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Full title: Objection to confirmation of plan (RE: related document(s)700 Chapter 11 plan) filed by Cypress-Fairbanks ISD, Dallas County, Harris County et al., Lewisville ISD, Smith County, Tarrant County. (Spindler, Laurie)

Document posted on Mar 9, 2021 in the bankruptcy, 7 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

Cypress-Fairbanks ISD and Lewisville ISD (collectively, the “Tax Authorities”), creditors and parties-in-interest, and file this, their objection to confirmation of the Debtors’ Second Amended Joint Plan of Reorganization for Studio Movie Grill Holdings, LLC and Jointly Administered Debtors (the “Plan”) and would respectfully show the Court the following: 1. As of January 1, 2021, the Tax Authorities are also the holders of administrative expense claims for year 2021 ad valorem property taxes.The Tax Authorities’ prepetition claims and administrative expense claims are secured by unavoidable, first priority, perfected liens on all of the Debtors’ real and business personal property pursuant to Texas Tax Code Section 32.01 and 32.05 and 11 U.S.C. Section 362(b)(18).1 Texas Tax Code Section 32.05 provides: (b) … a tax lien provided by this chapter takes priority over the claim of any creditor of a person whose property is encumbered by the lien and over the claim of any holder of a lien on property encumbered by the tax lien, whether or not the debt or lien existed before attachment of the tax lien.C. 3. provides for the vesting of property free and clear of all Liens, Claims, charges, Interests or other encumbrances.

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Laurie A. Spindler Linebarger Goggan Blair & Sampson, LLP 2777 N. Stemmons Fwy, Suite 1000 Dallas, Texas 75207 (214) 880-0089 Telephone (469) 221-5003 Facsimile Attorneys for Dallas County, Harris County, Smith County, Tarrant County, Cypress- Fairbanks ISD and Lewisville ISD 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 LLC, et al., § § (Jointly Administered) Debtors. § TAX AUTHORITIES’ OBJECTION TO CONFIRMATION OF SECOND AMENDED JOINT PLAN OF REORGANIZATION FOR STUDIO MOVIE GRILL HOLDINGS, LLC AND JOINTLY ADMINISTERED DEBTORS TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE: Come now Dallas County, Harris County, Smith County, Tarrant County, Cypress-Fairbanks ISD and Lewisville ISD (collectively, the “Tax Authorities”), creditors and parties-in-interest, and file this, their objection to confirmation of the Debtors’ Second Amended Joint Plan of Reorganization for Studio Movie Grill Holdings, LLC and Jointly Administered Debtors (the “Plan”) and would respectfully show the Court the following: 1. The Tax Authorities are the holders of prepetition claims against the Debtors for year 2019 and 2020 ad valorem real and business personal property taxes in the aggregate amount of $250,297.60. This amount does not include postpetition interest at the state statutory rate of 1% per month to which the Tax Authorities are entitled pursuant to 11 U.S.C. Sections 506(b) and 511. Objection to Confirmation Page 1

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2. As of January 1, 2021, the Tax Authorities are also the holders of administrative expense claims for year 2021 ad valorem property taxes. 3. The Tax Authorities’ prepetition claims and administrative expense claims are secured by unavoidable, first priority, perfected liens on all of the Debtors’ real and business personal property pursuant to Texas Tax Code Section 32.01 and 32.05 and 11 U.S.C. Section 362(b)(18).1 In re Winn’s Stores, Inc., 177 B.R. 253 (Bankr. W. D. Tex. 1995); Central Appraisal District of Taylor County v. Dixie-Rose Jewels, Inc., 894 S.W.2d 841 (Tex. App. – Eastland 1995). These liens arise on January 1 of each tax year along with the property owner’s personal liability for the ad valorem taxes and attach to the property by operation of law. Tex. Prop. Tax Code 32.01; 11 U.S.C. Sec. 362(b)(18). Texas Tax Code Section 32.01 provides: (a) On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the year on the property, whether or not the taxes are imposed in the year the lien attaches. The lien exists in favor of each taxing unit having power to tax the property. (b) A tax lien on inventory, furniture, equipment, or other personal property is a lien in solido and attaches to all inventory, furniture, equipment, and other personal property that the property owner owns on January 1 of the year the lien attaches or that the property owner subsequently acquires. … (d) The lien under this section is perfected on attachment and … perfection requires no further action by the taxing unit. Texas Tax Code Section 32.05 provides: (b) … a tax lien provided by this chapter takes priority over the claim of any creditor of a person whose property is encumbered by the lien and over the claim of any holder of a lien on property encumbered by the tax lien, whether or not the debt or lien existed before attachment of the tax lien. 1 11 U.S.C. Section 362(b)(18) allows the attachment of liens that secure taxes that come due postpetiton. Objection to Confirmation Page 2

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4. The Tax Authorities object to confirmation of the Plan to the extent that it violates the provisions of 11 U.S.C. Section 503(b)(1)(D) which very specifically states that a governmental unit is not required to file a request for payment of an administrative expense as a condition of allowance. 5. The Tax Authorities object to confirmation of the Plan because it does not explicitly provide for the payment of their administrative expense claims. 6. The Tax Authorities object to confirmation of the Plan because it does not provide for the payment of penalties and interest on their administrative expense claims in the event they are not timely paid prior to the state law delinquency date. Postpetition taxes incur interest and penalties at the state statutory rate until paid in full. U.S. v. Noland, 517 U.S. 535 (1996). 7. The Tax Authorities object to the treatment of their claims as set forth in the Plan. The Tax Authorities object to the treatment of their claims because the Plan does not specifically provide for retention of their prepetition and postpetition liens against their collateral and against the gross proceeds of their collateral, including all penalties and interest that may accrue, whether those proceeds are generated pursuant to an Asset Sale Reorganization or pursuant to the sale of the Debtors’ personal property pursuant to certain orders entered by the Court. 8. The Tax Authorities objection to confirmation of the Plan because it does not provide that they retain the state law seniority of their prepetition and postpetition liens especially since the Exit Facility provides that it is secured by senior liens which appear to prime the Tax Authorities’ senior liens. 9. The Tax Authorities object to the treatment of their claims in the Plan because it does not specifically provide for the payment of interest on their oversecured claims at the state statutory rate of 1% per month pursuant to 11 U.S.C. Sections 506(b) and 511. As oversecured Objection to Confirmation Page 3

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creditors, the Tax Authorities are entitled to postpetition interest on their claims. This violates 11 U.S.C. Sections 506(b), 511 and 1129. 10. The Tax Authorities object to the treatment of their claims in the Plan because it does not specifically provide for them to receive post-Effective Date2 interest on their claims at the state statutory rate of 12% per annum pursuant to 11 U.S.C. Sections 511 and 1129, to which they are entitled. 11. The Tax Authorities object to confirmation of the Plan because it does not provide when the Tax Authorities shall receive payment of their claims. It merely provides that they will “receive payment in accordance with section 1129 of the Bankruptcy Code.” (Plan Art. III Sec. B at 31.) The Tax Authorities have the right to know if the Debtors intend to pay their claims in installments or in one lump sum either at closing or from segregated funds, the number of installments that the Debtors contemplate and when they should expect the first installment payment or the lump sum payment of their claims. The Plan does not provide any of these details. 12. The Tax Authorities object to confirmation of the Plan because the treatment of Class 4 Other Secured Claims in Article III. Sec. B. provides the option of the Debtors returning the collateral that secures the claim of a member of this class. To the extent that the holder of an Other Secured Claim asserts a security interest in or lien against assets that secure a claim of one or more of the Tax Authorities, the Tax Authorities object to the preferential treatment of creditors who are junior to them and to the surrender of collateral to a junior creditor without first satisfying all ad valorem property tax liens against the collateral. 2 All capitalized terms that are not defined herein have the same meaning as ascribed to them in the Plan. Objection to Confirmation Page 4

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13. The Tax Authorities object to confirmation of the Plan because Article IV. Sec. C. 3. provides for the vesting of property free and clear of all Liens, Claims, charges, Interests or other encumbrances. (Plan at 40.) The Tax Authorities object to the avoidance of their liens without an adversary proceeding. 14. The Tax Authorities object to confirmation of the Plan because Article IV. Sec. D. 4. provides that on the Effective Date, except as otherwise expressly provided in the Plan or the Confirmation Order, all Liens on any property of any Debtors shall automatically terminate and all property subject to the liens shall be automatically released. (Plan at 46.) The Tax Authorities object to the avoidance of their liens without an adversary proceeding. 15. The Tax Authorities object to confirmation of the Plan because Article VI. Sec. C. (b) provides that an entity that holds an allowed claim and a disputed claim shall not receive any distribution on the allowed claim unless and until all objections to the disputed claim have been resolved. The fact that a claim in one Debtor case is subject to dispute should not affect the payment of ad valorem taxes that another Debtor entity owes to the same taxing entity. 16. The Tax Authorities object to confirmation of the Plan because Article VI. Sec. F. provides that if a W-8, W-9 or other tax documentation is not provided within forty-five (45) days of a written request then the distribution on the Allowed Claim shall be deemed disallowed and expunged in its entirety. The Tax Authorities object to the disallowance of their claim and the avoidance of their liens without the benefit of a claim objection and adversary proceeding in violation of their right to due process. 17. The Tax Authorities object to confirmation of the Plan because Article VI. Sec. G. provides that postpetition interest shall not accrue or be paid on any Claims and no interest shall be paid as a result of a delay, if any, between the confirmation date and the date of distribution Objection to Confirmation Page 5

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and interest shall not accrue or be paid on any Disputed Claim with respect to the period from the Effective Date to the date of final distribution. This provision violates 11 U.S.C. Sections 506(b), 511 and 1129. 18. The Tax Authorities object to confirmation of the Plan because Article VII. Sec. K. provides that distributions on Disputed Claims shall be the amount owed under Plan as of the Effective Date without any interest unless required under an order or judgment. This violates the provisions of 11 U.S.C. Sections 506(b), 511 and 1129. 19. The Tax Authorities object to confirmation of the Plan because Article VIII. Sec. B. provides that except as otherwise provided in the Plan, or, with regard to Secured Claims that the Debtors and the Agent elect to reinstate pursuant to Article III. Sec. B, on the Effective Date all Liens against any property of the Estates shall be discharged and released The Tax Authorities object to what amounts to the avoidance of their liens without an adversary proceeding and without payment in full of all amounts owed on their claims pursuant to the Bankruptcy Code. 20. The Tax Authorities object to confirmation of the Plan because they cannot determine when the Effective Date will occur. The definition of Effective Date and the conditions precedent to the Effective Date of the Plan do not provide any means of determining the Effective Date. Therefore, the Tax Authorities cannot determine when they will receive payment of their claims or when installment payments will commence, which renders them unable to determine if the Debtors default under the Plan. 21. The Tax Authorities object to confirmation of the Plan because it does not contain a default provision. Objection to Confirmation Page 6

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WHEREFORE, PREMISES CONSIDERED, the Tax Authorities request that the Court enter an order denying confirmation of the Plan and granting them such other and further relief to which they may be justly entitled. Dated: March 10, 2021. Respectfully submitted, Linebarger Goggan Blair & Sampson, LLP 2777 N. Stemmons Fwy, Suite 1000 Dallas, TX 75207 Direct: (469) 221-5125 Ph. No. (214) 880-0089 Fax No. (469) 221-5003 laurie.spindller@lgbs.com By: /s/Laurie A. Spindler____________ Laurie A. Spindler (SBN 24028720) ATTORNEYS FOR DALLAS COUNTY, HARRIS COUNTY, SMITH COUNTY, TARRANT COUNTY, CYPRESS- FAIRBANKS ISD AND LEWISVILLE ISD. CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing was served electronically through the Court’s electronic case filing system or via electronic mail upon Frank J. Wright, email: frank@fjwright.law; Jeffery M. Veteto, email: jeff@fjwright.law; William L. Wallander, email: bwallander@velaw.com; Bradley R. Foxman, email: bfoxman@velaw.com; John E. Mazey, email: jemazey@jonesday.com; Michael C. Schneidereit, email: mschneidereit@jonesday.com; Nicholas J. Morin, email: nmorin@jonesday.com; Jeffrey Pomerantz, email: jpomerantz@pszjlaw.com; Robert Feinstein, email: rfeinstein@pszjlaw.com; Steven Golden, email: sgolden@pszjlaw.com; Ryan Manns, email: ryan.manns@nortonrosefulbright.com; Meredyth A. Kippes, email: Meredyth.A.Kippes@usdoj.gov and Lisa Lambert, email: lisa.l.lambert@usdoj.gov on this 10th day of March 2021. /s/ Laurie A. Spindler ____________ Laurie A. Spindler Objection to Confirmation Page 7