.80 136.00 February and March prebills and time to be held for avoidance action matters. 06/03/05 Breeden Commence review and editing of April 2005 2.00 340.00 time descriptions in preparation of pending fee application. 06/06/05 Houle Review and revise billing invoices regarding 0.50 210.00 preparation of 6th interim fee application. 06/06/05 Breeden Assemble and prepare working copies of 1.00 170.00 avoidance action time to be reviewed by M. Houle and M. Walker. 06/06/05 Breeden Edit and re-write April 2005 time entries relating 3.40 578.00 to sixth interim fee application. 06/07/05 Breeden Commence review and edits to May 2005 3.20 544.00 prebills in preparation of pending sixth interim fee application. 06/08/05 Breeden Edit and re-writes to May 2005 time entries in 2.60 442.00 preparation of sixth interim fee application. 06/09/05 Breeden Multiple correspondence with E. Van Dette 1.00 170.00 regarding edits to time entries. 06/09/05 Breeden Continued edits and revisions to both fees and 3.20 544.00 expenses on final invoice to sixth interim fee application. 06/20/05 Freeman Review and revise time entries in support of 6 0.90 463.50 interim fee application. 06/20/05 Barbarosh Review and revise fee statement for interim fee 0.40 210.00 application. 06/20/05 Houle Review and revise invoices for 6th interim fee 0.50 210.00 application. 06/21/05 Houle Review and revise timekeeper entries regarding 0.20 84.00 sixth fee application. 07/12/05 Barbarosh Review and analyze June, 2005 billing statement. 0.50 262.50 08/04/05 Breeden Commence review and editing of June pre-bill. 2.80 476.00 08/05/05 Breeden Review and edit July pre-bills in preparation of 3.10 527.00 filing of fee application. 08/08/05 Breeden Assemble time entries for claims and avoidance 1.20 204.00 action categories for review by M. Walker and M. Houle. 08/08/05 Breeden Continue edits to June and July pre-bills. 1.50 255.00 08/10/05 Breeden Review and revise prebills in preparation of 3.80 646.00 filing sixth interim fee application. 08/11/05 Walker Read prebills to confirm time correctly charged. 0.30 129.00 08/11/05 Walker Four e-mails to H. Mayon regarding seeming 0.30 129.00 error in time entry. 08/11/05 Breeden Numerous correspond with N. Basco regarding 1.20 2024.00 edits to prebills in preparation of sixth interim fee application. 08/11/05 Breeden Review, revise and move time entries in 2.80 476.00 preparation of sixth interim fee application. 08/12/05 Breeden Correspond with N. Basco regarding numerous 0.60 102.00 revisions to invoice for Sixth Interim Fee Application. 08/23/05 Freeman Review and revise fee entries for Sixth Interim 1.40 721.00 fee application. 09/20/05 Breeden Edit time entries and prepare exhibit in support 2.20 374.00 of response to Stuart Maue regarding fifth interim fee application. 09/23/05 Breeden Review and edit time entries to September 2005 4.20 714.00 pre-bill in preparation of sixth interim fee application. 09/28/05 Breeden Correspond with N. Basco and review and 0.60 102.00 correct time entry of Sonicblue timekeeper for pending sixth interim fee application. H. Services Related to Prosecution of Avoidance Actions is Duplicative of Contingent Fee Arrangement

The applicant incurred fees of $740 in connection with services related to the pursuit of avoidance actions. However, these services are duplicative of those for which the court approved a contingent fee arrangement. Additional compensation for these services, the time entries for which are set forth below, is disallowed. Date Time- Description Hours Amount Keeper Business Operations Subtotal 0.20 84.00 Claims Administration/Objections Subtotal 2.10 357.00 Creditor Communications Subtotal 0.20 84.00 VIA/S3 Litigation Subtotal 0.50 215.00 TOTAL 740.00

03/07/05 Houle Telephone conference with D. Reiss regarding 0.20 84.00 procedures for preference litigation. 02/09/05 Breeden Research addresses for agents of service of 1.80 306.00 process of defendants in preference claims. 02/24/05 Breeden Correspond with client regarding additional 0.30 51.00 information requested relating to preference claimants' contact information. 06/06/05 Houle Telephone conference with E. O'Brien for 1350 0.20 84.00 regarding preference complaint. 07/21/05 Walker Read and analyze J. Todd settlement documents 0.30 129.00 to check for waiver of avoidance claims. 07/21/05 Walker Advise Mr. Loran regarding effect of J. Todd 0.20 86.00 settlement documents on avoidance claims. I. Compensation for Services That Are Not Adequately Described is Disallowed Without Prejudice

The applicant bears the burden of describing the services performed in sufficient detail to enable the court to make a meaningful assessment whether those services were actual, necessary, and beneficial to the estate and whether they were performed within a reasonable amount of time. Paragraph 13 of the Fee Guidelines provides that the timekeeper must include in each time entry, at a minimum, descriptions of the services performed and the subject matter involved. To enable the court to determine whether the services are compensable, the timekeeper is also expected to identify the other party to the conference, meeting, telephone call, or correspondence. Where the time entry omits some critical element describing the services performed, it is not compensable. Time entries that contain such vague characterization of the services performed as "attention to" and "work on" fail to adequately describe the services provided. Consequently, the court is unable to determine whether the task is necessary and the compensation sought is reasonable. The table below identifies time entries in which the services are not adequately described. The fees attributable to these entries total $3,133 and are disallowed without prejudice. Date Time- Description Hours Amount Keeper Employee Benefits/Pension/KERP Subtotal 5.00 1,884.00 SEC Compliance Subtotal 0.50 152.50 VIA/S3 Litigation Subtotal 3.00 1,096.50 TOTAL 3,133.00

02/11/05 Partrick Work on IRS filing in connection with 401(k) 0.70 157.50 plan termination. 02/18/05 Webster Attention to preparation of Form 5300 and 0.20 91.00 related issues. 03/09/05 Partrick Attention to costs incurred in connection with 0.40 90.00 Diamond Plan notice and final distribution. 03/14/05 Webster Attention to preparation of Diamond plan 0.20 91.00 distributions and related issues. 03/17/05 Webster Attention to missing participants and emails 0.20 91.00 regarding same. 03/18/05 Webster Attention to finalizing Diamond distributions. 0.20 91.00 03/21/05 Webster Attention to preparation for Diamond plan 0.20 91.00 distributions and related issues. 05/05/05 Partrick Work on 5310 application. 0.40 90.00 05/1/0/05 Webster Attention to preparation of IRS determination 0.20 91.00 letter application and review documentation regarding same. 07/06/05 Webster Attention to correspondence and analysis of 0.30 136.50 issues regarding Diamond Plan distributions and treatment of missing participants. 07/08/05 Webster Attention to treatment of missing participants and 0.20 91.00 correspondence regarding same. 07/14/05 Webster Attention to preparation of revised letters to IRS 0.30 136.50 and participants regarding Diamond distributions and related issues. 07/28/05 Webster Attention to making distributions from 0.20 91.00 SonicBlue 401(k) plan and related issues. 08/10/05 Webster Attention to preparation of correspondence to 0.60 273.00 participants and related Department of Labor guidance. 09/12/05 Partrick Attention to determination letter for 401(k) plan 0.20 45.00 termination. 09/13/05 Webster Attention to preparation of determination letter 0.20 91.00 application. 09/19/05 Webster Attention to preparation of determination letter 0.30 136.50 application and related notices. 07/13/05 Mayon Attention to Form 8-K. 0.25 76.25 09/09/05 Mayon Attention to Form 8-K. 0.25 76.25 03/08/05 Ragan Attention to inquiry for Potshner matter history 0.10 55.00 for OCC claim. 06/01/05 Damonte Work on getting Rule 26(a) initial disclosures 2.50 837.50 together. 07/20/05 Loran Review S. Uhland email. 0.10 51.00 08/29/05 Loran Review and respond to D. Gershon email. 0.10 51.00 09/20/05 Loran Review A. Boro email to VIA attorneys; revise 0.20 102.00 same. J. Time Entries That Are Clumped Are Disallowed Without Prejudice

The clumping of disparate services in a single time entry renders problematic the court's review of the application. See In re Dutta, 175 B.R. 41, 46-47 (B.A.P. 9th Cir. 1994). It impedes the court's ability to determine whether each task was completed within a reasonable amount of time. Each discrete task should be separately described in its own time entry. See id. Paragraph 14 of the Fee Guidelines provides that if a number of separate tasks are performed in a single day, the application should disclose the time spent for each separate task. Numerous time entries in the application are not in conformity with Paragraph 14 of the Fee Guidelines. These entries totaling $9,225.50 are set forth below and are disallowed without prejudice. Date Time- Description Hours Amount Keeper VIA/S3 Litigation TOTAL 36.30 9,225.50

02/07/05 Damonte Confer with A. Boro regarding discovery; revise 2.20 737.00 memo regarding discovery and confer with A. Boro and T. Loran regarding discovery. 02/09/05 Damonte Revise discovery memo; review Sonicblue files 2.10 703.50 (discovery review) and confer with A. Boro regarding same. 02/11/05 Palarczyk Responding to requests from Tom Lorane boxes 4.00 800.00 from Marina Parks' office, meeting with Al Boro and Ana Damonte re review files for OMM, assisting Ana Damonte in review of files, processing documents for David Eberhart. 02/14/05 Palarczyk Organizing and indexing boxes and files 7.00 1,400.00 regarding Sonicblue and Intel issues, processing documents after review, responding to requests from Ana Damonte, searching for missing files. 02/15/05 Palarczyk Meeting with Ana Damonte, review of boxes and 5.50 1,100.00 files regarding Sonicblue and Intel issues, searching for missing files. 02/17/05 Palarczyk Meeting with Ana Damonte; review files 6.00 1,200.00 regarding VIA's claims an SB complaint. 04/19/05 Damonte Draft opposition to motion to dismiss; consider 2.70 904.50 issues re Case Management Conference statement and e-file same; submit Case Management Conference statement to chambers. 04/27/05 Damonte Revise amended complaint; arrange for service 1.50 502.50 of same and e-file same. 07/15/05 Loran Edit, analyze and arrange filing of proposed 1.10 561.00 second amended adversary complaint. 08/15/05 Damonte Revise and e-file reply to VIA's counterclaim. 0.80 268.00 08/16/05 Damonte Prepare and e-file stipulation re: JV Sub counter 0.40 134.00 claim. 09/14/05 Catz Gathering and reviewing documents in support of 3.00 915.00 settlement meetings. K. Time Spent Performing Conflicts Check is Not Compensable

Time expended by counsel in performing the firm's conflicts check is not chargeable to the bankruptcy estate. In re Act Manufacturing, Inc., 281 B.R. 468, 490 (Bankr. D. Mass. 2002). The applicant incurred fees in the amount of $2,124.50 during this application period to conduct the firm's conflicts check. The time entries for these services are set forth below, and the fees are disallowed. Date Time-Keeper Description Hours Amount Compensation of Professionals Subtotal 0.70 360.50 Retention of Professionals Subtotal 4.20 1,764.00 TOTAL 2,124.50

04/07/05 Freeman Review spreadsheets regarding Shaw Pittman 0.70 360.50 clients that are potential creditors and edit declaration to Court regarding conflicts. 04/01/04 Houle File review regarding preparation of conflicts 0.30 126.00 declaration and notice of firm name change. 04/04/05 Houle Analysis regarding Shaw Pittman conflicts 0.60 252.00 regarding disclosure declaration. 04/06/05 Houle Analysis regarding potential conflict for 1.00 420.00 disclosure declaration of Pillsbury employment application. 07/11/05 Houle Analysis regarding potential conflict with 0.80 336.00 Synnex. 07/19/05 Houle File review regarding supplemental disclosure of 1.00 420.00 representation of DNNA. 07/26/05 Houle Analysis regarding potential conflicts. 0.20 84.00 09/01/05 Houle File review regarding potential conflict with 0.30 126.00 Bergeson LLP.

CONCLUSION

For the reasons set forth above, the court denies approval of fees in the amount of $65,321.40, $12,358.50 of which is denied without prejudice, and defers ruling on $10,723 of the fees requested in the sixth interim application by Pillsbury Winthrop. Taking into account the voluntary reductions by the applicant, the court allows interim compensation in the amount of $545,345.60 and expense reimbursement in the amount of $18,014.59.

Good cause appearing, IT IS SO ORDERED.