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Gruhhub, Seamless, Uber Eats, Postmates, and Doordash bled New York City restaurants dry during the coronavirus pandemic by illegally charging fees and inflating credit card costs, a new class action lawsuit alleges.
The class action lawsuit was filed in New York on June 7 by lead Plaintiff Micheli & Shel, LLC, which operates an Israeli-style bakery in Manhattan’s Lower East Side.
Micheli & Shel allege that the delivery apps – the four largest in New York City — flagrantly violated the New York City Council’s Delivery App. legislation and its amended Delivery App. Legislation passed to protect restaurants from outsize fees during the pandemic.
According to the lawsuit, the New York City Council passed the legislation in May 2020 to curb the imbalance of power between small, locally-owned restaurants and powerful national third-party delivery companies. The law placed a cap on “the exorbitant delivery fees that third party delivery companies,” such as those in the class action lawsuit, were charging restaurants for their services, the claim states.
The initial law placed a 20 percent cap on all fees that the delivery apps could charge their customers, with a specific cap of 15 percent on all fees charged for delivery and a 5 percent cap for any additional fees including for marketing, credit card processing, or any other fees.
In September, the council amended the law to allow for “pass-through” costs, such as credit card fees, to be charged to the restaurant above the 15 percent and 5 percent fee caps.
“Despite the passage of the Delivery App. Legislation and the Amended Delivery App. Legislation, Defendants proceeded to continue their prior practices of bleeding New York City’s restaurants dry while collecting millions of dollars at their expense in blatant disregard for the laws of the City of New York,” the claim states.
The class action lawsuit says that during the pandemic restaurants, such as Micheli & Shel’s, leaned on third-party delivery services to maximize sales and marketing as a lifeline to their businesses, as approximately half of New York City’s restaurants moved to online platforms for delivery and takeout services.
“As expected, third-party platforms for delivery and takeout experienced an extreme increase in order volume during the COVID-19 pandemic.”
However, the class action lawsuit contends the delivery companies got greedy and continued to charge restaurants more than the mandated fees, on top of collecting fees from customers. It also alleges that the delivery apps “fraudulently inflated their credit card processing fees in order to further extort fees,” from restaurants.
The claim says that the delivery companies restructured their fees to appear to comply with the laws, but in actuality continued to charge restaurants above the permitted fee caps by manipulating the numbers.
“While 2020 (and continuing into 2021) proved to be a crushing year full of extreme financial hardship for Plaintiff and the restaurant industry, Defendants each reported 2020 as the most profitable year yet and appear to show signs of being on a path to topping 2020’s revenue in 2021,” the claims states.
Micheli & Shel wants to represent all food service establishments that contracted with the delivery apps in New York City. The company is suing for violations of local business laws and unjust enrichment, and seeks certification of the Class, injunctive relief, damages, interest, legal fees, and jury trial.
Grubhub is also facing another class action lawsuit, but this time with a Grubhub investor alleging the food delivery company violated securities law in a proposed merger with Just Eat for the benefit of executive officers and board members.
Did you use food delivery services during the coronavirus pandemic? Did you know they were charging you and the restaurant fees? Let us know in the comments section!
Micheli & Shel is represented by Hamutal G. Lieberman, Lee N. Jacobs, and Joe D. Taylor of Helbraun & Levey LLP.
The Delivery App Fees Class Action Lawsuit 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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