Debtors' Motion, Payment of Commissions Earned by SRB Capital, LLC — In re Buddy Mac Holdings, LLC

Summary

The Debtors' Motion for Entry of an Order Authorizing and Directing the Payment of Commissions Earned by SRB Capital, LLC for Employee Retention Credit Refunds, filed March 4, 2026 as Doc 377 in In re Buddy Mac Holdings, LLC, et al., Case No. 25-34839-mvl11, in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The motion states that under an agreement executed on or about July 18, 2023, SRBC would receive 15% of the ERC Refund as its Commission. It lists IRS refund checks received by BMH-HR for quarters of 2021, including $2,582,941.10 dated March 25, 2025. The Debtors ask for an order authorizing and directing payment of all unpaid Commissions, stating that the final Commission payment of $370,804.37 has not been paid.

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“Debtors' Motion, Payment of Commissions Earned by SRB Capital, LLC — In re Buddy Mac Holdings, LLC.” Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/377-motion-pay-srb-capital-erc-commissions-b9f60e673d/, SHA-256 6d6a6d706a09ea154acd363b77e35e41686e7a016afc84eebca76abe49f4ad1e.

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Case 25-34839-mvl7 Doc 377 Filed 03/04/26 Entered 03/04/26 16:43:59 Desc Main
Document Page 1 of 11

John J. Kane (SBN 24066794) Mark C. Taylor (SBN 19713225)
Kyle Woodard (SBN 24102661) Casey Roy (SBN 00791578)
JaKayla J. DaBera (SBN 24129114) KANE RUSSELL COLEMAN LOGAN PC
KANE RUSSELL COLEMAN LOGAN PC 401 Congress Ave., Suite 2100
901 Main Street, Suite 5200 Austin, Texas 78701
Dallas, Texas 75202 Telephone: (512) 487-6650
Telephone: (214) 777-4200 Email: mtaylor@krcl.com
Email: jkane@krcl.com Email: croy@krcl.com
Email: kwoodard@krcl.com
Email: jdabera@krcl.com

COUNSEL FOR DEBTORS AND
DEBTORS-IN-POSSESSION

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

§
In re: § Chapter 11
§
BUDDY MAC HOLDINGS, LLC, et al., § Case No. 25-34839-mvl11
§
Debtors.1 § (Jointly Administered)
§

DEBTORS’ MOTION FOR ENTRY OF AN ORDER AUTHORIZING
AND DIRECTING THE PAYMENT OF COMMISSIONS EARNED BY
SRB CAPITAL, LLC FOR EMPLOYEE RETENTION CREDIT REFUNDS

If you object to the relief requested, you must respond in writing. Unless
otherwise directed by the Court, you must file your response electronically at
https://ecf.txnb.uscourts.gov/ no more than twenty-four (24) days after the
date this motion was filed. If you do not have electronic filing privileges, you
must file a written objection that is actually received by the clerk and filed on
the docket no more than twenty-four (24) days after the date this motion was
filed. Otherwise, the Court may treat the pleading as unopposed and grant
the relief requested.

A hearing will be conducted on this matter at a setting to be provided by the
Court in Courtroom #2, 14th Floor, Earle Cabell Federal Building, 1100
Commerce Street, Dallas, TX 75242. You may participate in the hearing
either in person or by an audio and video connection.

1
A complete list of the Debtors in these chapter 11 cases is available at: https://dm.epiq11.com/case/buddyshome/info.
The Debtors’ service address is 400 E. Centre Park Blvd., Suite 101, DeSoto, Texas 75115.

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Audio communication will be by use of the Court’s dial-in facility. You may
access the facility at 650-479-3207, access code 2301 476 1957. Video
communication will be by use of the Cisco WebEx platform. Connect via the
Cisco WebEx application or click the link on Judge Larson’s home page.
https://us-courts.webex.com/meet/larson The meeting code is
23014761957. Click the settings icon in the upper right corner and enter your
name under the personal information setting.

Hearing appearances must be made electronically in advance of electronic
hearings. To make your appearance, click the “Electronic Appearance” link
on Judge Larson’s home page. Select the case name, complete the required
fields and click “Submit” to complete your appearance.

Buddy Mac Holdings, LLC and its debtor affiliates, as debtors and debtors-in-possession

in the above-referenced chapter 11 cases (including the Initial Debtors and the Subsequent Debtors

(each as defined herein), collectively, the “Debtors”), hereby file this Motion for Entry of an Order

Authorizing and Directing the Payment of Commissions Earned by SRB Capital, LLC for

Employee Retention Credit Refund (the “Motion”) and, in support hereof, respectfully state as

follows:

I. RELIEF REQUESTED

1. The Debtors respectfully request entry of an order, substantially in the form

attached hereto (the “Proposed Order”), authorizing and directing the payment of commissions

earned by SRB Capital, LLC (“SRBC”) under an agreement (the “Agreement”)2 with Debtor

Buddy Mac Holdings, LLC by which SRBC: (a) determined whether the Debtor(s) were eligible

for an Employee Retention Credit (“ERC”) against the Debtors’ payroll taxes as part of the

Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”); and (b) provided

information necessary for the preparation of certain documents needed for recovery of ERC

payments, including assistance in preparation of IRS Form 941-X (Adjusted Employer’s

2
A true and correct copy of the Agreement is attached as Exhibit 1 hereto.

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QUARTERLY Federal Tax Return or Claim for Refund). In support hereof, the Debtors

respectfully state as follows:

II. JURISDICTION AND VENUE

2. The United States Bankruptcy Court for the Northern District of Texas, Dallas

Division (the “Court”), has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157.

This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), (B), and (O).

3. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

4. The legal predicates for the relief requested in this Motion are sections 105(a), 363,

503(b), and 541(a) of title 11 of the United States Code (the “Bankruptcy Code” or “Code”).

III. BACKGROUND

A. Chapter 11 Cases

5. On or about December 4, 2025 (the “Initial Petition Date”),3 Buddy Mac Holdings,

LLC and its debtor affiliates identified on the attached Schedule I (the “Initial Debtors”) each filed

a voluntary petition for relief in this Court under chapter 11 of the Bankruptcy Code. The date of

each Initial Debtor’s chapter 11 petition is set forth on Schedule I.

6. On December 19, 2025, the United States Trustee for the Northern District of Texas

(the “U.S. Trustee”) appointed an Official Committee of Unsecured Creditors (the “Committee”)

in the Initial Debtors’ cases [ECF #86].

7. On January 25, 2026 (the “Subsequent Petition Date”), the additional affiliates of

Buddy Mac Holdings, LLC set forth on Schedule II (the “Subsequent Debtors”) filed voluntary

3
Buddy Mac One, LLC, BMH One RE, LLC, BMH 95 RE Caruthersville, LLC, and BMH 96 RE Marion, LLC, each
filed their chapter 11 petitions Court on December 1, 2025; however, reference to the “Initial Petition Date” means
December 4, 2025, except as otherwise expressly stated herein.

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petitions in this Court under chapter 11 of the Bankruptcy Code. The Initial Debtors and

Subsequent Debtors are collectively referenced as the “Debtors,” and each as a “Debtor.”

8. The Debtors’ chapter 11 cases are jointly administered, for procedural purposes

only, under the above-captioned lead case of Buddy Mac Holdings, LLC, Case No. 25-34839-

mvl11 [ECF Nos. 32 and 187]. The Debtors continue to operate their businesses as debtors-in-

possession pursuant to Bankruptcy Code sections 1107 and 1108.

B. Debtors’ Business Operations

9. The Debtors rented and sold furniture, electronics, appliances, and other

merchandise to customers on a rent-to-own basis. The Initial Debtors and Subsequent Debtors

operated forty-six (46) rent-to-own stores (each, a “Store” and collectively, the “Stores”), thirty-

two (32) of which were operated by Initial Debtors.

10. Additional information regarding the Debtors’ business history, capital structure,

and circumstances leading to these chapter 11 cases is set forth in the Declaration of William I.

MacDonald and the Declaration of Mark Shapiro [ECF Nos. 12-13] (the “Initial Declarations”)

and in the Supplemental Declaration of Mark Shapiro and the Supplemental Declaration of

William I. MacDonald [ECF Nos. 169 and 171] (the “Supplemental Declarations,” and together

with the Initial Declarations, the “First Day Declarations”).

C. The Employment Retention Credit Recovery

11. The ERC is a refundable tax credit available to certain eligible corporate entities

(including tax-exempt organizations) that had employees during and were affected by the COVID-

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19 pandemic.4 Qualified businesses and tax-exempt organizations include those that experienced

the required decline in gross receipts during 2020 or the first three quarters of 2021.5

12. After reviewing the program’s eligibility requirements, the Debtors believed that

they qualified for the tax credits. To facilitate the application and qualification process, the Debtors

(specifically Buddy Mac Holdings, LLC (“Holdings”))6 entered into the Agreement with SRBC

executed on or about July 18, 2023, under which the parties worked together toward the goal of

recovering ERCs approved by the IRS. Generally, the Agreement required SRBC to review the

Debtors’ eligibility and payroll qualifications and run an analysis of the Debtors’ payroll.

Agreement, at 1-2. SRBC then provided an Opinion Letter,7 an Allocation Report (which is a detail

of the employee wages listed by employee), and a Process Control Certificate;8 and issued a Form

941-X and filing instructions to the Debtors. Agreement at 2.

13. In exchange for such services, SRBC was to bill the Debtors and receive payment

in accordance with Appendix A to the Agreement. The payment structure provided that SRBC

would receive 15% of ERC Refund (the “Commission”), due when first IRS check arrived, or a

one-time cash discount rate of 10% of ERC refund available for 15 calendar days after BMH-HR

receives SRBC’s invoice. See Agreement at 8 (Appendix “A” Professional Fees, Payment Terms,

Billing Rate).

4
See https://www.irs.gov/coronavirus/employee-retention-credit, last visited February 5, 2026.
5
See https://www.irs.gov/coronavirus/employee-retention-credit#eligibility, last visited February 5, 2026.
6
The Debtors’ employees are hired through Subsequent Debtor BMH-HR, LLC (“BMH-HR”), a wholly-owned
subsidiary of Holdings. The ERC application documents were submitted by or under BMH-HR, who administers
(through ADP) all wages and compensation paid to Employees, as well as the Employee Benefits programs. See
Declaration of Mark Shapiro in Support of the Debtors’ Chapter 11 Petitions and First Day Motions (the “Shapiro
Declaration”), ECF No. 13 at ¶ 34.
7
Exhibit 2.
8
Exhibit 3.

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14. In October 2023, BMH-HR submitted Forms 941-X to the IRS for each of the

quarters in 2021 referenced below.

15. BMH-HR subsequently received payment via check from the IRS (the “ERC

Refunds”), as follows:

(a) $2,582,941.10 dated March 25, 2025 for Q1 2021;

(b) $2,615,317.32 dated November 4, 2025 for Q2 2021; and

16. BMH-HR received each of the ERC Refunds prior to the Subsequent Petition Date,

including BMH-HR’s petition. However, the Debtors have not yet paid SRBC its final

Commission payment due in the amount of $370,804.37.

17. Under applicable state law, SRBC holds an equitable lien on the fees earned on a

contingency basis under the Agreement because the SRBC performed all obligations under the

Agreement and the Debtors received the ERC funds. In addition, payment of the Commission is

an appropriate exercise of the Debtors’ business judgment, and for the reasons set forth below,

satisfies the standard for approval of the Commissions on a post-petition basis under section 363(b)

of the Bankruptcy Code.

IV. BASIS FOR RELIEF

A. Texas Law Imposes an Equitable Trust on SRBC’s Share of the ERC Refunds

18. SRBC is entitled to payment of the Commissions earned when the ERC Refunds

were paid to the Debtors by the IRS, as applicable nonbankruptcy law imposes an equitable lien

on such proceeds. Under Texas law, the party holding payment rights under a contingency fee

agreement receives a legal and equitable interest when the contingency occurs. See, e.g., Payne v.

Bowers (In re Pickens), 2019 Bankr. LEXIS 3020 at *17 (Bankr. E.D. Tex. Sept. 27, 2019)

(holding that a party with a contingent interest in a recovery “does not receive a legal or equitable

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interest pursuant to a contingency fee contract until the contingency occurs.” (emphasis added))

(citing Marre v. U.S., 117 F.3d 297, 307 (5th Cir. 1997)). Here, SRBC’s right to the Commissions

under the Agreement was contingent upon and arose when BMH-HR received a check from the

IRS for the ERC Refunds. See Exhibit 1 at p. 8. The contingency thus occurred for purposes of

payment to SRBC when the Debtors received the check dated January 13, 2026, before the

Subsequent Debtors’ petition date.

19. The right to compensation under a contingency fee arrangement is a property right

governed by state law. See In re Willis, 143 B.R. 428, 431 (Bankr. E.D. Tex. 1992) (recognizing

that a right to compensation under a contingency fee arrangement is a property right governed by

state law) (citing Barnhill v. Johnson, 503 U.S. 393 (1992)). In Texas, when a claim upon which

a contingency fee is based is liquidated and reduced to a fixed recovery, counsel securing the

recovery is entitled to an equitable lien on the recovery securing payment of its services. Id. at 432

(citing Tarrant County Hosp. Dist. v. Jones, 664 S.W.2d 191, 195-96 (Tex. App.—Fort Worth

1984, no writ); see also Floyd v. Dykeswill, Ltd. (In re Dykeswill, Ltd.), 365 B.R. 683, 687-88

(S.D. Tex. 2007) (interest of holder of contingency fee claim vests upon settlement of claim).

Failing to pay a contingency fee that matured prior to the BMH-HR petition date would be

“inequitable and will not be condoned.” Willis, 143 B.R. at 433.

20. Contingency fee recoveries are also governed by the “common fund doctrine,”

which recognizes that “one who accomplishes the creation of a fund for the benefit of another is

entitled to reimbursement therefrom for the reasonable costs thereby incurred …” Id. (citing

Haynes v. Rederi A/S Alladin, 362 F.2d 345, 351 (5th Cir. 1966); Cappel v. Adams, 434 F.2d 1278,

1279 (5th Cir. 1970) and Knebel v. Capital Nat’l Bank, 518 S.W.2d 795, 799 (Tex. 1974)). In

Willis, the Court applied the common fund doctrine to allow recovery of fees out of settlement

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proceeds “in preference and priority over other claimants rather than as a general unsecured

creditor of Debtor’s estate.” Willis, 143 B.R. at 434.

21. Here, SRBC’s efforts to obtain the ERC Refunds provided a direct benefit to the

Debtors. Without SRBC’s services and oversight of the ERC application process, including

analyzing the Debtors’ eligibility and qualifications for the ERC Refunds, and preparation of the

necessary IRS forms and other documents, the Debtors would not have been able to receive the

full benefits of the ERC.

22. The Debtors therefore request the entry of an order authorizing the payment to

SRBC of all amounts due and owing pursuant to the Agreement in accordance with that contract.

Doing so will not violate any payment priority scheme because SRBC’s claim to the Commission

is secured and excluded from Phonix’s DIP Collateral. Further, payment to SRBC will prevent

the unjust enrichment of the estate and its creditors.

B. Payment of the Commissions Is a Proper Exercise of the Debtors’ Business Judgment
Under Section 363(b) and 105(a) of the Bankruptcy Code

23. As noted above, the Debtors assert that SRBC’s Commissions payable from the

ERC Refund currently held by the Debtors are not “property of the estate” as contemplated by

section 541(a). Nevertheless, even if the Court were to find that the entire ERC Refund currently

held by the Debtors constitutes “property of the estate,” the Debtors respectfully request that they

be authorized and directed to pay the Commissions pursuant to sections 363(b) and 105(a) of the

Code.

24. Section 363(b) provides, in pertinent part, that “[t]he trustee, after notice and a

hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate

…” 11 U.S.C. § 363(b). Courts, including the Fifth Circuit, uniformly hold that debtors-in-

possession must justify the proposed transaction, “[t]hat is, for the debtor-in-possession or trustee

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to satisfy its fiduciary duty to the debtor, creditors and equity holders, there must be some

articulated business justification for using, selling, or leasing the property outside the ordinary

course of business.” In re Continental Air Lines, Inc., 780 F.2d 1223, 1226 (5th Cir. 1986)

(citations omitted); see also In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y 1989)

(stating that “[t]he debtor must articulate some business justification, other than the mere

appeasement of major creditors, for using, selling or leasing property outside the ordinary course

of business, before the court may permit such disposition under § 363(b).”) (citations omitted);

Off. Comm. of Unsecured Creditors v. Bouchard Transp. Co. (In re Bouchard Transp. Co.), 74

F.4th 743, 750 (5th Cir. 2023) (finding that the “business judgment standard” is “less exacting and

gives the debtor more discretion . . . based on merely ‘sound business reasons.’”) (citations

omitted).

25. In addition, section 105(a) of the Code provides that the bankruptcy court may

“issue any order, process or judgment that is necessary or appropriate to carry out the provisions

of this title.” In Ionosphere Clubs, supra, the bankruptcy court found that section 105(a) empowers

the court “to authorize the payment of pre-petition debt when such payment is needed to facilitate

the rehabilitation of the debtor” and that such ability “is not a novel concept.”

26. Here, the Debtors satisfy the business judgment standard and have a valid business

justification for payment of the Commissions to SRBC for at least three reasons. First, payment of

the Commission to SRBC is a contractual obligation for services that produced significant value

to the estate. The total amount paid to the Debtors as ERC Refunds is almost $8.5 million, before

payment of the Commissions to SRBC. At bottom, SRBC’s services resulted in a direct,

identifiable, and material benefit to the Debtors and the estate.

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27. Second, the Debtors wish to maintain the relationship with SRBC, in the event that

any issues or concerns arise in conjunction with the ERC Refunds, including any potential IRS

inquiries or audits. While the Debtors believe that to be highly unlikely, working with SRBC would

be critical in responding to such inquiries.

28. Third, payment of the Commission to SRBC will avoid future litigation in this

Court regarding both the nature and the amount of SRBC’s claim, and the concomitant (and

unnecessary) expenditure of estate resources.

29. Accordingly, the Debtors request the entry of an order authorizing and directing

BMH-HR and the Debtors to pay SRBC all unpaid Commissions due from the ERC Refunds in

accordance with the terms of the Agreement.

V. NOTICE

11. Notice of this Motion will be provided to all parties receiving notices in this case

via the Court’s CM/ECF system and all parties on the Claims Agent’s Master Service List. The

Debtors respectfully submit that, in light of the nature of the relief requested, no further notice is

necessary.

VI. PRAYER

WHEREFORE, the Debtors request that this Court enter the order, substantially in the form

of Proposed Order attached hereto, granting the relief requested herein and granting such other and

further relief as this Court may deem just and proper.

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Dated: March 4, 2026 Respectfully submitted,

KANE RUSSELL COLEMAN LOGAN PC

/s/ John J. Kane
John J. Kane (SBN 24066794)
Kyle Woodard (SBN 24102661)
JaKayla J. DaBera (SBN 24129114)
901 Main Street, Suite 5200
Dallas, Texas 75202
Telephone: (214) 777-4200
Email: jkane@krcl.com
Email: kwoodard@krcl.com
Email: jdabera@krcl.com

Mark C. Taylor (SBN 19713225)
Casey Roy (SBN 00791578)
401 Congress Ave., Suite 2100
Austin, Texas 78701
Telephone: (512) 487-6650
Email: mtaylor@krcl.com
Email: croy@krcl.com

COUNSEL FOR DEBTORS AND
DEBTORS-IN-POSSESSION

CERTIFICATE OF SERVICE

The undersigned hereby certifies that on March 4, 2026, a true and correct copy of the
foregoing Motion, together with all exhibits and attachments hereto, was filed with the Court and
served via (i) the Court’s CM/ECF system upon all parties registered to receive such electronic
service in this bankruptcy case and (ii) by the Debtors’ service agent on the Master Service List.

/s/ John J. Kane
John J. Kane

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