Benihana, Inc. v. Benihana of Tokyo, LLC, No. 14-841 (2d Cir. 2015)
Annotate this Case
Justia Opinion Summary
Want to stay in the know about new opinions from the Second Circuit US Court of Appeals?
Sign up for free summaries delivered directly to your inbox. Learn More ›
You already receive new opinion summaries from Second Circuit US Court of Appeals. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here.
Benihana America obtained a preliminary injunction in aid of arbitration of a dispute arising under its license agreement with Benihana of Tokyo, prohibiting Tokyo from: selling unauthorized food items at the restaurant it operates under the license agreement; using certain trademarks in connection with that restaurant in a manner not approved by the license agreement; and arguing to the arbitral panel, if it rules that Tokyo breached the license agreement, that Tokyo should be given additional time to cure any defaults. The Second Circuit affirmed with respect to the menu offering and trademark use injunctions. The court reasonably concluded that each of the relevant factors favored Benihana America. The court reversed the prohibition on arguing to the arbitral panel for an extended cure period. When a dispute is properly before an arbitrator, a court should not interfere with the arbitral process on the ground that, in its view of the merits, a particular remedy would not be warranted. Benihana America may challenge an arbitrator’s decision in court only after it has been issued. It may not subvert its agreement to arbitrate by obtaining an advance judicial determination that there are no grounds for the arbitrator to grant a particular remedy.
Download PDF
14 841 Benihana, Inc. v. Benihana of Tokyo, LLC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2014 (Argued: January 6, 2015 Decided: April 28, 2015) Docket No. 14 841 BENIHANA, INC., Plaintiff Appellee, — v. — BENIHANA OF TOKYO, LLC, Defendant Appellant. B e f o r e: LYNCH and CHIN, Circuit Judges, and KOELTL, District Judge.* __________________ 27 28 1 2 * The Honorable John G. Koeltl, United States District Judge for the Southern District of New York, sitting by designation. 1 1 Defendant appellant Benihana of Tokyo, LLC appeals from a February 26, 2 2014 order of the United States District Court for the Southern District of New 3 York (Paul A. Engelmayer, J.) granting the application of plaintiff appellee 4 Benihana, Inc. for a preliminary injunction in aid of arbitration of a dispute 5 arising under the parties’ license agreement. The district court enjoined Benihana 6 of Tokyo from: (1) selling unauthorized food items at the restaurant it operates 7 pursuant to the license agreement; (2) using certain trademarks in connection 8 with the restaurant in a manner not approved by the license agreement; and (3) 9 arguing to the arbitral panel, if it rules that Benihana of Tokyo breached the 10 license agreement, that Benihana of Tokyo should be given additional time to 11 cure any defaults. We conclude that the district court was within its discretion in 12 granting the first and second components of the injunction. However, the district 13 court erred in restricting the arguments Benihana of Tokyo may make to the 14 arbitral panel. 15 16 17 18 19 20 21 AFFIRMED IN PART AND REVERSED IN PART. ALAN H. FEIN, Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Miami, Florida (Joseph A. Munn and Andrea N. Nathan, Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., 2 1 2 3 4 5 6 7 8 9 10 Miami, Florida, and Nicole Gueron, Clarick Gueron Reisbaum LLP, New York, New York, on the brief), for Plaintiff Appellee Benihana, Inc. JOSEPH L. MANSON III, Law Offices of Joseph L. Manson III, Alexandria, Virginia, for Defendant Appellant Benihana of Tokyo, LLC. GERARD E. LYNCH, Circuit Judge: 11 Defendant appellant Benihana of Tokyo, LLC (“Benihana of Tokyo”) 12 appeals from a February 26, 2014 order of the United States District Court for the 13 Southern District of New York (Paul A. Engelmayer, J.) granting the application 14 of plaintiff appellee Benihana, Inc. (“Benihana America”) for a preliminary 15 injunction in aid of arbitration of a dispute arising under the parties’ license 16 agreement. The district court enjoined Benihana of Tokyo from: (1) selling 17 unauthorized food items at the restaurant it operates pursuant to the license 18 agreement; (2) using certain trademarks in connection with the restaurant in a 19 manner not approved by the license agreement; and (3) arguing to the arbitral 20 panel, if it rules that Benihana of Tokyo breached the license agreement, that 21 Benihana of Tokyo should be given additional time to cure any defaults. 22 3 The district court did not abuse its discretion with respect to the menu 1 2 offering or trademark use injunctions, because it reasonably concluded that each 3 of the relevant factors favored Benihana America. But it erred in enjoining 4 Benihana of Tokyo from arguing to the arbitral panel for an extended cure 5 period. When a dispute is properly before an arbitrator, a district court should 6 not interfere with the arbitral process on the ground that, in its view of the merits, 7 a particular remedy would not be warranted. Benihana America may challenge 8 an arbitrator’s decision in court only after it has been issued. It may not subvert 9 its agreement to arbitrate by obtaining a determination from a district court in 10 advance that there are no grounds for the arbitrator to grant a particular remedy. We therefore AFFIRM IN PART and REVERSE IN PART the order of the 11 12 district court. BACKGROUND 13 14 15 I. The License Agreement This case arises from a dispute between the parties resulting from the 1994 16 corporate division of the well known Benihana restaurant chain. Under the 17 parties’ Amended and Restated Agreement and Plan of Reorganization (the 18 “ARA”), Benihana America received the right to operate Benihana restaurants 4 1 and use Benihana trademarks in the United States, Latin America, and the 2 Caribbean, while Benihana of Tokyo received those rights for all other territories. 3 The one exception to this clean split was Hawaii: the ARA provided that 4 Benihana America would grant Benihana of Tokyo a license to continue 5 operating an existing Benihana restaurant in Honolulu. 6 Accordingly, on May 15, 1995 the parties entered into a License Agreement 7 (the “Agreement”), governed by New York state law, granting Benihana of 8 Tokyo a license and franchise to operate Benihana restaurants in Hawaii, subject 9 to the terms of the Agreement. In the Agreement, Benihana of Tokyo 10 acknowledged the “necessity of operating the [restaurant] in conformity with 11 [Benihana America’s] standards and specifications,” Joint App’x at 31 32, many 12 of which are spelled out in the Agreement. Most relevant here, the Agreement 13 restricts Benihana of Tokyo’s menu selection and use of Benihana trademarks. 14 Article 6.3 requires Benihana of Tokyo to “sell or offer for sale only such products 15 and services as have been expressly approved for sale in writing” by Benihana 16 America, provided that “such approval shall not be unreasonably withheld.” Id. 17 at 42 43. Similarly, under Article 8.1(c), Benihana of Tokyo agreed “[t]o 18 advertise, sell or offer for sale only those items which are sold by [Benihana 5 1 America] in its company owned restaurants or such other products as are 2 approved by [Benihana America] in writing, which shall not be unreasonably 3 withheld, prior to offering the same for sale.” Id. at 44 45. Article 5.2 provides 4 that “[a]ny and all advertising . . . or other matter employing in any way 5 whatsoever the words ‘Benihana,’ ‘Benihana of Tokyo’ or the [Benihana] ‘flower’ 6 symbol shall be submitted to [Benihana America] for its approval prior to 7 publication or use. [Benihana America] shall not unreasonably withhold 8 approval for any such publication or use.” Id. at 40. 9 The Agreement also sets forth conditions and procedures governing 10 termination. Under Article 12.1, Benihana America has good cause to terminate 11 the Agreement in the event of either: (I) a violation of “any . . . substantial term or 12 condition of th[e] Agreement [that Benihana of Tokyo] fails to cure . . . within 13 thirty days after written notice from [Benihana America]”; or (ii) “three notices 14 [by Benihana America] of any default hereunder (and such defaults are thereafter 15 cured), within any consecutive twelve month period.” Id. at 52 53. The 16 Agreement also provides that violation of certain articles — including Article 5.2 17 restricting Benihana of Tokyo’s trademark use and Article 8.1(c) restricting the 18 items Benihana of Tokyo may advertise or sell — “would result in irreparable 6 1 injury to [Benihana America] for which no adequate remedy at law may be 2 available” and for which Benihana America may obtain “an injunction against 3 [such] violation . . . without the necessity of showing actual or threatened 4 damage.” Id. at 48. 5 Finally, Article 13 contains two arbitration provisions: 6 7 8 9 10 11 12 13 14 15 16 13.1 If this Agreement shall be terminated by [Benihana America] and [Benihana of Tokyo] shall dispute [Benihana America’s] right of termination, or the reasonableness thereof, the dispute shall be settled by arbitration at the main office of the American Arbitration Association in the City of New York in accordance with the rules of said association and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitration panel shall consist of three (3) members, one (1) of whom shall be chosen by [Benihana America], and (1) by [Benihana of Tokyo] and the other by the two (2) so chosen. 17 18 19 20 21 22 23 24 25 13.2 26 In the event that any other dispute arises between the parties hereto in connection with the terms or provisions of this Agreement, either party by written notice to the other party may elect to submit the dispute to binding arbitration in accordance with the foregoing procedure. Such right shall not be exclusive of any other rights which a party may have to pursue a course of legal action in an appropriate forum. Enforcement of any arbitration award, decision or order may be sought in any court having competent jurisdiction. Id. at 55 56. 27 7 1 II. The Licensing Disputes Things proceeded amicably enough under the Agreement for over fifteen 2 3 years. But in 2012 Benihana America was purchased by Angelo Gordon & Co., 4 which proved to be a more hands on licensor. In May 2013, Benihana America 5 wrote to Benihana of Tokyo that it had recently learned that Benihana of Tokyo 6 was selling hamburgers — called “BeniBurgers” — at its Honolulu location. 7 Benihana America reminded Benihana of Tokyo that the Agreement required 8 Benihana America’s approval of new menu items, noted that hamburgers were 9 not an authorized menu item, and demanded that the hamburgers be removed 10 from the menu. When no remedial action was forthcoming, Benihana America 11 sent a second letter on July 30, 2013 notifying Benihana of Tokyo that it was in 12 breach of the Agreement and had thirty days to cure. After receiving two extensions of the cure period from Benihana America, 13 14 Benihana of Tokyo brought suit on September 24, 2013 in the New York State 15 Supreme Court seeking an injunction to stay the running of the cure period 16 pending arbitration of whether selling hamburgers violated the Agreement.1 1 2 3 1 When Benihana of Tokyo brought suit, neither party had initiated an arbitration proceeding. But New York law provides that “[t]he supreme court . . . may entertain an application for . . . a preliminary injunction in connection with an 8 1 Benihana America promptly removed the suit to federal court. At a hearing 2 before the district court on October 1, 2013, Benihana of Tokyo did not dispute 3 that the Agreement prohibited selling hamburgers but argued that Benihana 4 America had waived its right to enforce that prohibition by failing to monitor the 5 Honolulu restaurant for many years. The district court rejected the waiver 6 argument as precluded by the plain language of the Agreement,2 found that each 7 of the relevant factors weighed against staying the cure period, and accordingly 8 denied the motion. The court also rejected Benihana of Tokyo’s backup request 9 at oral argument for “a very short stub period for the cure,” explaining that it had 10 “applied the standards and determined that they don’t justify extending the cure 11 period.” Joint App’x at 70. Later that day, counsel for Benihana of Tokyo 12 submitted to Benihana America certain financial documents required by the 13 Agreement and represented that Benihana of Tokyo “will not be selling 1 2 3 4 arbitration that is pending or that is to be commenced,” provided that “[i]f an arbitration is not commenced within thirty days of the granting of the provisional relief, the order granting such relief shall expire and be null and void.” N.Y. C.P.L.R. § 7502(c). 1 2 3 4 2 Article 17.2 of the Agreement provides that “[n]o failure of [Benihana America] to . . . insist upon strict compliance by [Benihana of Tokyo] of any obligation hereunder . . . shall constitute a waiver of [Benihana America’s] right to demand exact compliance with the terms hereof.” Joint App’x at 58. 9 1 hamburgers in Hawaii.” Id. at 99. On December 13, 2013 Benihana America sent 2 another notice of breach based on asserted deficiencies in the submitted financial 3 documentation and violations of the Agreement’s advertising restrictions. 4 On January 13, 2014, the day on which the latest cure period expired, 5 Benihana of Tokyo filed an arbitration demand with the American Arbitration 6 Association seeking “a declaratory judgment that the claimed defaults do not 7 exist, but, if the panel finds that the claimed defaults do exist, then [Benihana of 8 Tokyo] requests sufficient time to cure the alleged defaults.” Id. at 20. 9 Despite its assurances to the contrary, Benihana of Tokyo continued to sell 10 hamburgers at its Honolulu location. An onsite inspection by Benihana America 11 on January 21, 2014 allegedly revealed that, in place of the BeniBurger, Benihana 12 of Tokyo was now serving a “Tokyo Burger,” as well as a “Beni Panda” 13 children’s meal consisting of two mini burgers served with rice and arranged to 14 resemble a panda face. These menu offerings were advertised using the 15 Benihana name and other trademarks in a manner allegedly not authorized by 16 the Agreement. 17 That discovery prompted Benihana America on February 5, 2014 to send 18 Benihana of Tokyo a notice of termination of the Agreement effective February 10 1 15, 2014. The notice asserted that good cause for termination existed under either 2 prong of Article 12.1: (I) failure to cure within thirty days; and (ii) three notices of 3 default within twelve months. The notice also stated that Benihana of Tokyo’s 4 “attempt to relitigate [before an arbitral panel] the question of whether [Benihana 5 of Tokyo] may wait to cure until after the arbitration ‘panel finds that the claimed 6 defaults do exist,’ an argument rejected by [the district court] in October, 7 suggests a level of contempt so extreme that termination of the License 8 Agreement is [Benihana America’s] only option.” Joint App’x at 105. That same 9 day, Benihana America filed a counterclaim in the arbitration seeking 10 confirmation of its termination. 11 Two days later, Benihana America petitioned the district court for 12 injunctive relief in aid of arbitration pursuant to Federal Rule of Civil Procedure 13 65, seeking to enjoin Benihana of Tokyo: 14 15 16 17 18 19 20 21 22 (1) from selling hamburgers or other unauthorized food items on the premises of the Benihana[] restaurant it operates in Hawaii pursuant to the License Agreement, or using or publishing advertisements, publicity, signs, decorations, furnishings, equipment, or other matter employing in any way whatsoever the words ‘Benihana,’ ‘Benihana of Tokyo,’ or the ‘flower’ symbol that have not been approved in accordance with Article 5.2 of the License Agreement; and (2) from arguing to 11 1 2 3 the arbitration panel that it be permitted to cure any defaults if the arbitrators rule that [Benihana of Tokyo] breached the License Agreement. 4 Joint App’x at 24. The petition argued that the “advertising and the sale of these 5 items are clear and blatant violations . . . of the License Agreement.” Id. at 22. 6 Because it would be irreparably harmed by the continuing violations and was 7 likely to succeed on the merits before the arbitral panel, Benihana America 8 sought “provisional relief” so that the panel’s “decision and award . . . will not be 9 rendered ineffectual.” Id. at 24. Benihana America also argued that if either 10 termination condition under Article 12.1 were met, then it was entitled to 11 terminate without an additional cure period, and that Benihana of Tokyo should 12 therefore be prohibited from arguing to the arbitrators for an extended cure 13 period to which it was plainly not entitled under the Agreement. 14 In its three page brief opposing the petition, Benihana of Tokyo creatively 15 argued that it was not violating the Agreement at all. It asserted that the Tokyo 16 Burger was sold not in the restaurant but instead “from an outside non exclusive 17 area,” while the Beni Panda was “not itself a burger” but a “fried rice dish” 18 (albeit one that included two mini burgers shaped as panda ears). No. 14 cv 792 19 (PAE), Doc. No. 14, at 2. But, “in the spirit of cooperation,” Benihana of Tokyo 12 1 pledged (again) not to sell those items pending arbitration. Id. Benihana of 2 Tokyo contended that because the only advertising Benihana America sought to 3 enjoin pertained to the sale of these items, its pledge to discontinue these items 4 pending arbitration mooted the advertising component of Benihana America’s 5 petition. Lastly, Benihana of Tokyo argued that enjoining it from arguing to the 6 arbitrators for an extended cure period “would impermissibly involve the Court 7 in the merits of the arbitration and the powers of the arbitrators.” Id. at 3. 8 9 The district court granted Benihana America’s petition in a ruling from the bench on February 16, 2014, enjoining Benihana of Tokyo from: 10 11 12 13 1. Selling hamburgers or other unauthorized food items on the premises of, or in any manner in connection with, the Benihana restaurant it operates in Hawaii pursuant to a license from [Benihana America]. 14 15 16 17 18 19 20 21 2. Using or publishing, in connection with the Benihana restaurant it operates in Hawaii pursuant to a license from [Benihana America], advertisements, publicity, signs, decorations, furnishings, equipment, or other matter employing in any way whatsoever the words ‘Benihana,’ ‘Benihana of Tokyo,’ or the ‘flower’ symbol that have not been approved in accordance with Article 5.2 of the License Agreement. 22 23 24 25 3. Arguing to the arbitration panel, in the event the panel rules that it breached the License Agreement so as to justify its termination, that it should be permitted to cure any defaults. 13 1 Joint App’x at 188 89. 2 As to the hamburgers, the court found that each of the four preliminary 3 injunction factors favored Benihana America. It found a likelihood of success 4 “clear beyond peradventure” because serving hamburgers without Benihana 5 America’s consent plainly violated the Agreement. Id. at 177. The court also 6 found that “the sale of these burgers under a Benihana name will irreparably 7 harm [Benihana America] by undermining [its] distinct image . . . . Benihana 8 does not ‘do’ burgers; its niche is to sell higher end cuisine, like steak and 9 seafood.” Id. at 178. The balance of hardships likewise favored Benihana 10 America, because it “ought to be no hardship whatsoever for Benihana of Tokyo 11 to refrain from selling burgers that it has no legal right to sell.” Id. at 179. 12 Finally, the court found that the public interest, while not seriously implicated, 13 was served by assuring that lawful agreements are enforced. 14 The court’s analysis for the trademark use injunction was “much the same” 15 as for the hamburgers. Id. at 181. Because the request would enjoin only use of 16 the trademarks not authorized under the Agreement, the court found that success 17 on the merits was “guarantee[d]” and that use of Benihana trademarks in 18 violation of the Agreement “will irreparabl[y] harm [Benihana America’s] brand 14 1 and reputation just as much, if not more, than will the sale of unauthorized 2 burgers.” Id. at 182. As with the hamburger injunction, the last two factors 3 favored Benihana America because complying with the Agreement was not a 4 hardship and the public interest would be served by enforcing the Agreement. 5 Turning to the injunction preventing Benihana of Tokyo from arguing to 6 the arbitral panel for an extended cure period, the district court found that 7 Benihana America was “highly likely to succeed on the merits,” because the court 8 had “previously denied Benihana of Tokyo’s TRO application for an extension of 9 the cure period.” Id. at 184. “[R]eviewing the issue afresh,” the court explained 10 that it “cannot identify, and Benihana of Tokyo has not identified, any basis in 11 the licensing agreement on which a court or an arbitrator could lawfully give 12 Benihana of Tokyo a cure period beyond that in the agreement.” Id. The court 13 noted that the Agreement “gives Benihana of Tokyo a 30 day cure period” and 14 reasoned that the Agreement “does not afford a basis for a court or an arbitrator 15 to extend that period, much less following a hypothetical finding by an arbitral 16 panel of a material breach by Benihana of Tokyo justifying termination.” Id. The 17 court also found that Benihana America “would be irreparably harmed if 18 Benihana of Tokyo somehow wrongly convinced the arbitrators to grant it a 15 1 further cure period despite its material breach warranting termination.” Id. at 2 184 85. 3 Benihana of Tokyo timely appealed. DISCUSSION 4 5 Where the parties have agreed to arbitrate a dispute, a district court has 6 jurisdiction to issue a preliminary injunction to preserve the status quo pending 7 arbitration. See Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 8 F.2d 1049, 1052 53 (2d Cir. 1990). The standard for such an injunction is the same 9 as for preliminary injunctions generally. Roso Lino Beverage Distribs., Inc. v. 10 Coca Cola Bottling Co., 749 F.2d 124, 125 26 (2d Cir. 1984). A party seeking a 11 preliminary injunction must demonstrate: (1) “a likelihood of success on the 12 merits or . . . sufficiently serious questions going to the merits to make them a fair 13 ground for litigation and a balance of hardships tipping decidedly in the 14 plaintiff’s favor”; (2) a likelihood of “irreparable injury in the absence of an 15 injunction”; (3) that “the balance of hardships tips in the plaintiff’s favor”; and (4) 16 that the “public interest would not be disserved” by the issuance of an injunction. 17 Salinger v. Colting, 607 F.3d 68, 79 80 (2d Cir. 2010) (alterations and internal 18 quotation marks omitted). 16 We review the grant of a preliminary injunction for abuse of discretion, 1 2 reversing only if the injunction is based on an error in law or a clearly erroneous 3 assessment of the evidence, or if it cannot be located within the range of 4 permissible decisions. Oneida Nation v. Cuomo, 645 F.3d 154, 164 (2d Cir. 2011). 5 I. 6 Injunction Against Unauthorized Menu Items and Use of Trademarks The first two components of the district court’s injunction do not require 7 extensive discussion, and because Benihana of Tokyo’s arguments as to them 8 largely overlap, we consider them together. We conclude that the district court 9 acted within its discretion in finding that each of the factors for a preliminary 10 injunction favored Benihana America and accordingly in granting those portions 11 of the injunction. 12 A. Likelihood of Success on the Merits 13 Benihana of Tokyo concedes what it describes as “technical violations of 14 two ancillary provisions” of the licensing agreement — namely, the menu and 15 advertising restrictions. Appellant’s Br. at 6. But, it contends, when assessing 16 likelihood of success on the merits, that the question is not simply whether it has 17 breached the Agreement, but whether its breaches were grounds for termination. 18 Assuming that this is indeed the correct question, the answer depends largely on 17 1 the accuracy of Benihana of Tokyo’s characterization of the violations as 2 “technical” and the provisions as “ancillary.” Benihana of Tokyo does not fare 3 well on either front. 4 The district court properly found that, far from committing merely trivial 5 violations, Benihana of Tokyo was “blatantly not complying with the license 6 agreement,” even after it “could not have been more clear at [an earlier] hearing 7 in acknowledging that it was forbidden under the license agreement to sell 8 burgers,” Joint App’x at 175, 178, and even after it represented that it would 9 cease doing so. Instead, Benihana of Tokyo continued to flout the terms of the 10 Agreement, relying on, as the district court aptly put it, “justification[s] utterly 11 and unusually unconvincing,” id. at 176, such as that burgers with rice and 12 shaped as “panda ears” are not burgers. The menu item and advertising 13 restrictions of the Agreement were clear, and Benihana of Tokyo was clearly 14 violating them. 15 Nor do we agree with Benihana of Tokyo that the breached provisions are 16 “ancillary.” Control over menu and advertising is presumably a central concern 17 for a licensor of a restaurant brand, and the Agreement reveals precisely such a 18 concern in this case. The Agreement begins by explaining that Benihana America 18 1 has “created and developed a unique system of high quality restaurants” and 2 that Benihana of Tokyo “understands and acknowledges . . . the necessity of 3 operating the business franchised hereunder in conformity with [Benihana 4 America’s] standards and specifications.” Id. at 31 32. Moreover, the Agreement 5 included the menu and advertising restrictions among the provisions for 6 violation of which Benihana America could seek an injunction without showing 7 irreparable harm. 8 9 As a fallback, Benihana of Tokyo contends that Benihana America is not likely to prevail in the arbitration because, under the Agreement, had it submitted 10 the menu items and advertisements for approval, Benihana America could not 11 have unreasonably withheld its consent. Thus, Benihana of Tokyo argues, its 12 advertisements and “burger sales are impermissible only if [Benihana America] 13 acts reasonably in prohibiting [the advertisements and] burger sales to begin 14 with.” Appellant’s Br. at 36. We express no view on whether Benihana 15 America’s withholding such consent would have been reasonable, for that 16 question is beside the point. The Agreement required Benihana of Tokyo to seek 17 consent before taking these actions. Failure to do so put Benihana of Tokyo in 18 breach; it also meant that Benihana America’s obligation not to withhold its 19 1 approval unreasonably was never triggered. We therefore reject Benihana of 2 Tokyo’s contention that Benihana America’s conduct makes it unlikely to prevail 3 in the arbitration. 4 B. Irreparable Harm 5 Nor did the district court abuse its discretion in finding that “the sale of 6 these burgers under a Benihana name will irreparably harm [Benihana America] 7 by undermining the distinct image it has worked so hard to create in the minds 8 of consumers.” Joint App’x at 178. Benihana of Tokyo argues that Benihana 9 America has offered no “concrete evidence” that the unauthorized menu items 10 would cause irreparable harm and that because “many high end restaurants 11 regularly sell hamburgers at lunch, it is not at all axiomatic that serving 12 hamburgers would in any way tarnish [Benihana America] or constitute a 13 deviation from quality standards.” Appellant’s Br. at 30. But, as discussed 14 above, control over menu selection appears central to the Agreement. The 15 district court was not required to demand expert testimony or consumer surveys 16 before crediting Benihana America’s argument that “Benihana does not ‘do’ 17 burgers,” and that serving hamburgers undermined its distinct image — a 18 conclusion supported by common sense and the Agreement. The district court 20 1 also properly concluded that if the unauthorized sales continue, Benihana 2 America “would suffer substantial harm to its reputation that is ‘not calculable 3 nor precisely compensable.’” Joint App’x at 178 79, citing Power Test Petroleum 4 Distribs., Inc. v. Calcu Gas, Inc., 754 F.2d 91, 95 (2d Cir. 1985). 5 Moreover, the licensing agreement provides that a violation of the 6 prohibition on “sell[ing] or offer[ing] for sale” items not “approved by [Benihana 7 America] in writing” would “result in irreparable injury” for which Benihana 8 America “shall be entitled . . . [to] an injunction . . . without the necessity of 9 showing actual or threatened damage.” Joint App’x at 44 45, 48. As the district 10 court noted, under our precedent such an “irreparable harm” provision in the 11 parties’ agreement, while not controlling, is “relevant evidence that can help 12 support a finding of irreparable injury.” Id. at 179, citing N. Atl. Instruments, 13 Inc. v . Haber, 188 F.3d 38, 49 (2d Cir. 1999). 14 Similarly, Benihana of Tokyo argues that Benihana America failed to 15 present sufficient evidence of irreparable harm from the unauthorized 16 advertising. Specifically, it asserts that Benihana America provided “no evidence 17 of customer confusion,” and instead “merely presented pictures of [Benihana of 18 Tokyo’s] unauthorized advertising and asked the court to conclude that confused 21 1 customers would probably think [Benihana America] had sponsored the ads.” 2 Appellant’s Br. at 31. But before the district court, Benihana of Tokyo argued 3 only that with its “agreement not to sell the Tokyo Burger or the Beni Panda 4 during the pendency of the arbitration, this issue is moot” because the only 5 unauthorized advertising concerned those items. No. 14 cv 792 (PAE), Doc. No. 6 14, at 2. Because Benihana of Tokyo in its brief and in oral argument opposing 7 the injunction application failed to contest the sufficiency of the evidence 8 supporting irreparable harm from unauthorized advertisements, that argument is 9 waived on appeal. See In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 132 10 33 (2d Cir. 2008). 11 C. Balance of Hardships and Public Interest 12 We also agree with the district court that it is no hardship for Benihana of 13 Tokyo to refrain from menu offerings and trademark uses that are not permitted 14 under the Agreement, whereas Benihana America faces harm to its brand from 15 the Agreement’s violation. Finally, we agree that, to the extent it is implicated, 16 the public interest here is served by the enforcement of the parties’ lawful 17 agreement, and that therefore this factor too favors Benihana America. 18 22 1 II. Injunction Against Arguing to Arbitrator for Extended Cure Period Benihana of Tokyo argues that the district court exceeded its limited power 2 3 to issue injunctive relief only as necessary to preserve the status quo pending 4 arbitration. It notes that the parties agreed to arbitrate disputes regarding 5 termination, with no explicit limitation on the arbitrators’ power to resolve such 6 disputes. Thus, Benihana of Tokyo maintains, its argument for an extended cure 7 period poses a question for the arbitrators rather than the court. It contends that, 8 by restricting the arguments it may make in arbitration, the court delved deeply 9 into the merits and thereby “invad[ed] the proper province of the arbitrators.” 10 Appellant’s Br. at 3. Finally, it argues that any remedy granted by an arbitrator 11 may be challenged in the district court only after it has been issued, and not ex 12 ante. 13 Benihana America counters that it is for the court to determine in the first 14 instance what issues and corresponding remedies properly may be considered by 15 the arbitrators. Benihana America asserts that because the Agreement provides 16 no basis for an extended cure period once termination has been found warranted, 17 the court was within its discretion in enjoining Benihana of Tokyo from arguing 18 for a remedy to which it had no arguable right. In other words, Benihana 23 1 America maintains that awarding such a remedy is outside the scope of the 2 arbitrators’ authority and is therefore outside the scope of the parties’ agreement 3 to arbitrate. 4 “[T]he arbitrability of a given issue is a question for the court unless there 5 is ‘clear and unmistakable’ evidence from the arbitration agreement, as construed 6 by the relevant state law, that the parties intended that the question of 7 arbitrability shall be decided by the arbitrator.” PaineWebber Inc. v. Bybyk, 81 8 F.3d 1193, 1198 99 (2d Cir. 1996) (internal quotation marks omitted). “The scope 9 of an arbitrator’s authority . . . generally depends on the intention of the parties to 10 an arbitration, and is determined by the agreement . . . .” ReliaStar Life Ins. Co. 11 of N.Y. v. EMC Nat’l Life Co., 564 F.3d 81, 85 (2d Cir. 2009) (internal quotation 12 marks omitted). “[E]ven absent an express contractual commitment of the issue 13 of arbitrability to arbitration, a referral of ‘any and all’ controversies reflects such 14 a ‘broad grant of power to the arbitrators’ as to evidence the parties’ clear 15 ‘inten[t] to arbitrate issues of arbitrability.’” Shaw Grp. Inc. v. Triplefine Int’l 16 Corp., 322 F.3d 115, 121 (2d Cir. 2003), quoting PaineWebber, 81 F.3d at 1199 17 1200); see also, Smith Barney Shearson Inc. v. Sacharow, 91 N.Y.2d 39, 43, 46 18 (1997) (holding that an agreement governed by New York law that states that 24 1 “[a]ny controversy . . . shall be settled by arbitration” clearly and unmistakably 2 reserves the decision of arbitrability for the arbitrator) (alterations in original) 3 (internal quotation marks omitted). 4 In this case, Article 13.1 of the Agreement provides that if Benihana of 5 Tokyo disputes the “right of termination, or the reasonableness thereof, the 6 dispute shall be settled by arbitration.” Joint App’x at 55. Article 13.2 then 7 provides that if “any other dispute arises between the parties hereto in connection 8 with the terms or provisions of this Agreement, either party by written notice to 9 the other party may elect to submit the dispute to binding arbitration.” Id. 10 (emphasis added). Once a party has elected to submit such dispute to arbitration, 11 these two clauses taken together grant the arbitrators jurisdiction over disputes 12 concerning the Agreement that is “inclusive, categorical, unconditional and 13 unlimited.” PaineWebber, 81 F.3d at 1199. Accordingly, we read the plain 14 language of the Agreement to clearly indicate that the parties intended to grant 15 the arbitrator the power to decide questions of arbitrability, including whether 16 Benihana of Tokyo’s claim for an extended cure period in lieu of termination, is 17 arbitrable. 18 25 1 The parties, however, appear to believe the contrary. Benihana America 2 briefly asserts that the question of arbitrability is for the courts, see Appellee’s Br. 3 at 34, and Benihana of Tokyo nowhere contests that assertion, simply arguing on 4 the merits that the question it desires to raise is arbitrable. It is therefore arguable 5 that the parties have agreed to submit the question of the arbitrability of 6 Benihana of Tokyo’s extended cure period argument to us for decision. See S&R 7 Co. of Kingston v. Latona Trucking, Inc., 159 F.3d 80, 83 85 (2d Cir. 1998); 8 Leadertex, Inc. v. Morganton Dyeing & Finishing Corp., 67 F.3d 20, 25 27 (2d Cir. 9 1995). 10 We need not decide whether Benihana of Tokyo’s failure to contest this 11 issue waives the broad arbitration clause in the Agreement, since we would in 12 any event conclude that the merits of the extended cure issue are for the 13 arbitrators to decide. For the same reason that we interpret the arbitration 14 agreement to encompass the issue of arbitrability — namely, that it covers any 15 and all disputes arising under the Agreement, once either party has elected to 16 arbitrate that dispute — we would conclude that it also encompasses Benihana of 17 Tokyo’s argument for an extended cure period. Indeed, this conclusion follows a 18 fortiori because in interpreting the scope of the agreement to arbitrate we 26 1 “reverse[] the presumption” that applies to the issue of who decides arbitrability, 2 such that “any doubts concerning the scope of arbitrable issues [are] resolved in 3 favor of arbitration.” Shaw Grp. Inc., 322 F.3d at 120 (internal quotation marks 4 omitted). “[W]here the contract contains an arbitration clause, there is a 5 presumption of arbitrability in the sense that an order to arbitrate the particular 6 [claim] should not be denied unless it may be said with positive assurance that 7 the arbitration clause is not susceptible of an interpretation that covers the 8 asserted dispute.” AT&T Techs., Inc. v. Commc ns Workers of Am., 475 U.S. 643, 9 650 (1986) (alterations and internal quotation marks omitted). It is arguable, to 10 say the least, that a dispute regarding whether Benihana of Tokyo may receive an 11 extended cure period in lieu of termination falls within an agreement to arbitrate 12 any and all disputes arising under the Agreement. 13 Benihana America’s argument that the issue of an extended cure period is 14 outside the scope of the agreement to arbitrate is in reality an argument that the 15 Agreement provides no basis for extending the cure period. Put differently, 16 Benihana America’s position is not that an arbitrator cannot grant the remedy 17 Benihana of Tokyo seeks, but rather that the remedy cannot be granted by either a 18 court or an arbitrator, because the Agreement does not provide for such a remedy. 27 1 The district court saw the issue in these same terms, concluding that the 2 Agreement “does not afford a basis for a court or an arbitrator to extend that 3 period.” Joint App’x at 184. At bottom, Benihana America’s position concerns 4 what decision may be reached — that is, it concerns the proper interpretation of 5 the Agreement — not who may reach it, and is therefore a merits argument 6 masked as a jurisdictional one. Thus, the actual question before us is whether, 7 when the parties have agreed to submit a dispute to arbitration, a court may 8 enjoin a party from seeking a particular remedy in arbitration if, in the court’s 9 assessment, that remedy would have no basis in the parties’ agreement. 10 We hold that it may not. Once arbitrators have jurisdiction over a matter, 11 “any subsequent construction of the contract and of the parties’ rights and 12 obligations under it” is for the arbitrators to decide. McDonnell Douglas Fin. 13 Corp. v. Pa. Power & Light Co., 858 F.2d 825, 832 (2d Cir. 1988). If the parties 14 have agreed to arbitrate a dispute, a court has “no business weighing the merits 15 of the [claims], considering whether there is equity in a particular claim, or 16 determining whether there is particular language in the written instrument 17 which will support the claim. The agreement is to submit all [claims] to 18 arbitration, not merely those which the court will deem meritorious.” AT&T 28 1 Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. at 650 (internal quotation 2 marks omitted). Although the district court enjoined Benihana of Tokyo from 3 arguing for an extended cure period, rather than directly prohibiting the 4 arbitrators from awarding such a remedy, a dispute obviously cannot be 5 “submit[ted]” to the arbitrators for decision, as contemplated by AT&T, if a party 6 is prohibited from arguing its position on that issue to the arbitrators. This 7 portion of the injunction is thus fully equivalent to a ruling that the arbitrator 8 may not grant Benihana of Tokyo an extended cure period. “Whether ‘arguable’ 9 or not, indeed even if it appears to the court to be frivolous,” a dispute 10 concerning the Agreement “is to be decided, not by the court . . . but as the 11 parties have agreed, by the arbitrator.” Id. at 649 50. While the district court 12 believed that the Agreement provided no basis to extend the cure period, that 13 question was nevertheless for the arbitrators in the first instance. Benihana 14 America’s opportunity to challenge a particular remedy in the district court 15 would come after the arbitrators had granted the remedy, not before. 16 To support its position that a court may issue an injunction to prevent an 17 arbitrator from awarding a remedy without basis in the parties’ agreement, 18 Benihana America relies heavily on this Court’s decision in 187 Concourse 29 1 Assocs. v. Fishman, 399 F.3d 524 (2d Cir. 2005). In that case, an employer and a 2 terminated employee submitted two questions to an arbitrator pursuant to a 3 collective bargaining agreement (“CBA”): “Was the [employee] discharged for 4 just cause? If not, what shall the remedy be?” Id. at 526 (internal quotation 5 marks omitted). Despite finding that the employer “had no option but to 6 terminate” the employee, the arbitrator ordered the employee restored “to his 7 prior . . . position with a final warning.” Id. We held that the arbitrator had 8 exceeded its authority by reinstating the employee. We explained that “the 9 arbitrator’s authority was limited by both the CBA and the questions submitted 10 by the parties for arbitration. . . . Upon a finding of just cause, there was nothing 11 further to be done. The arbitrator had no authority, under either the CBA or the 12 submission, to fashion an alternative remedy.” Id. at 527. Benihana America 13 contends that the arbitrators’ power here is similarly limited to determining 14 whether the Agreement was properly terminated. If it was properly terminated, 15 Benihana America argues, then as in 187 Concourse the arbitrators may not 16 proceed to fashion an alternative remedy, such as extending the cure period. 17 Benihana America’s argument ignores a critical distinction between 187 18 Concourse and this case: in 187 Concourse, we held that the arbitrator had 30 1 exceeded its authority after it had rendered its decision. Here, by contrast, 2 Benihana America seeks a ruling ex ante that, in a matter properly submitted to 3 arbitration, ordering a particular remedy would exceed the arbitrators’ 4 authority.3 Tellingly, Benihana America has not cited, and we have not found, 5 any precedent for a court holding that a particular remedy may not be awarded 6 by an arbitrator before the arbitrator has actually awarded that remedy. On the 7 contrary, courts that have determined that a remedy exceeded the scope of an 8 arbitrator’s power have done so exclusively after the arbitrator’s ruling. 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 3 187 Concourse is distinguishable in other respects as well. First, the question submitted to the arbitrators in this case is not on its face a binary one of whether the Agreement was properly terminated, as it was in 187 Concourse. Benihana of Tokyo filed an arbitration demand for “a declaratory judgment that the claimed defaults do not exist, but, if the panel finds that the claimed defaults do exist, then [Benihana of Tokyo] requests sufficient time to cure the alleged defaults.” Joint App’x at 20. Thus, the question of whether the arbitrator may properly grant Benihana of Tokyo an extended cure period has in fact been presented to the arbitrators. Second, the Agreement here contains no explicit limitation on the arbitrators’ power, whereas in 187 Concourse the CBA provided that the “arbitrator shall have no authority to add to, subtract from, or modify the provisions of this Agreement and shall confine his decision to a determination based on the facts presented.” 399 F.3d at 526 (internal quotation marks omitted). We note these distinctions merely to emphasize that we do not suggest that 187 Concourse would compel vacatur of a hypothetical arbitral award granting an extended cure period. In keeping with our holding here, we express no view on that question. 31 1 That is hardly coincidental. Prohibiting a court’s assessment of the merits 2 until after the arbitral decision has been rendered is consistent with the structure 3 of the Federal Arbitration Act (“FAA”) and with the “strong federal policy 4 favoring arbitration as an alternative means of dispute resolution.” Hartford 5 Accident & Indem. Co. v. Swiss Reinsurance Am. Corp., 246 F.3d 219, 226 (2d Cir. 6 2001). The FAA contains no provision for a court’s pre arbitration assessment of 7 whether a particular remedy is supported by the parties’ agreement and 8 therefore may be awarded by the arbitrator. Instead, § 10(a)(4) of the FAA 9 permits a court to vacate an arbitral award, among other grounds, “where the 10 arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). That process furthers the 11 FAA’s “principal purpose” of “ensur[ing] that private arbitration agreements are 12 enforced according to their terms,” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 13 1740, 1748 (2011) (internal quotation marks omitted), by seeing that disputes that 14 parties have agreed to arbitrate are indeed decided by an arbitrator. New York 15 law is to the same effect, because the “firmly established . . . public policy of New 16 York State favors and encourages arbitration . . . . [and aims] to interfere as little 17 as possible with the freedom of consenting parties” to achieve that objective. 18 Westinghouse Elec. Corp. v. N.Y.C. Transit Auth., 82 N.Y.2d 47, 53 54 (1993). 32 Consequently, “[t]his Court has repeatedly recognized the strong deference 1 2 appropriately due . . . the arbitral process.” Porzig v. Dresdner, Kleinwort, 3 Benson, N. Am. LLC, 497 F.3d 133, 138 (2d Cir. 2007). When parties agree to 4 arbitrate a dispute, it undermines and discredits the arbitral process for a district 5 court to enjoin parties from advancing arguments in arbitration for fear that the 6 arbitrators might wrongly accept them. Here, the district court granted an 7 injunction after finding that Benihana America “would be irreparably harmed if 8 Benihana of Tokyo somehow wrongly convinced the arbitrators to grant it a 9 further cure period despite its material breach warranting termination.” Joint 10 App’x at 184 85. Such a concern is not a proper ground for finding irreparable 11 harm or for granting an injunction. If a court determines the merits of the parties’ 12 arguments in advance of a pending arbitration, “the ostensible purpose for resort 13 to arbitration, i.e., avoidance of litigation, would be frustrated.” Amicizia Societa 14 Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 808 (2d Cir. 15 1960). 16 Considerations of judicial economy and efficient dispute resolution also 17 counsel against a district court’s assessment of the merits of a pending 18 arbitration. If a remedy sought by a party in arbitration indeed finds no support 33 1 in the parties’ agreement, the district court has no reason to presume that the 2 arbitrators are likely to grant it. There is little to be gained from a district court’s 3 opining on a hypothetical award that likely will never materialize. Moreover, for 4 a court to preview the issues that a party seeks to present to the arbitrator, and 5 decide the merits of some of those issues in advance, risks delaying the 6 arbitration process, and divides the issues to be resolved between two decision 7 makers, where the parties selected a unitary dispute resolution process in the 8 hopes that such a procedure would be more expeditious than litigation in court. 9 Refraining from a view on the merits until after an arbitral decision has 10 been rendered will also aid the district court in applying the proper highly 11 deferential standard of review to those decisions. “[A]s long as the arbitrator is 12 even arguably construing or applying the contract and acting within the scope of 13 his authority, a court’s conviction that the arbitrator has committed serious error 14 in resolving the disputed issue does not suffice to overturn his decision.” 15 ReliaStar Life Ins. Co. of N.Y., 564 F.3d at 86 (internal quotation marks omitted). 16 “[T]he sole question for us is whether the arbitrator (even arguably) interpreted 17 the parties’ contract, not whether he got its meaning right or wrong.” Oxford 18 Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013). To apply the appropriate 34 1 standard of deference, it will be helpful for the court to know (at least in cases in 2 which the arbitrator chooses to give its reasons) exactly what the arbitrator 3 decided and why, rather than anticipating the arguments or reaching its own 4 conclusions. 5 The benefit of having the arbitrator’s decision is particularly important 6 given that arbitrators are generally afforded greater flexibility in fashioning 7 remedies than are courts. “Where an arbitration clause is broad,” as it is here, 8 “arbitrators have the discretion to order remedies they determine appropriate, so 9 long as they do not exceed the power granted to them by the contract itself.” 10 Banco de Seguros del Estado v. Mut. Marine Office, Inc., 344 F.3d 255, 262 (2d Cir. 11 2003). “[I]t is not the role of the courts to undermine the comprehensive grant of 12 authority to arbitrators by prohibiting them from fashioning awards or remedies 13 to ensure a meaningful final award.” Reliastar Life Ins. Co., 564 F.3d at 86 14 (internal quotation marks omitted). Like federal law, “New York law gives 15 arbitrators substantial power to fashion remedies that they believe will do justice 16 between the parties . . . . [and] [u]nder New York law arbitrators have power to 17 fashion relief that a court might not properly grant.” Sperry Int’l Trade, Inc. v. 18 Gov’t of Israel, 689 F.2d 301, 306 (2d Cir. 1982). If the court is correct that the 35 1 Agreement provides no basis for an extension of the cure period, a question on 2 which we express no view, the arbitrators presumably will not grant such relief; 3 if the arbitrators do grant such relief, they may well explain their reasoning in a 4 manner that will persuade the court that such relief is in fact permissible. 5 Because the parties’ dispute had been submitted to arbitration, the district 6 court, rather than independently assessing the merits, should have confined itself 7 to preserving the status quo pending arbitration. Restricting the relief Benihana 8 of Tokyo could seek in arbitration undermined rather than aided the arbitral 9 process, and therefore that portion of Benihana America’s petition for an 10 injunction should have been denied. 11 CONCLUSION 12 For the foregoing reasons, we AFFIRM the order of the district court 13 insofar as it enjoins Benihana of Tokyo, pending resolution of the arbitration, 14 from selling hamburgers or other unauthorized menu items or engaging in 15 unapproved advertising at its Hawaii location, and we REVERSE that order 16 insofar as it enjoins Benihana of Tokyo from arguing to the arbitrators for an 17 extended cure period. 36
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
