Judge Refuses to Dismiss NYC Applebee’s Forced Tipping Class Action

Top Class Actions’s website and social media posts use affiliate links. If you make a purchase using such links, we may receive a commission, but it will not result in any additional charges to you. Please review our Affiliate Link Disclosure for more information.

On Friday, a federal judge denied three New York City Applebee’s operators’ bid to dismiss a class action lawsuit alleging that two New York City locations force customers to tip servers.

In March 2017, plaintiffs Kendall Ghee and Yang Shen brought forward a class action lawsuit alleging two Applebee’s restaurants in midtown Manhattan force customers to tip their servers via the digital ordering and payment system at each table, without disclosing the surcharge in advance.

Ghee and Shen assert that the Broadway location requires at least a 15 percent tip and that the Times Square location requires at least an 18 percent tip, and that at both locations, the ordering systems do not give the option of not tipping.

Apple-Metro Inc., 42nd Apple LLC, and Broadway Apple LLC, operators of the two locations, requested that the Applebee’s forced tipping class action lawsuit be dismissed. U.S. District Judge J. Paul Oetken denied the request, poking holes in the Applebee’s operators’ argument that the claims were invalid.

In response to the Applebee’s tip class action lawsuit, the Applebee’s operators assert the following:

• The tipping structure was adequately disclosed on the menu
• The tips were not really mandatory
• Tipping is an accepted social norm
• Plaintiffs did not properly allege that they were injured
• There was no unjust enrichment because the tip went to the waitstaff, not to Applebee’s

The judge first counters the operators’ argument that the tipping structure was adequately closed in the menu. The operators assert that the fact that the menu notes that prices “do not include beverages, dessert, taxes, or gratuity” shows that the pricing structure was adequately communicated to customers.

The judge responded by stating in his order that “It is one thing to disclose that prices do not include tips. It is quite another thing to disclose that prices do not include tips and that there be a mandatory tip when the check arrives…Using the [Applebee’s operators’] logic, Applebee’s could serve each customer a mandatory ice cream sundae based on its closer that the meal price does not include dessert.”

So, the judge asserts that Applebee’s did not adequately communicate its pricing structure.

Secondly, the judge counters the operators’ claim that tipping was not mandatory, as claimed in the Applebee’s class action lawsuit. Applebee’s operators claim that “even though customers had to tip in order to pay via the table-top tablet…customers could have called their server and asked for a paper bill without the mandatory tip.” The judge asserts that this argument is premature, because Ghee and Shen would likely dispute the assertion that customers would know that this option was available.

The judge then goes on to refute the operators’ third claim that the social norm of tipping negates the Applebee’s mandatory tipping class action lawsuit. He argues that the social norm does not negate the claim, because a social norm also exists that customers may tip below the expected 18-25 percent if service is poor.

This determination then leads the judge to his last reason why the Applebee’s class action lawsuit should not be dismissed. The Applebee’s operators state that Ghee and Shen did not adequately show that harm was done as a result of Applebee’s alleged claim that the restaurants’ tipping structure was misleading.

The operators argue that since the social norm of tipping does exist, most diners would tip between 15 and 18 percent anyway, even if the digital tipping structure had not required such a tip. According to the operators, this means that no customers were harmed.

The judge argues that there is the potential that consumers who would not otherwise choose to tip between 15 and 18 percent were injured by Applebee’s practice. Therefore, the judge determined that Ghee and Shen’s claims that consumers were injured does indeed stand.

Lastly, the judge addresses the operators’ claim that Applebee’s cannot be liable for unjust enrichment if the tips went to the waitstaff and not the restaurant. The judge countered this statement, saying that “a restaurant’s management and its waitstaff do not exist on separate economic planes. If the waitstaff makes more in tips, the management might have to pay them less, particularly if the waitstaff makes less than minimum wage [according to New York law]… Therefore, management could have been enriched by the tips even if all of the tips went to the waitstaff.”

According to the judge, the amount that the establishments benefitted from the tipping structure is still up for debate, so Ghee and Shen’s assertion should stand.

The plaintiffs are represented by C.K. Lee and Anne Seelig of Lee Litigation Group PLLC.

The Applebee’s Forced Tipping Class Action Lawsuit is Kendall Ghee and Yang Shen v. Apple-Metro Inc., et al., Case No. 1:17-cv-05723, in the U.S. District Court for the Southern District of New York.