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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIndianapolis-based Steak n Shake Inc. is facing more setbacks in its already-suffering financial situation due to a new legal settlement and a downgrade in its credit rating.
The fast-casual burger chain has agreed to pay $8.35 million to settle two lawsuits that claimed the chain failed to pay managers for overtime hours they worked.
Additionally, credit ratings agency Standard & Poor’s this week demoted Steak n Shake’s credit rating from CCC to CCC-, a rating that falls under “junk” status, or non-investment grade.
The rating “reflects our belief that the company may be unable to meet its financial obligations because of its weakened liquidity and thus could pursue a restructuring or a distressed exchange in the next six months,” S&P said.
The settlement likely puts an end to a drawn-out legal fight that began five years ago. One of the suits was filed by Steak n Shake branch managers in St. Louis in 2014. The other was filed in 2017 by two Illinois women on behalf of managers at locations outside St. Louis. Class-action status was sought for both suits.
The suits were settled together after mediation in May, according to Brendan Donelon, one of the attorneys involved in the cases.
Steak n Shake entered mediation after losing the first case in court in February. A jury awarded the managers about $3 million for lost overtime compensation. Then, on May 10, U.S. District Judge John A. Ross doubled the award. He also ordered the chain to pay the managers’ lawyers almost $1.6 million in fees and about $40,000 in costs, putting Steak n Shake on the hook for about $7.7 million.
Faced with another court battle and possibly another hefty judgment, Steak n Shake opted to settle both cases. According to a July 22 court filing, $5.2 million from the $8.35 million settlement will be split among the managers, and the rest will be used to pay attorney fees.
The settlement payments are still pending approval from U.S. District Judge John Ross.
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