Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Haw.: Benihana dispute remanded to Hawaii state court, (Jun 2, 2015)

By Greg Hammond, J.D.

A suit alleging that Benihana, Inc. and Angelo, Gordon & Co. engaged in a concerted effort to force Benihana of Tokyo, LLC to sell its company back to Benihana, Inc. was remanded to state court upon a finding that the federal district court in Honolulu lacked diversity jurisdiction. The district court overruled defendants’ objections and adopted the magistrate judge’s findings and recommendation to grant Benihana of Tokyo’s motion to remand (Benihana of Tokyo, LLC v. Angelo, Gordon & Co., June 1, 2015, Kay, A.).

Plaintiff Benihana of Tokyo and defendant Benihana, Inc. previously entered into an amended and restated agreement and plan of reorganization, dividing the business of the Benihana restaurants between them. After Angelo, Gordon & Co. (AGC) acquired Benihana, Inc., the defendants allegedly engaged in a concerted effort to force Benihana of Tokyo to sell. Benihana of Tokyo filed suit, alleging unfair competition, breach of contract, deceptive trade practices, and false advertising. The magistrate judge issued his findings and recommendation to grant plaintiff’s motion to remand, finding that defendant AGC was not fraudulently joined as a sham defendant to defeat jurisdiction.

The district court adopted the magistrate judge’s findings, also finding that AGC was not fraudulently joined and that, in light of the lack of complete diversity among the parties, the court lacked diversity jurisdiction over the case. Although AGC was not specifically named in the first five counts, the court determined that the complaint, on its face, clearly contemplates that the claims be brought against not only Benihana, Inc., but also against AGC. Each of the counts states that it “refers to and realleges” all of the prior allegations, incorporating the allegations specifically regarding AGC’s alleged conduct. The complaint also alleged that AGC and Benihana, Inc. went on the offensive, in a concerted effort to force an unwilling Benihana of Tokyo to sell, and that the defendants engaged in a strategy aimed at inflicting damage to Benihana of Tokyo’s well-developed reputation and simultaneously financially degrading the company. Based on the allegations in the complaint, the court was satisfied that AGC is one of the individuals that engaged in the conduct for which Benihana of Tokyo seeks remedy.

The case number is 15-00028 ACK-RLP.

Attorneys: Daniel J. O'Meara (Dubin Law Office) for Benihana of Tokyo, LLC. Alan Harold Fein (Stearns Weaver Miller Weissler Alhadeff & Sitterson, PA) and Paul Alston (Alston Hunt Floyd & Ing) for Angelo, Gordon & Co. and Benihana, Inc.

Companies: Benihana of Tokyo, LLC; Angelo, Gordon & Co.; Benihana, Inc.; Benihana National Corp.

Cases: Advertising FranchisingDistribution StateUnfairTradePractices HawaiiNews