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Full title: Objection to (related document(s): 635 Application for administrative expenses filed by Creditor EPT Dallas LLC) filed by Debtor Studio Movie Grill Holdings, LLC. (Wright, Frank)

Document posted on Mar 7, 2021 in the bankruptcy, 5 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

HOLDINGS, LLC, et al., § § (Jointly Administered) Debtors.1 § 1The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Studio Movie Grill Holdings, LLC (6546) (“SMG Holdings”); OHAM Holdings, LLC (0966); Movie Grill Concepts Trademark Holdings, LLC (3096); Movie Grill Concepts I, Ltd. (6645); Movie Grill Concepts III, Ltd. (2793); Movie Grill Concepts IV, Ltd. (1454); Movie Grill Concepts IX, LLC (3736); Movie Grill Concepts VI, Ltd. (6895); Movie Grill Concepts VII, LLC (2291); Movie Grill Concepts X, LLC (6906); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XII, LLC (6040); Movie Grill Concepts XIII, LLC (5299); Movie Grill Concepts XIV, LLC (4709); Movie Grill Concepts XIX, LLC (9646); Movie Grill Concepts XL, LLC (4454); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLII, LLC (2309); Movie Grill Concepts XLIII, LLC (9721); Movie Grill Concepts XLIV, LLC (8783); Movie Grill Concepts XLV, LLC (2570); Movie Grill Concepts XV, LLC (4939); Movie Grill Concepts XVI, LLC (1033); Movie Grill Concepts XVII, LLC (1733); Movie Grill Concepts XVIII, LLC (8322); Movie Grill Concepts XX, LLC (7300); Movie Grill Concepts XXI, LLC (1508); Movie Grill Concepts XXII, LLC (6748); Movie Grill Concepts XXIV, LLC (5114); Movie Grill Concepts XXIX, LLC (5857); Movie Grill Concepts XXV, LLC (4985); Movie Grill Concepts XXVI, LLC (5233); Movie Grill Concepts XXVII, LLC (4427); Movie Grill Concepts XXVIII, LLC (1554); Movie Grill Concepts XXX, LLC (1431); Movie Grill Concepts XXXI, LLC (3223); Movie Grill Concepts XXXII, LLC (0196); Movie Grill Concepts XXXIII, LLC (1505); Movie Grill Concepts XXXIV, LLC (9770); Movie Grill Concepts XXXIX, LLC (3605); Movie Grill Concepts XXXV, LLC (0571); Movie Grill Concepts XXXVI, LLC (6927); Movie Grill Concepts XXXVII, LLC (6401); Movie Grill Concepts XXXVIII, LLC (9657); Movie Grill Concepts XXIII, LLC (7893); Studio Club, LLC (3023); Studio Club IV, LLC (9440); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLVI, LLC (2344); Movie Grill Concepts XLVII, LLC (5866); Movie Grill Concepts XLVIII, LLC (8601); Movie Grill Concepts XLIX, LLC (0537); Movie Grill Concepts L, LLC (5940); Movie Grill Concepts LI, LLC (7754); Movie Grill Concepts LII, LLC (8624); Movie Grill Concepts LIII, LLC (3066); Movie Grill Concepts LIV, LLC (2018); Movie Grill Concepts LV, LLC (4699); Movie Grill Partners 3, LLC (4200); Movie Grill Partners 4, LLC (1363); Movie Grill Partners 6, LLC (3334); and MGC Management DEBTORS’ OBJECTION TO ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIMS OF EPT DALLAS, LLC Studio Movie Grill Holdings, LLC and its debtor affiliates, specifically Movie Grill Concepts XXI, LLC (“MGC XXI”), as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the “Debtors” or “SMG”), file this Objection (the “Objection”) to the Request for Allowa

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Frank J. Wright Texas Bar No. 22028800 Jeffery M. Veteto Texas Bar No. 24098548 Jay A. Ferguson Texas Bar No. 24094648 LAW OFFICES OF FRANK J. WRIGHT, PLLC 2323 Ross Avenue, Suite 730 Dallas, Texas 75201 Telephone: (214) 935-9100 COUNSEL TO DEBTORS AND DEBTORS-IN-POSSESSION IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION § In re: § Chapter 11 § STUDIO MOVIE GRILL § Case No. 20-32633-SGJ HOLDINGS, LLC, et al., § § (Jointly Administered) Debtors.1 § 1 The Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Studio Movie Grill Holdings, LLC (6546) (“SMG Holdings”); OHAM Holdings, LLC (0966); Movie Grill Concepts Trademark Holdings, LLC (3096); Movie Grill Concepts I, Ltd. (6645); Movie Grill Concepts III, Ltd. (2793); Movie Grill Concepts IV, Ltd. (1454); Movie Grill Concepts IX, LLC (3736); Movie Grill Concepts VI, Ltd. (6895); Movie Grill Concepts VII, LLC (2291); Movie Grill Concepts X, LLC (6906); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XII, LLC (6040); Movie Grill Concepts XIII, LLC (5299); Movie Grill Concepts XIV, LLC (4709); Movie Grill Concepts XIX, LLC (9646); Movie Grill Concepts XL, LLC (4454); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLII, LLC (2309); Movie Grill Concepts XLIII, LLC (9721); Movie Grill Concepts XLIV, LLC (8783); Movie Grill Concepts XLV, LLC (2570); Movie Grill Concepts XV, LLC (4939); Movie Grill Concepts XVI, LLC (1033); Movie Grill Concepts XVII, LLC (1733); Movie Grill Concepts XVIII, LLC (8322); Movie Grill Concepts XX, LLC (7300); Movie Grill Concepts XXI, LLC (1508); Movie Grill Concepts XXII, LLC (6748); Movie Grill Concepts XXIV, LLC (5114); Movie Grill Concepts XXIX, LLC (5857); Movie Grill Concepts XXV, LLC (4985); Movie Grill Concepts XXVI, LLC (5233); Movie Grill Concepts XXVII, LLC (4427); Movie Grill Concepts XXVIII, LLC (1554); Movie Grill Concepts XXX, LLC (1431); Movie Grill Concepts XXXI, LLC (3223); Movie Grill Concepts XXXII, LLC (0196); Movie Grill Concepts XXXIII, LLC (1505); Movie Grill Concepts XXXIV, LLC (9770); Movie Grill Concepts XXXIX, LLC (3605); Movie Grill Concepts XXXV, LLC (0571); Movie Grill Concepts XXXVI, LLC (6927); Movie Grill Concepts XXXVII, LLC (6401); Movie Grill Concepts XXXVIII, LLC (9657); Movie Grill Concepts XXIII, LLC (7893); Studio Club, LLC (3023); Studio Club IV, LLC (9440); Movie Grill Concepts XI, LLC (2837); Movie Grill Concepts XLI, LLC (4624); Movie Grill Concepts XLVI, LLC (2344); Movie Grill Concepts XLVII, LLC (5866); Movie Grill Concepts XLVIII, LLC (8601); Movie Grill Concepts XLIX, LLC (0537); Movie Grill Concepts L, LLC (5940); Movie Grill Concepts LI, LLC (7754); Movie Grill Concepts LII, LLC (8624); Movie Grill Concepts LIII, LLC (3066); Movie Grill Concepts LIV, LLC (2018); Movie Grill Concepts LV, LLC (4699); Movie Grill Partners 3, LLC (4200); Movie Grill Partners 4, LLC (1363); Movie Grill Partners 6, LLC (3334); and MGC Management I, LLC (3224).

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DEBTORS’ OBJECTION TO ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIMS OF EPT DALLAS, LLC Studio Movie Grill Holdings, LLC and its debtor affiliates, specifically Movie Grill Concepts XXI, LLC (“MGC XXI”), as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the “Debtors” or “SMG”), file this Objection (the “Objection”) to the Request for Allowance and Payment of Post-Petition Obligations Under Unexpired Leases of Non-Residential Real Estate (the “Application”) filed by EPT Dallas, LLC (“EPT”), and respectfully state as follows: I. BACKGROUND 1. On October 23, 2020 (the “Petition Date”), the Debtors each filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”), thereby initiating the above-captioned bankruptcy cases (the “Chapter 11 Cases”). The Debtors continue to manage and operate their businesses as debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. 2. An official committee of unsecured creditors has been appointed in these Chapter 11 Cases. No trustee or examiner has been requested or appointed in these Chapter 11 Cases. 3. SMG is engaged in the dine-in movie theater business. In addition to its movie offerings, SMG’s theaters include a bar and lounge area, with direct to seat service for guests before and during their movies. As of the Petition Date, SMG operated 33 movies theaters in 10 states, including Arizona, California, Florida, Georgia, Illinois, North Carolina, Pennsylvania, Texas, Indiana, and Virginia. All theaters operate under the brand name “Studio Movie Grill.” 4. A detailed description of the Debtors and their businesses, and the facts and circumstances supporting the Motion and the Debtors’ Chapter 11 Cases are set forth in greater detail in the Declaration of William Snyder, CRO of the Debtors, in Support of the Debtors’ Chapter 11 Petitions and First Day Motion (the “Snyder Declaration”),which was filed on the Petition Date and is incorporated

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by reference in this Objection. 5. On February 15, 2021, EPT filed its Application, seeking allowance and payment of an administrative expense claim in the amount of $215,649.28, allegedly arising out of unpaid post-petition rent on a non-residential lease of a theater location in Dallas, Texas. II. OBJECTION 6. In its Application, EPT seeks $215,649.28 as an administrative expense claim, comprised of alleged post-petition rent in the amount of $82,500.00 and real estate taxes in the amount of $133,149.28. Debtors contend that the alleged post-petition rent has been paid or will be paid in the ordinary course of business. 7. Debtors further contend that a portion of the alleged real estate taxes is a pre-petition claim because all are calendar year 2020 real estate taxes. Specifically, the 2020 real estate taxes which were incurred prior to the Petition Date should be classified as a pre-petition claim. In addition, the real estate tax amount stated is yet to be confirmed as accurate. 8. Alternatively, Debtors contend that the real estate taxes are not due directly to EPT, and instead are subject to separate claims by the applicable taxing authorities and thus subject to the treatment afforded to such claims under the proposed plan of reorganization (the “Plan”).29. In addition, Debtors contend that EPT clearly has not met the requirements to trigger the obligation to pay the real estate taxes under the lease between MGC XXI and EPT.310. Section 503(b)(1)(A) of the Bankruptcy Code sets out the provisions applicable to the allowance of General Administrative Expense Claims in this case. It provides in pertinent part that “[a]fter notice and a hearing, there shall be allowed administrative expenses … including – (1)(A) the 2 For purposes of this Objection, the Plan means the Second Amended Joint Plan of Reorganization for Studio Movie Grill Holdings, LLC and Jointly Administered Debtors [Dkt. No. 700]. 3 See In re FFP Operating Partners, L.P., 2004 Bankr. LEXIS 884 (Bankr. N.D. Tex. 2004) (holding that the landlord must meet the requirements of the underlying lease).

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actual, necessary costs and expenses of preserving the estate….” 11 U.S.C. § 503(b)(1)(A) (emphasis added). 11. For any costs and expenses to qualify for allowance as an administrative expense claim, they must (i) be actual and (ii) have been necessary to preservation of the estate. Courts have construed these terms narrowly: “[a]n ‘actual and necessary cost’ must have been of benefit to the estate and its creditors . . . The ‘benefit’ requirement has no independent basis in the Code, . . . but is merely a way of testing whether a particular expense was truly ‘necessary’ to the estate: If it was of no ‘benefit,’ it cannot have been ‘necessary.’” State of Texas v. Lowe (In re H.L.S. Energy Co., Inc.), 151 F.3d 434, 437 (5th Cir. 1998); see also Total Minatome Corp. v. Jack/Wade Drilling, Inc. (In re Jack/Wade Drilling, Inc.), 258 F.3d 385, 387 (5th Cir. 2001); In re SGS Studio, Inc., 256 B.R. 580, 582 (Bankr. N.D. Tex. 2000). 27. “In order to qualify as an ‘actual and necessary cost’ under section 503(b)(1)(A), a claim against the estate must have arisen post-petition and as a result of actions taken by the [debtor-in-possession] that benefitted the estate.” Jack/Wade Drilling, Inc., 258 F.3d at 387 (emphasis added). 12. EPT bears the burden of proof in relation to these claims. See SGS Studio, Inc., 256 B.R. at 582; see also 11 U.S.C. § 503(b)(1)(A). 13. Debtors assert that EPT has failed to make even a prima facie case that the 2020 taxes arose post-petition. With respect to the 2020 taxes that were incurred before the Petition Date, any obligations of the Debtors associated with such tax amounts also arose before the Petition Date. Otherwise, by EPT’s logic, taxes would almost always become post-petition administrative expenses, instead of receiving their allowed treatment under the Bankruptcy Code. 14. Furthermore, EPT has failed to make even a prima facie case that the 2020 taxes cannot be paid over an extended period of time as contemplated by the Plan. 15. For such reasons, taken together, Debtors submit that the Application should be denied.

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III. RESERVATION OF RIGHTS 16. Debtors hereby expressly reserve the right to amend or supplement this Objection prior to any hearing pertaining to its determination for the purposes of asserting additional objections to the Application, amending this Objection, offering additional support, and as Debtors otherwise deem necessary and appropriate. WHEREFORE, the Debtors respectfully request that this Court deny the relief requested by the Application and award the Debtors such other and further relief as this Court may deem just and proper. DATED: March 8, 2021 Respectfully submitted, LAW OFFICES OF FRANK J. WRIGHT, PLLC By: /s/ Frank J. Wright Frank J. Wright Texas Bar No. 22028800 Jeffery M. Veteto Texas Bar No. 24098548 Jay A. Ferguson Texas Bar No. 24094648 2323 Ross Avenue, Suite 730 Dallas, Texas 75201 Telephone: (214) 935-9100 Emails: frank@fjwright.law jeff@fjwright.law jay@fjwright.law COUNSEL TO DEBTORS AND DEBTORS-IN-POSSESSION CERTIFICATE OF SERVICE I hereby certify that on March 8, 2021, a true and correct copy of the foregoing document was served on all parties consenting to electronic service of this case via the Court’s ECF system for the Northern District of Texas /s/ Jeffery M. Veteto Jeffery M. Veteto