Restaurant Price-Fixing Lawsuit Granted Class Action Status
A Los Angeles County Superior Court has granted class action status to an antitrust lawsuit against a number of the city’s well-known restaurants. The lawsuit was started by Margaret Imhoff in 2015 after a meal at Rustic Canyon where she noticed a 3 percent healthcare surcharge on her bill which she believed to be a mandatory additional cost.
Further investigation found that may top restaurant owners discussed the inclusion of the 3 percent healthcare charge and fix a portion of their prices across each of their eateries. Rustic Canyon co-owner Josh Loeb emailed a group of “like-minded” restaurant operators in 2014 to plan a course of action for implementing a surcharge. Chef Josiah Citrin, co-owner of Melisse, was quoted in the antitrust class action lawsuit as stating, “We decided it would be a good thing to do it as a group … [u]sually when lots of people do things it’s easier to make changes.”
In the lawsuit granted class action, Imhoff alleged she paid $3.60 for the surcharge. The filing states, “In an attempt to justify their collusion, Defendants have publicly cited the Affordable Care Act and labeled the 3% mark up as an employee ‘healthcare surcharge.’ Their justifications are legally irrelevant and simply a smokescreen…California Courts will not consider any defense seeking to justify a price-fixing agreement as reasonable or required by business or economic considerations; such agreements are deemed illegal.”
The restaurants in question include AOC, Lucques, The Hungry Cat, Rustic Canyon, Milo & Olive, Huckleberry, Melisse, Animal, Son of a Gun, Trois Mec, and others. These establishments either added the healthcare charge or wrapped any additional charges into menu prices, asking more for each item while disallowing an additional gratuity to be paid.
“There just doesn’t seem to be whole lot of options: You either pay people a wage, pay them a commission, or you just keep paying them a tip,” says Mike Lynn, a professor at Cornell University’s School of Hotel Management said. If one way is granted priority over another then it becomes an unwritten standard for the interconnected eateries.
The defending restaurant owners argue that the surcharge provides benefits to their employees. However, Imhoff responded that it results in a reduction of the employees’ tip pool. Patrons are likely to tip just as much if not more.
The price-fixing practices have been more widespread in recent years as country wide conversation around more equitable pay for low-wage workers has taken off. These practices have been one way that restaurants in areas that have seen significant increases in minimum-wage requirements have been able to make up for lost profits.
As part of the granted class action status any customer who can produce a receipt (with a demonstrable healthcare surcharge) from one of the listed restaurants between September 1, 2014, and January 9, 2018, is eligible to apply to join the case. The final day to apply for the class action is February 20.
The class action claims the city’s restaurants violated the Cartwright Act and California’s Unfair Competition Law. Under these allegations, Imhoff is seeking restitution of all gains made from the additional charges on her bill and for the Class, treble damages, as well as attorney’s fees.
Sources:
LA Restaurant Surcharge Triggers Antitrust Class Action
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Courts Confirm Class Action Status of Price-Fixing Lawsuit Against LA Restaurants
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