COA: Genuine issues of material fact in indemnification dispute with Steak ‘n Shake contractor

The Indiana Court of Appeals has reversed in favor of a popular Indiana-based restaurant chain in an indemnification clause dispute with a waste removal company it contracted with.

In 2004, Steak N Shake Operations, Inc. entered into a nationwide contract with Ohio-based Simon Waste Consulting for the management of solid waste disposal and recycling from Steak ’n Shake’s numerous restaurant locations. Simon also entered into a three-year subcontract with Aspen Waste Systems of Missouri to remove waste from the Steak ‘n Shake restaurants in St. Louis.

But when Steak ’n Shake terminated its contract with Simon and retained National Waste Associates for the same work, Simon failed to terminate its subcontract with Aspen and National engaged Aspen in its own subcontract.

In 2011, National removed Aspen’s equipment from Steak ’n Shake’s St. Louis locations, prompting Aspen to file a complaint against Steak ’n Shake, National, and Simon in a Missouri federal court.

Although they eventually settled the matter, Steak ’n Shake filed suit against National in the Marion Superior Court and alleged it had failed to indemnify the restaurant company in the Missouri litigation as provided under an indemnification clause in the Steak ’n Shake-National contract.

In its counterclaim, National alleged Aspen’s claim arose out of an act or omission of Steak ’n Shake and/or its agent, Simon, and, therefore, Steak n’ Shake owed National a duty to defend and indemnify National from any costs it incurred in connection with the Missouri litigation and the subsequent Indiana suit.

In short, the Marion Superior Court ruled Simon was responsible for Aspen’s conduct arising out of the Simon-Aspen contract and as such, Simon’s failure to cancel the Simon-Aspen contract was “the factual basis” of the Missouri litigation and that the Missouri litigation was, therefore, attributable to Steak ’n Shake. It then granted National’s motion and denied Steak ’n Shake’s motion.

Reversing that ruling in a Friday decision, the Indiana Court of Appeals found a genuine issue of material fact concerning the terms and conditions under which National employed Aspen as its subcontractor, “which preclude summary judgment for National on Steak ’n Shake’s complaint and National’s counterclaim.”

“We also hold that Simon…was not Steak ’n Shake’s agent, and that the Missouri litigation is not attributable to Steak ’n Shake, which had no duty to indemnify National from that litigation,” Judge Edward Najam wrote for the COA.

Since National advanced no other theory under which Steak ’n Shake would have been required to indemnify National in the Missouri litigation, the COA concluded that Steak ’n Shake was entitled to summary judgment on National’s counterclaim.

Finally, the COA held National had a duty to indemnify Steak ’n Shake from the Missouri litigation initiated by Aspen.

“The designated evidence shows that the immediate cause of the Missouri litigation was National’s act of removing Aspen’s equipment from various St. Louis-area Steak ’n Shake locations,” the COA wrote. “But it was also National’s omission that caused Aspen to file suit over its contract rights when, after four years, National had failed to reach a definitive agreement on the terms of its subcontract with Aspen.

“…In other words, the Missouri litigation was unmistakably a breach-of-contract dispute between National and its subcontractor, which National caused both by its act in removing Aspen’s equipment and its omission in having not resolved the terms of its contract with Aspen.”

It therefore remanded with instructions that the court enter summary judgment for Steak ’n Shake and determine the company’s damages in the case of Steak N Shake Operations, Inc. v. National Waste Associates, LLC, et al., 21A-CP-00213.

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