Steak n Shake Enterprises, Inc. v. Globex Co.
110 F. Supp. 3d 1057
D. Colo.2015Background
- Plaintiffs sued for injunctive relief and damages arising from termination of franchise, license, and area development agreements for two Steak n Shake restaurants operated by Globex Company, LLC and Springfield Downs, LLC.
- Franchisees became Steak n Shake operators in late 2011–2012, under ADA, Franchise, and Guaranties, with post-termination covenants not to compete.
- Prominent pricing actions in 2013 included a $4 menu and a Summer Promotion, with defendants altering pricing, menus, and marketing materials without Plaintiffs’ consent.
- Plaintiffs issued a notice of default on June 18, 2013, and terminated the Franchise, License, and ADA agreements on July 3, 2013 for cause.
- Plaintiffs now operate the Centennial and Sheridan Steak n Shake restaurants; Defendants’ counterclaims were narrowed after early rulings, with certain claims moot.
- Court granted summary judgment for Plaintiffs on multiple contract, trademark, and related claims, and made the preliminary injunction permanent as to the marks.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether termination for cause was proper due to breaches | Steak n Shake | Globex and Springfield Downs | Yes; termination for cause upheld as lawful |
| Whether the Area Development Agreement breach justified termination | ADA breached for failure to open third restaurant by deadline | Assurances made negate default | Yes; ADA breach established; termination affirmed |
| Whether Plaintiffs are entitled to trademark infringement and unfair competition relief | Unauthorized use of marks post-termination creates confusion | Questions about validity of termination defeat relief | Yes; permanent injunction and summary judgment granted |
| Whether Plaintiffs are entitled to damages under the Lanham Act | Defendants’ profits and damages should be disgorged | Need for trial to determine amounts | Reserved for status conference; damages to be addressed later |
| Choice of law and related enforceability of covenants | Indiana law governs, with Colorado influence in places | Indiana law should apply across the board | Court applied Colorado and Indiana law where parties relied on them; choice not dispositive |
Key Cases Cited
- Anderson v. United States Postal Serv., 812 F.2d 621 (10th Cir. 1987) (summary judgment standard; burden shifting)
- 1-800 Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229 (10th Cir. 2013) (summary judgment burden shifting; evidence standard)
- Keller v. A.O. Smith Harvestore Prods., Inc., 819 P.2d 69 (Colo. 1991) (integration clause and parol evidence limits misrepresentation claims)
- Wind Wire, LLC v. Finney, 977 N.E.2d 401 (Ind. App. 2012) (integration clause weight in fraud cases; case-by-case approach)
- Thorne v. Bauder, 981 P.2d 662 (Colo. App. 1998) (materiality of information is a question of law when reasonable minds could not differ)
- Canada Dry Corp. v. Nehi Bev. Co., Inc., 723 F.2d 512 (7th Cir. 1983) (material breach and assessment of damages; summary judgment standard)
- Morrison v. Goodspeed, 68 P.2d 458 (Colo. 1937) (materiality of contract breach; court may decide as matter of law)
- Barzingus v. Wilheim, 306 F.3d 17 (10th Cir. 2010) (standing and summary judgment standards)
- Goddard v. Banner Health, 734 F.3d 1095 (10th Cir. 2013) (good faith and fair dealing; contract interpretation constraints)