By Daphne Zhang

Law360 (August 31, 2020, 5:54 PM EDT) -- A group of Denny's and Ruby Tuesday franchise restaurants has urged an Illinois federal judge to ax a suit from an insurer seeking not to cover the eateries' pandemic-related losses, arguing that the action raises exactly the same issues as the group's suit against the insurer in Ohio state court.

Classic Dining Group LLC said Thursday that the issues in State Auto Property and Casualty Insurance Co. 's complaint, which seeks a declaration that the insurer doesn't have to cover the restaurants' losses, "completely mirror" the issues raised in the Ohio case filed by Classic Dining in June. The two actions involve the same parties and raise the same questions about state law regarding the same insurance policies, the group said.

At a minimum, the Illinois federal court should stay the case to allow the issues to be resolved in the first-filed Ohio action, the restaurants said. Allowing the insurer's suit to proceed in Illinois while the Ohio suit is pending would create a substantial financial hardship to the restaurants, which are already struggling to survive, the group added.

"All of the issues raised in the instant lawsuit are already before a court in Ohio that has jurisdiction over all aspects of the dispute, notwithstanding State Auto's apparent preference to relocate the case to Illinois," the group said. "Classic Dining deserves its day in court without having to expend at least twice what its legal fees would otherwise be in order to obtain the coverage they plainly deserve."

The eatery group, which owns 31 Denny's and Ruby Tuesday restaurants in Illinois, Indiana and Wisconsin, sued State Auto in June asking for a declaration that the insurer should cover the restaurants' coronavirus-related business losses. State Auto, which had denied coverage asserting a virus exclusion, demanded the opposite declaration in Illinois in July, saying its insureds' losses don't qualify for coverage under their policies.

State Auto has argued that its policies were "rooted in a much narrower risk" that covers business losses resulting from "direct physical loss of or damage to property," and were not designed to cover "economic fallout from a global pandemic," according to court records.

The insurer urged the Ohio state court to toss the restaurants' suit the same day it sued them in Illinois, saying that it would be unfair and inconvenient for it to have to litigate in its home state of Ohio because some of the policies were issued in Illinois, according to court records.

On Thursday, the restaurant group said that State Auto is trying to "drive up litigation costs for Classic Dining with baseless procedural motions and duplicative actions, and avoid a familiar court (and perhaps a judge) located just two blocks away from its corporate headquarters in downtown Columbus, Ohio."

In the motion, the restaurant group stressed that permitting the carrier to litigate the same coverage dispute simply because it wants to avoid litigating in its home state "would give in to blatant forum shopping and yield to yet another delay tactic on the part of State Auto."

"We are puzzled by the fact that State Auto seems to be doing everything it can to prevent this case from being decided in a courthouse that is just blocks away from State Auto's corporate headquarters in Columbus, Ohio," the restaurants' attorney, Christopher O'Malley of King & Spalding LLP, told Law360 on Monday.

Counsel for State Auto could not be immediately reached for comment.

State Auto is represented by Adam Fleischer, David Buishas and Elise Allen of BatesCarey LLP.

The restaurants are represented by Christopher O'Malley, Joseph Englert and Shelby Guilbert Jr. of King & Spalding LLP.

The case is State Auto Property and Casualty Co. v. Classic Dining Group LLC et al., case number 1:20-cv-04434, in the U.S. District Court for the Northern District of Illinois.

--Editing by Jack Karp.

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