Liquidators Conducting GOB Sales Are Not ‘Professionals’ Covered by Section 327

A liquidator conducting store-closing sales for a retailer is not a “professional” whose employment is governed by Section 327, according to Bankruptcy Judge Brendan Linehan Shannon of Delaware. In the reorganization of Brookstone Holdings Corp., the debtor signed a contract one day before the chapter 11 filing for a liquidator to conduct going-out-of-business sales, or GOB sales, at the company’s 102 mall-based stores. The debtor intends to reorganize around its 35 airport locations and its internet business. Immediately after filing, the debtor filed a motion to authorize the GOB sales and assume the prepetition contract with the liquidator. In his October 1 opinion, Judge Shannon said there had been a “well-developed practice in this and other courts” to authorize the retention of liquidators to conduct GOB sales by the assumption of prepetition contracts. Recently, however, he said the U.S. Trustee had begun objecting and contending that liquidators are “professionals” who must be retained under Section 327. Disclosure of potential conflicts of interest was not the issue, however, because the liquidator in the Brookstone case had filed an extensive list of connections with the debtor and other parties. Applying Section 327 was significant because being a “professional” might later preclude the liquidator from providing other necessary functions for the debtor, such as purchasing assets or making loans.

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