IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: PERKINS & MARIE CALLENDERS INC.

, et al., Debtors. Case No. 11-11795 (KG) Chapter 11

Hearing Date: October 25, 2011 at 1:00 p.m. Objection Deadline: October 18, 2011 Related Docket No. 1071

JANELL MCCLAIN AND MARC MEALIE RESPONSE TO DEBTORS OBJECTION TO CERTAIN CLAIMS SOLELY FOR PURPOSES OF VOTING TO ACCEPT OR REJECT THE DEBTORS SECOND AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE Janell McClain and Marc Mealie, on behalf of themselves and others similarly situated (the Claimants or Respondents), hereby submit their Response to the Debtors Objection to Certain Claims Solely for Purposes of Voting to Accept or Reject the Debtors Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code [D.I. 1071] (the Objection). In Debtors Objection, Debtors request this Court to temporarily disallow the Claimants Claim by assessing its dollar value as zero ($0.00), as opposed to the $19,990,396.62 asserted by the Claimants in their Proof of Claim numbered 1529 (the Claim). In response, the Claimants respectfully request this Court to allow their Claim for the asserted ballot value amount solely for purposes of voting at this juncture in the proceedings. In support of this Response, the Claimants represent as follows: I. BACKGROUND FACTS 1. The Claim is predicated upon a putative class action filed by Janell

McClain and Marc Mealie in the Superior Court of the State of California for the County of Los Angeles on October 1, 2007, entitled Janell McClain and Marc Mealie, on behalf of themselves and others similarly situated, Plaintiffs, v. Wilshire Restaurant Group, Inc. dba Marie Callender Pie Shops/East Side Marios; Marie Callender Pie Shops, Inc.; and

Does 1 to 50, Inclusive, Defendants (the Action). The Action was filed on behalf of all individuals who hold or held the position of hourly employee who are employed by or formerly employed by Wilshire Restaurant Group, Inc. dba Marie Callender Pie Shops/East Side Marios and/or Marie Callender Pie Shops, Inc., and any subsidiaries or affiliated companies doing business as Marie Callenders (hereinafter collectively referred to as Defendants or the Debtors), within the State of California from December 1, 2005 until the present. The First Amended Complaint, filed on November 26, 2007, alleges causes of action for: (1) failure to provide meal breaks under Labor Code 226.7; (2) failure to timely pay wages upon termination or resignation pursuant to Labor Code 203; (3) penalties pursuant to Labor Code 2699; and (4) violation of Business & Professions Code 17200. 2. On May 29, 2008, the parties stipulated to a stay in the Action pending the

California Supreme Courts decision in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25. The case has been stayed ever since. 3. On July 12, 2011, Respondents received notice of the Chapter 11 petitions

filed by the Debtors in the United States Bankruptcy Court for the District of Delaware on June 13, 2011 in the bankruptcy cases entitled In re: Perkins & Marie Callenders Inc., et al. 4. Respondents submitted the Claim on behalf of themselves and a class of

6,606 similarly situated employees on August 15, 2011. II. VALUE OF THE CLAIM 5. After receiving notice of the bankruptcy filing, Respondents retained

Malcolm S. Cohen, Ph.D., an expert in wage and hour research, to conduct a survey of putative class members to collect evidence in support of a class proof of claim. Mr. Cohen was asked to calculate the violation rates and compensation owed to putative class members resulting from Defendants failure to provide meal periods pursuant to Labor Code 226.7. Mr. Cohen was also asked to calculate compensation owed resulting from the failure to timely pay wages pursuant to Labor Code 203, as well as pre-petition

interest. For purposes of filing the class proof of claim, the class period was limited to December 1, 2005 through December 31, 2008. 6. The results of the survey revealed that, during the Class Period,

approximately 59% of the more than 10,000 employees did not receive a timely, thirtyminute, uninterrupted meal periods for every five hours of work, as required by California law. Employees missed approximately 2.6 meal periods per week and made approximately $7.91 per hour, on average. Mr. Cohen concluded that, based on the survey data, the meal period claim for each of the 6,606 class members is worth approximately $1,442.52, and the meal period claim for the class as a whole is worth $9,529,537.41. Pre-judgment interest, calculated at 10%, brought the value of the claim to $13,330,916.19. Finally, the penalties for violation of Labor Code 203 were

$6,659,480.42, bringing the total damages in the Action to $19,990,396.62. This is the value of the claim that Respondents submitted on behalf of the putative class. The claim is supported by the expert testimony, a summary of the survey results, and the damage model that were submitted along with the proof of claim. III. THE MEAL PERIOD CLASS IS CERTIFIABLE UNDER CALIFORNIA LAW 7. Labor Code 226.7(a) states, No employer shall require any employee to

work during any mealperiod. Labor Code 226.7(b) states, If an employer fails to provide an employee a meal period...the employer shall pay the employee one additional hour of pay at the employees regular rate of compensation for each work day that the mealperiod is not provided. Employers do not satisfy their obligations under the laws set forth above by assuming that meal periods are taken or by merely having a policy that purportedly allows meal breaks. Cicairos v. Summit Logistics, Inc. (2005) 133

Cal.App.4th 949, 62 (rev. denied Jan. 18, 2006). Rather, employers have an affirmative duty to ensure their employees are relieved of all duty during meal periods. Id. at 962-63. Labor Code 512(a) provides:

An employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutesAn employer may not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period of not less than 30 minutes. Id. (Emphasis added). 8. The plain language of 512 prohibits employers from providing late meal

periods. By forbidding employers from requiring employees to work more than five hours without a meal period of at least thirty minutes, the statute plainly requires that employees be given a thirty-minute meal period within a five hour work period. The interest protected by these meal period provisions is the right of employees to be free of the employer's control during the meal period. Murphy v. Kenneth Cole (2007) 40 Cal.4th 1094, 1104. 9. Moreover, Labor Code 512(b) provides, Notwithstanding subdivision

(a), the Industrial Welfare Commission may adopt a working condition order permitting a meal period to commence after six hours of work if the commission determines that the order is consistent with the health and welfare of the affected employees. There is no applicable Industrial Welfare Commission order in place permitting class members to commence meal periods after six hours of work. 10. Thus, it is without argument that Defendants have an obligation under the

Labor Code to provide their employees with thirty-minute, uninterrupted meal breaks within the first five hours of each shift. However, the definition of the word provide has recently been subject to much debate, and is currently an issue before the California Supreme Court in the case of Brinker Restaurant Corp. v. Superior Court (2008) 80 Cal.Rptr.3d 781, rev. granted, 85 Cal.Rptr. 688 (Cal. Oct. 22, 2008). Brinker has been set for oral argument on November 8, 2011, and the decision will likely impact the issues of this case. Although unciteable, Brinker is relied upon by the Debtors for the proposition that an employer need only make meal breaks available to its employees. However, under the current state of the law, employers have an affirmative obligation to ensure

that workers are actually relieved of all duty for a thirty-minute meal period. Cicairos, 133 Cal.App.4th at 962-63; see also DLSE Opinion Letter 2002.01.28, p. 1 (stating that rest periods differ from meal periods, during which an employer has an affirmative obligation to ensure that workers are actually relieved of all duty, not performing any work, andfree to leave the employers premises. This distinction between meal periods and rest periods is present in all of the wage orders.). 11. In Cicairos, the court addressed the meaning of the word provide with

respect to meal period law. There, the defendant did not schedule meal periods and pressured the plaintiff drivers to make more than one daily trip so they felt they did not have time to stop for lunch. The evidence showed that most drivers ate their meals while driving or else skipped a meal nearly every working day. Id. at 962. Based on these facts, as well as the applicable wage order requiring employers to record meal periods, the court concluded that the defendant had failed to provide compliant meal periods to its employees. 12. Similarly, Defendants have failed to provide compliant meal periods to its

employees throughout the Class Period. The survey results indicate that 59% of all employees were not provided a timely, thirty-minute meal period for every five hours of work, as required by law. California law. IV. CLAIMANTS REQUEST 13. Pursuant to section 105(a) of the Bankruptcy Code, Bankruptcy Rule Thus, the meal period class is clearly certifiable under

3018, and Paragraph 14 of this Courts Disclosure Statement Order, and by this Response, the Claimants request this Court to overrule Debtors Objection to the Claimants Claim, as it is exercised solely for purposes of voting to accept or reject the Plan. The Claimants request this Court allow the Claim for purposes of voting in the amount asserted on the Claimants ballot.

V.

ARGUMENT 14. This Court should overrule the Debtors Objection and temporarily allow

the Claimants Claim for purposes of voting in the amount asserted on the Claimants ballot. Section 1126(a) of the Bankruptcy Code permits a holder of a claim or interest allowed under section 502 of the Bankruptcy Code to accept or reject a chapter 11 reorganization plan. Section 502(a) of the Bankruptcy Code explains that a claim or interest is automatically deemed allowed when it is supported by a proof of claim, filed pursuant to section 501 of the Bankruptcy Code, unless a party in interest objects to said claim or interest. 15. Rule 3018(a) of the Bankruptcy Rules vests broad discretion in the courts

to temporarily allow claims in an amount which the court deems proper for the purposes of accepting or rejecting a plan. Fed. R. Bankr. P. 3018(a). 16. As the Bankruptcy Code and Bankruptcy Rules do not establish guidelines

for determining whether to temporarily allow a claim solely for purposes of voting and how to estimate its value, courts have taken various approaches to applying rule 3018 of the Bankruptcy Rules with respect to who bears the burden of proof, whether and when to shift the burden of proof, what standard of proof to apply, and what method to use to calculate the value of the claim. Claimants contend that Debtors should be held to the same standard here as they would be held to in a claim objection dispute. 17. Pursuant to Fed. R. Bankr. P. 3001(f) the filing of a proof of claim with

proper documentation provides prima facie evidence of the validity and amount of the claim. The Claimants have timely and properly filed a valid claim against the Debtors with supporting documentation.

18.

[T]he mere filing of a proof of claim is prima facie evidence of its

validity, with the burden of disproving it upon the objector. Sloan's Furriers v. Bradley, 146 F.2d 757 (C.C.A.6 1945). The Debtors have presented no evidence to disprove the Claimants Claim. 19. When a claim objection is filed in a bankruptcy case, the burden of proof

as to the validity of the claim shifts between parties. In re Allegheny Int'l, Inc., 954 F.2d 167, 173 (3d Cir.1992). These shifting burdens of proof are described in Allegheny Int'l as follows: Initially, the claimant must allege facts sufficient to support the claim. If the averments in his filed claim meet this standard of sufficiency, it is prima facie valid. In other words, a claim that alleges facts sufficient to support a legal liability to the claimant satisfies the claimant's initial obligation to go forward. The burden of going forward then shifts to the objector to produce evidence sufficient to negate the prima facie validity of the filed claim. It is often said that the objector must produce evidence equal in force to the prima facie case...In practice, the objector must produce evidence which, if believed, would refute at least one of the allegations that is essential to the claim's legal sufficiency. 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...The burden of persuasion is always on the claimant. Allegheny Int'l, 954 F.2d at 173-74. Claimants have met their burden of persuasion by way of their proof of claim filing. The burden going forward should be on the Debtors to present evidence that Claimants Claim is insufficient, which they fail to do by way of the Objection. VI. RESERVATION 20. The Claimants reserve any and all rights to amend, supplement, or

otherwise modify this Response. VII. CONCLUSION

21.

Based on the foregoing, Respondents respectfully request that the Court

deny the Debtors Objection for purposes of voting to accept or reject the plan and deny the Debtors modified claim classification in the amount of $0.00. Dated: October 18, 2011 Wilmington, Delaware Respectfully submitted, MARGOLIS EDELSTEIN

/s/Herbert W. Mondros Herbert W. Mondros, Esq. (#3308) 750 Shipyard Drive, Suite 102 Wilmington, DE 19801 Telephone: 302-888-1112 Facsimile: 302-888-1119 E-mail: hmondros@margolisedelstein.com -andKINGSLEY & KINGSLEY, APC Eric Kingsley Deanna S. Engles 16133 Ventura Blvd., Suite 1200 Encino, CA 91436 (818) 990-8300 Fax (818) 990-2903 Counsel to Janell McClain and Marc Mealie