Meltzer/Austin Restaurant Corporation et al v. Benihana National Corp.

Filing 280

ORDER GRANTING IN PART AND DENYING IN PART 266 Motion for Attorney Fees. Signed by Judge Andrew W. Austin. (dm)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
MELTZER/AUSTIN RESTAURANT
CORPORATION, et al.,
V.
BENIHANA NATIONAL CORP.

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A-11-CV-542-AWA

ORDER
Before the Court are Defendant Benihana National Corp.’s Motion for Attorneys’ Fees and
Costs (Dkt. No. 266); Plaintiff’s Response (Dkt. No. 267); Benihana’s Reply (Dkt. No. 269);
Plaintiff’s Surreply (Dkt. No. 270); and Benihana’s Response to the Surreply (Dkt. No. 276). Also
before the Court are Benihana’s Supplemental Memorandum in Support of Its Right to Recover
Attorneys’ Fees and Costs Pursuant to Section 8.5 of the San Antonio Franchise Agreement (Dkt.
No. 278) and Plaintiff’s Response (Dkt. No. 279).
I. BACKGROUND
At issue is whether Defendant Benihana National Corporation is entitled to have Meltzer,
former Benihana franchisees, pay the attorneys fees accrued over the course of this lengthy
litigation. Prior to the events at issue in this case, Meltzer had owned and operated Benihana
franchises in Austin and San Antonio. The parties’ relationship soured, and in November, 2010,
Benihana sent Meltzer notices of default, informing him that he had thirty days to correct violations
of the Franchise Agreements or face termination of his franchise status. Meltzer failed to satisfy
Benihana’s demands, and on June 23, 2011, Benihana terminated Meltzer’s franchise status.
That same day, Benihana filed suit in the Southern District of Florida. Benihana alleged that
by continuing to operate after default, Meltzer San Antonio Restaurant I, L.P. and Meltzer/Austin
Restaurant Corporation had breached their respective Franchise Agreements and infringed on

Benihana’s trade marks and service marks. Thereafter, on July 31, 2011, Meltzer Austin closed, and
on August 3, 2011, Meltzer San Antonio closed.
The Meltzer companies filed their own suits in Texas: Meltzer San Antonio and Meltzer
Austin brought an action in Travis County District Court, alleging breach of the Franchise
Agreements and fraud; and Meltzer/Austin Restaurant II, LLC, another of Meltzer’s restaurant
entities, filed a separate action against Benihana in this Court, alleging fraud, negligent
misrepresentation, and other causes of action relating to Meltzer Austin II’s purchase of property
for a new Benihana franchise. The Texas state court case was removed to this Court, and
Benihana’s case in the Southern District of Florida was transferred to this district. Eventually, Judge
Lee Yeakel consolidated all three cases into the instant action. The parties were then ordered to
replead. Plaintiffs filed several amended complaints, adding new parties and claims to the action.
Benihana also filed counterclaims alleging that Meltzer San Antonio and Meltzer Austin had
breached the franchise agreements by failing to pay royalties. (Benihana did not, however, refile
the breach of the Franchise Agreement and trademark infringement claims it had filed in the Florida
suit, likely because the closing of the Restaurants rendered those claims moot.)
After the claims were pared down through a number of motions, the case proceeded to trial.
After the close of Plaintiffs’ case, the Court granted Benihana’s Rule 50 Motion, entering judgment
in Benihana’s favor on all of Plaintiffs’ claims, save Meltzer Austin and Meltzer San Antonio’s
breach of contract claims against Benihana. Subsequently, Meltzer Austin withdrew all of its claims
against Benihana, including its breach of contract claim. Thus, the only claim that went to the jury
was Meltzer San Antonio’s breach of contract claim against Benihana, and the jury found that
Benihana had not breached the franchise agreement. The Court entered judgment in Benihana’s

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favor on the jury’s verdict, and, pursuant to the parties’ stipulation, entered judgment in Benihana’s
favor on its counterclaims for unpaid royalties.
Benihana then filed its motion for fees and costs. This Court held that Benihana was not
entitled to recover its attorneys’ fees from Meltzer under the indemnification clauses of either the
Austin or San Antonio Franchise Agreements. It then ordered the parties to submit additional
briefing on the limited issue of whether one provision of the San Antonio Agreement, requiring
Meltzer to pay Benihana for costs incurred “in connection with the enforcement” of the agreement,
extended to the attorneys fees at issue.
II. ANALYSIS
Benihana argues that Paragraph 8.5 of the San Antonio Agreement provides for the recovery
of attorneys’ fees. That provision states that:
8.5
Franchisee [Meltzer San Antonio] 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.
Id. at 19 (emphasis added). Article 8 of the San Antonio Agreement lays out the covenants of a
Benihana franchisee to Benihana National Corporation. These range from broad requirements for
restaurant management, hiring practices, and finances, to the provision stated above. Article 5 of
the San Antonio Agreement describes obligations related to the use of Benihana’s service marks,
trade names, and confidential information.
This Court has already held that Paragraph 8.5 does not apply to Benihana’s counterclaim
for unpaid royalties—royalty payments are covered by Article 3 of the agreement, not Articles 8 or
5. At issue is whether the provision applies to two other portions of this litigation. First, Benihana’s
original Florida case alleged that “by continuing to operate the Restaurants after the Franchise
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Agreements were terminated and refusing to comply with the post-termination obligations contained
in the Franchise Agreement,” Meltzer San Antonio had breached the Franchise Agreement. Dkt.
No. 7-2 at 13. To the extent Benihana brought that action “in connection with the enforcement” of
Article 5 of the San Antonio Franchise Agreement (relating to use of tradenames and service marks),
it would appear that Section 8.5 would permit Benihana to recover its fees expended in that effort.
Second, if Benihana’s defense of Meltzer San Antonio’s suit is understood as having been “in
connection with the enforcement” of the San Antonio Agreement, then 8.5 might permit recovery
of attorney’s fees more broadly. In both instances, then, the award of fees turns on the definition
of “enforcement” under the agreement. The agreement does not define the term.
Other courts, though, when faced with similar language, have held that, absent other
provisions, defending a breach of contract claim did not constitute “enforcement” of the contract.
While none are binding on this Court, they are nonetheless instructive. An appellate court in Illinois
recently faced a provision similar to the one at issue here in a case regarding breach of a lease
agreement. Housing Auth. Of Champaign Cnty. v. Lyles, 395 Ill.App.3d 1036 (Ill.App.Ct. 2009).
The agreement stated:
In the event one party to this lease defaults in fulfilling any of the provisions of this
lease, the non-defaulting party may recover all costs and reasonable attorney fees
incurred in enforcing this lease, whether or not suit shall be required.
Id. at 1039. To determine how to construe the provision, the court looked to the dictionary
definition of the word “enforce:”
The American Heritage Dictionary defines “enforce” as “1. To compel observance
of or obedience to. 2. To compel. 3. To give force to; reinforce.” American Heritage
Dictionary 610 (3rd ed.1992). Black's Law Dictionary defines “enforce” to mean,
“To put into execution; to cause to take effect; to make effective; as, to enforce a
particular law, a writ, a judgment, or the collection of a debt or fine; to compel
obedience to.” Black's Law Dictionary 528 (6th ed.1990).
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Applying these common definitions to the language of the lease, this court finds as
a matter of law that the lessor or lessee would be entitled to attorney fees only if that
party was suing to compel or make effective the covenants of the lease. In this case,
defendant was defending against plaintiff's claim that she breached the terms of the
lease “as a result of keeping her unit in an unsanitary and unsafe condition.”
Defendant never sued to enforce any covenant of the lease. Defendant was not
enforcing anything, but merely defending against the charge that she had breached
the lease. We will not “torture ordinary words until they confess to ambiguity.”
Id. at 1039-1040. A Utah court faced a similar provision and came to the same conclusion:
The provision in the earnest money agreement regarding attorney fees is not
comprehensive but is somewhat limited in scope. With our emphasis, it provided:
“If either party fails [to perform], he agrees to pay all expenses of enforcing this
agreement, or of any right arising out of the breach thereof, including a reasonable
attorney's fee.” Smith took an entirely defensive posture. It was not enforcing any
right arising under the agreement or arising from a breach thereof. On the contrary,
its position at trial was that there was no viable contract left to enforce. While Smith
would surely be entitled to attorney fees under the more typical provision awarding
fees to the prevailing party, it is not entitled to attorney fees under the provision at
issue.
Carr v. Enoch Smith Co., 781 P.2d 1292, 1296 (Utah Ct. App. 1989) (internal citations omitted).
Notably, when courts have held that such provisions extend to the defense of an action, they have
relied on other, broader, and more inclusive language in the relevant agreements. In an Illinois
federal case, for example, the agreement stated that a customer would pay attorneys’ fees incurred
“in connection with the preparation, execution, administration, collection, enforcement, protection,
waiver or amendment” of an agreement. Bank of America, N.A. v. Oberman, Tivoli & Pickert, Inc.,
12 F.Supp.3d 1092 (N.D.Ill. Jan. 22, 2014). The court held that defending a suit, while not
“enforcement” of the agreement, was “protection” of the agreement, and accordingly an award of
fees was appropriate. Id. at 1103.
Drafters, then, are capable of writing clauses awarding attorneys’ fees in a variety of
circumstances. But absent such additional language, courts generally do not read “enforcement” to
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mean anything more than “to enforce.” Thus, a district judge in the Middle District of Florida held
as such when she considered an agreement between a golf club and its members. The agreement
read:
If the Club is required to turn a Member's account over to a collection agency or
institute legal action to collect any dues or charges owed by a Member, or to enforce
any provision of these Bylaws against a Member, the Member agrees he or she shall
be responsible for all costs of collection, reasonable attorneys' fees incurred by the
Club, and court costs.
Gadsby v. Am. Golf Corp. of California, 2014 WL 5473555 at *5 (M.D. Fla. Oct. 28, 2014). The
Court held that the provision did not extend to the Club’s defense of “a suit by former members to
enforce a different provision of the Bylaws.” Id. at *10. It noted that the Club “would be entitled
to recover fees under an attorneys’ fees provision using more standard language; the Club could
have included in Section 11.9 broader language clearly entitling it to recover attorneys’ fees in a
situation as it now faces, but it did not.” Id. at *8.
The San Antonio Agreement only requires Meltzer to pay attorneys’ fees incurred in
connection with the enforcement of specific parts of the Agreement. “Enforcement” means “the act
or process of compelling compliance with a law, mandate, command, decree, or agreement.”
Black’s Law Dictionary, 10th Ed., p. 645. In this context, “enforcement” means proactive steps
taken to ensure that Meltzer complied with its obligations under the Agreement. It does not mean
Benihana’s defense of Meltzer’s suit related to the Agreement. If Benihana had wanted to be
reimbursed for attorneys’ fees incurred defending an action brought by Meltzer or any other
franchisee, it could have included such language in its agreements. It did not. Accordingly,
Benihana may not recover attorneys’ fees incurred defending itself against Meltzer’s actions.

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Benihana may, however, recover attorneys’ fees incurred in preparing for and bringing its
initial suit against Meltzer in the Southern District of Florida. In that action Benihana alleged that
Meltzer had breached the Agreement by continuing to operate the restaurant after the Franchise
Agreement had been terminated. Benihana had terminated Meltzer’s Franchise Agreement because
of violations of Section 8.1 of the Agreement. It also alleged that its continued use of Benihana’s
marks and other intellectual property post-termination violated Section 5.5 of the Agreement. This
action was clearly taken “in connection with the enforcement” of Article 5 of the San Antonio
Agreement. Further, the Court finds that Meltzer was the breaching party in these actions.
Accordingly, Benihana is entitled to recover from Meltzer its costs and expenses incurred preparing
for and bringing that suit up through the time that Meltzer closed the San Antonio restaurant on
August 3, 2011.
As noted in previous rulings, because Section 8.5 is only contained in the San Antonio
Agreement, the award is limited to fees Benihana incurred enforcing the San Antonio Agreement
only. As such, and in accordance with the local rules, counsel for the parties are 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 San Antonio. W.D. Tex. Civ. R. 7-3(j)(1).
III. CONCLUSION
Based upon the foregoing and this Court’s previous rulings on the motions, Benihana’s
Motion for Attorneys’ Fees is GRANTED in part and DENIED in part. The parties are
ORDERED to meet and confer to determine the correct amount of fees incurred by Benihana in the
Florida action against Meltzer San Antonio only, and submit that application to the Court, in
accordance with Local Rule 7-3(j)(1).

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SIGNED this 15th day of December, 2014.

_____________________________________
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE

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