Menu
Blog Banner Image

The Franchise Memorandum

District Court Grants Franchisor’s Motion for Stay While Seventh Circuit Considers Application of Federal Arbitration Act to “Non-Binding” Arbitration Clause
Posted in Arbitration

A federal court in Indiana has granted a franchisor’s motion to stay proceedings in three related lawsuits pending appeal to the Seventh Circuit. Druco Rests., Inc. v. Steak n Shake Enters., 2014 U.S. Dist. LEXIS 8198 (S.D. Ind. Jan. 23, 2014). Three franchisees had filed separate lawsuits against Steak n Shake (“SNS”) alleging breach of contract, fraud, and violations under their respective state franchise laws. After SNS sought to stay all three actions and compel arbitration, the trial court concluded the respective agreements contained only “nonbinding” arbitration provisions and, for that reason, were not controlled by the mandatory stay provisions of the Federal Arbitration Act.

SNS appealed the court’s decision to the Seventh Circuit and requested that the trial court stay proceedings until the appeal could be decided. The court granted the stay, noting that the franchisees had not shown any good reason for the trial court to proceed with the underlying actions while the Seventh Circuit considered the fundamental issue of whether the trial court had jurisdiction over the claims in the first place. The court further noted that because the nonbinding nature of the franchise agreements’ arbitration provision was an issue of first impression, the reasoning against asserting simultaneous jurisdiction with the court of appeals was all the more compelling.

Email LinkedIn Twitter Facebook

The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.

About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

To subscribe to monthly emails for The Franchise Memorandum, please click here

Topics

Archives

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

Blog Authors