NYC Restaurants File Class Claims Against Food Delivery Apps
On June 7, 2021, popular food delivery services Grubhub, Seamless, Postmates, UberEats and DoorDash were served with class claims in federal court in the Southern District of New York, alleging that the companies are “bleeding New York City restaurants dry” by charging fees while collecting millions of dollars at the restaurants’ expense, in what the plaintiff referred to as a blatant disregard of the laws of the City of New York.
In the complaint, named plaintiff, Israeli-style bakery, Micheli & Shel describes how the onset of the COVID-19 pandemic, along with New York Governor Cuomo’s executive order “New York State PAUSE,” which required all non-essential business to close in-office personnel functions, caused a significant increase in delivery app takeout food orders. The complaint then referenced an attempt to curb the already powerful influence of third-party delivery companies when the Delivery App Legislation (“the Legislation”) went into effect on June 2, 2020.
The Legislation prohibits third-party food delivery services from charging restaurants a fee of more than 15% of the purchase price of each order, exclusive of taxes, for providing delivery services, and a fee of more than 5% per order for all other types of charges. However, the plaintiff argued that despite the protective measures taken by the Legislation, restaurants continued to be charged in excess of the 15% delivery fee cap and 5% cap on all additional fees.
The plaintiff argued that on many orders the defendants charged a 20% service fee without even identifying what the fee was for. The complaint also alleged that the defendants fraudulently inflated their credit card processing fees in order to further extort funds from already struggling New York area restaurants that were severely impacted by the COVID-19 pandemic.
The plaintiff is seeking to represent a class made up of all food service establishments that contracted with the defendants for delivery services, with businesses located within New York City, that were improperly charged by the defendants for delivery services. The suit brings causes of action for violation of Local Law No. 52 of 2020 Council Int. against all defendants, violation of Local Law No. 88 of 2020 Council Int. No2054-A of 2020 against Uber Eats and declaratory relief against all defendants.
The case is: Micheli & Shel LLC v. Grubhub Inc. et al., Case No.: 1:21-cv-04995, in the U.S. District Court for the Southern District of New York.
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