SCOTT'S S & S, INC. v. STEAK N SHAKE ENTERPRISES, INC. et al

Filing 68

ORDER granting 62 Defendants' Motion to Stay - For the reasons stated herein, Defendants', Steak n Shake Enterprises, Inc., and Steak n Shake Operations, Inc., Expedited Motion to Stay Litigation Pending Appeal in each case (Druco, Dkt. No. 55; PSPC, Dkt. No. 54; Scott's, Dkt. No. 62 ) is GRANTED. ***SEE ORDER***. Signed by Judge Larry J. McKinney on 1/23/2014. (JKS)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
DRUCO RESTAURANTS, INC.,

)
)
Plaintiff,
)
)
vs.
)
No. 1:13-cv-00560-LJM-DML
)
STEAK N SHAKE ENTERPRISES, INC.,
)
and
)
STEAK N SHAKE OPERATIONS, INC.,
)
)
Defendants.
)
______________________________________________________________________
PEOPLE SALES & PROFIT COMPANY,
)
INC.,
)
)
Plaintiff,
)
)
vs.
)
No. 1:13-cv-00654-LJM-DML
)
STEAK N SHAKE ENTERPRISES, INC.,
)
)
Defendant.
)
______________________________________________________________________
SCOTT’S S&S, INC.,
)
)
Plaintiff,
)
)
vs.
)
No. 1:13-cv-00655-LJM-DML
)
STEAK N SHAKE ENTERPRISES, INC.,
)
and
)
STEAK N SHAKE OPERATIONS, INC.,
)
)
Defendants.
)
ORDER ON DEFENDANTS’ MOTIONS TO STAY PENDING APPEAL
Defendants Steak n Shake Enterprises, Inc., and Steak n Shake Operations, Inc.
(collectively “SNS”) have appealed this Court’s decision denying its motion to stay and
compel arbitration (the “Motion”).

See Druco Restaurants, Inc. v. Steak N Shake

Enterprise, Inc., Cause No. 1:13-cv-00560-LJM-DML, Dkt. No. 55 (hereinafter “Druco”);
Peoples Sales & Profit Co. v. Steak n Shake Enterprises, Inc., Cause No. 1:13-cv00654, Dkt. No. 54 (hereinafter “PSPC”); Scott’s S&S, Inc. v. Steak N Shake
Enterprises, Inc., 1:13-cv-00655-LJM-DML, Dkt. No. 62 (hereinafter, “Scott’s”).
Plaintiffs, Druco Restaurants, Inc. (“Druco”), People Sales & Profit Company, Inc.
(“PSPC”) and Scott’s S&S, Inc. (“Scott’s”) (collectively, the “Franchisees”), oppose the
Motion. For the reasons stated herein, the Court GRANTS the Motion.
I. BACKGROUND
The Franchisees individually sued SNS seeking, inter alia, a declaratory
judgment regarding whether or not certain policies of SNS constitute grounds for
termination of their respective franchise agreements and alleging breach of contract,
fraud and violation of respective state franchise laws based on the same conduct. See,
e.g., PSPC, Dkt. No. 1. In each of the respective cases, SNS moved to stay the action
and for an order compelling the Franchisees to participate in non-binding arbitration; the
Court denied that motion for multiple reasons. See Druco, Dkt. No. 40; PSPC, Dkt. No.
41; Scott’s, Dkt. No. 51. One of those reasons was based on the nonbinding nature of
the arbitration called for by the respective franchise agreements. See, e.g., Druco, Dkt.
No. 40, at 10-12.
On November 6, 2013, SNS timely appealed the Court’s decision and filed the
instant Motion on January 9, 2014. See, e.g., Druco, Dkt. Nos. 42 & 55.

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II. DISCUSSION
SNS argues that the Court should stay its hand because otherwise the point of
the appeal would be defeated and Seventh Circuit case law demands that this Court
stay its hand. See Druco, Dkt. Nos. 56, at 3-6; 60, at 4-7 (citing, inter alia, BradfordScott Data Corp., Inc. v. Physician Computer Network, Inc., 128 F.3d 504 (7th Cir.
1997). SNS also notes that the issue presented in this case, whether or not non-binding
arbitration is subject to the mandatory stay provisions of the Federal Arbitration Act
(“FAA”), is a novel one for the Seventh Circuit. See Druco, Dkt. No. 60, at 7.
The Franchisees argue that the Court’s decision that non-binding arbitration is
not subject to the FAA does not divest this Court of jurisdiction over the case while an
appeal is pending. See Druco, Dkt. No. 59, at 3-6. Moreover, the Franchisees contend
that SNS is merely trying to delay resolution of the Franchisees’ claims and raise
litigation costs; therefore, the proceedings here should move in parallel to the appellate
proceedings. Id.
The Court concludes that the reasoning of Bradford-Scott applies, even in a case
such as this where the Court has concluded that the FAA does not apply to the parties’
agreement, and that a stay is proper. As SNS points out, the question is
not whether appellants have shown a powerful reason why the district
court must halt proceedings, but whether there is any good reason why
the district court may carry on once an appeal has been filed. For it is
fundamental to a hierarchical judiciary that “a federal district court and a
federal court of appeals should not attempt to assert jurisdiction over a
case simultaneously. The filing of a notice of appeal is an event of
jurisdictional significance---it confers jurisdiction on the court of appeals
and divests the district of its control over those aspects of the case
involved in the appeal.”

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Bradford-Scott, 128 F.3d at 505 (quoting Griggs v. Provident Consumer Disc. Co., 459
U.S. 56, 58 (1982); further citation omitted). The Franchisees have simply not shown
that there is any good reason for this Court to proceed when the Seventh Circuit is
considering the fundamental issue of whether or not proceedings in this Court are
proper under the parties’ agreements. Moreover, the question of the impact of the nonbinding nature of the arbitration called for in the agreements is one of first impression,
which makes the reasoning of Bradford-Scott all the more compelling.
For these reasons, Defendants’, Steak n Shake Enterprises, Inc., and Steak n
Shake Operations, Inc., Expedited Motion to Stay Litigation Pending Appeal in each
case (Druco, Dkt. No. 55; PSPC, Dkt. No. 54; Scott’s, Dkt. No. 62) is GRANTED.
IT IS SO ORDERED this 23rd day of January, 2014.

________________________________
LARRY J. McKINNEY, JUDGE
United States District Court
Southern District of Indiana

Distribution attached.

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Distribution:
Fredric A. Cohen
CHENG COHEN LLC
[e-mail]
Marlen Cortez Morris
CHENG COHEN LLC
[e-mail]
Irwin B. Levin
COHEN & MALAD LLP
[e-mail]
Lynn A. Toops
COHEN & MALAD LLP
[e-mail]
Richard E. Shevitz
COHEN & MALAD LLP
[e-mail]
Joshua A. Stevens
GREENSFELDER HEMKER & GALE PC
[e-mail]
Lizabeth M. Conran
GREENSFELDER HEMKER & GALE, PC
[e-mail]
Kirsten M. Ahmad
GREENSFELDER, HEMKER & GALE, PC
[e-mail]
Tonya L. Sallee
STEAK N SHAKE ENTERPRISES INC
[e-mail]

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