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Full title: Objection to (related document(s): 641 Application for administrative expenses filed by Creditor Continental Casualty Company) filed by Debtor Studio Movie Grill Holdings, LLC. (Veteto, Jeffery)

Document posted on Aug 12, 2021 in the bankruptcy, 6 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

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 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 DEBTORS’ OBJECTION TO ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIM OF CONTINENTAL CASUALTY COMPANY Studio Movie Grill Holdings, LLC and its debtor affiliates (collectively, the “Debtors” or “SMG”), file this Objection (the “Objection”) to the Motion of Continental Casualty Company and its Applicable Affiliates for Allowance of an Administrative Expense Claim Pursuant to 11 U.S.C. § 503(b) (the “Application”) filed by Continental Casualty Company an

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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 § 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 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 CONTINENTAL CASUALTY COMPANY Studio Movie Grill Holdings, LLC and its debtor affiliates (collectively, the “Debtors” or “SMG”), file this Objection (the “Objection”) to the Motion of Continental Casualty Company and its Applicable Affiliates for Allowance of an Administrative Expense Claim Pursuant to 11 U.S.C. § 503(b) (the “Application”) filed by Continental Casualty Company and its North American insurance affiliates using the CNA service mark (“CNA”), 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 February 15, 2021, CNA filed its Application seeking an administrative expense claim in “an unliquidated amount” that was subject to CNA “continuing to investigate the extent to which it provided [certain] services to the Debtors under the Insurance Policies, and any related agreements, that are allocable to the post-petition period[.]” Further in the Application, CNA acknowledged that such administrative expense claim was “being filed, in part, as a protective administrative claim . . . to protect CNA from the potential forfeiture of any and all rights against the

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Debtors.” At that time CNA, estimated that amount “might be . . . a postpetition outstanding balance of at least $59,843.35.” 4. 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. 5. Pursuant to the confirmed plan of reorganization: [e]ach of the Debtors’ Insurance Policies and any agreements, documents, or instruments relating thereto, are treated as Executory Contracts under the Plan. Unless otherwise provided in the Plan, and in the event of an Equitization Restructuring, on the Effective Date, (a) the Debtors shall be deemed to have assumed all Insurance Policies and any agreements, documents, and instruments relating to coverage of all insured Claims and (b) such Insurance Policies and any agreements, documents, or instruments relating thereto shall revest in the Reorganized Debtors. [Dkt. 869, P. 63]. 6. Pursuant to the Notice of Filing of Supplement to the Amended Joint Plan of Reorganization for Studio Movie Grill Holdings, LLC and Jointly Administered Debtors (the “Plan Supplement”) [Dkt. 702], as amended, Debtors’ insurance policies were defined by its Exhibit I to include the CNA insurance policies. 7. In the more than five (5) months since the Application was filed, CNA has not sought to amend its pleading to indicate or confirm any actual post-petition amounts due to it by the Debtors, let alone any amounts it believes would be subject to treatment as administrative expense claims. 8. Moreover, CNA has issued audit returns assessments, for the return of over-charged premiums for Debtors premium year of July 1, 2019 through July 1, 2020, that should likely result in CNA owing funds back to the Debtors. 9. Debtors and CNA have engaged in efforts to resolve the Application without success.

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II. OBJECTION 10. By its Application, CNA seeks payment of the alleged, unliquidated administrative expense claims. Debtors contend that all of these claims have been resolved by their confirmed plan of reorganization and are not entitled to the treatment as requested. 11. 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). 12. 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. 13. CNA 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). 14. Debtors assert that CNA has not carried its burden of proof with respect to the amounts and entitlements it has claimed to the extent still claimed outside the Debtors’ confirmed

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plan of reorganization. Debtors request that CNA be required to prove such amounts if not otherwise resolved as contemplated above. 15. For such reasons, taken together, Debtors submit that the Application should be denied. III. RESERVATION OF RIGHTS 16. 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: August 13, 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 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

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CERTIFICATE OF SERVICE I hereby certify that on the 13th day of August, 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

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