Applebee's Franchisor LLC v. Georgas
2:24-cv-02497
D. Kan.Mar 11, 2025Background
- Applebee’s Franchisor LLC (Plaintiff) sued William J. Georgas (individually and as trustee for various trusts) and others (Defendants), alleging they are liable as guarantors for millions of dollars arising from franchise and lease agreements for Applebee’s restaurants in Kansas City.
- Apple Central KC, LLC (ACKC), the underlying franchisee, filed for Chapter 11 bankruptcy in October 2024, and an adversary proceeding is pending in Bankruptcy Court regarding similar claims between Plaintiff and ACKC.
- Plaintiff alleged Defendants guaranteed ACKC’s financial obligations, which were triggered by ACKC’s alleged breach involving the closing of eight restaurants.
- ACKC’s bankruptcy filing and subsequent adversary proceeding centered on overlapping contractual breach allegations and defenses as in the District Court case.
- Defendants moved to stay the District Court case pending the resolution of the Bankruptcy Court proceedings, arguing for judicial economy and avoidance of inconsistent judgments.
- Plaintiff opposed the stay, arguing prejudice and delay, and that the Guarantors (Defendants) are not subject to the automatic bankruptcy stay or to the jurisdiction of the Bankruptcy Court for all claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Should the case be stayed pending Bankruptcy Court proceedings? | Stay prejudices Plaintiff, delays resolution, Guarantors not within bankruptcy court’s jurisdiction, duplicative litigation expected by law | Judicial economy favors stay, identical claims in both courts, risk of inconsistent results, underlying liability to be decided in Bankruptcy Court | Stay granted; Court finds judicial economy warrants stay until bankruptcy proceedings (including recommendation on withdrawal of reference) are resolved |
| Is risk of inconsistent judgments grounds for a stay? | Duplicative or inconsistent judgments are a tolerated feature of bankruptcy law | Avoiding inconsistent results is an important concern; might bind parties | Gives some weight but not determinative on its own; part of overall consideration for stay |
| Would Defendants face undue burden without a stay? | No undue burden, Guarantors must defend their obligation regardless, they chose to guarantee | Facing parallel litigation and possible inconsistent liabilities is unduly burdensome | Some concern for burden to Defendants; favors stay but weighed with other factors |
| Is there public interest or third-party interest in stay? | Most efficient to consolidate in District Court; public interest in prompt resolution; creditors' interests support prompt litigation | Non-parties and creditors have an interest in resolving ACKC’s obligations first in Bankruptcy Court | Public interest neutral; court proceeds based on judicial economy and efficiency |
Key Cases Cited
- Clinton v. Jones, 520 U.S. 681 (broad discretion to stay proceedings as docket management)
- Landis v. N. Am. Co., 299 U.S. 248 (standard for granting a stay; requires showing of hardship or inequity if stay may injure another)
- Overland Park Sav. & Loan Ass’n v. Miller, 243 Kan. 730 (relationship of guarantors' liability to underlying obligation)