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Full title: Objection to (related document(s): 942 Application for administrative expenses filed by Creditor KONE, Inc.) filed by Debtor Studio Movie Grill Holdings, LLC. (Veteto, Jeffery)

Document posted on Jun 3, 2021 in the bankruptcy, 6 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

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 4, 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 ManagementAll theaters operate under the brand name “Studio Movie Grill.”SMG asserts that KONE has not carried its burden of proof with respect to the amounts and entitlements it has claimed to the extent that it fails to demonstrate that it performed any actual post-petition services at the Tampa theater location for Movie Grill Concepts XXIV, LLC that preserved the estate.SMG submits that service contract is with the ambiguous “Studio Movie Grill” but its proper party

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Document Contents

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 4, 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 CLAIM OF KONE, INC. Studio Movie Grill Holdings, LLC and its debtor affiliates (collectively, the “Debtors” or “SMG”), file this Objection (the “Objection”) to the Application for KONE, Inc. for the Allowance and Payment of an Administrative Expense (the “Application”) filed by KONE, Inc. (“KONE”), 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”). An official committee of unsecured creditors was appointed in these Chapter 11 Cases. No trustee or examiner was requested or appointed in these Chapter 11 Cases. 2. 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.” 3. On March 31, 2021, the Court entered its Finding of Fact, Conclusions of Law, and Order Confirming the Debtors’ Fourth Amended Joint Chapter 11 Plan of Reorganization [Dkt. No. 875] (the “Confirmation Order”), pursuant to which the Debtors’ confirmed plan of reorganization went effective as of April 15, 2021. See Dkt. No. 917. 4. On May 14, 2021, KONE filed its Application, seeking allowance and payment of an administrative expense claim pursuant to 11 U.S.C. § 503(b)(1)(A) and (9) in the amount of $7,447.01, related to a certain prepetition invoice.

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II. OBJECTION 5. By its Application, KONE seeks payment of an alleged Section 503(b)(9) administrative expense claim. SMG contends that (i) the Agreement (as defined in the Application) is a service contract and not for “goods” as contemplated by Section 503(b)(9); (ii) to the extent KONE seeks payment under Section 503(b)(1), it did not provide actual services during the pendency of the case; and (iii) KONE fails to specify against which debtor it seeks payment, but the proper party may be a converted debtor. 6. Section 503(b)(9) of the Bankruptcy Code provides that “[a]fter notice and a hearing, there shall be allowed administrative expenses … including – (9) the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business.” (emphasis added). Here, KONE submits the Agreement, which is principally a service contract for the Tampa theater location. The Agreement only provides for the provision of any “goods” in that except for specific exclusions “KONE will repair or replace the components listed [ ] if the repair or replacement is, in KONE’s sole judgment, necessitated by normal wear and tear.” (Application, Exhibit A, P. 2). Such “goods” would be covered therein under the amount of administrative expense claim that KONE seeks as “[t]he value of unpaid services[.]” (Application, Para. 12). 7. KONE bears the burden of proof in relation to these claims. See In re SGS Studio, Inc., 256 B.R. 580, 582 (Bankr. N.D. Tex. 2000); see also 11 U.S.C. § 503(b). 8. What KONE presents is prima facie evidence that it had a service contract, not a contract for provision of goods. KONE fails to overcome the presumption resulting therefrom. No evidence has been presented to demonstrate that KONE, at any point during the pertinent time period, provided “goods” to a Debtor as contemplated by Section 503(b)(9). SMG requests that KONE be required to prove such alleged goods were provided.

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9. 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 actual, necessary costs and expenses of preserving the estate….” 11 U.S.C. § 503(b)(1)(A) (emphasis added). 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); SGS Studio, Inc., 256 B.R. at 582. “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. 10. Again, KONE 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). 11. SMG asserts that KONE has not carried its burden of proof with respect to the amounts and entitlements it has claimed to the extent that it fails to demonstrate that it performed any actual post-petition services at the Tampa theater location for Movie Grill Concepts XXIV, LLC that preserved the estate. In fact, SMG asserts that KONE refused to perform under the Agreement

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due to “nonpayment” of the invoice. SMG requests that KONE be required to prove any actual services were rendered.2 12. Finally, the Application by KONE fails to specify against which debtor it seeks payment. SMG submits that service contract is with the ambiguous “Studio Movie Grill” but its proper party could be ascertain from a copy with an unredacted Federal Tax ID #. That said, the Agreement and invoice (Application Exhibit B) solely cover the Tampa theater location formerly operated by Movie Grill Concepts XXIV, LLC (“MCG XXIV”), which has been converted to Chapter 7. SMG requests that KONE be required to replead to identify the debtor subject to the Application. III. RESERVATION OF RIGHTS 13. SMG hereby expressly reserves 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 SMG otherwise deems necessary and appropriate. WHEREFORE, SMG respectfully requests that this Court deny the relief requested by the Application and award SMG such other and further relief as this Court may deem just and proper. DATED: June 4, 2021 Respectfully submitted, LAW OFFICES OF FRANK J. WRIGHT, PLLC By: /s/ Jeffery M. Veteto Frank J. Wright Texas Bar No. 22028800 Jeffery M. Veteto Texas Bar No. 24098548 Jay A. Ferguson Texas Bar No. 24094648 2 SMG expressly reserves argument on the necessity of any services to the preservation of the estate pending identification of what actual services were performed.

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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 a true and correct copy of the foregoing document was served on the parties listed below, on all parties consenting to electronic service of this case via the Court’s ECF system for the Northern District of Texas on all parties electronically accepting service on the 4th day of June, 2021. /s/ Jeffery M. Veteto Jeffery M. Veteto

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