Plaintiffs try to scuttle deal in Benihana suit

Nation's Restaurant News, Jan 13, 1992 by Bill Carlino

MIAMI -- Just as a shareholder suit against Benihana appeared to have been settled, the plaintiffs filed a motion to rehear the 2-year-old case, arguing that their attorney entered into the settlement without authorization.

"He just went ahead and settled without asking any of us," claimed Manuel Asensio, managing director of New York-based Asset Trading Co., one of four dissident shareholders who brought a suit two years ago against Benihana chairman Rocky Aoki and five executives of the Japanese dinner-house chain.

The suit alleged that the officials caused more than $22 million in losses for Benihana National Corp., the publicly owned component of the restaurant operation, and manipulated funds through Benihana of tokyo Inc., an affiliated concern owned by Aoki. Aoki holds a 25-percent stake in Benihana national.

The plaintiff's attorney, Arthur Rice, a partner in the Miami firm of Rice & Reiser, was not available for comment. He reportedly was dismissed by the group, which has since retained counsel in both New York and Miami, where Benihana is based.

"He [Rice] made an offer, and we took it," said Alan Fein, an attorney representing Joel Schwartz and Darwin Dornbush, two of the Benihana officials named in the suit. "Besides, he was representing all the Benihana shareholders, not just the plaintiffs."

The settlement was approved by Broward Circuit Court judge Patti Englander Henning. In her final judgment decree, she termed the settlement "adequate and in the best interests of Benihana National Corp."

The settlement calls for Benihana National and Benihana of Tokyo to retain separate, independent counsels for all future business transactions between them. It also specifies that Benihana National will obtain bids from unrelated companies for services currently provided by Benihana of Tokyo, including insurance, and that Rice & Reiser will receive a payment of $60,000 for its services.

Fein said the decision was final, and statements to the contrary were "nonsense."

"This [the settlement] provides absolutely no benefit to the shareholders," Asensio countered. "We shouldn't be obligated to abide by it."

Asensio said the settlement does not address the findings of the one-man Special Litigation Committee that was appointed last year to investigate the shareholders' charges of mismanagement. He added that the agreement does not eradicate the chain's "Services Agreement" clause, which stipulates that Benihana National and Benihana of Tokyo share all accounting, legal and distribution services.

According to the plaintiffs, the Special Litigation Committee discovered that Aoki sold a Benihana unit in Dallas to Benihana National for an inflated price, and that he acted inappropriately in agreeing to serve only Kirin Beer in Benihana restaurants.

"Where do you think the company expenses get stuffed if he [Aoki] owns 100 percent of one company and only 25 percent of another?" asked Thomas Dilk, one of the litigious investors. "That will be one of our points of contention if we get a new trial."

"The court went over the findings and found no instances of impropriety," stated Joe DeMaria, Aoki's attorney in the suit. "Nor should Rocky have to pay any money to the public company. The suit is settled, and they [the plaintiffs] seem to have a problem accepting it."

The court-approved settlement caps a two-year legal imbroglio that was stalled several times by such developments as the plaintiffs' decision to change lawyers.

The case also had to be reassigned after the first presiding judge, Joseph Luzzo, discovered that he belonged to the same country club as Joseph Abdo, the Benihana national director who headed the Special Litigation Committee. Luzzo disqualified himself.

Last August the dissident investors -- acting in concert with fellow shareholder Stephen F. Anfang -- submitted proxy proposals for inclusion in the chain annual proxy statement.

The proposals called for the elimination of the management services contract between Benihana's public and private segments, the consolidation of the company's two classes of common stock into one and the lifting of a court-enforced gag order on the findings of the Special Litigation Committee.

However, the Securities and Exchange Commission ruled that the proposals were filed too late to be included in Benihana's 1991 shareholders' statement and that each investor was limited to filing one proposal amendment rather than three.