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UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

IN RE: Chapter 11

CINEMEX HOLDINGS USA, 

INC.,

CASE NO. 20-14696-LMI

(Formerly Jointly Administered 

Under Lead Case: Cinemex USA 

Real Estate Holdings, Inc., Case 

No. 20-14695-LMI)

Reorganized Debtor.

___________________________/

MEMORANDUM OPINION ON OBJECTION TO THE KHAN PARTIES’

CLAIMS (ECF #153)1

This matter came before the Court for evidentiary hearings on May 20, 

June 18, and July 9, 2021 (collectively the “Trial”), upon the Amended Objection 

to Amended Claim Nos. 28 and 85 of Omar Khan, Amended Claim Nos. 29 and 87 

of S.C.G.C. Inc., Amended Claim Nos. 30 and 89 of S.C.G.M. Inc., Amended Claim 

1 Originally docketed at ECF #756, Case No. 20-14695-LMI.

Laurel M. Isicoff

Chief United States Bankruptcy Judge

___________________________________________________________________________

ORDERED in the Southern District of Florida on October 4, 2021.

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Nos. 31 and 91 of SCG-B Inc., Claim Nos. 39 and 94 of SCG-VP Inc., Claim Nos. 

50 and 109 of District Theaters Inc., Claim Nos. 49 and 110 of SCG-WR LLC, Claim 

Nos. 51 and 108 of SCG-CS Inc., Claim Nos. 45 and 102 of SCGK Inc., Claim Nos. 

46 and 103 of SCG-SW Inc., Claim Nos. 47 and 104 of SCG-WL Inc., and Claim 

Nos. 48 and 105 of SCG-N Inc. (ECF #756, Case No. 20-14695-LMI) (the 

“Amended Objection”) filed by Cinemex Holdings USA, Inc. and Cinemex USA 

Real Estate Holdings, Inc. (collectively, “Cinemex”) and the Response to Amended 

Objection to Claims (ECF #816, Case No. 20-14695-LMI) (the “Response”) filed by 

the Khan Parties (hereinafter defined) in connection with the Proofs of Claim (the 

“Claims”) filed by the Khan Parties. The Court, having reviewed the Amended 

Objection, the Response, heard the arguments of the Parties2 (hereinafter 

defined), and considered the evidence presented, the Amended Objection is 

GRANTED for the reasons stated herein.

FINDINGS OF FACT3

1. Omar Khan (“Mr. Kahn”) is the sole owner of S.C.G.C INC. (“SCGC”), 

SCGM INC. (“SCGM”), SCG-B INC. (“SCGB”), SCG-VP INC. (“SCGVP”), DISTRICT 

THEATERS INC. (“District”), SCG-WR LLC (“SCGWR”), SCG-CS INC. (“SCGCS”), 

SCGK INC. (“SCGK”), SCG-SW INC. (“SCGSW”), SCG-WL INC. (“SCGWL”) and 

SCG-N INC. (“SCGN”, and collectively with SCGC, SCGM, SCGB, SCGVP, 

2The Khan Parties and Cinemex are referenced collectively as the “Parties” and each a “Party.” 

3The findings and conclusions set forth herein constitute the Court’s findings of fact and 

conclusions of law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure (“Fed.

R. Bankr. P.”). To the extent any of the following findings of fact are determined to be conclusions 

of law, they are adopted, and shall be construed and deemed, as conclusions of law. To the extent 

any of the following conclusions of law are determined to be findings of fact, they are adopted, 

and shall be construed and deemed, as findings of fact. 

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District, SCGWR, SCGCS, SCGK, SCGSW, SCGWL and SCGN, the “Companies”, 

and collectively, with Mr. Khan, the “Khan Parties”).

2. Each of the Companies owns and operates as a “Star Cinema Grill” 

(“SCG”) (individually, a “Business” and, collectively, the “Businesses”). Each 

Business is a dine-in theater and offers food and beverage to go. There are ten4

(10) theater locations in Texas, including one under construction, and one 

theater in Naperville, Illinois. Mr. Khan resides in Houston, Texas. 

3. On December 3, 2019, Mr. Khan engaged PJ Solomon, an investment 

banking firm, for purposes of assisting the Khan Parties with a process relating 

to the sale of Mr. Khan’s ownership interests in the Companies. Mr. Richard 

Brail, the co-head of the Global Technology, Media, & Telecommunications 

Group at PJ Solomon and an experienced advisor in the theater exhibition sector, 

together with his colleague, Mr. Adam Jaffe, advised the Khan Parties in 

connection with the sale of the SCG Theaters.5 

4. In December 2019, Mr. Brail contacted José Martí, then President and 

CEO of Cinemex, to inquire whether Cinemex would be interested in acquiring 

what Mr. Brail described as “an upscale dine-in movie theater circuit offering 

scratch-made food and plush recliners.”

5. The Khan Parties characterize their theaters as “upscale dine-in movie 

theatres” because they claim that their theaters provide the customer a “luxury 

4 The location in Woodlands, Texas was under construction as of the date of the EPAs (hereinafter 

defined). 

5 The term “SCG Theaters” refers to the ten theaters located in Texas and the one theater located 

in Illinois that were the properties subject to acquisition under the EPAs, which were collectively 

owned by the Companies. Each of the Companies owned one of the theaters. 

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feel” and “perfect date night experience” with “better services and operations 

than any other cinema” and “expanded food and beverage” options with “high 

value products,” “tasty food,” and “comfortable chairs.”

6. Cinemex understood that Mr. Brail was claiming that Cinemex was 

“being offered a movie theater that was a high-end dine-in theater with 

extraordinary service.”

7. Subsequently, Cinemex executed a non-disclosure agreement provided 

by PJ Solomon so that Mr. Brail could provide it with additional information. 

Shortly thereafter on December 19, 2019, PJ Solomon provided Cinemex: (1) a

“Phase I Process Letter” providing potential bidders with an explanation of the 

first phase of the bidding process and soliciting non-binding offers by January 

14, 2020; as well as (2) a confidential information memorandum (“CIM”)

providing an “executive summary of . . . the assets,” including their location, the 

food and beverage menus, vendor summaries, and overviews of the operations 

and financials. 

8. On January 14, 2020, Cinemex made a non-binding offer of $87.5 

million for the equity purchase of the SCG Theaters (the “Non-Binding Offer”). 

9. On January 15, 2020, PJ Solomon invited Cinemex to participate in the 

second phase of the bidding process (the “Second Phase Invitation”). 

10. The Second Phase Invitation notified Cinemex that “management 

meetings and tours” were available the weeks of January 27 and February 3 and 

requested Cinemex to provide dates on which Cinemex could attend. 

11. PJ Solomon indicated that at the management meeting they would 

discuss “positive developments” in the theaters “since the CIM was released.” 

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12. Mr. Martí testified that he understood the objective of the 

management meetings and tours to be “a sort of marketing tool that [the Khan 

Parties] use to further sell the company.”

13. The Parties apparently agree that during the management meeting 

and tours, Cinemex was not permitted to identify themselves as potential 

purchasers of the SCG Theaters. But Cinemex was permitted to identify 

themselves as potential investors, which, according to Mr. Brail, is common 

during a sales process.

14. On February 5 and 6, six Cinemex employees travelled to Houston 

for the management meeting and tours of the Houston theaters (the “February 

Tours”).

15. The Cinemex representatives who attended the management 

meeting were: Rogelio Velez (CEO); Luis Castelazo (CFO); Javier Ezquerro (COO); 

Alejandro Muhech (head of construction); Ximena Carreño (legal counsel); and 

Jose Martí, chief development officer. 

16. The SCG representatives that were present at the management 

meeting were: Mr. Khan (CEO); Mr. Brail and Mr. Jaffe from PJ Solomon; Jason 

Ostrow (VP of Development); John Walsh (VP of Operations); Ron Mock (CFO);

and Michael Pawlowski (culinary director). 

17. After the management meeting, Mr. Khan and Mr. Ostrow led guided 

tours of the Houston theaters6, where the Parties spent on average between 45 

minutes to an hour at each theater, and in that time toured the theater lobby, 

6 The theaters range from 22,000 to 55,000 square feet in size, averaging around one acre in 

size. 

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box office, concession area, auditoriums, kitchens, bathrooms, and projection 

rooms of each theater, all while the theaters were operating. Approximately two 

or three minutes was spent in each space. However, Cinemex did not conduct a 

physical inspection of the theaters during the February Tours. 

18. On February 18, 2020, PJ Solomon sent a Phase II Process Letter 

on the Khan Parties’ behalf to Cinemex, soliciting a binding offer by noon on 

March 3, 2020 (the “Phase II Letter”).

19. The Phase II Letter provided certain requirements governing

Cinemex’s submission of a binding offer. 

20. The Phase II Letter also provided that it was SCG’s “expectation that 

each Offer would be able to close the acquisition no later than March 31, 2020” 

and that “[i]nspections are expected to occur after signing of an Agreement.”).7

21. On March 3, 2020, Cinemex submitted a formal binding offer of $75 

million to purchase the SCG Theaters (the “Binding Offer”). Cinemex’s $75 

million offer was the only binding offer the Khan Parties received. After a series 

of negotiations, including conversations in which the emerging COVID-19

situation was discussed, on March 6, 2020, Cinemex increased its Binding Offer 

to $83 million. Mr. Martí testified that the offer “assumed that the SCG theaters 

7 Mr. Martí testified at Trial that Cinemex “interpreted [the Phase II Letter] to mean that [the 

Khan Parties] were giving this to use so that [Cinemex] could do the signing or feel sure about 

doing the signing without having done the inspections, but that these inspections would be 

carried out afterwards. So [the Khan Parties] wanted to give us the [comfort] that – that we 

would, indeed, do the inspection before closing.” Mr. Martí testified at Trial that Cinemex’s 

“expectation” was that Cinemex “would then be able to do the inspections, after the signing, but 

before the closing.” 

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would be operating when they were acquired, as was set out in the draft EPA, 

and would continue to operate after the acquisition.”

22. On March 6, when Cinemex submitted its offer, there were no

restrictions in place concerning businesses or gatherings. 

23. On March 10, 2020, the SCG Theaters and Cinemex entered into 

two equity purchase agreements with the Khan Parties whereby Cinemex would 

purchase 100% of the equity held by Mr. Khan in the Companies (the “EPAs”) for 

$83 million – one for the Texas theaters (the “Texas EPA”), and one for the Illinois 

theater (the “Illinois EPA”). 

24. Both EPAs stated that the closing would take place on a date “which 

shall be no later than the second Business Day after satisfaction (or waiver) of 

the conditions set forth in Article 8 (not including conditions which are to be 

satisfied by actions taken at the Closing), in Houston, Texas, unless another 

time, date or place is agreed to in writing by the Parties.” The Illinois EPA 

included the following additional phrase after the word “Texas”: “(but in no event 

shall closing take place prior to April 10, 2020).”

25. Each of the EPAs provided outside closing dates, that is, dates after 

which either Party could terminate if the EPA had not closed. The outside closing 

date for the Texas EPA was April 30, 2020 (the “Texas Closing Date”) and the 

outside closing date for the Illinois EPA was May 31, 2020 (the “Illinois Closing 

Date”) (collectively the “Outside Closing Dates”). Nothing in either EPA required 

closing to occur by March 31, 2020, or even mentioned a March 31, 2020 date, 

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although there is no dispute that as of March 18, the Parties were working 

towards a March 31 closing.8 

26. Immediately after signing the EPAs, the Khan Parties and Cinemex

began coordinating the items necessary to close and transition the theaters into 

Cinemex’s ownership, including coordinating visits to inspect the theaters. 

27. The Parties discussed the details necessary for a March 17 visit. 

Cinemex made several requests of the Khan Parties in anticipation of the March 

17 visit, including: (1) Operations requesting a location so that Cinemex can 

show its “Presentation about CMX and embrace the opportunity to meet some of 

the Star Cinema Team-members;” (2) Human Resources requesting to “meet 

Ramón on Tuesday in Houston;” and (3) IT requesting a point of contact because 

the “team will need to conduct an onsite visit (each location) and complete a 

SAQ-D for PCI Compliance.” 

28. In addition to paragraph 8 of the Phase II Letter that provided that 

“[i]nspections are expected to occur after signing of an Agreement,” Section 7.2 

of the EPAs provided “[f]rom the date hereof until the Closing . . . the [Khan 

Parties] shall: (A) afford [Cinemex] reasonable access to and the right to inspect 

all of the properties, assets, premises, books and records, contracts, agreements 

and other documents and data related to the [Khan Parties]; and (B) make 

available to [Cinemex] with such financial, operating and other data and 

information related to the [Khan Parties] as [Cinemex] may reasonably request; 

8 See infra ¶101 and note 21.

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provided that any such investigation shall be conducted during normal business 

hours upon reasonable advance notice to the [Khan Parties].”

29. Mr. Martí testified that during the planned March 17 trip to 

Houston, Cinemex intended to conduct a multi-day full physical inspection of 

the theaters during operating hours, including in the following areas: operations, 

culinary, projection and sound, maintenance, HR, and IT, as well as meeting

with SCG employees and completing other transition tasks. 

30. Mr. Martí testified that Cinemex expected to complete a full physical 

inspection of all the areas described above before closing the transaction. 

Moreover, Mr. Martí testified, without contradiction, that Cinemex never agreed 

to close by March 31 without a physical inspection.

31. Meanwhile, the world was changing. On March 12, 2020, the Khan 

Parties required SCG employees to disclose any out of state travel plans between 

March 10 and April 30 to the general manager. Cinemex was not consulted on 

this decision.

32. On March 14, 2020, the Khan Parties requested that SCG guests 

leave empty seats between parties to socially distance. Cinemex was not 

consulted on this decision.

33. On March 15, 2020, Mr. Khan informed Mr. Martí that “attendance 

has dropped a lot on the last shows of the day” and as such, Mr. Khan is 

considering “taking them out as a[sic] effort to be financially [r]esponsible.” Mr. 

Khan asked whether Cinemex would support such a decision, to which, Mr. 

Martí responded the following day that Mr. Khan should “according to the EPA, 

[] make any operational changes you decide are beneficial for SCG.” 

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34. Between March 15 and 16, Cinemex informed the Khan Parties that 

it would postpone its planned March 17 visit to the Houston theaters to learn 

more about the risks of COVID-19 before asking their employees to travel. 

35. As of March 16, Cinemex and the Khan Parties discussed 

postponing, but not canceling, the visit to the Houston theaters until the 

following week. 

36. By order effective as of 8:00 a.m. on March 17, 2020 and continuing 

until 11:59 p.m. on March 31, 2020, the local governments of the City of Houston 

and Harris County (which encompasses Houston and its surrounding areas) 

required all restaurants and bars to provide only delivery, take-out or drivethrough services.9

37. On the evening of March 16, 2020, the Khan Parties “informed 

studios and vendors that the SCG theaters would be closing business until 

further notice, starting at the close of business that day.” Cinemex was not 

consulted on this decision. 

38. On March 17, 2020, the Khan Parties publicly announced that they

would be temporarily closing all SCG Theaters “in accordance with local 

government direction and recommendations.” 

39. Thus the SCG Theaters were closed beginning on March 17—the 

week that Cinemex had planned to visit the theaters in Houston. 

9 The Khan Parties suggest this exception means that the theaters “were operating” since the 

theaters could have prepared food but since the Khan Parties shut down the theaters as of March 

17, 2020, there is absolutely no factual support for this statement.

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40. On March 16, Mr. Walsh advised Mr. Martí that “following the state 

of IL directives” they were “closing Hollywood Palms after today’s business.” Mr. 

Martí responded by advising Mr. Walsh to “take any decision according to the 

EPA.” 

41. On March 19, 2020, the state of Texas ordered a prohibition on 

gatherings of more than ten individuals. 

42. On March 19, a Cinemex employee asked Mr. Walsh whether the 

Khan Parties had “closed all your theatres?”, to which Mr. Walsh responded 

“[y]es, just for a short period. Your team is aware.” 

43. Meanwhile, Cinemex also closed its operations at its theaters due to 

COVID-19. Cinemex closed its first theaters on March 16, 2020 and by March 

19, 2020, Cinemex had shut down all 41 of its theaters across 12 states. 

44. The Khan Parties and Cinemex assumed that the closures would be 

short-lived. Mr. Martí testified that Cinemex believed the COVID-19 situation 

would be similar to Cinemex’s experience with the H1N1 flu (“swine flu”) in 

Mexico, which involved the short-term closure of certain of Cinemex’s Mexico 

theaters for between a few days and two weeks. 

45. Discussions continued regarding closing logistics, including the 

rescheduling of the March 17 inspections. Mr. Martí testified at Trial that “the 

contract was going to expire on April 30th in the . . . Houston theatres, and for 

the Illinois theater, it was going to expire on May 31st. So, we said it doesn’t 

make sense to put people at risk if we had all that time remaining to close. So 

we said, yes, let’s postpone the inspections and the closing until they can be 

carried out without any kind of risk.” 

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46. Mr. Khan’s view of when closing should occur was different.

Although neither of the EPAs mentioned a March 31 closing date, it is clear the 

Parties knew Mr. Khan wanted to close by that date. The situation with COVID19 was continuing to develop even as the Parties continued to work towards 

closing. However, Cinemex expressed concerns about not being able to do a 

physical inspection of the theaters while the theaters were not operating.

47. On March 20, 2020, Mr. Khan emailed Mr. Martí asking whether 

Cinemex was on track to close on March 31st. 

48. There followed a series of offers made by Mr. Khan to keep an endof-March closing date, ranging from Mr. Khan proposing a price discount along 

with four proposed alternatives to the physical inspections: (1) a private plane, 

(2) a virtual inspection, (3) an inspection by a third-party, and (4) a transition 

agreement and an offer to delay closing if a non-refundable deposit was paid; all 

of which Cinemex rejected. 

49. After his March 20, 2020 email to Mr. Martí asking whether Cinemex 

“accept[ed] the discount??”, Mr. Khan followed up the very next day (a Saturday)

stating “I’m willing to work with you on the price like I said. So please take this 

very serious, it could turn in the very bad situation and neither one of us want 

that. Good luck!!” 

50. Mr. Martí testified at Trial that he interpreted the email to be a 

threat. 

51. On that following Monday, March 23, Mr. Khan again followed up 

asking Mr. Martí to call him because he had “lots of decisions to make.” 

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52. Mr. Khan emailed Mr. Martí shortly thereafter demanding an 

update. An hour later, Mr. Khan followed up demanding “a solution tonight.” 

Mr. Martí responded that he would call the following day. Mr. Khan again 

responded that he needed an answer because again he reiterated that he had 

“lots of decisions to make.” 

53. Throughout this time, and notwithstanding Mr. Khan’s threatening 

statements, Cinemex never stopped attempting to close. 

54. Cinemex continued to collect information and coordinate items 

necessary to close. For example, on March 24, 2020, Mr. Khan received a 

message from Mr. Ostrow forwarding a request Mr. Ostrow received from 

Cinemex for additional information and to schedule an introductory phone call. 

Mr. Khan forwarded that message to PJ Solomon that same morning, noting that 

Cinemex was “still communicating with [the SCG] team asking for things.”10 

55. Despite Mr. Khan knowing Cinemex was still working towards 

closing, on March 24, 2020, Mr. Khan instructed SCG’s counsel to send an email 

(the “March 24 Email”) to counsel for Cinemex declaring that all the closing 

conditions had been met, and that Cinemex was required to close in two business 

days—i.e., by March 26, 2020. 

10 At Trial, Mr. Khan agreed that Cinemex was “still collecting information related to the close, 

and trying to arrange calls related to the close as of March 24.” May 20 Hearing Tr. 226:05-08.; 

June 18 Hearing Tr. 393:13–21 (“Q. So they continued to get information as if they were working 

towards a closing even after cancelling the visit? A [Brail]. Yeah, like I said, there were -- there 

were lease consents and other documents that I believe were still travelling back and forth up 

until, you know, the morning of the 25th.”); July 9 Hearing Tr. 546:14–18 (Mr. Martí testified at 

Trial that the March 24 email requesting additional information was sent because Cinemex was 

“still having conversations with the different areas of Star Cinema Grill to carry out this trip, 

these inspections and the closing of the transaction.”). 

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56. Cinemex’s counsel responded to the Khan Parties’ March 24 Email 

that same day, informing the Khan Parties and their counsel that “Cinemex will 

not and is not obligated to close this transaction. Among other things, Cinemex’s 

operations and finance teams lack pre-Closing access to [SCG] theaters and the 

Corporate Employees managing those theaters.” Cinemex’s counsel further

informed the Khan Parties in their response that the Parties were in 

communication to try to resolve the situation. 

57. The EPAs provided Cinemex the right to inspect the theaters 

“provided that any such investigation shall be conducted during normal 

business hours upon reasonable advance notice.” 

58. Mr. Martí testified that Cinemex has acquired over 200 theaters in 

multiple transactions over recent years and never closed any of those 

acquisitions without a physical inspection of each and every theater. 

59. Mr. Martí testified at Trial that a physical inspection is “very 

important [because i]f we don’t do that, the only thing we would have is the 

information from the data room, which is written information, but what we’re 

buying is an ongoing concern. We’re buying a theater in operation, so it’s very 

important to carry out, fundamental to carry out an inspection.” Mr. Martí

testified that the inspection during operations is particularly important where a 

theater distinguishes itself from its competitors based on “upscale” service as 

the SCG Theaters do.

60. As of March 17, Mr. Martí testified, Cinemex did not believe it could 

conduct an inspection because “it wouldn’t have made any sense to do the 

inspection. We needed to inspect a functioning theater, movie theater, in 

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operations to evaluate, like I said before, that they offer an extraordinary service 

and an extraordinary experience for customers.” 

61. “Inspection” is not defined in the EPAs. However, under Section 

7.1(A) of the EPAs, the Khan Parties covenanted to use “commercially reasonable 

efforts” to “conduct the Business in the Ordinary Course,” and to “keep available 

the services of their respective directors, officers and employees” from the signing 

of EPAs (March 10) until the closing or termination of the EPAs. 

62. Mr. Martí testified that a physical inspection11 of a theater includes 

exanimation of the following areas: operations, culinary, projection and sound, 

maintenance, HR12, and IT, as well as meeting with SCG employees and 

completing other transition tasks. Mr. Martí also testified that each area 

requires comprehensive evaluation by individuals with expertise in the respective 

field and discussions with theater employees. 

63. Overall, Mr. Martí testified, the operations inspection would take “at 

least 10 to 15 minutes in each auditorium” to complete. 

64. On March 25, 2020, the Khan Parties’ counsel served Cinemex with 

a breach letter, asserting Cinemex was in breach of the EPAs (the “Breach 

Notice”).

11 Mr. Martí testified that a physical inspection of a theater’s operations requires evaluation of 

the customer experience from beginning to end, and thus must be done while each theater is 

open and “operating.” 

12 Mr. Martí testified at Trial that an HR inspection involves talking to employees about the 

theaters because to offer “amazing service, you need to have the right people” who are “welltrained” and “motivated.” Mr. Martí further testified at Trial that the HR inspection is also 

important to uncover any defects or problems that would not otherwise be revealed in a 

management presentation because the presenters are “not going to tell you that.” 

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65. The next day, on March 26, 2020, (the “March 26 Letter”) Cinemex’s 

counsel responded to the Breach Notice, stating that “Cinemex is not required 

to close the transaction at this time.” They explained that, contrary to Mr. Khan’s 

assertion, the closing conditions had not been met, and identified specific 

provisions of the EPAs that had not been satisfied, including that the closing 

take place in Houston and that Cinemex have reasonable access to, and the right 

to conduct a physical inspection of, the properties and assets. Cinemex’s counsel 

further noted that “we are certainly open and willing to discuss solutions that 

would be acceptable to both parties.” 

66. Even after being accused of breach, Cinemex continued its efforts to 

close, and on March 27, 2020, Cinemex requested contracts from the Khan 

Parties that were represented as being in the data room, but were not. Later that 

evening, the Khan Parties provided certain of the requested contracts, and 

notified Cinemex that they were “waiting on a copy [of a remaining contract] from 

our rep,” effectively confirming that their prior representations about the 

completeness of the data room were incorrect.

67. Between March 28 and March 30, Mr. Khan demanded immediate 

payment of a $7 million to $20 million-dollar deposit to consider waiting to close 

and allowing Cinemex the opportunity to inspect the theater.

68. On March 28, 2020, Cinemex offered to postpone the closing and 

provide Mr. Khan with a $20 million-dollar interest free loan, but proposed terms 

that Mr. Khan testified were not acceptable to him. Mr. Khan rejected Cinemex’s 

loan offer and asked that Cinemex provide him a non-refundable deposit in that 

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amount. Meanwhile, negotiations ensued as Mr. Khan pushed for a March 31 

closing and Cinemex pushed back. 

69. On April 1, 2020, the Khan Parties filed a verified complaint in the 

U.S. District Court for the Southern District of Texas (the “Texas Action”) in 

which the Khan Parties sued Cinemex for breach of contract and specific 

performance. 

CONCLUSIONS OF LAW

70. The Khan Parties’ Claims allege damages13 arising from the breach 

of contract claim brought by the Khan Parties in the Texas Action. This Court 

must decide who breached the EPAs– Cinemex or the Khan Parties? The Khan 

Parties allege Cinemex breached because Cinemex refused to close when it was 

obligated to do so, and that Cinemex failed to use commercially reasonable 

13 The Proofs of Claim include:

(a) Amended Claim Nos. 28 in Case No. 20-14696 (for $82,970,000) and 85 in Case No. 20-14695 

(for $82,970,000) of Omar Khan, 

(b) Amended Claim Nos. 29 in Case No. 20-14696 (for $26,079,214.65) and 87 in Case No. 20-

14695 (for $26,079,214.65) of S.C.G.C., Inc., 

(c) Amended Claim Nos. 30 in Case No. 20-14696 (for $26,079,214.65) and 89 in Case No. 20-

14695 (for $26,079,214.65) of S.C.G.M., Inc., 

(d) Amended Claim Nos. 31 in Case No. 20-14696 (for $26,079,214.65) and 91 in Case No. 20-

14695 (for $26,079,214.65) of SCG-B, Inc., 

(e) Claim Nos. 39 in Case No. 20-14696 (for $26,079,214.65) and 94 in Case No. 20-14695 (for 

$26,079,214.65) of SCG-VP, Inc.,

(f) Claim Nos. 50 in Case No. 20-14696 (for $26,079,214.65) and 109 in Case No. 20-14695 (for 

$26,079,214.65) of District Theaters, Inc., 

(g) Claims Nos. 49 in Case No. 20-14696 (for $26,079,214.65) and 110 in Case No. 20-14695 (for 

$26,079,214.65) of SCG-WR, LLC, 

(h) Claim Nos. 51 in Case No. 20-14696 (for $26,079,214.65) and 108 in Case No. 20-14695 (for 

$26,079,214.65) of SCG-CS, Inc., 

(i) Claims Nos. 45 in Case No. 20-14696 (for $26,079,214.65) and 102 in Case No. 20-14695 (for 

$26,079,214.65) of SCGK, Inc., 

(j) Claim Nos. 46 in Case No. 20-14696 (for $26,079,214.65) and 103 in Case No. 20-14695 (for 

$26,079,214.65) of SCG-SW, Inc., 

(k) Claim Nos. 47 in Case No. 20-14696 (for $26,079,214.65) and 104 in Case No. 20-14695 (for 

$26,079,214.65) of SCG-WL, Inc., and 

(l) Claim Nos. 48 in Case No. 20-14696 (for $26,079,214.65) and 105 in Case No. 20-14695 (for 

$26,079,214.65) of SCG-N, Inc.

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efforts to close. Cinemex argues that it did not breach either of the EPAs, rather, 

the Khan Parties breached by trying to force a closing contrary to the terms of 

the EPAs and filing the Texas Action without the legal right to do so which breach 

excused Cinemex’s obligation to close. 

A. Legal Standard.

71. “The burden of proof for claims brought in the bankruptcy court 

under 11 U.S.C. §502(a) rests on different parties at different times.” In re Mayne, 

556 B.R. 651, 654 (Bankr. M.D. Pa. 2016). However, the “[t]he burden of 

persuasion is always on the claimant.” Id. (citing In re Allegheny Int’l, Inc., 954 

F.2d 167, 173 (3d Cir. 1992)); see also In re Lampe, 665 F.3d 506, 514 (3d Cir. 

2011) (“[T]he claimant always has the burden of persuasion in a contested 

proceeding.”).

72. “[A] claim that alleges facts sufficient to support a legal liability to 

the claimant satisfies the claimant's initial obligation to go forward” because it 

would thus meet the prima facie validity requirement under Rule 3001(f) of the 

Federal Rules of Bankruptcy Procedure. In re AVN Corp., 248 B.R. 540, 547 

(Bankr. W.D. Tenn. 2000) (quoting In re Allegheny Int’l, Inc., 954 F.2d at 173–

74).

73. A filed proof of claim is “deemed allowed, unless a party in 

interest . . . objects.” 11 U.S.C. §502(a). If the party in interest objects, the 

burden “then shifts to the objector to produce evidence sufficient to negate the 

prima facie validity of the filed claim.” In re Mayne, 556 B.R. at 654. The objector 

must produce evidence “refut[ing] at least one of the allegations essential to the 

claim’s legal sufficiency.” Id. 

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74. “If the objector produces sufficient evidence to negate one or more 

of the sworn facts in the proof of claim, the burden reverts to the claimant to 

prove the validity of the claim by a preponderance of the evidence.” In re Sheed, 

607 B.R. 470, 477 (Bankr. E.D. Pa. 2019) (quoting In re Allegheny Int’l, Inc., 954 

F.2d at 173‒74).

75. Under Delaware law, to establish a breach of contract, the plaintiff 

must demonstrate: (1) the existence of the contract, whether express or implied; 

(2) the breach of an obligation imposed by that contract; and (3) the resultant 

damage to the plaintiff. VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 

612 (Del. 2003). 

76. In this case, the first element is not disputed. The Trial addressed 

the second element alone.

77. A party is liable for breach of contract where it wrongly concludes 

that its counterparty has repudiated the agreement and himself ceases to 

complete the transaction. Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027, at 

*32 (Del. Ch. 2005).

78. “Under Delaware law, repudiation is an outright refusal by a party 

to perform a contract or its conditions entitling ‘the other contracting party to 

treat the contract as rescinded.’” CitiSteel USA, Inc. v. Connell Ltd. P’ship, 758 

A.2d 928, 931 (Del. 2000) (quoting Sheehan v. Hepburn, 138 A.2d 810, 812 (Del. 

Ch. 1958)); see Restatement (Second) of Contracts §250 (1981) (“A repudiation 

is [ ] a statement by the obligor to the obligee indicating that the obligor will 

commit a breach that would of itself give the obligee a claim for damages for total 

breach.”). To constitute a repudiation, a party “must give an ‘unequivocal 

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statement’ that is ‘positive and unconditional’ about its intent not to perform its 

contractual obligation.” Veloric v. J.G. Wentworth, Inc., 2014 WL 4639217, at 

*15 (Del. Ch. 2014) (quoting Carteret Bancorp, Inc. v. Home Grp., Inc., 1988 WL 

3010, at *5–6 (Del. Ch. 1988)). The repudiating statement concerning 

nonperformance must be “clear and precise.” In re Broadstripe, LLC, 435 B.R. 

245, 262 (Bankr. D. Del. 2010). An “expression of doubt” about the ability to 

perform does not suffice. Veloric, 2014 WL 4639217, at *16.

B. Cinemex Did Not Breach Section 3.1 of the EPAs.

79. The Khan Parties have alleged that Cinemex breached Section 3.1 of 

the EPAs by not closing on March 26, 2020, two business days after the date the 

Khan Parties claim that the closing conditions were satisfied. 

80. The Khan Parties are wrong. The Khan Parties’ Claims fail (1) as to 

the Illinois EPA because, as set forth in the Illinois EPA, the Illinois EPA could 

not close before April 10, 2020; and (2) as to both the Illinois and Texas EPAs 

because the Khan Parties did not satisfy all of the closing conditions as required 

by Section 3.1 of the EPAs; and (3) as to both the Illinois and Texas EPAs because 

the Khan Parties eliminated Cinemex’s obligations under both EPAs by wrongly 

claiming a repudiation and refusing to perform.

81. The Court finds that Cinemex did not breach the Illinois EPA 

because, based on its plain language, the Illinois EPA could not close prior to 

April 10, 2020, and Cinemex did not repudiate the Illinois EPA (if at all) prior to 

April 1, 2020—the date the Khan Parties filed the Texas Action.

82. Section 3.1 of the Illinois EPA expressly states that Cinemex is 

obligated to close “no later than the second Business Day after satisfaction (or 

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waiver) of the conditions set forth in ARTICLE 8. . . (but in no event shall 

Closing take place prior to April 10, 2020).” (emphasis added). Absent 

ambiguity in the contract, “the Court interprets the contract based on the plain 

meaning of the language on the face of the contract.” Phunware, Inc. v. Excelmind 

Grp. Ltd., 117 F. Supp. 3d 613, 625 (D. Del. 2015) (citation omitted). There is 

no ambiguity in the Illinois EPA and the Khan Parties have previously 

acknowledged that under the Illinois EPA “the Closing must occur on or after 

April 10, 2020.” Thus, the Court finds that the Illinois EPA could not have closed 

prior to April 10, 2020.

83. The Khan Parties argued in their “Response to the Debtor’s Proposed 

Findings of Fact and Conclusions of Law” that the Illinois EPA and the Texas 

EPA “are not divisible agreements,” and that the two agreements are “indivisible”, 

“in reality one agreement.” And finally, that “[t]here is no evidence suggesting 

that Mr. Khan would have sold the Texas theaters without selling the Illinois 

theater, or that the Debtors would have purchased the Texas theaters without 

purchasing the Illinois theater.” 

84. The Court does not disagree but makes the following observations: 

a) Neither the Texas EPA nor the Illinois EPA referred to 

the consummation of the other agreement as a condition 

precedent or a condition subsequent to the other. 

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b) The Illinois EPA contains a firm “cannot close before” 

date; the Texas EPA does not.14

c) The Illinois EPA has a different Outside Closing Date 

(May 31, 2020) than the Texas EPA (April 30, 2020).

85. But, accepting the Khan Parties’ “indivisible” argument, 

notwithstanding the difference in the language of Section 3.1 of the two EPAs, 

neither contract could close prior to April 10, 2020, and, therefore, Mr. Khan’s 

March 24 Email, insisting on a closing within two days, was premature, and the 

filing of the Texas Action on April 1, 2020, was clearly a repudiation by the Khan 

Parties of the EPAs. 

86. If, as the Court anticipates, the Khan Parties will now want to back 

off of the logical consequences of their own “indivisible” argument, there is still 

no question that the Khan Parties had no right to sue Cinemex on April 1, 2020 

for a breach arising from Cinemex’s alleged breach of the Illinois EPA by failing 

to close the Illinois EPA transactions on March 26, or March 31, because under 

the Illinois EPA Cinemex could not close prior to April 10, 2020.

87. In sum, if the two EPAs should be considered as one, as the Khan 

Parties have argued, then neither contract could close before April 10, 2020 

unless Cinemex breached or repudiated both contracts based on something 

other than the failure to close on March 26, 2020. If the two EPAs are not to be 

considered as one, then the Khan Parties must show that Cinemex repudiated 

14 Mr. Khan testified the April 10 date was inserted based on his tax advisor’s advice and relates 

to some kind of tax advantage. It is not relevant why or how the provision was included except 

to note that it was clearly added at Mr. Khan’s request. 

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or breached the Illinois EPA prior to April 1, 2020 and separately repudiated or 

breached the Texas EPA prior to April 1, 2020. 

88. The Khan Parties have not identified any “clear and precise” 

statement of refusal to perform made by Cinemex, as required under Delaware 

law. See Broadstripe, 435 B.R. at 262. Indeed, the evidence shows that Cinemex 

continued to try to close the EPAs, even after the Khan Parties had declared a 

breach.

C. The Khan Parties Did Not Satisfy All Conditions Precedent to Closing 

Under Article 8 of the EPAs.

89. The Court will now turn to the Texas EPA. The Court finds that the 

Khan Parties failed to establish that any breach occurred because the Khan 

Parties have not proven that they satisfied all applicable closing conditions or, 

as described in the Joint Pretrial Stipulation, “used reasonable efforts to cause 

the closing conditions to occur.” In choosing to unilaterally declare that all 

closing conditions were met, the Khan Parties must bear the consequences of 

being wrong.

90. Under Delaware law, a “condition precedent” is “[a]n act or event, 

other than a lapse of time, that must exist or occur before a duty to perform 

something promised arises.” Cato Cap. LLC v. Hemispherx Biopharma, Inc., 70 

F. Supp. 3d 607, 619 (D. Del. 2014), aff’d, 625 F. App'x 108 (3d Cir. 2015) 

(citation omitted); See Restatement (Second) of Contracts §224 (1981). 

91. Section 3.1 of the Texas EPA provides that Cinemex is obligated to 

close “no later than the second Business Day after satisfaction (or waiver) of the 

conditions set forth in ARTICLE 8 (not including conditions which are to be 

satisfied by actions taken at the Closing), in Houston, Texas.” 

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92. Section 8.1 of the EPAs provides the “Buyer’s Closing Conditions” 

which are described as “[t]he obligations of the Buyer to consummate the 

purchase of the Equity Interests” being “subject to the satisfaction (or waiver by 

Buyer) of” a list of conditions “as of the time of Closing.” 

93. Counsel for the Khan Parties sent the March 24 Email to counsel for 

Cinemex stating “[a]t this point, each of the Buyer’s closing conditions set forth 

in Section 8.1 of the EPA has been satisfied our client is prepared to move 

forward.” So the question is: were all the Khan Parties’ conditions to close 

satisfied on March 24, 2020, or, to the extent documents were to be delivered at 

the closing, was it possible for the Khan Parties to satisfy those conditions at 

closing? 

94. The Court finds that each of the conditions set forth in Article 8 of 

the EPAs was a condition precedent to closing, and that Cinemex only had an 

obligation to close if all of the Article 8 conditions precedent were met. The Khan 

Parties do not contend to the contrary, alleging that Cinemex breached Section 

3.1 of the EPAs by refusing to close within two business days of the Khan Parties 

“satisfy[ing] all applicable Closing Conditions as of March 24, 2020.” 

95. Because the Court finds that the Khan Parties failed to meet the 

conditions precedent in Sections 8.1(B) and (D), Cinemex was not required to 

close on March 26, 2020 and therefore did not breach the Texas EPA.15

15 As noted above, if the two EPAs are indivisible then neither closing could occur prior to April 

10, regardless of whether all other conditions to close had been satisfied.

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96. On March 25, 2020, when Cinemex had advised they did not have 

to close16, counsel to the Khan Parties sent a letter that repeated that the Khan 

Parties had satisfied all closing conditions as of March 24, and that Cinemex’s 

refusal to close on March 26 “or even by March 31” was a repudiation of the 

Texas EPA. 

97. So what does Cinemex argue excused the closing? Cinemex’s 

response to the March 24 Email said “Covid-19 Related Fallout” preventing 

access to SCG employees and theaters “because the US/Mexico border is 

closed.”17 Subsequent correspondence, the Amended Objection, and evidence at 

Trial focused on a few primary issues:

a) The Cinemex operations team could not inspect the SCG 

Theaters while they were not operating;

b) The Cinemex team could not interview SCG personnel 

including managers and theater employees;

c) The SCG Theaters were not open and operating on March 24; 

and

16 A follow up email clarified that Cinemex did not have to close “at this time.”

17 While Cinemex appeared to rely on COVID-19, the doctrine of impossibility, and the Material 

Adverse Effect clause (the “MAE Clause”) prior to Trial, it appears to have abandoned that 

approach in its Proposed Findings of Fact and Conclusions of Law. The Khan Parties focused 

on the MAE Clause a great deal in their Proposed Findings of Fact and Conclusions of Law, trying 

to guide the Court through the convoluted, twisted language of the EPAs (a good example why 

“plain English for lawyers” must become the norm). The Court need not tweeze its way through 

the MAE Clause, and the various exceptions to the exceptions analysis, other than as is 

addressed further in this memorandum opinion.

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d) The Escrow Agreement, a critical closing document, had not 

been included in the “deliverables” and could not have been 

produced for a March 26 closing.18

a. The Khan Parties Failed to Satisfy Section 8.1(D) of the EPAs

By Failing to Deliver An Executed Escrow Agreement.

98. Section 8.1(D)(5) of the EPAs requires that “[o]n or prior to the 

Closing Date, the Equityholder will have delivered (or cause to be delivered) to 

Buyer . . . [t]he Escrow Agreement, duly executed by the Equityholder and the 

Escrow Agent.” 

99. The Khan Parties did not provide Cinemex with an executed Escrow 

Agreement as provided by the EPAs prior to demanding that Cinemex close in 

two business days. The Escrow Agreement was a critical closing document.19

100. There is no Escrow Agreement executed by the Khan Parties and 

Wells Fargo in the record. The only Escrow Agreement in the record is 

unexecuted. 

101. While, arguably, the signed Escrow Agreement could have been 

delivered at closing, it was not possible for a signed Escrow Agreement to be 

provided at a March 26 closing. According to a March 18 email sent by the Khan 

Parties’ counsel to counsel for Cinemex “the Escrow Agreement will need Buyer’s 

18 The Khan Parties object that the missing Escrow Agreement was not raised until Trial. 

However, the Court notes that the Joint Pretrial Stipulation invokes Section 8.1 in its entirety as 

a condition precedent to Cinemex’s obligation to close unless waived and, in any event the Escrow 

Agreement was clearly raised at Trial with no objection by the Khan Parties. 

19 The proposed Escrow Agreement set aside $8.1 million, around 10% of the purchase price. At 

Trial, Mr. Khan testified that the Escrow Agreement was a means for handling any “shortfalls in 

aesthetics, equipment, contracts, or anything of that nature.” The Court is familiar with the 

concept of escrow agreements such as this in purchase transactions. These “set aside” funds 

are sometimes referred to as “indemnification baskets” which leaves funds to address any postclosing adjustments that arise by virtue of timing or unknown circumstance.

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KYC20 information at least 5 business days prior to closing.”21 Thus, the Khan 

Parties’ counsel knew when he sent the March 24 Email that a closing on March 

26 was not possible.

102. Accordingly, the Court finds that the Khan Parties did not satisfy 

Section 8.1(D)(5), a condition precedent that would obligate Cinemex to close. 

On that basis alone, the Court finds that the Khan Parties did not satisfy the 

closing conditions under Article 8 and therefore, that Cinemex did not breach 

the Texas EPA by not closing on March 26, 2020. 

103. However, the lack of the Escrow Agreement, a clearly critical 

document, is not the only closing condition that had not been met on March 24, 

2020 and could not be met on March 26, 2020. 

b. The Khan Parties Failed to Satisfy Section 8.1(B) of the EPAs By 

Failing to Satisfy the Covenants Set Forth in Article 7 of the 

EPAs. 

104. Section 8.1(B) of the EPAs require that “the Equityholder will have 

performed and complied (or shall have cured any non-performance or noncompliance) with all of the covenants and agreements required to be performed 

by the Company and the Equityholder, as the case may be, hereunder or under 

any of the Transaction Documents at or prior to the Closing.” 

105. The record demonstrates that the Khan Parties failed to comply with 

all covenants and agreements prior to demanding that Cinemex close in two 

business days.

i. Section 7.1(A)(a) - Conducting Business in the Ordinary Course.

20 KYC means “know your customer.” 

21 That email noted that both parties were “pushing to close on March 31”, not on March 26.

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106. Under Section 7.1(A) of the EPAs, the Khan Parties covenanted to 

use “commercially reasonable efforts” to “conduct the Business in the Ordinary 

Course,” and to “keep available the services of their respective directors, officers 

and employees” from the signing of EPAs (March 10) until the closing or 

termination of the EPAs. 

107. Delaware courts interpret “commercially reasonable efforts” to mean 

“reasonable best efforts,” which requires “tak[ing] all reasonable steps to solve 

problems and consummate the transaction.” Akorn, Inc. v. Fresenius Kabi AG, 

2018 WL 4719347, at *87 (Del. Ch. 2018), aff’d, 198 A.3d 724 (Del. 2018) 

(quoting Williams Companies v. Energy Transfer Equity, L.P., 159 A.3d 264, 272 

(Del. 2017)).

108. Where a party obligated to use commercially reasonable efforts 

chooses not to take action that is “both commercially reasonable and advisable 

to enhance the likelihood of consummation of the [transaction],” and instead 

“pursued another path designed to avoid the consummation of the [transaction], 

[that party] knowingly and intentionally breached this covenant.” Hexion 

Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715, 749 (Del. Ch. 2008) 

(emphasis in original).

109. For the reasons explained below, although the Court finds that the 

Khan Parties used commercially reasonable efforts in temporarily suspending 

operations of the SCG Theaters, the Court finds they did not do so with respect 

to keeping available the services of their respective directors, officers, and 

employees, as required by the EPAs. 

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110. The EPAs define “Ordinary Course” to mean “in the ordinary course 

of that Person’s business consistent with past practice.” 

111. Where an “ordinary course” provision includes the phrase 

“consistent with past practice,” under Delaware law, a court must examine how 

the specific seller company has “routinely operated” in the past. See AB Stable 

VIII LLC v. Maps Hotels and Resorts One LLC, 2020 WL 7024929, at *70 (Del. Ch. 

2020).

112. The court “must evaluate the company’s operations ‘before and after 

entering into’ the transaction agreement to determine whether those operations 

are ‘consistent.’” Id. at *71 (quoting Mrs. Fields Brand, Inc. v. Interbake Foods, 

LLC, 2017 WL 2729860, at *32 (Del. Ch. 2017)). “[O]rdinary course” covenants 

“exist to ‘help ensure that the business the buyer is paying for at closing is 

essentially the same as the one it decided to buy at signing.’” Snow Phipps Grp., 

LLC v. Kcake Acquisition, Inc., 2021 WL 1714202, at *38 (Del. Ch. 2021) (quoting

Akorn, 2018 WL 4719347, at *83).

113. The SCG Theaters were not “essentially the same” as what Cinemex 

“decided to buy at signing.” See id. There is no question that the Khan Parties 

departed from the normal and ordinary routine of conducting the SCG Theaters’ 

business, as established by past practice, between the time the Parties signed 

the EPAs on March 10, 2020 to the date the Khan Parties declared that all closing 

conditions had been met on March 24, 2020. 

114. While the theater closures were outside of the Khan Parties’ control, 

and while it would not have been commercially reasonable for the theaters to 

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operate in violation of applicable law, or, for that matter, CDC recommendations, 

COVID-19 alone does not excuse the Khan Parties’ closing conditions.

115. The Khan Parties repeatedly point out that the MAE Clause did not 

excuse Cinemex from its requirements under the EPAs. That applies equally to 

the Khan Parties requirements under the EPAs.

116. In light of the COVID-19 developments, and consistent with the 

provisions of the EPAs, Schedule 7.1(A) of the EPAs was amended in Schedule 

Supplement No. 1 (the “Schedule Supplement”) to add “The COVID-19 

Response.” The COVID-19 Response is defined in Schedule 5.5(c) of the Schedule 

Supplement as follows –

1. As a result of state and local requirements 

banning large public gatherings in response to COVID19, as well as the declaration of a national state of 

emergency and the public guidance issued by the 

Center for Disease Control and Prevention with respect 

thereto, the Company Group, as well as SCG-N, have 

taken a number of actions and adjusted their business 

operations accordingly in order to comply with such 

requirements, including temporarily closing all theatres

(including all attached restaurants and dining areas) 

and suspending all operations while such restrictions 

remain in effect, which has been consistent with the 

industry-wide practice (collectively, the “COVID-19 

Response”).

117. However, that Schedule Supplement only amended the Khan Parties 

representations and warranties of Articles 4 and 5 of the EPAs, not the covenants 

of Article 7 of the EPAs. See Section 7.5 of the EPAs.

118. Even though the COVID-19 pandemic “warranted those changes, 

and the changes were reasonable responses to the pandemic,” a party 

nevertheless breaches the “ordinary course” covenant when the changes are not 

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in “the normal and ordinary routine of the business” as established by past 

practice. AB Stable VIII LLC v. Maps Hotels and Resorts One LLC, 2020 WL 

7024929, at *75 (Del. Ch. 2020) (the “Maps Opinion”). In Maps, a leading onpoint Delaware opinion, the Delaware Chancery Court found that the seller of 15 

luxury U.S. hotels breached the “ordinary course” covenant because, among 

other things, in response to the COVID-19 pandemic, it closed two of its hotels 

entirely, severely limited operations at the other thirteen—including stopping 

nearly all food and beverage service and limiting all other amenities—and 

“slashed” its workforce through lay-offs, furloughs, and reduced hours down to 

“skeleton staffing.” Id. at *75–76. The court found that the changes were “wholly 

inconsistent with past practice” and could reasonably be viewed as “having 

significantly altered the operation of the business.” Id. at *76.

119. While, as the Khan Parties point out, the Maps Opinion considered 

a “MAE clause” that qualified “past practices” with the word “only”, the language 

of the MAE clause in the Maps Opinion and the MAE Clause in this case both 

refer to “past practices.” The Maps Opinion is clear that “ordinary course” 

covenants did not permit a company to do whatever such companies “ordinarily 

would do when faced with a global pandemic.”22 Id. at *70. Rather, “precedents 

compare the company’s actions with how the company has routinely operated 

and hold that a company breaches an ordinary course covenant by departing 

significantly from that routine.” Id. Where the parties choose to define “ordinary 

22 The court also noted that even though there were questions as to whether the company had 

legal obligations to make changes to its business due to government stay-home orders, this 

argument did not “enable[] Seller to carry its burden of demonstrating that [the company’s] 

deviations from the ordinary course of business were excused.” Id. at *81.

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course” as being “consistent with past practice,” as is the case here, “the court 

cannot look to how other companies responded to the pandemic or operated 

under similar circumstances.” Id. at *71. Thus, the ordinary course covenant 

“‘impose[s] an unconditional obligation’ to operate in the ordinary course 

consistent with past practice.” Id. (quoting Cooper Tire & Rubber Co. v. Apollo 

(Mauritius) Holdings Pvt. Ltd., 2014 WL 5654305, at *15 (Del. Ch. 2014)).

120. Thus, while the Khan Parties’ representations and warranties were 

not breached by the closures, and while the closures were commercially 

reasonable, nonetheless the Khan Parties had departed from their ordinary 

course of business prior to the purported closing date, and in doing so, breached 

their covenant under Section 7.1(A)(a) of the EPAs. Because the Khan Parties 

failed to perform a condition precedent to closing under Section 8.1(B) of the 

EPAs, they had no right to declare all conditions to close had been met on March 

24, 2020 or would be met on March 26, 2020.

ii. Section 7.1(A)(d) - Keep Available the Services of Their 

Respective Directors, Officers, and Employees.

121. Under Section 7.1(A)(d), the Khan Parties covenanted to use 

commercially reasonable efforts to “keep available the services of their respective 

directors, officers and employees.” 

122. Even if the covenant requirements of the EPAs had excused the 

temporary shutdown of the theaters for purposes of forcing a closing, nothing in 

the shutdown orders or CDC guidelines required the Khan Parties to furlough 

employees or release executives. While there is a dispute regarding the timing 

of the furloughs, it is uncontroverted that SCG furloughed its employees. Mr. 

Khan testified in his deposition that somewhere between a week to ten days after 

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the theater closures on March 17, one hundred percent of employees were 

furloughed - well before any Outside Closing Date, and while Cinemex was still 

trying to arrange inspections.

123. The decision to furlough employees was not discussed with 

Cinemex. It appears there was no reason for the furloughs other than to save 

costs. Thus, even though Cinemex could have inspected the theaters while they 

were closed, Cinemex personnel were not given the opportunity to discuss with 

on-site employees any operational questions or concerns that might be raised 

during, or as part of, the inspection process.

124. The record demonstrates that the Khan Parties failed to satisfy the 

covenant to keep available the services of their respective directors, officers and 

employees, as required under Section 7.1(A)(d) of the EPAs and therefore failed 

to perform a condition precedent to closing under Section 8.1(B) of the EPAs.23

iii. Section 7.2 - Provide Reasonable Access to and the Right to 

Inspect All Property, Assets, Premises, Books, Records, 

Contracts, Etc.

125. Under Section 7.2 of the EPAs, the Khan Parties covenanted to 

provide Cinemex “reasonable access to and the right to inspect all of the 

properties, assets, premises, books and records, contracts, agreements and 

other documents and data related to the Company Group” from the signing of

23 In another example of careless drafting, Section 7.9 of the EPAs require the Khan Parties to 

provide Cinemex “reasonable access to each Corporate Employee.” The EPAs define “Corporate

Employee” as “each employee of SCG-AH, Inc.” However, SCG-AH, Inc. is not a party to either 

EPA and is not identified in either EPA. 

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the EPAs to the closing date or termination of the EPAs. The Khan Parties failed 

to do so.

126. As part of the diligence process, PJ Solomon populated the data 

room with what should have included, and what had been represented as, “the 

actual contracts with all the vendors prior to requesting final offers.”

127. Despite the Khan Parties having represented that all contracts were 

provided to Cinemex, even as of March 27, three days after the Khan Parties 

claimed, “the satisfaction (or waiver) of the closing conditions set forth in Article 

8 of the EPA,” the Khan Parties had still not provided all contracts.24

128. Accordingly, the Court finds that the Khan Parties did not provide 

Cinemex reasonable access to, and the right to inspect, their contracts prior to 

the purported closing date, March 26, 2020, and in doing so, the Khan Parties

failed to satisfy a condition precedent to closing under Section 8.1(B) of the EPAs. 

See ECB USA, Inc. v. Savencia, S.A., 2021 WL 3187495, at *14 (D. Del. 2021) 

(concluding that the failure to provide requested documents under a contract 

requiring “reasonable access to and the right to inspect all of the . . . books and 

24 On March 19, 2020, a Cinemex employee, Loretta Thomas, emailed Mr. Walsh, of SCG 

Theaters, copying Mr. Ostrow and Mr. Khan, also of SCG Theaters, requesting that the SCG 

Theaters provide “copies of the contracts relating to theater operations.” In response, Mr. Ostrow 

asserted that “[a]ll contracts are in the [data room].” Having not found copies of all contracts 

requested, on March 27, 2020, Ms. Thomas followed up with Mr. Ostrow, asking for a copy of 

five specific contracts because Cinemex “checked the data room and could not find [them.]” Mr. 

Ostrow replied shortly after, attaching several contracts and calling out the contract with Vistar 

as one for which “we are waiting on the copy from our rep.” The email exchange goes on to say 

that “any other company not listed here is comparable to Conroe agreement.” 

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records, contracts, agreements and other documents and data” would amount 

to breach) (applying Florida law).

129. Pursuant to Section 8.1(B) of the EPAs, as a condition of closing, the 

Khan Parties had to provide Cinemex with reasonable access to, and the right to 

inspect properties and premises of the SCG Theaters, as provided by Section 7.2 

of the EPAs.

130. The Court finds that the Khan Parties did not provide reasonable 

access to the theaters by foreclosing Cinemex’s ability to conduct the inspections 

– either by waiting to see if the theaters would open closer to the Outside Closing 

Date, or at least taking additional time to come to another resolution. By sending 

the March 24 Email the Khan Parties prematurely declared this condition 

satisfied, and failed to act in a commercially reasonable fashion. 

131. At the time of the March 24 Email where the Khan Parties declared 

all conditions to close were satisfied, the Parties were still negotiating the 

physical inspection of the theaters. 

132. It is clear, based on the evidence, that all Parties knew and expected 

that inspections would occur after the EPAs were signed25, however, the Khan 

25 The Phase II letter made clear that inspections would take place after a contract was signed; 

the EPAs provided for inspections and the Parties were trying to coordinate the inspections from 

the date the EPAs were signed. 

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Parties now take the position that the February Tours were the inspections. That 

position is completely unfounded.

26

133. Cinemex never waived their right to a physical inspection. There is 

a dispute, however, as to whether an inspection of the SCG Theaters while they 

were closed would satisfy Section 7.2 of the EPAs. Cinemex has not indicated 

where in the EPAs a physical inspection must take place only while the theaters 

are operating. It is true that the EPAs specifically state “any such investigation 

shall be conducted during normal business hours” but, the “normal business

hours” of the theaters was different during the mandated COVID-19 shut down. 

Moreover, Cinemex did tour the theaters while they were operating during the 

February Tours. Mr. Martí testified as to a variety of reasons why the inspections 

needed to occur while the theater was in operation, but other than timing 

delivery of food and the food to table experience, the other “live experience” 

requests seemed to have occurred during the February Tours.27

134. The Khan Parties insist that they never denied Cinemex a request 

to inspect the theaters, and as such they are in compliance with their obligations 

under Section 7.2.

135. But the Khan Parties did effectively deny Cinemex’s request to 

inspect the theaters by declaring satisfaction of the conditions precedent to 

26 Mr. Brail testified that he believed “inspections” applied to roofs and HVAC systems and that 

Mr. Martí had told him Cinemex did not need to inspect the roofs or the HVAC. However, at no 

time did Cinemex agree to limit the physical inspection of the SCG Theaters only to the theaters’ 

roofs and HVAC systems. Moreover, Mr. Khan’s several suggestions relating to the inspections 

(the private plane, hiring a third party, etc.) show Mr. Khan knew Cinemex had the right to 

inspect and that he recognized that the February Tours were not inspections. 

27 For example, Mr. Martí testified that Cinemex would need to inspect the bathrooms during 

operating to make sure the bathrooms were kept clean during the high traffic flow of operations. 

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closing on March 24, 2020 (thereby seeking to trigger a closing on March 26, 

2020), prior to Cinemex inspecting the theaters despite the Khan Parties knowing

Cinemex intended to exercise its right to inspect the theaters and 

notwithstanding the Outside Closing Dates.

136. The Khan Parties’ attempt to close prior to Cinemex’s rescheduling 

of the inspections when both EPAs provided additional time before closing was 

required constitutes an impermissible restriction of access on Cinemex’s right to 

inspect the SCG Theaters, regardless of whether the inspection could be of a 

closed theater or had to be an open theater. See Frontier Oil, 2005 WL 1039027, 

at *32 (after seller wrongly declared repudiation and sued, seller would be liable 

to buyer for damages for not allowing buyer to complete the transaction).

137. Accordingly, the Court finds that the Khan Parties did not provide 

Cinemex reasonable access to, and the right to inspect, its properties and 

premises prior to the purported closing date, and in doing so, breached their 

covenant under Section 7.2 of the EPAs and therefore failed to perform a 

condition precedent to closing under Section 8.1(B) of the EPAs.

iv. Section 7.9 - Access to Corporate Employees.

138. Under Section 7.9 of the EPAs, the Khan Parties covenanted to 

provide Cinemex “reasonable access to each Corporate Employee (including but 

not limited to by providing contact information for each such Corporate 

Employee) and to the personnel record of each Corporate Employee, and Buyer 

However, Mr. Martí acknowledged on cross-examination that, in fact, the Cinemex group did go 

into the bathrooms during the February Tours, when the SCG Theaters were fully operational.

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and its Affiliates may conduct interviews and discussions with such Corporate 

Employees regarding employment.” 

139. Under Section 1.1 of the EPAs, “Corporate Employee” is defined “as 

of the date” the EPAs were executed—March 10, 2020. 28 

140. As discussed supra, it is undisputed that the Mr. Khan furloughed 

one hundred percent of his employees by April 1, 2020.

141. The Court finds that the Khan Parties’ furloughing of one hundred 

percent of its employees necessarily restricted reasonable access to Corporate 

Employees because, the Corporate Employees that were employed at the time of 

signing were no longer under the custody and control of the Khan Parties during 

a time when Cinemex was still actively seeking inspection of the theaters and 

access to the associated employees.

142. Not only were the hourly employees unavailable, at least one key 

Corporate Employee was not available. Michael Pawlowski was the SCG 

Theaters former culinary director. Despite Mr. Pawlowski being a Corporate 

Employee, Mr. Khan asked that Mr. Pawlowski “move on” and did not replace 

his role due to “COVID, lower performance, [and] theaters [being] closed.” 

Cinemex thus could not exercise its right to interview the culinary director of a 

dine-in movie theater, where the “scratch-made food” was a key selling point. 

143. Accordingly, the Khan Parties inappropriately limited Cinemex’s 

access to its Corporate Employees under Section 7.9 of the EPAs and therefore 

28 But see supra note 23 regarding the nonsensical definition of Corporate Employee. Since both 

Parties assume “Corporate Employees” referred to those involved in the operation of the SCG 

Theaters, the Court will ignore the contractual definition problem.

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the Khan Parties failed to perform a condition precedent to closing under Section 

8.1(B) of the EPAs. 

v. Section 7.4 - Further Assurances.

144. Under Section 7.4 of the EPAs, the Khan Parties covenanted to 

provide Cinemex “reasonable assurances” that they would use “reasonable best 

efforts” to satisfy the closing conditions and obligations to consummate the 

closing.

145. The Court finds that the Khan Parties did not use reasonable best 

efforts to cause the closing to occur. Not only did the Khan Parties not meet all 

closing conditions (see supra), they also demanded—and indeed, threatened—

that Cinemex close prematurely, to meet a closing deadline of Mr. Khan’s 

unilateral choosing, one that was not even mentioned in the EPAs. See supra 

¶¶46-52.

146. The only justification Mr. Khan offered for his behavior was that he 

was entitled to a March 31 closing because it was his “God-given right to do so.” 

Such an explanation does not constitute reasonable best efforts. See Frontier 

Oil, 2005 WL 1039027, at *31 (by peremptorily declaring a repudiation, the seller 

denied the buyer the opportunity to resolve contingencies).

147. Mr. Khan’s explanation for filing the Texas Action during the term 

of the EPAs is equally unreasonable. Mr. Khan’s behavior was driven entirely on 

his feelings. Mr. Khan testified that he filed the Texas Action on April 1 because 

he “felt that they were playing games and they were not going to close” and that 

he “also felt that they were intentionally doing it to get the April 30th drop-dead 

date.” Khan Dep. Tr. 523:18-524:03. When asked during deposition why Mr. 

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Khan did not wait until April 30th to file suit, Mr. Khan responded: “I don't know 

why anyone or anyone thinks that they would have the right to make that 

decision for me: I just felt like it was the right time.” Id. at 527:25–528:19. Mr. 

Khan testified that he was “frustrated,” “going through an emotional roller 

coaster,” and “when someone’s upset and they’re angry and frustrated and 

they’re emotional, [they] take action when [they] feel like taking it.”

148. Mr. Khan admitted that he had no reason to rush the filing of the 

lawsuit. (“I don’t know what the rush was.”). Khan Dep. Tr. 524:15–24. 

According to Mr. Khan, it ultimately came down to the simple fact that he “didn’t 

want to” wait. These are not legally justifiable reasons and do not come close to 

constituting reasonable best efforts.

D. Cinemex Did Not Waive Any of the Closing Conditions.

149. Under Delaware law, waiver is “the voluntary and intentional 

relinquishment of a known right.” Seidensticker v. Gasparilla Inn, Inc., 2007 WL 

1930428, at *6 (Del. Ch. 2007) (citation omitted). The standards for proving 

waiver are “quite exacting.” Id. Waiver “implies knowledge of all material facts 

and an intent to waive, together with a willingness to refrain from enforcing those 

contractual rights.” Id. (citation omitted).

150. Pursuant to Section 12.1, any amendment or waiver to the EPAs

must have been in writing. The writing requirement was absolute, and no part 

of the EPAs, or any rights or obligations of any party under the EPAs, could be 

modified, amended, or discharged simply by “course of dealing.” 

151. At no time did Cinemex waive its right to conduct an in-person 

physical inspection of the SCG Theaters or to have the closing take place in 

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Houston. There is no writing reflecting a waiver in the record. And no testimony 

was elicited from any witness indicating the existence of such a writing (or even 

an oral waiver).29

E. The Khan Parties Breached the EPAs By Wrongly Declaring A 

Repudiation By Cinemex.

152. A party is liable for breach of contract where it wrongly concludes 

that its counterparty has repudiated the agreement and itself ceases to complete 

the transaction. Frontier Oil, 2005 WL 1039027, at *32.

153. It is undisputed that on March 25, 2020, the Khan Parties, through 

its counsel, sent Cinemex the Breach Notice claiming that Cinemex had 

repudiated the EPAs in providing an “unconditional and unambiguous refusal to 

close in the timeframe required by the Agreement.” 

154. The basis for the Khan Parties’ claim was that “[a]s of [] March 24, 

2020, the Companies and Equityholders have satisfied all remaining closing 

conditions and the Agreement requires your clients now to close.” 

155. The Court finds that Cinemex had not, in fact, repudiated for two 

reasons. First, the Khan Parties cannot point to any statement where Cinemex 

made clear that it would not perform its contractual obligations. See Veloric, 

2014 WL 4639217, at *16. Instead, Cinemex made clear, and the Khan Parties 

understood, that Cinemex would not close on March 26, 2020 specifically—not 

29 There is also no evidence that Cinemex waived the condition that the closing occur in Houston. 

As Cinemex explained to the Khan Parties in its March 26 letter, the requirement for the closing 

location was “in place for good reason” so that Cinemex could assess the facilities and perform 

other actions needed onsite “to ensure an orderly and successful transition of the business.” 

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that it would never close. This is demonstrated by the statements Cinemex made 

at the time in its March 26 letter that Cinemex “was not obligated to close the 

transaction at this time” (emphasis added), and that Cinemex continued to work 

towards closing, even after the Khan Parties had accused it of breach.

156. Second, as explained in supra Section C, the Khan Parties had not, 

in fact, satisfied all closing conditions. Thus, Cinemex was not required to close 

on March 26, 2020.

157. The Khan Parties, therefore, wrongly claimed in the Breach Notice 

on March 25 that Cinemex repudiated. 

158. In that same Breach Notice, the Khan Parties made clear that they

would cease to complete the transaction by claiming that “if your clients do not 

close in accordance with the Agreement, our clients have instructed us to pursue 

all available remedies, including without limitation potentially seeking expedited 

injunctive relief and specific performance as well as all costs incurred or damages 

suffered.” See W. Willow-Bay Ct., LLC v. Robino-Bay Ct. Plaza, LLC, 2009 WL 

458779, at *5 (Del. Ch. 2009) (“A party may repudiate an obligation through 

statements when its language, reasonably interpreted, indicates that it will not 

or cannot perform.”).

159. The Khan Parties’ refusal to perform its obligations under the EPAs 

is further demonstrated by their filing of the Texas Action on April 1, 2020 even 

before the April 10 Illinois threshold date.

160. Both the threat of filing suit and the Texas Action itself qualify as 

the Khan Parties’ repudiation of the EPAs, which precludes the Khan Parties 

from claiming the benefit of the agreement. See PAMI-LEMB I Inc. v. EMB-NHC, 

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L.L.C., 857 A.2d 998, 1014–15 (Del. Ch. 2004) (“Once a party repudiates or 

breaches a contract, it cannot claim the benefits of that contract.”).

161. Section 9.1(D) of the EPAs provide the buyer may terminate either 

EPA if the seller fails to satisfy or breaches a condition to close and fails to cure 

such breach within thirty days. By wrongfully declaring repudiation, and filing 

the Texas Action, the Khan Parties cut off the thirty-day cure period that the 

Khan Parties would have had to cure their own breaches, and therefore gave 

Cinemex the right to terminate.

CONCLUSION

162. To prevail on their Claims that Cinemex breached the EPAs, the 

Khan Parties were required to prove that the closing conditions under the EPAs, 

which included both the covenants under Article 7 and the conditions precedent

under Article 8, had been met as of March 24, 2020. They have failed to do so. 

In choosing to unilaterally declare that all closing conditions were met, the Khan 

Parties must bear the consequences of being wrong.

163. COVID-19 threw everyone in the world into a realm that no one 

expected. While the evidence shows that the Parties were fully aware of the 

COVID-19 pandemic at the time the EPAs were signed, neither Party had any 

idea it would go on for as long as it has. However, both Parties were aware that 

COVID-19 had some impact, as is reflected in the Schedule Supplement, they 

just believed it would be short term. Indeed, the EPAs reflected the possible need 

for some “wiggle room,” hence the Outside Closing Dates. But Mr. Khan didn’t 

want to wait. Mr. Khan, despite having signed two contracts, neither of which 

even mentioned his desired March 31 closing, nevertheless decided to ignore the 

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terms of those contracts, and pushed to meet his own personal agenda. 

Regardless of whether the issues that were percolating could have been resolved 

by the Outside Closing Dates does not matter. What matters is that Mr. Khan, 

and by extension, the Khan Parties, foreclosed any opportunity for resolution, 

built into the EPAs themselves, by filing the Texas Action. 

164. And for those reasons, the Court finds that Cinemex’s objections to 

the Claims must be sustained. 

ORDER

BASED ON THE FOREGOING FINDINGS OF FACT AND CONCLUSIONS 

OF LAW, IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED THAT: 

165. The Amended Objection is granted. The Claims are disallowed in 

their entirety. 

# # #

Copies furnished to: 

Patricia B. Tomasco, Esq.

Michael Seese, Esq. 

Attorney Tomasco is directed to serve a copy of this Order on interested parties who do not 

receive service by CM/ECF, and file a proof of such service within two (2) business days from entry 

of the Order. 

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