Judge tosses another round of restaurant surcharge lawsuits

A San Diego County judge has dismissed another batch of lawsuits alleging that restaurants violated the law by tacking 2 to 4 percent surcharges on bills in order to pay for rising labor costs, upholding an increasingly common industry practice.

The latest round of dismissals occurred Jan. 29, based originally on an order from last fall. Superior Court Judge Timothy B. Taylor found the restaurants demonstrated solid business reasons for the charges and fully disclosed them, leaving the lawsuit meritless.

"The undisputed evidence establishes that the surcharge is not unlawful as a matter of law," he wrote in the Nov. 30 order granting judgment for Galaxy Taco, one of the defendants.

"We are pleased with the outcome and appreciate the judge's thorough analysis, which ultimately led to the ruling that restaurant surcharges are legal," said Bruno W. Katz of Wilson Elser, who represented several of the restaurants.

They were also represented by Marisa Janine-Page of Caldarelli Hejmanowski Page & Leer LLP.

"We said from the very beginning that these were the worst kind of shakedown lawsuits," said Jot Condie, president and CEO of the California Restaurant Association. "The fact that these law firms were unsuccessful should be no surprise to anyone."

The plaintiffs were represented by Hyde & Swigart, which did not respond to a request for comment. A form for potential plaintiffs remains live on the firm's website, posted Jan. 25.

Katz declined to comment on the apparent solicitation for more plaintiffs.

Katz

The plaintiffs argued that the surcharges allow restaurants to misrepresent the cost of dining, are inadequately disclosed, and that restaurants needing to cope with rising costs should raise menu prices.

"During the past year, several restaurants in San Diego, including George's at the Cove, Bali Hai, or Sammy's Restaurant, have implemented unfair business practices by misrepresenting the price of their menu items and adding an additional surcharge to the bills of California consumers who dined at such restaurant. The listed menu prices were misleading because they did not reflect the additional 3-4 percent surcharge collected by such restaurants after their guests consumed his dinner," the firm's website post says.

Such charges are represented on menus before customers order, sufficiently disclosing the cost, according to the California Restaurant Association.

Surcharges also allow restaurants to increase revenue pre-tip in order to pay cooks and other back of shop workers more, said the association and the defendants.

Taylor found both arguments persuasive, noting that the restaurants posted multiple notices about the surcharges.

"In addition, the defendant has stated a valid business reason to add a surcharge rather than simply raising the price: Raising the price would help only the servers, who are tipped based on the price of the item ordered," he wrote.

"All claims in the [first amended complaint] fail," he concluded.