Buddy Mac Holdings, LLC, operator of 46 rent-to-own stores, filed a motion on March 4, 2026, seeking bankruptcy court authorization to pay $370,804.37 in commissions to SRB Capital, LLC for services related to obtaining approximately $8.5 million in Employee Retention Credit refunds from the IRS. The motion, filed in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, contends that the ERC consultant holds an equitable lien on its earned fees under Texas law and that payment constitutes a sound exercise of business judgment.
Company Background and Business Operations
The debtors rented and sold furniture, electronics, appliances, and other merchandise to customers on a rent-to-own basis across 46 store locations. The initial debtors filed chapter 11 petitions on or about December 4, 2025, with additional affiliated entities — designated as the subsequent debtors — filing on January 25, 2026. The cases are jointly administered under Case No. 25-34839-mvl11. The United States Trustee appointed an Official Committee of Unsecured Creditors on December 19, 2025. The debtors continue to operate their businesses as debtors-in-possession.
The debtors' employee operations were administered through BMH-HR, LLC, a wholly-owned subsidiary of Buddy Mac Holdings, LLC, which managed all wages, compensation, and employee benefits programs through ADP.
The ERC Engagement and Refund History
The Employee Retention Credit is a refundable tax credit established under the CARES Act for eligible businesses affected by the COVID-19 pandemic. Buddy Mac Holdings, LLC entered into an engagement agreement with SRB Capital, LLC — an Ohio-based ERC consulting firm — on July 18, 2023. Under the agreement, SRB Capital was to review the debtors' eligibility and payroll qualifications, run payroll analysis using proprietary software, provide an opinion letter and allocation reports, and prepare IRS Form 941-X amended returns for submission.
The fee structure provided that SRB Capital would receive 15% of any ERC refund upon receipt, with an alternative discounted rate of 10% available if paid within 15 calendar days of invoicing.
BMH-HR, LLC submitted Forms 941-X to the IRS in October 2023 for the first three quarters of 2021. The IRS subsequently issued three refund payments: $2,582,941.10 on March 25, 2025, covering the first quarter of 2021; $2,615,317.32 on November 4, 2025, covering the second quarter of 2021; and $3,249,319.19 on January 13, 2026, covering the third quarter of 2021. All three ERC refund checks were received before the subsequent debtors' petition date of January 25, 2026. The total ERC refunds amounted to approximately $8.45 million.
The debtors have not yet paid SRB Capital its commission of $370,804.37.
ERC Qualification Basis
The debtors' ERC eligibility was supported by a professional opinion letter from SRB Capital dated September 21, 2023, which concluded that the MacDonald Aggregated Group — consisting of nine related business entities under common ownership — qualified for the ERC based on a partial suspension of operations exceeding 10% due to COVID-19 government orders from January 1, 2021, through September 30, 2021.
The aggregated group had 260 full-time employees as of 2019, making it eligible for the 2021 ERC program (which required fewer than 500 full-time employees) but not the 2020 program (which required fewer than 100). The qualification was based primarily on government restrictions in New Mexico, where the group operated one of its locations. SRB Capital's analysis documented a progression of New Mexico public health emergency orders from March 2020 through late 2021, including capacity restrictions, masking requirements, and the state's county-by-county operating framework.
The engagement also included an "Audit Armor" package with an opinion letter, allocation reports, a process control certificate, prepared 941-X returns, and IRS audit support.
Legal Basis for the Motion
The motion presents two primary legal arguments in support of authorizing the payment.
First, the debtors contend that SRB Capital holds an equitable lien on the commission under Texas law. The motion cites Texas case law establishing that a party holding payment rights under a contingency fee agreement receives a legal and equitable interest when the contingency occurs. Because the IRS refund checks were received before the subsequent debtors' petition date, the debtors argue that the contingency was fully satisfied pre-petition, vesting SRB Capital's right to the commission. The motion further invokes the common fund doctrine, under which a party that creates a fund for another's benefit is entitled to reimbursement from that fund.
Second, the debtors argue that even if the court determines the ERC refunds constitute property of the estate, payment is justified under the business judgment standard of Bankruptcy Code sections 363(b) and 105(a). The motion identifies three business justifications: the commission represents a contractual obligation for services that produced approximately $8.5 million in ERC refunds for the estate; the debtors wish to maintain their relationship with SRB Capital in the event of any future IRS inquiries or audits regarding the ERC refunds; and payment would avoid future litigation over the nature and amount of SRB Capital's claim and the associated expenditure of estate resources.
The motion also states that SRB Capital's claim to the commission is secured and excluded from the DIP lender's collateral, and that nonpayment would result in unjust enrichment of the estate and its creditors.
Key Dates and Timeline
- July 18, 2023: Engagement agreement executed between Buddy Mac Holdings, LLC and SRB Capital, LLC
- October 2023: BMH-HR, LLC submitted Forms 941-X to the IRS
- March 25, 2025: First ERC refund of $2,582,941.10 received (Q1 2021)
- November 4, 2025: Second ERC refund of $2,615,317.32 received (Q2 2021)
- December 1–4, 2025: Initial debtors filed chapter 11 petitions
- December 19, 2025: Official Committee of Unsecured Creditors appointed
- January 13, 2026: Third ERC refund of $3,249,319.19 received (Q3 2021)
- January 25, 2026: Subsequent debtors filed chapter 11 petitions
- March 4, 2026: Motion to pay SRB Capital commissions filed
Court Information and Professional Representation
The case is pending before the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, under Case No. 25-34839-mvl11. The debtors are represented by Kane Russell Coleman Logan PC, with attorneys based in Dallas and Austin, Texas.
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