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Full title: Motion for 2004 examination of - Motion for Order Directing Production of Documents and Answers to Written Discovery Pursuant to Fed. R. Bankr. P. 2004. Filed by D&D Cabling Solutions, Ready Construction Services, LLC (Kane, John)

Document posted on Feb 23, 2021 in the bankruptcy, 12 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

While Debtor's counsel agreed to a brief call with Movants' counsel in December, 2021, the Debtor failed to provide any information responsive to requests for information related to the construction, funding, or payments owed for the Chisholm Trail location.To finalize construction of the Chisholm Trail location to turn-key condition for opening, the Chisholm Landlord was to pay to the Debtor a Construction Allowance of up to $8 million—$200.00 per square foot of the 40,000 sq.All correspondence from any Debtor to RCS or D&D Cabling Solutions regardingamounts due and owing or any obligation of any Debtor to remit payment to either of those entities for services rendered related to the construction of the Chisholm Trail location.An accounting of all amounts that remain unpaid by any Debtor for construction ofthe Chisholm Trail location, specifically identifying the amount and creditor to whom any Debtor owes money.All loan documents or other documents evidencing any credit or loans received by anyDebtor to fund some or all of the costs of construction of the Chisholm Trail location.

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John J. Kane State Bar No. 24066794 S.Kyle Woodard State Bar No. 24102661 R.Hale Neilson State Bar No. 24116820 Kane Russell Coleman Logan PC 901 Main St., Suite 5200 Dallas, Texas 75202 Tel: (214) 777-4200 COUNSEL TO READY CONSTRUCTION SERVICES, LLC AND D&D CABLING SOLUTIONS IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION § IN RE § Chapter 11 § STUDIO MOVIE GRILL HOLDINGS, § Case No. 20-32633-SGJ LLC, et al., § § Debtors. § (Jointly Administered) § ______________________________________________________________________________ MOTION FOR ORDER DIRECTING PRODUCTION OF DOCUMENTS AND ANSWERS TO WRITTEN DISCOVERY PURSUANT TO FED. R. BANKR. P. 2004 ______________________________________________________________________________ Ready Construction Services ("RCS") and D&D Cabling Solutions ("D&D" and together "Movants") respectfully submit this Motion for Order Directing Production of Documents and Answers to Written Discovery Pursuant to Fed. R. Bankr. P. 2004 (the "Motion") and seek an order, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), from this Court requiring (i) the Debtor1 to produce documents in its custody or under its control, and (ii) provide written responses to the Movants' questions not later than March 12, 2021. 1 The defined term "Debtor" is used in this Motion to include each individual debtor in the above styled and jointly administered bankruptcy cases, and also collectively to refer to all of the debtors.

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SUMMARY 1. As set forth below, Movants need information concerning the actions and accountsof the Debtors to assess whether they have viable trust fund claims against the Debtors under Chapter 162 of the Texas Property Code. RCS, through undersigned counsel, requested similar information from Debtor's counsel on three separate occasions from November 30, 2020 through February 1, 2021. While Debtor's counsel agreed to a brief call with Movants' counsel in December, 2021, the Debtor failed to provide any information responsive to requests for information related to the construction, funding, or payments owed for the Chisholm Trail location. 2. On February 1, 2021, counsel for Movants informed Debtors' counsel by email that ifhe did not receive written responses to his inquiries, he would be forced to seek formal discovery. Movants' counsel received no response from the Debtors and, to this day, has not received any response to that email. Accordingly, Movants are left with little choice but to file this motion. JURISDICTION 3. This Court has jurisdiction over this Motion pursuant to 28 U.S.C. § 1334. Consideration of this Motion is a core proceeding under 28 U.S.C. § 157(b)(2)(A). The statutory predicates for the relief requested are Fed. R. Bankr. P. 2004 and 9016. PARTIES 4. On October 23, 2020 (the "Petition Date"), the Debtor filed its voluntary petitionunder chapter 11 of title 11, United States Code (the "Bankruptcy Code"). 5. Since the Petition Date, the Debtor has managed its property and operated as a debtor-in-possession pursuant to the provisions of Sections 1107 and 1108 of the Bankruptcy Code. 6. No trustee has been appointed in this case.

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RELIEF REQUESTED 7. Movants respectfully request that the Court issue an order compelling the Debtor toanswer the written discovery requests and produce the documents described on Exhibit "A" attached hereto in accordance with the definitions and instructions found therein on or before March 12, 2021. BACKGROUND AND LEGAL AUTHORITY 8. On November 8, 2018, Movie Grill Concepts XLIV, LLC, one of the Debtors in theabove-captioned bankruptcy, entered a lease agreement with SEC CTR & MCP, LP (the "Chisholm Landlord") for the construction and lease of a Studio Movie Grill movie theater at the Chisholm Trail Ranch shopping center in Fort Worth, Texas (the "Chisholm Trail" location). Pursuant to the Lease, the Chisholm Landlord would acquire the shopping center where the Chisholm Trail location would be built. [Lease, Arts. 1.23.1]. To finalize construction of the Chisholm Trail location to turn-key condition for opening, the Chisholm Landlord was to pay to the Debtor a Construction Allowance of up to $8 million—$200.00 per square foot of the 40,000 sq. ft. premises. [See Lease, Arts. 1.6; 1.16; 2.2; 4.3.1]. Any work the Debtor was obligated to pay for to complete the Chisholm Trail location was to be paid to the Debtor's Contractor out of the Construction Allowance. [Lease, Arts. 4.3.1, 4.3.2]. Any costs beyond the Construction Allowance fell on the Debtor. [Lease, Art. 4.4]. 9. To complete the Theater, Movie Grill Concepts XLIV, LLC entered into a ContractorAgreement (the "RCS Agreement") with RCS on August 14, 2019, and separately contracted with other subcontractors or independent contractors like D&D for construction related services. Pursuant to the terms of the RCS Agreement, RCS provided construction services as a contractor for the construction of the Chisholm Trail location. Despite receiving the Construction Allowance, the Debtor stiffed RCS for more than $980,000, including more than $757,000 of earned and unpaid retainage, which should be held in trust for RCS. Moreover, despite the Debtor's Construction Allowance for the Chisholm Trail location, the Debtors stiffed D&D for more than $83,000.

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10. Pursuant to Bankruptcy Rule 2004, upon motion of any party in interest, the Court may order the examination of any entity (as defined in the Bankruptcy Code), including individuals, relating to the acts, conduct or property of the debtor or "any matter which may affect the administration of the debtor's estate." Further, in a Chapter 11 case, Bankruptcy Rule 2004 provides that the examination may also relate to, among other subjects, the operation of any business, the desirability of its continuance, the source of money or property to be acquired by the debtor for purposes of consummating a plan, claims asserted in the bankruptcy case and any other matter relevant to consummation of a plan. 11. At present, Movants lack sufficient information to determine whether certain prepetition claims, including construction trust fund claims under Chapter 162 of the Texas Property Code, are actionable. If Movants have valid trust fund claims, those trust funds in the Debtors' possession may not be property of the Debtors' estates, and may not be used in the administration of the Debtors' estates. Instead, state law may require their prompt payment to the Movants, even despite the Bankruptcy Code's payment hierarchy. See, e.g., Lone Star Milk Producers, Inc. v. Litzler, 370 B.R. 671, 678 (Bankr. N.D. Tex. 2007) (recognizing creation of statutory trust under Texas state statute, excluding trust funds from Chapter 7 debtor's estate, and requiring payment of trust funds to beneficiaries of the statutory trust). 12. Alternatively, Movants may have claims and causes of action against Debtors' representatives, officers, or employees if they misappropriated or otherwise misused trust funds earmarked for the construction of the Chisholm Trail location. In either event, Movants need to review certain specific documents and information that Movants believe are in the possession, custody, or control of the Debtors. 13. Bankruptcy Rule 2004(a) provides "[o]n motion of a party in interest, the court may order the examination of any entity." As this Court has provided, "the scope of a Rule 2004

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examination is exceptionally broad[.]" In re Correra, 589 B.R. 76, 108 (Bankr. N.D. Tex. 2018) (citations omitted). Generally, good cause to order a Rule 2004 examination is shown if the examination is necessary to establish a party's claims. In re Metiom, Inc., 318 B.R. 263, 268 (S.D.N.Y. 2004). It is well settled that a Rule 2004 examination can be broad in scope. See In re GHR Energy Corp., 33 B.R. 451, 453 (Bankr. D. Mass. 1983) (a Rule 2004 examination is "unfettered and broad"); In re Dinubilo, 177 B.R. 932, 939 (E.D. Cal. 1993). In GHR Energy, the court noted that an examination under Rule 2004 is allowed for the "purpose of discovering assets and unearthing frauds," and is compared to a "fishing expedition." GHR Energy, 33 B.R. at 453. 14. In this case, Movants have been stiffed by the Debtors despite apparently receiving$8,000,000 from Landlord and withholding more than $757,000 of retainage. Movants seek to investigate whether the Debtors possess trust funds under Texas law that must be withheld from the Debtors' estates and remitted to pay contractors and subcontractors under Chapter 162 of the Texas Property Code. PRAYER WHEREFORE, PREMISES CONSIDERED, Movants respectfully request that the Court issue an order compelling the Debtors to produce the documents and answer written questions set forth on Exhibit "A" attached hereto in accordance with the definitions and instructions found therein on or before March 12, 2021.

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DATED: February 24, 2021 Respectfully submitted, KANE RUSSELL COLEMAN LOGAN PC By: /s/ John J. Kane John J. Kane State Bar No. 24066794 S.Kyle Woodard State Bar No. 24102661 R. Hale Neilson State Bar No. 24116820 Bank of America Plaza 901 Main Street, Suite 5200 Dallas, Texas 75202 Telephone: (214) 777-4200 Telecopier: (214) 777-4299 E-mail: jkane@krcl.com E-Mail: kwoodard@krcl.com E-mail: hneilson@krcl.com Counsel for Movants CERTIFICATE OF CONFERENCE Pursuant to LBR 2004-1 (a), the undersigned hereby certifies that on February 23, 2021, Movants provided a copy of this Motion to Debtors' counsel and asked whether the Debtors opposed the Motion and a motion seeking expedited consideration of this Motion. As of 2:15 pm on February 24, 2021, the undersigned counsel still has not received a response from the Debtors and so assumes the Debtors oppose the Motion. /s/John J. Kane John J. Kane CERTIFICATE OF SERVICE The undersigned hereby certifies that on February 24, 2021, a true and correct copy of the foregoing document was filed with the Court and served via the Court's electronic case filing system (ECF) upon parties receiving such service in this bankruptcy case. /s/John J. Kane John J. Kane

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION § IN RE § Chapter 11 § STUDIO MOVIE GRILL HOLDINGS, § Case No. 20-32633-SGJ LLC, et al., § § Debtors. § (Jointly Administered) § ______________________________________________________________________________ REQUEST FOR PRODUCTION OF DOCUMENTS AND ANSWERS TO WRITTEN DISCOVERY TO THE DEBTORS ______________________________________________________________________________ I. INSTRUCTIONS 1. All documents provided pursuant to the requests below shall be identified. Whenidentifying a document, you must state the following: a. The nature of the document (e.g., letter, handwritten note). b. The title or heading that appears on the document c. The date of the document and the date of each addendum, supplement, or otheraddition or change. d. The identity of the author and the signer of the document, and of the person on whosebehalf or at whose request or direction the document was prepared or delivered. 2. For a document that no longer exists or that cannot be located, identify the document,state how and when it passed out of existence, or when it could no longer be located, and the reasons for the disappearance. Also, identify each person having knowledge about the disposition or loss of the document, and identify any other document evidencing the lost document’s existence or any facts about the lost document.

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3. All answers to requests for written discovery shall be in writing and shall identify theauthor and signor. Any documents or sources of information utilized in making such answers shall be identified and, to the extent practicable, included with the answer to which such document or identification corresponds. II. REQUESTS FOR PRODUCTION 1. All documents identifying the source of funds for the construction of the ChisholmTrail location. 2. An accounting of all funds received by any Debtor for construction of the ChisholmTrail location and all underlying documents used in the preparation of the accounting, including all bank account statements, wire transfer or ACH records, and invoice or payment requests or demands. 3. An accounting of all funds paid by any Debtor for the construction of the ChisholmTrail location and all underlying documents used in the preparation of the accounting, including all bank account statements, wire transfer or ACH records, and invoice or payment requests and demands. 4. A chronological list of all payments by any Debtor to all general and subcontractorsor independent contractors related to the construction of the Chisholm Trail location. 5. A chronological list of all payments by any Debtor related to the construction of theChisholm Trail location other than to any general contractor, subcontractor, or independent contractor. 6. Documents evidencing any funds paid to any Debtor by any non-debtor party to fundthe construction of the Chisholm Trail location. 7. Documents evidencing any funds earmarked or otherwise allocated by any Debtor forthe construction of the Chisholm Trail location.

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8. Documents evidencing any retainage earned by any general or subcontractor butunpaid by any Debtor during the construction of the Chisholm Trail location. 9. All correspondence from any Debtor to RCS or D&D Cabling Solutions regardingamounts due and owing or any obligation of any Debtor to remit payment to either of those entities for services rendered related to the construction of the Chisholm Trail location. 10. An accounting of all amounts that remain unpaid by any Debtor for construction ofthe Chisholm Trail location, specifically identifying the amount and creditor to whom any Debtor owes money. 11. All documents identifying all accounts in which any Construction Allowance fundsrelated to the Chisholm Trail location were deposited or later transferred by any Debtor. 12. A list of all Debtor accounts from which any costs of construction of the ChisholmTrail location were paid. 13. All of Debtors' internal correspondence regarding the payment of RCS. 14. All of Debtors' internal correspondence regarding retainage owed to RCS. 15. All of Debtors' internal correspondence regarding the payment of D&D CablingSolutions. 16. All of Debtors' internal correspondence regarding its ability or inability to pay allconstruction costs associated with the Chisholm Trail location. 17. All loan documents or other documents evidencing any credit or loans received by anyDebtor to fund some or all of the costs of construction of the Chisholm Trail location. III. REQUESTS FOR WRITTEN ANSWERS TO DISCOVERY 1. Did any entity provide money to any Debtor to fund the construction of the ChisholmTrail location? a. If so, which entity, how much, and when?

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b. If so, into what account or accounts did the Debtor deposit such funds? c. Were any such funds comingled with other money in the Debtor or Debtors'accounts? d. What is the current balance of each such account? e. What was the balance of each such account as of the date on which the Debtoror Debtors filed for bankruptcy relief? 2. Did any person affiliated with any of the Debtors direct any of the Debtors to usefunds provided for the construction of the Chisholm Trail location for any obligations other than the construction of the Chisholm Trail location? a. If so, who issued the directions? b. If so, for what other obligations were the funds used? 3. Explain why RCS was not paid retainage owed by the Debtor? 4. Did the Debtor withhold money with which to pay RCS's retainage? a. If so, does the Debtor currently possess money to pay RCS's retainage? (1) In what account is it located? (2) How much money is currently in the account? (3) When does the Debtor intend to remit those funds to RCS? b. If not, why not? 5. Did the Debtor use any funds earmarked or allocated to fund the construction of theChisholm Trail location for any other purpose? a. If so, how much and to what purpose? b. If so, who authorized or directed the Debtor to do so?

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION § IN RE § Chapter 11 § STUDIO MOVIE GRILL HOLDINGS, § Case No. 20-32633-SGJ LLC, et al., § § Debtors. § (Jointly Administered) § ______________________________________________________________________________ ORDER DIRECTING PRODUCTION OF DOCUMENTS AND ANSWERS TO WRITTEN DISCOVERY PURSUANT TO FED. R. BANKR. P. 2004 ______________________________________________________________________________ Came on for consideration Ready Construction Services, LLC and D&D Cabling Services' (together, the "Movants") Motion for Order Directing Production of Documents and Answers to Written Discovery Pursuant to Fed. R. Bankr. P. 2004 (the "Motion"). After reviewing the Motion and the record in this case, the Court determines that good cause exists to grant the Motion. It is therefore: ORDERED that the Motion and relief requested therein are hereby GRANTED; it is further: ORDERED that the Debtors shall provide all documents requested and provide answers to all other requests described in the Motion and its Exhibit A, in accordance with the instructions in Exhibit A to the Motion, no later than March 12, 2021 by serving copies of such documents and written answers to any other requests upon Movants' counsel, John Kane, located at 901 Main

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Street, Suite 5200, Dallas, TX 75204, by reasonable electronic or physical means agreed to by the parties.