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Benihana of Tokyo, L.L.C. v. Benihana Inc.

United States District Court, S.D. New York

January 8, 2020

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 the appellate phase of a Lanham Act lawsuit.

         I. Factual Background

         A. The Award of Fees and Costs to BI Under the Lanham Act

         On July 25, 2018, this Court issued a decision resolving a motion by defendant and counter-plaintiff Benihana, Inc. (“BI”), for an award of fees and costs from plaintiff and counter-defendant Benihana of Tokyo, LLC (“BOT”), under § 1117 of the Lanham Act, 15 U.S.C. § 1117(a). See Benihana of Tokyo, LLC v. Benihana, Inc., No. 14 Civ. 224 (PAE), 2018 WL 3574864 (S.D.N.Y. July 25, 2018) (“Fees Decision”); see also Dkt. 153. The Court incorporates by reference here the background and analysis set out in that decision. As recapped briefly in the Fees Decision, the Lanham Act dispute was the latest in a series of litigations between BI and BOT in recent years, a number of which centered in this Court.

         Since a 1995 agreement with BOT, BI has held the right to operate Benihana restaurants and to own and use Benihana trademarks in the United States, Central America, South America, and Canada (“the Territory”). Fees Decision, 2018 WL 3574864, at *2. BOT held these rights outside the Territory. Id. Under a license agreement with BI that has been the subject of numerous of the BI / BOT lawsuits, BOT operated a Benihana restaurant in Honolulu, Hawaii. Id.

         In this litigation, BI claimed a range of glaring Lanham Act violations by BOT. These largely consisted of website statements by BOT that misleadingly stated or implied that BOT owned or operated the 77 Benihana restaurants, and owned the Benihana trademarks, within the Territory. See Id. BI sought injunctive relief. See Id. at *3. After discovery and motions practice, the case proceeded to a bench trial, which began on January 22, 2018. Id. The case settled during the first day of the trial. See Id. The Court entered an order embodying the parties' settlement terms. Id. In language tracking the relief that BI had sought, the settlement enjoined BOT and its chief executive, Keiko Aoki, from infringing on BI's Benihana trademarks. Id.

         On February 12, 2018, BI moved for attorneys' fees and costs, which it had reserved the right to do. Id. at *4. In the Fees Decision, the Court granted that motion. Id. at *16. The Court noted that under the Lanham Act, a court “in exceptional cases may award reasonable attorney fees to the prevailing party, ” 15 U.S.C. § 1117(a). Fees Decision, 2018 WL 3574864, at *5. The Court held both that BI had been the prevailing party and that the case had been exceptional.

         As to the former, the Court held that BI had been the prevailing party, in that the injunctive relief entered pursuant to the mid-trial settlement had paralleled the full relief BI sought in its original prayer for relief, such that the relief entered, although taking the form of a settlement, had been tantamount to a full victory for BI at trial. See Id. at *7-9.

         As to the latter, the Court noted that there were two potentially applicable tests for an “exceptional case.” See Id. at *6-7; see also Id. at *9-12. The first test, the use of which BOT advocated, was that used in the Second Circuit before the Supreme Court's decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014). See Fees Decision, 2018 WL 3574864, at *6-7. Octane interpreted the Patent Act's fee-shifting provision, 35 U.S.C. § 285, which is identical to the fee-shifting provision of the Lanham Act. See Octane, 572 U.S. at 553- 54. Under the “pre-Octane” standard, a party seeking fees was required to show bad faith, fraud, or willful infringement. Fees Decision, 2018 WL 3574864, at *7; see also Id. at *9. Octane, however, construed the term “exceptional case” more broadly, as “simply one that stands out from the others with respect to the substantive strength of the party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which it was litigated.” Octane, 572 U.S. at 554. Octane held that a district court was to determine a case's exceptional nature of a case on a case-by-case basis, “considering the totality of the circumstances”; in this test, the Court stated, relevant factors include “frivolousness, motivation, objective unreasonableness, both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Id. at 554 n.6 (citation omitted). Although the Second Circuit had yet to hold that the Octane test applied to Lanham Act cases, BI urged the Court to hold that it did. See Fees Decision, 2018 WL 3574864, at *6.

         The Court agreed with BI that the Octane test applied to § 1117(a) of the Lanham Act. Id. at *9. But, the Court held, the circumstances qualified as exceptional under either test, warranting an award of fees. Id. Under the pre-Octane test, the Court held, BOT (which had initiated this litigation but later dropped its claims) had engaged in bad faith. See Id. at *9-11. Indeed, BOT's prior counsel had admitted in sworn testimony before the Court that Aoki had instructed him to bring meritless litigation to drive up BI's fees. See Id. at *10. Further, BOT had also persisted in violating the Lanham Act after the litigation was underway. See Id. Under the Octane standard, the Court held, this case stood out as exceptional because of BOT's demonstrated bad faith, the blatant quality of BOT's underlying Lanham Act violations, and the ongoing nature of these violations. See Id. at *11. Further, the Court held, given the admission by counsel that BOT had deliberately pursued meritless claims here (and in other litigations and arbitrations with BI), the factors of deterrence and compensation strongly supported a fee award. See Id. at *11-12.

         The Court, finally, found that an award of $936, 665.24 in fees and costs from BOT to BI was reasonable. Id. at *16. The Court approved the hourly rates of all relevant timekeepers as reasonable. Id. at *12. As to the hours for which BI sought compensation, upon close review of time records, the Court, for various reasons, pruned by 25% the hours worked by BI's principal outside law firm, Miami-based Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. (“Stearns Weaver”), and by 5% the hours worked by BI's local counsel, Clarick Gueron Reisbaum LLP (“Clarick Gueron”). Id. at *16. This yielded a fee award of $866, 448.72. Id. The Court approved in its entirety BI's request for an award of $70, 216.52 in costs. Id.

         B. BOT's Appeal

         BOT appealed. On June 21, 2019, after briefing and argument, the Circuit affirmed in a brief summary order, stating that it did so “for substantially the reasons set forth in the district court's thorough and well-reasoned opinion.” Benihana of Tokyo, LLC v. Benihana Inc., 771 Fed.Appx. 71, 72 (2d Cir. 2019). The Circuit affirmed the determinations both that BI was the prevailing party and that the case presented “exceptional circumstances.” Id. The Circuit added only that, as to the latter standard, it had held, following the onset of BOT's appeal, that the Octane standard applied to fee litigation under the Lanham Act. See Id. (citing Sleepy's LLC v. Select Comfort Wholesale Corp., 909 F.3d 519, 530 (2d Cir. 2018)).

         C. BI's Motion for Appellate Fees and Costs

         On July 29, 2019, BI timely moved before this Court for an award under § 1117(a) for its appellate fees and costs, and for the fees and costs it expended in connection with related collection, bond, and stay issues incurred before BOT's appeal. See Dkt. 174 (“BI Mem.”); Dkt. 175 (declaration of Alan H. Fein, Esq.) (“Fein Decl.”). Specifically, BI sought (1) $302, 702.50 for its appellate work including reviewing BOT's brief, preparing its brief, and participating in mediation as required by the Second Circuit; (2) $21, 925 for analysis of BOT's reply brief and its follow-on efforts to supplement the appellate record; (3) $96, 105 for preparation and presentation of oral argument before the Circuit; and (4) $37, 153 for its work litigating appellate bond, stay, and collection issues. See BI Mem. at 7.

         On August 12, 2019, BOT submitted a memorandum of law opposing such an award. See Dkt. 176 (“BOT Mem.”); Dkt. 177 (declaration of Jeremy W. Schulman, Esq.) (“Schulman Decl.”) On August 19, 2019, BI submitted a reply. See Dkt. 178 (“BI Reply”); Dkt. 179 (reply declaration of Alan H. Fein, Esq.) (“Fein Reply Decl.”).

         II. ...

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