BANKRUPTCY CORNER
BANKRUPTCY CORNER
Evergreen Retainers are Permissible in Subchapter V
JASON S. RIGOLI
Judge Isicoff issued an opinion in In re Soul Wellness LLC, Case No. 24-23368- LMI, 2025 Bankr. LEXIS 1026, 2025 WL 1213300( Bankr. S. D. Fla. Apr. 24, 2025), holding that bankruptcy courts have the discretion to authorize post-petition retainers, including“ evergreen” retainers, in appropriate circumstances.
As Judge Isicoff points out,“[§] 328 provides that a debtor in possession may employ a professional " on any reasonable terms and conditions of employment, including on a retainer [,]’” and“‘[ r ] etainer [] is not qualified by any pre-petition requirement.” 2025 Bankr. LEXIS 1026 at * 5( internal citations omitted). Based upon the express authority granted under § 328( a) to permit post-petition retainers, Judge Isicoff overruled an objection arguing that the request had to be made under § 363( b) for“ use of estate property outside the ordinary course of business.”
Notwithstanding the authority to grant a post-petition retainer, the court has discretion and must determine whether approving the retainer is appropriate. The court must consider the totality of the circumstances, including considering from the perspective of the professional and the debtor, and whether there was any collusion, undue pressure, or other factors such as the pre-petition relationship between the debtor and professional. Id. at * 11-13.
Judge Isicoff pointed to certain nonexhaustive factors to consider when“ compensation arrangements depart from typical prepetition retainer agreements, including:( 1) the case is an unusually large one in which an exceptionally large amount of fees accrue each month;( 2) the court is convinced that waiting an extended period for payment would place an undue hardship on counsel;( 3) the court is satisfied that counsel can respond to any reassessment in one or more of the ways listed above; and( 4) the fee retainer procedure is, itself, the subject of a noticed hearing prior to any payment thereunder. Id. at * 7-9.
Judge Isicoff pointed to additional factors with respect to“ evergreen” retainers, such as:( i) appropriate notice;( ii) specific disclosure of the existence of an evergreen retainer in any employment application filed with the Court;( iii) the inclusion of any retention agreement with any employment application;( iv) terms in the applicable retention agreement making clear that any amounts paid shall be held in trust until a final fee application is approved( or other time period as agreed by the parties and approved by the Court); and( v) ultimate approval of any employment application by the Court prior to any payments made by any entity thereunder. Id. at * 9-10.
Conclusion
In a subchapter V bankruptcy case, post-petition and evergreen retainers are permitted, but not guaranteed to be approved in every circumstance. The determination will be made on a case-bycase basis.
This article was submitted by Jason S. Rigoli, Esq., Furr and Cohen, P. A., 2255 Glades Road, Suite 419A, Boca Raton, FL 33431, jrigoli @ furrcohen. com
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