Benihana Case Brief
Behihana of Tokyo, Inc. v. Benihana, Inc., 906 A.2d 114 (Del. 2006)
Facts: Rocky Aoki founded Benihana of Tokyo, Inc. (BOT), and its subsidiary, Benihana, which own and operate Benihana restaurants in the United States and other countries. Aoki transferred his 100% ownership of BOT to Benihana Protective Trust in 1998 in order to avoid licensing problems stemming from his conviction on insider trading charges. Benihana, a Delaware corporation, had two classes of common stock. There were 6 million shares of Class A Common Stock, each share of Class A Common Stock had a 1/10th vote, and the holders of Class A Common Stock were entitled to elect 25% of the directors. There were 3 million shares of Common Stock outstanding, each with one vote, and the holders of Common Stock were entitled to elect the remaining 75% of Benihana’s directors. BOT owned 50.9% of all Common Stock and 2% of Class A Common Stock. It was determined that the restaurants in the chain were in need of significant renovation and that the plan would cost $56 million or more. Fred Joseph, of Morgan Joseph, met with the board of directors and recommended that Benihana issue convertible preferred stock to help finance the project. BFC Financial Corporation was interested in buying the convertible stock. After meeting with John E. Abdo, the principal owner of BFC and an executive committee member of Benihana, Joseph, acting on behalf of Benihana, agreed to a Stock Purchase Agreement and approved the stock issuance. The board met to discuss the purchase, and even after discovering Abdo’s involvement with BFC, still approved the transaction. Aoki filed the action against the Benihana directors arguing that the directors had breached their fiduciary duties by allowing Abdo to negotiate the deal from both sides, and Benihana was not allowed to issue the stock with preemptive rights that would be self dealing which was a breach of the duty of loyalty. Aoki also filed suit against BFC, claiming that the
Facts: Rocky Aoki founded Benihana of Tokyo, Inc. (BOT), and its subsidiary, Benihana, which own and operate Benihana restaurants in the United States and other countries. Aoki transferred his 100% ownership of BOT to Benihana Protective Trust in 1998 in order to avoid licensing problems stemming from his conviction on insider trading charges. Benihana, a Delaware corporation, had two classes of common stock. There were 6 million shares of Class A Common Stock, each share of Class A Common Stock had a 1/10th vote, and the holders of Class A Common Stock were entitled to elect 25% of the directors. There were 3 million shares of Common Stock outstanding, each with one vote, and the holders of Common Stock were entitled to elect the remaining 75% of Benihana’s directors. BOT owned 50.9% of all Common Stock and 2% of Class A Common Stock. It was determined that the restaurants in the chain were in need of significant renovation and that the plan would cost $56 million or more. Fred Joseph, of Morgan Joseph, met with the board of directors and recommended that Benihana issue convertible preferred stock to help finance the project. BFC Financial Corporation was interested in buying the convertible stock. After meeting with John E. Abdo, the principal owner of BFC and an executive committee member of Benihana, Joseph, acting on behalf of Benihana, agreed to a Stock Purchase Agreement and approved the stock issuance. The board met to discuss the purchase, and even after discovering Abdo’s involvement with BFC, still approved the transaction. Aoki filed the action against the Benihana directors arguing that the directors had breached their fiduciary duties by allowing Abdo to negotiate the deal from both sides, and Benihana was not allowed to issue the stock with preemptive rights that would be self dealing which was a breach of the duty of loyalty. Aoki also filed suit against BFC, claiming that the