Gordon Brothers Retail Partners has asked a Delaware bankruptcy court to compel PayPal Inc. to turn over approximately $600,000 in reserve funds that the asset purchaser claims belongs to it following its acquisition of substantially all of Big Lots Inc.'s remaining assets earlier this year.
In a motion filed October 8, 2025, in the U.S. Bankruptcy Court for the District of Delaware, Gordon Brothers Retail Partners LLC (GBRP) alleges that PayPal has ignored multiple written demands to release the funds, forcing the company to seek judicial intervention in the high-profile retail bankruptcy case.
The dispute centers on reserve funds that PayPal has been holding in connection with Big Lots' customer payment processing accounts. GBRP argues these funds rightfully belong to it under the terms of an Asset Purchase Agreement approved by the court on January 2, 2025, which transferred substantially all of the retailer's remaining assets to the liquidation specialist.
Background of the Big Lots Bankruptcy
Big Lots and its affiliated entities filed for Chapter 11 bankruptcy protection on September 9, 2024, as the discount retailer struggled with declining sales and mounting financial pressures. The Columbus, Ohio-based company, known for selling closeout merchandise and home goods, had been grappling with increased competition and changing consumer shopping patterns.
Following the bankruptcy filing, the court approved GBRP's acquisition of substantially all of the debtors' remaining assets through a sale order entered January 2, 2025. The transaction closed on January 3, 2025, transferring the assets "free and clear" of liens and encumbrances to GBRP.
According to the Asset Purchase Agreement, GBRP acquired rights to "all prepaid and deferred items, including any royalties, advance payments, prepayments, prepaid expenses, prepaid rentals, prepaid assets, unbilled charges, fees, security and other deposits or the like" under Section 2.01(a)(xix) of the agreement.
The PayPal Reserve Funds Dispute
The contested funds stem from Big Lots' use of PayPal to process certain customer merchandise purchases prior to the bankruptcy filing. Payment processors like PayPal typically maintain reserve accounts to cover potential chargebacks, refunds, and disputes.
According to court documents, the last customer transaction processed through PayPal occurred on or around March 17, 2025, meaning nearly seven months have passed since Big Lots permanently ceased operations and processed its final PayPal transaction.
GBRP's motion states: "Nearly seven (7) months have passed since Big Lots permanently ceased operations and the last PayPal transaction was processed."
Unanswered Demand Letters
GBRP's legal team attempted to resolve the matter outside of court through direct communication with PayPal. The company sent formal demand letters on August 21, 2025, and September 9, 2025.
In the August 21 letter, GBRP's counsel wrote: "We understand that PayPal holds an approximate reserve of $600,000 in connection with the Debtors' accounts with PayPal, the rights to any refund of which belongs to GBRP pursuant to the terms of the aforementioned APA and related Sale Approval Order."
The September 9 follow-up letter took a more forceful tone, warning that "in the event we do not hear from PayPal prior to September 16, 2025, GBRP will have no other option than to commence suit against PayPal in the Bankruptcy Court to recover the reserve funds being withheld by PayPal."
Despite these communications, GBRP states that PayPal "has to date failed to respond" to either letter and "has not returned any portion of the PayPal Reserve Funds."
Legal Arguments and Court Jurisdiction
In its motion, GBRP argues that the bankruptcy court has retained jurisdiction to enforce the terms of both the Sale Order and the Asset Purchase Agreement. The Sale Order specifically provides that the court maintains authority "to interpret, implement, and enforce the terms and provisions of the Sale Order and the GBRP APA."
GBRP seeks relief under multiple sections of the Bankruptcy Code, including Section 105(a) (general powers), Section 363 (use, sale, or lease of property), and Section 542 (turnover of property of the estate).
The motion emphasizes that the reserve funds constitute GBRP's "exclusive property" under the terms of the court-approved asset purchase agreement, making PayPal's continued retention of the funds improper.
Upcoming Court Proceedings
The bankruptcy court has scheduled a hearing on GBRP's motion for November 4, 2025, at 1:00 p.m. Eastern Time. Any objections to the motion must be filed by October 22, 2025, at 4:00 p.m. Eastern Time.
GBRP has reserved the right to supplement its motion to assert additional claims, including potential damages resulting from PayPal's alleged failure to turn over the funds and enforcement of other rights under the Asset Purchase Agreement.
The case is being handled in the U.S. Bankruptcy Court for the District of Delaware under Case No. 24-11967 (JKS), with cases being jointly administered. GBRP is represented by Riemer & Braunstein LLP as lead counsel and Ashby & Geddes, P.A. as Delaware counsel.
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