Benihana, Inc. v. Benihana of Tokyo, LLC
784 F.3d 887
| 2d Cir. | 2015Background
- Benihana America (licensor) and Benihana of Tokyo (licensee) entered a 1995 License Agreement allowing the licensee to operate a Benihana restaurant in Honolulu subject to menu and trademark-use approvals and a 30-day cure provision for breaches.
- In 2013–2014 Benihana of Tokyo sold unauthorized hamburgers (Beni/ Tokyo Burger, Beni Panda) and used Benihana trademarks in advertising without prior written approval; Benihana America issued notices of default and ultimately a termination notice.
- Benihana of Tokyo filed for arbitration on January 13, 2014 seeking a declaration that defaults did not exist or, if they did, additional time to cure; Benihana America sought a preliminary injunction in district court to stop unauthorized menu items, unauthorized trademark use, and to bar Benihana of Tokyo from arguing for an extended cure period in arbitration.
- The district court granted the injunction: (1) prohibiting sale of unauthorized food items, (2) prohibiting unauthorized trademark/advertising use, and (3) prohibiting Benihana of Tokyo from arguing to the arbitrators for an extended cure period.
- On appeal, the Second Circuit affirmed the injunction as to unauthorized menu items and trademark use but reversed the portion that barred arguing for an extended cure period, holding such merits issues belong to the arbitrators.
Issues
| Issue | Benihana America (Plaintiff) Argument | Benihana of Tokyo (Defendant) Argument | Held |
|---|---|---|---|
| 1) May a court issue a prelim. injunction forbidding sale of unauthorized menu items/trademark use pending arbitration? | Breaches of clear contractual approval provisions cause irreparable brand harm; injunction preserves status quo pending arbitration. | Violations are technical/ancillary or waived by long acquiescence; insufficient proof of irreparable harm. | Affirmed — district court did not abuse discretion; factors (likelihood of success, irreparable harm, balance, public interest) favored Benihana America. |
| 2) May court enjoin defendant from arguing in arbitration for an extended cure period? | The Agreement contains no basis for an extended cure; court may preclude arbitration arguments that exceed the contract. | Whether an arbitrator may grant a cure period is for the arbitrator; court cannot preclude argument on the merits. | Reversed — court may not bar a party from advancing arguments in arbitration; merits/remedies belong to arbitrators first. |
| 3) Who decides arbitrability/remedial scope under this Agreement? | Court should decide whether arbitrators may award particular remedies. | The arbitration clause is broad; arbitrators decide scope and remedies. | Held for arbitration — the clause covers "any other dispute" and supports arbitrator authority; presumption favors arbitrability. |
| 4) Was evidence of irreparable harm and likelihood of success sufficient for injunction on ads/menu? | Contract language and brand-image injury show irreparable harm; failure to seek approval is itself breach. | No concrete consumer-confusion or expert proof; equitable relief unnecessary. | Affirmed — district court reasonably credited contract provisions and common-sense brand injury; issue waived where not argued. |
Key Cases Cited
- AT & T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643 (U.S. 1986) (presumption in favor of arbitrability; courts should not deny arbitration unless clause clearly does not cover dispute)
- PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (who decides arbitrability depends on clear-and-unmistakable evidence in the arbitration agreement)
- ReliaStar Life Ins. Co. of N.Y. v. EMC Nat'l Life Co., 564 F.3d 81 (2d Cir. 2009) (scope of arbitrator authority depends on parties’ intent as reflected in the agreement)
- McDonnell Douglas Fin. Corp. v. Pa. Power & Light Co., 858 F.2d 825 (2d Cir. 1988) (once arbitrators have jurisdiction, contract construction and parties’ rights are for arbitrators)
- 187 Concourse Assocs. v. Fishman, 399 F.3d 524 (2d Cir. 2005) (arbitrator may exceed authority if award conflicts with CBA or submission; courts review post-award)
- N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38 (2d Cir. 1999) (contractual clause acknowledging irreparable injury is relevant evidence supporting preliminary injunction)
- Power Test Petroleum Distribs., Inc. v. Calcu Gas, Inc., 754 F.2d 91 (2d Cir. 1985) (irreparable harm may be presumed where harm is not readily compensable in money)
- Shaw Grp. Inc. v. Triplefine Int’l Corp., 322 F.3d 115 (2d Cir. 2003) (broad arbitration clauses can reflect intent to have arbitrator decide arbitrability)