Benihana of Tokyo, LLC v. Angelo, Gordon & Co. et al

Filing 49

ORDER OVERRULING OBJECTIONS AND ADOPTING MAGISTRATE JUDGE'S FINDINGS AND RECOMMENDATION REGARDING ATTORNEYS' FEES AND COSTS re 46 , 47 - Signed by JUDGE ALAN C KAY on 9/14/2015. "For the foregoing reasons, the Court OVERRULES Defendants' Objections and ADOPTS the magistrate judge's Finding and Recommendation to Grant in Part and Deny in Part Local Counsel for Plaintiff's Application Regarding Award of Attorney's Fees and Costs and P laintiff's Motion for Attorneys' Fees. The Court awards Plaintiff $37,772.362 in attorneys' fees, costs, and actual expenses incurred as a result of removal pursuant to 28 U.S.C. § 1447(c)." (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
BENIHANA OF TOKYO, LLC, as
)
successor to BENIHANA OF TOKYO, )
INC.,
)
)
Plaintiff,
)
)
v.
)
)
ANGELO, GORDON & CO., BENIHANA, )
INC., as successor to BENIHANA )
NATIONAL CORP., and NOODLE TIME,)
INC.,
)
)
Defendants.
)
)

Civ. No. 15-00028 ACK-RLP

ORDER OVERRULING OBJECTIONS AND ADOPTING MAGISTRATE JUDGE’S
FINDINGS AND RECOMMENDATION REGARDING ATTORNEYS’ FEES AND COSTS
For the following reasons, the Court hereby OVERRULES
Defendants’ Objections and ADOPTS the Magistrate Judge’s Findings
and Recommendation to Grant in Part and Deny in Part Local
Counsel for Plaintiff’s Application Regarding Award of Attorneys’
Fees and Costs and Plaintiff’s Motion for Attorneys’ Fees,
entered July 23, 2015. (Doc. No. 46.)
PROCEDURAL AND FACTUAL BACKGROUND
This case arises out of a dispute between the Plaintiff
Benihana of Tokyo, LLC (“Plaintiff”) and Defendants Angelo,
Gordon & Co. (“AGC”), Benihana, Inc. (“BI”), Benihana National
Corp., and Noodle Time, Inc. (collectively, “Defendants”) over
their business relationship regarding the Benihana restaurants.

Plaintiff filed its original complaint in the Circuit
Court of the First Circuit of Hawaii on October 3, 2014.1/ (Doc.
No. 6-3.) On December 22, 2014, Plaintiff filed its First Amended
Complaint, including additional factual information. (Doc. No. 11.) The First Amended Complaint asserts five claims against the
Defendants: common law unfair competition, unfair competition
under Hawaii Revised Statutes Section 480-2, breach of contract,
deceptive trade practices under Hawaii Revised Statutes Section
481A-3, and false advertising under Hawaii Revised Statutes
Section 708-871. (Id. at 20-24.)
Defendants removed this action on January 26, 2015.
(Doc. No. 1. ) On March 3, 2015, Plaintiff filed its Motion to
Remand, arguing that remand to state court was appropriate
because this Court lacks subject matter jurisdiction. (Doc. No.
18.) Specifically, Plaintiff asserted that there is no complete
diversity among the parties because Plaintiff and Defendant AGC
are both citizens of New York. Defendants countered that

1/

Before Plaintiff filed the action in state
court, it filed an action alleging the same five claims against
the same Defendants in federal court. See Benihana of Tokyo, LLC
v. Angelo, Gordon & Co., Benihana, Inc., Noodle Time, Inc, and
Benihana National Corp., Civil No. 14-00442 ACK-BMK, filed
September 30, 2014. According to Plaintiff, it mistakenly
asserted in that action that there was complete diversity between
the parties, but Plaintiff and Defendant AGC are both
citizens of New York. (See Mot. to Remand at 3.) Plaintiff
asserts that after it realized its error, it voluntarily
dismissed the federal suit on October 3, 2014, without ever
serving Defendants. (Id.) On the same day, it re-filed its
complaint in state court.
2

Defendant AGC was fraudulently joined as a sham defendant to
defeat jurisdiction and, thus, jurisdiction is proper in federal
court.
On April 17, 2015, Magistrate Judge Puglisi issued his
Findings and Recommendation to Grant Plaintiff’s Motion to
Remand. (Doc. No. 25.) On June 1, 2015, this Court issued its
Order Overruling Objections and Adopting Magistrate Judge’s
Findings and Recommendation to Grant Plaintiff’s Motion to
Remand. (Doc. No. 35 (“6/1/15 Order”).) In that Order, the Court
rejected Defendants’ argument that Defendant AGC was fraudulently
joined. (Id.) The Court found that remand was appropriate because
the Court lacks subject matter jurisdiction in light of the fact
that Plaintiff and Defendant AGC are citizens of the same state.
(Id.) In so concluding, the Court held that Defendants had
“failed to show by clear and convincing evidence that there is no
possibility that Plaintiff can state a cause of action against
Defendant AGC.” (Id. at 14.) Thus, the Court adopted the Findings
and Recommendation and concluded that remand to state court was
proper. (Id.)
On June 15, 2015, Plaintiff filed the instant motions
regarding attorneys’ fees: Local Counsel for Plaintiff’s
Application Regarding Award of Attorney’s Fees and Costs, (Doc.
No. 38,) and Plaintiff’s Motion for Attorneys’ Fees. (Doc. No.
39.) On July 23, 2015, Magistrate Judge Puglisi issued his

3

Findings and Recommendation to Grant in Part and Deny in Part
Local Counsel for Plaintiff’s Application Regarding Award of
Attorney’s Fees and Costs and Plaintiff’s Motion for Attorneys’
Fees. (Doc. No. 46 (“7/23/15 F&R”).) Defendants filed their
Objections to the 7/23/15 F&R on August 6, 2015. (Doc. No. 47.)
Plaintiff filed a response to the Objections on August 24, 2015.
(Doc. No. 48.)
STANDARD
A district court reviews de novo those portions of a
magistrate judge’s findings and recommendation to which an
objection is made and may accept, reject, or modify, in whole or
in part, the findings and recommendation made by the magistrate
judge. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b); Local Rule
74.2. The district court may accept those portions of the
findings and recommendation that are not objected to if it is
satisfied that there is no clear error on the face of the record.
United States v. Bright, 2009 WL 5064355, *3 (D. Haw. Dec. 23,
2009); Stow v. Murashige, 288 F. Supp. 2d 1122, 1127 (D. Haw.
2003).
The district court may receive further evidence or
recommit the matter to the magistrate judge with instructions. 28
U.S.C. § 636(b)(1). It may also consider the record developed
before the magistrate judge. Local Rule 74.2. The district court
must arrive at its own independent conclusions about those

4

portions of the magistrate judge’s report to which objections are
made, but a de novo hearing is not required. United States v.
Remsing, 874 F.2d 614, 617 (9th Cir. 1989); Bright, 2009 WL
5064355, *3; Local Rule 74.2.
DISCUSSION
In the 7/23/15 F&R, the magistrate judge found that an
award of just costs and actual expenses associated with the
removal is appropriate under 28 U.S.C. § 1447(c). The magistrate
then went on to analyze the reasonableness of the requested rates
and hours, and concluded that the Court should award Plaintiff a
total of $37,772.36 in attorneys’ fees, costs, and actual
expenses incurred by mainland counsel and local counsel as a
result of removal. (Doc. No. 46.)
Defendants object to the magistrate judge’s conclusions
insofar as they assert that the magistrate judge erred in finding
that Plaintiff was entitled to an award of attorneys’ fees under
28 U.S.C. § 1447(c). (Obj. at 4.) Defendants do not, however,
appear to object to the magistrate judge’s calculation of the
amount of the award. (Id. at 4 n.2.) The Court therefore turns to
an analysis of the magistrate’s determination that an award of
fees and costs is appropriate under 28 U.S.C. § 1447(c).
Pursuant to 28 U.S.C. § 1447(c), “an order remanding
the case may require payment of just costs and any actual
expenses, including attorney fees, incurred as a result of the

5

removal.” The Ninth Circuit has explained the standard for making
such an award as follows:
The Supreme Court settled the standard for
awarding attorney’s fees when remanding a case to
state court in Martin v. Franklin Capital Corp.,
546 U.S. 132, 126 S.Ct. 704, 163 L.Ed.2d 547
(2005). The Court held that “the standard for
awarding fees should turn on the reasonableness of
the removal.” Id. at 141, 546 U.S. 132, 126 S.Ct.
704, 163 L.Ed.2d 547. As the Court put it,
“[a]bsent unusual circumstances, courts may award
attorney’s fees under § 1447(c) only where the
removing party lacked an objectively reasonable
basis for seeking removal. Conversely, when an
objectively reasonable basis exists, fees should
be denied.” Id.
Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th
Cir. 2008) (alteration in original) (footnotes omitted). That a
removing party’s arguments lack merit is not enough to render
removal objectively unreasonable. Id. Rather, removal is
objectively unreasonable if “the relevant case law clearly
foreclosed the defendant’s basis of removal.” Id. at 1066 (citing
Lott v. Pfizer, Inc., 492 F.3d 789 (7th Cir. 2007)). The Court
must therefore assess whether Defendants’ removal of the instant
case was objectively unreasonable, or clearly foreclosed by the
relevant case law.
Defendants have asserted that removal of the case was
warranted because Defendant AGC was fraudulently joined in the
suit to avoid diversity jurisdiction. (See Doc. No. 28 at 2.)
Generally, joinder is fraudulent “[i]f the plaintiff fails to
state a cause of action against a resident defendant, and the
6

failure is obvious according to the settled rules of the state.”
Hunter v. Phillip Morris, USA, 582 F.3d 1039, 1043 (9th Cir.
2009). Defendants offered as evidence that Defendant AGC was
fraudulently joined the fact that Plaintiff failed to
specifically name Defendant AGC in each of the enumerated counts
of the First Amended Complaint, and that AGC has “no connection
to the actual causes of action alleged in the complaint.” (Doc.
No. 28 at 2.)
In rejecting this argument, the Court noted that, while
AGC is not specifically named in each claim, the First Amended
Complaint nevertheless contains numerous allegations regarding
AGC’s conduct in bringing about the alleged harm. For example,
the First Amended Complaint states that the relationship between
Plaintiff and Defendant BI was “good” until “AGC acquired BI.”
(FAC ¶ 20.) Plaintiff asserts that AGC was the impetus behind the
attempt to purchase Plaintiff, (id. ¶¶ 22-24,) and that when
Plaintiff rejected the purchase offer “AGC and BI went on the
offensive,” and “in a concerted effort to force an unwilling
[Plaintiff] to sell, the Defendants . . . engaged in a strategy
aimed at inflicting damage to [Plaintiff’s] well-developed
reputation and simultaneously financially degrading the company.”
(Id. ¶ 24.) Plaintiff further alleges that “AGC and BI initiated
a plan to litigate multiple cases against [Plaintiff],” thereby
damaging its reputation and finances. (Id. ¶ 26.) The First

7

Amended Complaint also contains allegations implicating AGC in
BI’s attempt to terminate the licensing agreement with Plaintiff.
(See id. ¶¶ 46, 60.) Finally, in a paragraph that appears
directly before the enumerated counts, Plaintiff summarizes the
factual allegations against “Defendants” and states that “they
have engaged in unfair competition and made false statements, in
violation of Hawaii law. In addition, Defendants have breached
the ARA.” (Id. ¶ 84.) Thus, the First Amended Complaint clearly
and plainly sets forth specific factual allegations as against
Defendant AGC. The Court is therefore unpersuaded that the
complaint was so completely lacking in allegations against
Defendant AGC that Defendants had an objectively reasonable basis
for asserting that removal was appropriate based on a theory of
fraudulent joinder.
Moreover, Defendants had no objectively reasonable
grounds to believe that Plaintiff’s claims against Defendant AGC
would obviously fail under settled Hawaii law. As noted above, in
the First Amended Complaint, Plaintiff brings claims for common
law unfair competition, unfair competition under Hawaii Revised
Statutes § 480-2, common law breach of contract, deceptive trade
practices under Hawaii Revised Statutes § 481A-3, and false
advertising under Hawaii Revised Statutes § 708-871. Leaving
aside whether or not the claims may actually be proven, there is
no question as to Plaintiff’s ability to assert them as against

8

Defendant AGC under Hawaii law. The Court therefore cannot
conclude that Defendants had a reasonable belief that there was
no possibility that Hawaii state law might impose liability on
Defendant AGC under the facts alleged in the First Amended
Complaint. See Hunter, 582 F.3d at 1044 (“[I]f there is any
possibility that the state law might impose liability on a
resident defendant under the circumstances alleged in the
complaint, the federal court cannot find that joinder of the
resident defendant was fraudulent[.]”).
In sum, knowing the extremely high standard for
fraudulent joinder (which requires that Defendants prove by clear
and convincing evidence that there is no possibility of a claim
against Defendant AGC), and in light of the many allegations
contained in the First Amended Complaint against Defendant AGC,
the Court concludes that Defendants lacked an objectively
reasonable basis for removal in this case. See Cnty. of Hawaii v.
Univev, LLC, Civ. No. 09-00368 ACK-LEK, 2010 WL 520696, at *26
(D. Haw. Feb. 11, 2010). The Court therefore OVERRULES Defendants
Objections and ADOPTS the magistrate judge’s finding and
recommendation that an award of costs and expenses is appropriate
under 28 U.S.C. § 1447(c).
No party has objected to the portion of the 7/23/15 F&R
addressing the calculation of just costs and actual expenses
under 28 U.S.C. § 1447(c), (see Obj. at 4 n. 2,) and the Court is

9

satisfied that there is no clear error on the face of the record
as to those findings. The Court therefore ADOPTS that portion of
the 7/23/15 F&R as well.
CONCLUSION
For the foregoing reasons, the Court OVERRULES
Defendants’ Objections and ADOPTS the magistrate judge’s Finding
and Recommendation to Grant in Part and Deny in Part Local
Counsel for Plaintiff’s Application Regarding Award of Attorney’s
Fees and Costs and Plaintiff’s Motion for Attorneys’ Fees. The
Court awards Plaintiff $37,772.362/ in attorneys’ fees, costs,
and actual expenses incurred as a result of removal pursuant to
28 U.S.C. § 1447(c).
IT IS SO ORDERED.
DATED:

Honolulu, Hawaii, September 14, 2015

________________________________
Alan C. Kay
Senior United States District Judge

Benihana of Tokyo, LLC v. Angelo, Gordon & Co., et al., Civ. No. 15-00028 ACKRLP; Order Overruling Objections and Adopting Magistrate Judge’s Findings and
Recommendation Regarding Attorneys’ Fees and Costs

2/

As set forth in the Findings and Recommendation, the
Court awards $12,910.99 in attorneys’ fees, costs, and expenses
incurred by local counsel, and $24,861.37 in attorneys’ fees,
costs, and expenses incurred by mainland counsel.
10