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Benihana of Tokyo, LLC v. Benihana, Inc.

United States District Court, S.D. New York

July 25, 2018

BENIHANA OF TOKYO, LLC, as successor to BENIHANA OF TOKYO, INC., Plaintiff and Counter-Defendant,
BENIHANA, INC., as successor to BENIHANA NATIONAL CORP., and NOODLE TIME, INC., Defendants and Counter-Plaintiffs,
KEIKO AOKI, Counter-Defendant.

          OPINION & ORDER

          Paul A. Engelmayer United States District Judge.

         This decision resolves an application for attorneys' fees and costs incurred during one lawsuit in a long-running series among the two corporate entities that run different parts of the worldwide Benihana restaurant empire. The chapter of these disputes covered by this lawsuit involves claims under the Lanham Act: specifically, claims by Benihana, Inc. ("BI") that the other entity, Benihana of Tokyo, LLC ("BOT") and its chief executive, Keiko Aoki ("Aoki") repeatedly engaged in false and misleading marketing practices. BI and its fellow counter-plaintiff, Noodle Time, Inc. (collectively with BI, "BI") prevailed in this case: BOT and Aoki capitulated after opening statements at trial and agreed to a settlement that gave BI substantively all the relief it sought, in the form of a broad injunction.

         Pending now is BI's motion for an award of fees and costs under § 1117 of the Lanham Act from BOT and Aoki. For the reasons that follow, the Court, after careful consideration of the relevant circumstances and the parties' submissions, finds that BI is entitled to fees and costs totaling $936, 665.24, less than the figure ($1, 212, 897.02) that BI requested.

         This decision proceeds in three parts. First, the Court briefly reviews this lawsuit and the tortuous recent litigation history between these parties. The Court then addresses BI's claims of entitlement to fees and costs under the Lanham Act. The Court then explains its determination as to the proper amount of the award.

         I. Background

         The Court assumes familiarity with the background and procedural history of this case, including the decisions in Benihana of Tokyo, LLC v. Benihana, Inc., 73 F.Supp.3d 238 (S.D.N.Y. 2014) ("Benihana I''), which dismissed some of BI's counterclaims in favor of arbitration; and Benihana of Tokyo, LLC v. Benihana, Inc., No. 14 Civ. 224 (PAE), 2017 WL 1424325 (S.D.N.Y. Apr. 19, 2017) ("Benihana II''), which denied BOT's motion to dismiss BI's remaining counterclaims. The Court also assumes familiarity with the related lawsuits that have unfolded over the past five years between BI and BOT in this Court. Consequential decisions in those cases include Benihana of Tokyo, LLC v. Angelo, Gordon & Co., L.P., 259 F.Supp.3d 16 (S.D.N.Y. 2017), aff'd, 712 Fed.Appx. 85 (2d Cir. 2018); Benihana, Inc. v. Benihana of Tokyo, LLC, No. 15 Civ. 7428 (PAE), 2016 WL 3913599 (S.D.N.Y. July 15, 2016); and Benihana, Inc. v. Benihana of Tokyo, LLC, 784 F.3d 887 (2d Cir. 2015). These parties have also crossed swords in other courts and in arbitration proceedings. See, e.g., Benihana of Tokyo, Inc. v. Benihana, Inc., 622 Fed.Appx. 169 (3d Cir. 2015); Benihana of Tokyo, LLC v. Angelo, Gordon & Co., No. CV 15-00028 (ACK)(RLP), 2015 WL 5439357 (D. Haw. Sept. 14, 2015).

         The following are the key facts and procedural history of this distinct matter.

         A. Factual Background[1]

         In 1963, Benihana of Tokyo, Inc. was incorporated by Rocky Aoki. In 1964, he opened the first Benihana of Tokyo restaurant in New York City. Dkt. 122 ("Joint Pretrial Order" or "JPTO") at 3.

         The Benihana restaurant empire is today operated by two distinct corporations, BOT and BI. Pursuant to a contract entitled the Amended and Restated Agreement and Plan of Merger ("ARA"), executed on December 29, 1994 and amended March 17, 1995, BI received the right to operate Benihana restaurants and to own and use Benihana trademarks in the United States, Central America, South America, and the Caribbean ("the Territory"). BOT retained the rights to operate Benihana restaurants and use Benihana trademarks outside the Territory. See Benihana I, 73 F.Supp.3d at 243 (S.D.N.Y. 2014); Dkt. 122 at 3-4. As of 2016, when it filed its final amended counterclaims in this case, BI owned or franchised 77 restaurants within the Territory, whereas BOT owned or franchised 19 restaurants outside of the Territory. Under a license agreement with BI that has been subject of several of the lawsuits and an arbitration, see, e.g., Benihana I, 73 F.Supp.3d at 243, BOT also operated a Benihana restaurant in Honolulu, Hawaii. See Dkt. 87 ("TACC") ¶ 13.

         B. Procedural History

         This lawsuit focused on claims by BI of Lanham Act violations by BOT. On December 13, 2013, BI sent a letter to BOT, claiming such violations. See Dkt. 1-3, Ex. B.

         Examples of such violations as cited there by BI included the following:

• "BOT's claim [on its website] that it operates franchises 'all around the world' is . .. false, material and misleads the consuming public into believing that BOT owns the BENIHANA Trademarks and/or has the right to operate BENIHANA restaurants in every country in the world when it does not. . . . [BI] owns exclusive rights to the BENIHANA Trademarks in the United States, the Caribbean, Central America and South America. Therefore, BOT's statements here are entirely false and misleading." Id. at 2.
• "BOT makes several references [on its website] to 'Benihana of Toyko' as the 'Global Leader' or 'World Leader' in teppanyaki. . . . BOT makes such statements knowing that BOT cannot be a 'world leader' or 'global leader' since BOT does not have the right to operate BENIHANA restaurants and does not own the BENIHANA Trademarks throughout the world. BOT's rights are limited geographically and its rights are separate, apart, and distinct from [BI's] rights- therefore, any suggestion to the contrary is false, misleading, and damaging to [BI's] reputation and [BI's] goodwill. It appears that BOT is attempting to trade on Benihana's presence in the marketplace and to deceive consumers into believing that [BI] and BOT are one and the same .... At the same time, the website refers to [BI] as a 'subsidiary company,' which is knowingly false." Id. at 2.
• "BOT claims to be the 'originator of the unique hibachi cooking style and "eatertainment" created in the United States.' BOT has assigned all rights to the BENIHANA System and the BENIHANA Trademarks in the United States, the Caribbean, South America, and Central America. Its statement that it is the originator in the United States is intended to create confusion among consumers that there continues to be an affiliation, sponsorship, or partnership between [BI] and [BOT] (a relationship which BOT claims it controls) and to trade on the goodwill residing in our client's BENIHANA Trademarks." Id. at 2-3.

         On January 13, 2014, BOT responded by filing the initial complaint in this case. It sought a declaratory judgment that its website did not violate the Lanham Act. See Dkt. 1 at 6.

         On March 20, 2014, BI filed its answer to the complaint. It also filed counterclaims against BOT for, under the Lanham Act, trademark infringement, false designation of origin and unfair competition, and trademark dilution; and for, under New York law, common law trademark infringement, common law unfair competition, deceptive trade practices, trademark dilution, and breach of contract. See Dkt. 7 ("Answer") at 17-23. The factual allegations that BI cited in support largely reprised, and expanded upon, those in its initial letter to BOT.

         On May 2, 2014, BOT filed motions to arbitrate BI's counterclaims. It also moved to dismiss its own claim for a declaratory judgment. Dkts. 24 & 28. BI opposed the motion to compel arbitration. Dkt. 35. On July 22, 2014, this Court issued a decision in which, in addition to granting BOT's unopposed motion to dismiss its claim for a declaratory judgment, it denied in principal part BOT's motion to compel arbitration. The Court, however, granted that motion as to the portion of the Lanham Act claims related to BOT's Hawaii restaurant. That is because the operation and marketing of that restaurant is subject to a unique license agreement that, unlike the ARA, contains an arbitration provision entitling either side to pursue claims in arbitration. Dkt. 42.

         On July 31, 2014, BI filed an amended counterclaim, amending the claims remaining to be tried in this Court. Dkt. 43. On February 18, 2015, in the interest of efficiency, the Court stayed discovery, and this case as a whole, pending the outcome of the pending arbitration relating to matters in Hawaii, which included-in addition to other claims by BI of material breaches by BOT-the Lanham Act claims the Court had directed to arbitration. Dkt. 68.

         On July 15, 2016, the Court confirmed the arbitral award issued relating to the Hawaii restaurant. See 15 Civ. 7428, Dkt. 42. The Court thereafter lifted the stay in this case.

         On September 1, 2016, the Court granted BI leave to file third amended counterclaims, Dkt. 86, which, on September 30, 2016, BI filed. See Dkt. 87 ("TACC"). The TACC is the operative document on which trial in this case proceeded. The TACC added factual allegations about Lanham Act violations that had occurred after the initiation of this lawsuit.

         On October 14, 2016, BOT and Aoki filed a motion to dismiss the TACC, Dkt. 89, which BI opposed, Dkt. 92. On April 19, 2017, this Court denied that motion. It held, inter alia, that BI had adequately pled the elements of the claims at issue. Dkt. 104 at 10.

         The case then proceeded to a bench trial, for which there was extensive preparation and detailed pretrial submissions. Trial commenced on January 22, 2018. As detailed further below in connection with the Court's assessment of the reasonable fee award, the parties, following opening statements, entered into a settlement.

         On January 23, 2018, the Court entered an order embodying the settlement terms. The order enjoined BOT and Aoki from taking specified actions, including "directly or indirectly infringing on the BENIHANA® Trademarks." Dkt. 132 at 1. The injunctive relief to which the parties agreed tracked that which BI had sought in its prayer for relief in the TACC, save for BI's application for fees and costs (an issue the parties' settlement agreement expressly left open, and which is addressed in this decision). Compare Dkt. 132 with TACC at 13-14. There was no injunctive relief issued against BI in the order. As part of the settlement agreement, BI did, however, agree to certain conditions, including to refrain from using certain language on its websites and to create a landing page on its website that directs visitors to both the BI website and the BOT website. See Dkt. 131. The Court, consistent with the settlement agreement, then enjoined BOT and Aoki from infringing on the Benihana trademarks. See Dkt. 132.

         On February 12, 2018, BI moved for attorney's fees and costs. Dkt. 134 ("BI Br."). On March 5, 2018, BOT filed its opposition, which noted that BI had failed to enter its trial evidence into the record in support of its fee application. Dkt. 139. On March 9, 2018, following letter motions on the subject, the Court authorized BI to file supplemental affidavits attaching the exhibits it needed to support such claims, and authorized BOT to file a new opposition brief in light of these filings. See Dkts. 142-44. On March 14, 2018, BOT filed its revised opposition. Dkt. 146 ("BOT Br.").[2]

         C. Alleged Bad-Faith Conduct by BOT and Aoki

         In moving for attorney's fees and costs, BI submitted evidence of various areas of allegedly bad-faith conduct by BOT and Aoki in initiating and litigating this case.

         In brief:

First, and most significant, BI argues that BOT and Aoki engaged in the marketing practices that it challenges, and then initiated this lawsuit and through the first day of trial defended these practices, in demonstrable bad faith. As to BOT's state of mind, BI relies on testimony given earlier in related proceedings before this Court by BOT's outside counsel at the time this lawsuit was initiated, Richard Feldman, Esq. Feldman's testimony was received at a June 6, 2017 hearing before this Court, in connection with BI's successful pursuit of sanctions against BOT for breaches of the injunction that the arbitral panel had put in place relating to the Hawaii restaurant; this Court, in confirming the arbitral award, had adopted the injunctive terms in a court order, which BOT proceeded to violate. In the June 2017 hearing, Feldman recounted Aoki's statements to him about her overall strategy and goals in initiating and litigating cases against BI. See Dkt. 145-45 ("Feldman Tr.") at 5, 1.[3]Feldman testified that, on numerous occasions, Aoki directed him "that it was her strategy for BOT to challenge and contest the validity of the [agreements between BOT and BI], whether there was merit to those challenges or not." Further, Feldman testified that Aoki's "strategy was to instigate confrontations with BI, so that litigation would ensue, so that the threat of actual or potential expenditures of huge sums on legal fees would coerce [BI] into discussions [to further Aoki's goal of reuniting all Benihana restaurants under BOT]," and that Aoki's "overall strategy [was] to force BI to expend large counsel fees contesting her unreasonable actions." Feldman Tr. at 5, 7. Aoki, in a responding submission, denied such bad intentions. She stated that she had "never acted with any intention to violate the Lanham Act," that BOT had not filed this lawsuit for an improper purpose, and that the strategy that Feldman attributed to her would have been "nonsensical." Dkt. 147 ("Aoki Decl.")¶¶ 15-18.

Second, BI argues, after this case was filed, BOT and Aoki continued to engage in bad faith marketing practices. These principally consisted of continuing to use terms and marks that falsely depicted BOT as a worldwide or global entity, improperly taking credit for BI operations in the substantial part of the world (i.e., the Americas) which the ARA allocated to BI, and holding Aoki out as heading BI. For example:

• In October 2014, Aoki opened a restaurant named KOA, in New York City. See Dkt. 145-2. An invitation sent out to members of the Luxury Marketing Council inaccurately referred to Aoki as the "CEO of Benihana, Inc." Dkt. 145-3 (emphasis added).
• In 2015, the website for Keiko Aoki Inner Makeup, a company founded by Aoki to providing catering and food sales in New York City, i.e., within BI's territory, see Dkt. 145-4; Dkt. 145-41 at 117-118, contained a photograph of a chef wearing the Benihana uniform with the Benihana trademark. See Dkt. 145-4 at 3; Dkt. 145-41 at 118. Aoki claims that by 2011, she had stopped "using the website or operating the business at all [by 2011]." Aoki Decl. ¶ 27. The website and the Benihana image on it, however, remained accessible to the public.
• BOT continued to use the URL, whose use had been an initial basis for BI's letter that inspired this lawsuit. During the pendency of this case, BOT also began using the URL See Dkt. 145-41 at 72 (admission by Aoki in testimony to creating a new ...

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