Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Tex.: Benihana recovers cut of attorney fees from franchisee, (Dec 17, 2014)

By Greg Hammond, J.D.

Global teppanyaki franchisor, Benihana National Corp., is entitled to recover a portion of its attorney fees in connection with the enforcement of a franchise agreement. In partially granting Benihana’s motion for attorney fees and costs, the federal district court in Austin, Texas determined that the franchisor could recover fees and costs associated with the enforcement of its franchise agreement, but not for its defense of a breach of contract claim (Meltzer/Austin Restaurant Corp. v. Benihana National Corp., December 15, 2014, Austin, A.).

Meltzer/Austin Restaurant Corp. owned and operated Benihana franchises in Austin and San Antonio. However, after the parties’ relationship soured, Benihana sent Meltzer notices of default, informing the company that it had 30 days to correct violations of the franchise agreements. Meltzer failed to cure its violations, and Benihana consequently terminated the company’s franchise status.

Claiming that Meltzer continued to operate after default, Benihana filed suit in Florida against Meltzer, alleging that the company breached the franchise agreement and infringed on Benihana’s trademarks and service marks. Meltzer filed its own law suit in Texas, alleging Benihana breached the franchise agreements and engaged in fraud. The court, however, found in favor of Benihana, determining that the franchisor did not violate the franchise agreement. Benihana subsequently moved for attorney fees and costs.

Provision 8.5 of the parties’ San Antonio franchise agreement stated that Meltzer “agrees to pay all costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred by Franchisor [Benihana] in connection with the enforcement of this Article 8 or of Article 5 provided that the Franchisee is determined to be the breaching party.”

The court determined that the term “enforcement” means “the act or process for compelling compliance with a law, mandate, command, decree, or agreement.” Consequently, it determined that Benihana could not recover attorney fees incurred defending itself against Meltzer’s breach of contract action. However, Benihana could recover attorney fees incurred in preparing for and bringing its initial suit against Meltzer. The parties were therefore ordered to meet and confer to determine the correct amount of fees Benihana is entitled to for enforcing its rights through the Florida action against Meltzer.

The case number is A-11-CV-542-AWA.

Attorneys: Alvin D. Houston (Leyh, Payne & Mallia, PLLC) and Michelle F. Wakefield (Rain Minns Law Firm) for Meltzer/Austin Restaurant Corp. Michael D. Joblove (Genovese Joblove & Battista, PA) for Benihana National Corp.

Companies: Meltzer/Austin Restaurant Corp.; Benihana National Corp.

Cases: FranchisingDistribution TexasNews