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ORDERED in the Southern District of Florida on April 24, 2025.
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Laurel M. Isicoff, Judge
United States Bankruptcy Court
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
IN RE: CASE NO. 24-23368-BKC-LMI
SOUL WELLNESS LLC, Chapter 11
Subchapter V
Debtor.
ORDER ON DEBTOR’S APPLICATION FOR APPROVAL OF EMPLOYMENT
OF ATTORNEY JACQUELINE CALDERIN AND AGENTIS PLLC AS GENERAL
BANKRUPTCY COUNSEL FOR THE DEBTOR-IN-POSSESSION
This matter came before the Court for hearing on January 16, 2025 at
10:30 a.m. (the “Hearing”) upon the Debtor’s Application for Approval of
Employment of Attorney Jacqueline Calderin and Agentis PLLC as General
Bankruptcy Counsel for the Debtor-In-Possession as of the Petition Date (ECF #15)
(the “Application”) filed by the Debtor and the United States Trustee’s Limited
Objection to Application to Employ Debtor’s Counsel (ECF #47) (the “Limited
Objection”) filed by the United States Trustee (“UST”). In the Limited Objection,
the UST objected only to the proposed characterization of a post-petition
payment plan incorporated into the engagement letter attached to the
Application. At the Hearing, the Court approved the Debtor’s retention of counsel
but deferred ruling, and requested further briefing, on whether the post-petition
payments will be characterized as a post-petition retainer available only to pay
Debtor’s counsel or money held in trust, and subject to the claims of all
administrative claimants should the Debtor’s bankruptcy case be
administratively insolvent.1 The parties filed supplemental briefing2 on the issue,
which the Court has reviewed. Having considered the written submissions by the
parties as well as argument at the Hearing, the Court holds that the Court has
the authority to authorize post-petition retainers under certain circumstances
but that the circumstances of this case do not support Counsel’s (defined
hereinafter) request for a post-petition retainer.
FACTUAL BACKGROUND
On December 20, 2024 (the “Petition Date”), the Debtor commenced this
bankruptcy case by filing a voluntary petition for relief under Subchapter V of
Chapter 11 of the Bankruptcy Code (the “Code”). The Debtor operates two fitness
centers located in Miami, Florida and Fort Lauderdale, Florida.
1 Order Approving in Part Application to Employ Jacqueline Calderin and Agentis PLLC as General
Bankruptcy Counsel for the Debtor in Possession as of the Petition Date and Setting Briefing
Schedule (ECF #54).
2 Memorandum of Law in Support of Application to Employ Attorney Jacqueline Calderin and
Agentis PLLC [ECF #15] (ECF #61) (“Debtor’s Memo”); United States Trustee’s Response in
Opposition to Memorandum of Law in Support of Application to Employ Jacqueline Calderin and
Agentis, PLLC (ECF #64) (“UST Response”); and Debtor’s Limited Reply to United States Trustee’s
Response in Opposition to Memorandum of Law in Support of Application to Employ Attorney
Jacqueline Calderin and Agentis PLLC [ECF #64] (ECF #70) (“Debtor’s Reply”).
Pre-petition, the Debtor retained Attorney Jacqueline Calderin and Agentis
PLLC (collectively, “Counsel”), as its bankruptcy counsel and executed a retainer
agreement which (subject to the provisions of this Court, the Code, and the
bankruptcy rules and local rules) governs the relationship between the Debtor
and Counsel (the “Retainer Agreement”).3
Because, according to Counsel, the Debtor could only afford to pay
Counsel a small pre-petition retainer, the Debtor and Counsel agreed that the
Debtor would set aside a sum every month to cover a portion of Counsel’s fees
and expenses and the Subchapter V Trustee’s fees and expenses as a post-
petition retainer (the “Post-petition Retainer”)4. The Retainer Agreement provides
that (subject to Court approval) the Debtor would deposit $6,000 each month—
$5,0005 earmarked for Counsel’s post-petition fees and expenses; and $1,000
for the Subchapter V Trustee, which funds would be held by Counsel in its trust
account. The Retainer Agreement provides that these funds would be payable to
Counsel and the Subchapter V Trustee only upon application by each and
approval of this Court.
On December 23, 2024, Counsel filed the Application. On January 14,
2025, the UST filed the Limited Objection, objecting only to Counsel’s request
that the monthly payments into its trust account on account of Counsel’s fees
be characterized as a post-petition retainer arguing first, that any proposed use
3 The Retainer Agreement is attached to the Application as Exhibit A.
4 The exact language in the Retainer Agreement is: “You further agree to pay the sum of $6,000
on the 1st day of month [sic] after the case filing to Agentis PLLC during the pendency of the case
as a post-petition retainer towards future fees.”
5 Counsel announced at the Hearing that, in order to assist Debtor with its cash flow, it had
reduced the monthly payment amount to Agentis from $5,000 per month to $3,500 per month.
of property of the estate requires application pursuant to 11 U.S.C. §363; and
second, that holding such funds as a retainer as opposed to holding them merely
in trust gives Counsel the equivalent of a super-priority claim for its fees over
any other administrative claim. Instead, the UST argues that the Court should
enter an order holding that any funds transferred to Counsel’s trust account
post-petition remains property of the estate for the potential pro rata benefit of
all administrative claimants, and not just for the benefit of Counsel.
ANALYSIS
Initially the UST appeared to object to payments of post-petition retainers
in general; but in its post-Hearing submission the UST recognizes that post-
petition retainers are appropriate so long as certain criteria are satisfied.
However, the UST argues that such criteria are not satisfied in this instance. The
UST does not object to Counsel’s retention on the terms set forth in the
Application because, the UST argues, holding the funds in trust does not change
the funds’ characteristic as property of the estate. The UST does object to
treating those escrowed funds as a retainer, as provided by the terms of the
Retainer Agreement, because a retainer provides extra security for payment of
Counsel’s fees to which Counsel is not entitled.6
The law is clear that the Court has discretion to authorize a post-petition
retainer under 11 U.S.C. §328(a). Section 328 provides that a debtor in
possession may employ a professional “on any reasonable terms and conditions
6 In contrast, the UST has not objected to treating post-petition funds deposited for the benefit
of Subchapter V trustees as retainers. The UST argues that, unlike a debtor’s original counsel,
a Subchapter V trustee does not have an opportunity to obtain a retainer, and some assurance
of payment, before the case is filed.
of employment, including on a retainer.” 11 U.S.C. §328(a). The “retainer” in
section 328 is not qualified by any pre-petition payment requirement. See In re
Knudsen Corp., 84 B.R. 668, 672 (B.A.P. 9th Cir. 1988); see also In re Golden
Fleece Beverages, Inc., 2021 WL 6015422, at *4 (Bankr. N.D. Ill. 2021); In re
Mariner Post-Acute Network, Inc., 257 B.R. 730–31 (Bankr. D. Del. 2000). The
issue is what should a court consider when determining whether to grant the
request.
The UST’s first objection is that Counsel failed to seek authority for
payment in accordance with 11 U.S.C. §363(b). The UST argues that, as the Post-
petition Retainer will be paid from property of the estate, and section 363(b)
provides the mechanism for the use of property of the estate outside of the
ordinary course of business, such as the use of property of the estate for post-
petition retainers, Counsel was required to seek relief pursuant to section 363(b).
See Golden Fleece, 2021 WL 6015422, at *4. “Retainers to bankruptcy counsel
are not paid in the ordinary course of business, but the Code provides a method
for obtaining court approval to use property of the estate outside of the ordinary
course. . . . Simply because postpetition retainers are not ordinarily part of the
compensation arrangement, however, does not bar their use.” Id. However, this
Court has authorized payment of post-petition retainers from estate funds many
times over the past nineteen years – whether to committee counsel, or special
counsel, or even substitute debtor’s counsel. Never, in any of those instances,
has authorization been sought under section 363(b). And never, previously, has
the UST argued that section 363(b) authorization is required. Indeed, as noted
by the court in Knudsen, the payment of a post-petition retainer is authorized
under section 328, which provides independent authority for the payment. See
Knudsen, 84 B.R. at 670–71. Accord In re Raocore Tech., LLC, 2025 WL 828880
(Bankr. D.D.C. 2025); Mariner Post-Acute Network, 257 B.R. 723 (in each case
the issue of the appropriateness of a post-petition retainer was considered
without any reference whatsoever to section 363(b)).7
Having determined that allowance of a post-petition retainer paid out of
estate funds is appropriate under certain circumstances, and that a formal
request citing to section 363(b) is not required, the Court will now turn to what
the Court should consider in determining whether to approve such a request.
The Debtor cites to Knudsen, 84 B.R. 668 and Golden Fleece, 2021 WL
6015422 in support of its argument that the Court should approve the Post-
petition Retainer. In Knudsen, the Ninth Circuit Bankruptcy Appellate Panel
considered whether the bankruptcy court has authority to approve a fee payment
and application procedure that permits periodic post-petition payments to
professionals without prior court approval of the payments. In reaching its
conclusion that the requested fee retainer provisions were appropriate, the court
outlined the following four factors a court should consider when reviewing
compensation arrangements that depart from typical pre-petition retainer
agreements:
(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;
7 If a creditor had a security interest in the Debtor’s funds, Counsel would be required to seek
authority to use the cash collateral to pay any post-petition funds, whether as a retainer or
otherwise. In this case, the SBA agreed to use of its cash collateral to fund the Post-petition
Retainer.
(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.
Knudsen, 84 B.R. at 672–73.
In Golden Fleece, the Bankruptcy Court for the Northern District of Illinois
approved a post-petition retainer for a Subchapter V debtor’s replacement
counsel and in doing so looked to the factors set forth in Knudsen. Golden Fleece,
2021 WL 6015422, at *4–5. However, the court noted that its consideration was
not limited to the four factors set forth in Knudsen.
The Knudsen factors may be more or less important, and there may
be other relevant factors, depending on the circumstances of the
case. See In re Mariner Post-Acute Network, Inc., 257 B.R. 723, 731
(Bankr. D. Del. 2000) (other factors could include whether debtors
would prefer monthly rather than quarterly payments, the effect of
the proposal on the court’s ability to adequately review fee
applications, the economic impact of the payment arrangement on
the debtor, the debtor’s ability to reorganize, and the reputation of
proposed counsel).
Id. at *6.
In a more recent decision on this issue, the Court in Raocore outlined
additional factors that it believes are appropriate to considering the
appropriateness of a post-petition retainer for counsel. In Raocore, the court
outlined its standards for approval of what the court called evergreen retainers.
“In a chapter 11 case, an evergreen retainer agreement contemplates that a
debtor’s professional’s interim compensation shall be paid from the debtor’s
operating capital, holding the original retainer for application towards a final fee
application.” Raocore, 2025 WL 828880, at *4.8
8 In applying those standards, the Raocore court declined to approve the requested retainer
arrangement.
[T]his Court agrees that reasonable evergreen retainers are
permissible in certain chapter 11 cases with: (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. In
addition to the foregoing notice and disclosure requirements, before
approving an evergreen retainer provision, the Court must consider
the reasonableness of the employment application and the
underlying evergreen retainer, especially whether they are tailored
to both the requirements of the Bankruptcy Code and the particular
circumstances of the individual chapter 11 proceeding. See In re
Insilco Techs., Inc., 291 B.R. 628, 634 (Bankr. D. Del. 2003).
Although no one factor is determinative, factors to be considered in
determining whether the terms of a proposed retention are
reasonable include (i) the relationship between the Debtor and the
applicant, including whether the parties have equal bargaining
power engaging in an arms-length negotiation; (ii) whether the
proposed terms of retention are in the best interests of the estate;
(iii) whether there is creditor opposition to the retention or retainer
provisions; and (iv) whether given the size and circumstances of the
case, the amount and terms of the retainer are reasonable, including
whether the terms provide an appropriate level of risk minimization
taking into consideration any other risk minimization factors such
as an administrative order or carve-outs. See id.; see also In re
Knudsen, 84 B.R. 668, 672–73 (B.A.P. 9th Cir. 1988) (holding that
an applicant seeking approval of an evergreen retainer agreement
bears the burden of establishing that the case is one in which such
agreement is necessary, such as a case where exceptionally large
fees will accrue each month or that waiting an extended period of
time for payment would place an undue hardship on counsel).
Additionally, if an applicant seeks approval of an evergreen retainer,
the terms of the evergreen retainer must be clearly disclosed in the
applicable employment application and the retention agreement
outlining the terms and conditions of the evergreen retainer must be
attached to the application. See Insilco, 291 B.R. at 636.
Id. at *5.
Like the courts in Golden Fleece and Raocore, the Court agrees that all of
these factors provide guidance. Moreover, the Court also finds that, although
procedurally, citation to section 363(b) is not required, an additional
consideration is whether the agreement by a debtor to negotiate a post-petition
retainer is an appropriate exercise of the debtor’s business judgment. Thus, in
exercising its discretion, the Court must consider the arrangement both from the
perspective of the professional and of the debtor.
Using this framework for guidance, the Court will review the Post-petition
Retainer request, addressing some of the factors considered by the Raocore
court.
A. Notice and Disclosure
The UST argues that the Application did not disclose the intended nature
of the escrowed funds. Paragraph 14 of the Application provides: “the Debtor
has agreed to deposit the sum of $5,000.00 per month to be held in trust for
payment of court-awarded fees and costs to [Counsel].” The Retainer Agreement
attached to the Application states that the monthly fees are to be held “as a post-
petition retainer toward future fees.” However, the Application only states the
funds will be held in trust. While the Court agrees with the UST that the better
practice would be to explicitly describe the intended nature of the funds to be
deposited, because the Retainer Agreement was attached to the Application, the
Court finds that the Application contained adequate disclosures.
B. Relationship Between Counsel and Debtor
This factor focuses on whether there is any kind of collusion, undue
pressure, or other factor that would impact the decision by bankruptcy counsel
or the debtor with respect to seeking either a pre-petition or post-petition
retainer. See, e.g., Raocore, 2025 WL 82880, at *7. However, this Court finds
that the appropriate consideration is broader – is there anything about the pre-
petition relationship between a debtor and the professional, from the perspective
of either the debtor or the professional, that weighs in favor (or against) the
approval of a post-petition retainer.
Counsel disclosed at the first day hearings that Counsel became familiar
with the Debtor, its principal, and the employees of the Debtor because some
members of the law firm exercise and train at the Miami facility. Counsel also
disclosed that, based on the community outreach work offered by the Debtor and
its staff, Counsel has come to admire the Debtor’s mission beyond providing
exercise and training. Thus, the relationship between the Debtor and Counsel
reflects some relationship beyond mere attorney-client. This pre-petition
relationship, combined with Counsel’s admiration for the work done by the
Debtor at its facilities, surely played a role in Counsel’s decision to take the
representation on such a small retainer.9
C. Best Interests of the Estate
Counsel argues that without approval of the Post-petition Retainer, the
Debtor would not have been able to obtain counsel to file this case on an
emergency basis during the holidays. The UST points out that the Debtor had
plenty of cash before the case was filed and Counsel, the UST argues, chose not
to ask for a larger retainer. Counsel counters that the Debtor needed that money
to address the imminent eviction from its Miami business premises, which
eviction precipitated the filing of the bankruptcy case.
9 In Raocore the court determined that this factor weighed against approval of an evergreen
retainer because the negotiation between the debtor and the applicants was not at arms-length.
Raocore, 2025 WL 828880, at *7.
Counsel also argues that the Debtor’s proposed budget reflecting a
projected allowance of the $3,500 per month to Counsel does not have any
negative impact to the estate, nor would it impose an economic hardship on the
Debtor, its business operations, or its ability to reorganize. Further, Counsel
argues that approval of the Post-petition Retainer provided this cash-strapped
Debtor a mechanism to be able to hire competent counsel to be able to
successfully reorganize without being turned away at the outset for an inability
to pay counsel.
However, as the Raocore court noted, “[w]hile the willingness of [Counsel]
to represent a corporation engaged in significant pre-petition litigation and facing
significant post-petition litigation did provide the benefit of allowing the Debtor
to remain in bankruptcy, there was nothing unique brought to the case by
[Counsel] different than any other bankruptcy firm accepting a [similar]
engagement that would support approval of the [Post-petition Retainer] as in the
best interests of the estate.” Id. The Court agrees. Counsel knew of the Debtor’s
financial constraints at the inception of the case and chose to take the
engagement, nonetheless. Moreover, the Court notes that the UST is not
objecting to the monthly post-petition escrow of the funds with Counsel, only
with its characterization of a retainer that is no longer property of the estate once
deposited.
D. Creditor Opposition
While the UST is the only party who objected to the approval of the Post-
petition Retainer, the Court notes that the only active creditor, the former
landlord, is no longer involved. As this is a Subchapter V case, there is no
committee appointed, and the Subchapter V Trustee has not expressed any
position except with respect to his own monthly deposit, to which the UST has
not raised any objection. Thus, the Court will consider the UST’s objection based
on its right to be heard on all matters. See 11 U.S.C §307.
E. Reasonableness of Post-petition Retainer Given the Size and
Circumstances of this Case
“As designed, subchapter V is intended to be a streamlined process for
qualifying debtors resulting in lower costs to facilitate a more efficient
reorganization. Given this background, it will be the truly rare subchapter V case
that will be of a size and exceptional nature to warrant an evergreen retainer.”
Raocore, 2025 WL 828880, at *8. Counsel acknowledges this is not a “large”
case10 but argues that the amount of legal fees and costs required to take the
Debtor to confirmation is “exceptionally large” for this particular Debtor. This is
because, when Counsel filed this case, Counsel anticipated future litigation with
Debtor’s then landlord, in addition to other contested matters to resolve other
creditor claims.11 Although the case started out adversarial with the Debtor’s
prior landlord, those matters have been resolved. There do not appear to be any
further anticipated contested matters. Moreover, Counsel knew that there was
likely to be significant litigation with the landlord when it agreed to take the case;
indeed, as already stated, the dispute with the landlord is the reason the case
was filed. Therefore, the Court finds that there is nothing about the size and
circumstances of this case that warrants a post-petition retainer.
10 Debtor’s Memo at 5.
11 Debtor’s Memo at 6.
The Court is also unconvinced that the failure to have the escrowed funds
treated as a retainer creates an undue hardship on Counsel, shifting the burden
of administrative insolvency to Counsel. However, as in any bankruptcy case,
there is a point at which a pre-petition retainer, no matter how robust, may be
exhausted. The exhaustion of a smaller pre-petition retainer merely causes the
event to occur sooner. Moreover, Counsel can file an interim fee application if
appropriate. Although interim fee applications are not common in Subchapter V
cases, they are not prohibited. Thus, to the extent that this Subchapter V case
cannot be concluded in as timely a manner as all would hope, the concerns
raised by Counsel regarding risk of non-payment if the case becomes
administratively insolvent can be mitigated somewhat by the filing of an interim
fee application which, if granted, will cause all or part of the funds deposited to
that time to be paid, subject only to disgorgement.12
Accordingly, the Court determines that this case is not a Subchapter V
case of a size or exceptional nature to warrant authorizing the Post-petition
Retainer.
CONCLUSION
For the foregoing reasons, the Court finds that, while post-petition
retainers are authorized under the Bankruptcy Code, and appropriate under
certain circumstances, the facts and circumstances of this case do not support
approval of the Post-petition Retainer.
It is therefore ORDERED as follows:
12 The Court always retains its inherent authority to order disgorgement of all professional fees
paid under 11 U.S.C. §§328, 330, 331.
1. The Limited Objection is SUSTAINED.
2. The Application is DENIED in part with respect to the Post-petition
Retainer incorporated into the Retainer Agreement attached to the
Application. However, the monthly deposit of funds is approved.
3. Any funds transferred to Counsel’s trust account post-petition remain
property of the estate.
###
Copies to:
Jacqueline Calderin, Esq.
Daniel L. Gold, Esq.
Attorney Calderin is directed to serve a copy of this Order on interested
parties who do not receive service by CM/ECF, and file a proof of such service
within two (2) business days from entry of the Order.