Benihana, Inc. v. Benihana of Tokyo, LLC - 784 F.3d 887 (2d Cir. 2015)

Rule:

In interpreting the scope of an agreement to arbitrate, the court reverses the presumption that applies to the issue of who decides arbitrability, such that any doubts concerning the scope of arbitrable issues are resolved in favor of arbitration. Where the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that an order to arbitrate a particular claim should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible to an interpretation that covers the asserted dispute.

Facts:

Defendant-appellant Benihana of Tokyo, LLC appealed from the district court’s order granting the application of plaintiff-appellee Benihana, Inc. for a preliminary injunction in aid of arbitration of a dispute arising under the parties' license agreement. The district court enjoined Benihana of Tokyo from selling unauthorized food items at the restaurant it operates pursuant to the license agreement; from using certain trademarks in connection with the restaurant in a manner not approved by the license agreement; and from arguing to the arbitral panel, if it rules that defendant breached the license agreement, that defendant should be given additional time to cure any defaults.

Issue:

Did the district court err in granting the application of plaintiff for a preliminary injunction in aid of arbitration of a dispute arising under the parties' license agreement?

Answer:

Yes.

Conclusion:

The court held that the district court did not abuse its discretion with respect to the menu offering or trademark use injunctions because it reasonably concluded that each of the relevant factors for granting an injunction under Fed. R. Civ. P. 65 favored plaintiff. But the court held that the district court erred in enjoining defendant from arguing to the arbitral panel for an extended cure period because when a dispute was properly before an arbitrator, a district 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. Plaintiff could challenge an arbitrator's decision in court only after it had been issued, and it could not subvert its agreement to arbitrate by obtaining a determination from a district court in advance that there were no grounds for the arbitrator to grant a particular remedy.