‘Bleeding New York City’s Restaurants Dry’: Food Delivery Apps Hit with Class Action Over ‘Excessive’ Fees [UPDATE]
Last Updated on March 4, 2022
Micheli & Shel, LLC v. Grubhub Inc. et al.
Filed: June 7, 2021 ◆§ 1:21-cv-04995
A class action alleges Grubhub, Seamless, Uber Eats, Postmates and Doordash have continued to charge excessive fees in NYC despite the passage of legislation meant to curb the imbalance of power between the companies and restaurants.
GrubHub, Inc. Uber Technologies Inc. DoorDash, Inc. Seamless Uber Eats Seamless North America, LLC Postmates, LLC
New York
Case Updates
March 3, 2022 – Claims Against All Except Postmates Sent to Arbitration
The judge overseeing the case detailed on this page has sent the plaintiff’s claims against Grubhub, Uber Eats and DoorDash to arbitration while allowing claims against Postmates to remain in court.
In a March 1 order, U.S. District Judge Jesse M. Furman noted that the bakery’s respective contracts with Grubhub, Uber Eats and DoorDash each contained an arbitration agreement. While the plaintiff argued that its dispute with each of the food delivery platforms does not fall under the respective arbitration provisions, the judge found that each contract “plainly delegates” the question of a dispute’s arbitrability to the arbitrator.
“Accordingly, the Court is compelled to conclude that the threshold questions of arbitrability with respect to Plaintiff’s claims against Uber Eats, Grubhub, and DoorDash are for the relevant arbitrator to decide and, thus, that their motions to compel arbitration must be granted,” the judge wrote.
As for Postmates, Judge Furman noted that the plaintiff’s initial agreement with the company did not contain an arbitration clause. Though an arbitration agreement was included in Postmates’ “Modified Terms” as sent to the plaintiff via email, the original agreement signed by the plaintiff clearly indicated that the contract could only be amended by a written document signed by both parties, the judge found.
“It follows that the Postmates Modified Terms, which were not signed by Plaintiff, are not effective as to Plaintiff and that the original agreement, which concededly includes no arbitration agreement, governs their relationship,” the order stated.
Thus, Judge Furman denied Postmates’ motion to compel arbitration and ordered the company to answer the plaintiff’s complaint within 21 days.
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A proposed class action alleges Grubhub, Seamless, Uber Eats, Postmates and Doordash have continued to “bleed[] New York City’s restaurants dry” by charging excessive fees despite the passage of legislation meant to curb the imbalance of power between the companies and eateries during the COVID-19 pandemic.
The 21-page lawsuit claims that although the New York City Council placed last June a 15-percent cap on delivery fees and an additional five-percent cap on fees for marketing, credit card processing and other services, among other measures designed to help struggling restaurants, the four major third-party delivery platforms have nevertheless blatantly disregarded the city’s laws and continued to profit on “both ends” of food-order transactions.
According to the plaintiff, an Israeli-style bakery on Manhattan’s Lower East Side, some of the defendants have reconfigured their fees so as to give off the appearance of compliance with the city’s pandemic-era fee rules, while others have reduced their fees by only slightly so as to appear as though they’re toeing the line:
“Defendants restructured their fees to appear to comply with the laws, but in actuality continued to charge Plaintiff and the class members above the permitted fee caps. In some cases, for example, Defendants charged a flat twenty percent (20%) service fee without clearly identifying what the fee was for. This ambiguity violates both the delivery fee and the additional fee cap as neither fee may be twenty percent (20%) under the law.
Other Defendants disingenuously appeared to comply with the cap by keeping their delivery fee under the fifteen percent (15%) fee cap, charging thirteen percent (13%) or fourteen and half percent (14.5%), but then overcharged Defendants with respect to the category of ‘other’ non-delivery fees. These other fees were charged for several categories of fees each individually under the five percent (5%) threshold, but cumulatively added up to well over the five percent (5%) threshold.”
The suit additionally alleges the defendants have fraudulently inflated their credit card processing fees in order to “further extort” proposed class members. Overall, the defendants, the case alleges, have during the COVID-19 pandemic “extorted” New York City restaurants left “desperately dependent on their delivery services” amid a “historic decline in sales” and the largest disruption the industry has faced since Hurricane Sandy in 2012 and the September 11, 2001 terrorist attacks.
As New York City residents were encouraged to stay home at the onset of the COVID-19 pandemic, restaurants and bars were limited to providing only take-out and delivery services, and demand for the latter became unprecedented, the case says. The New York City Council, on May 13, 2020, aimed to “curb the imbalance of power” between local restaurants and third-party delivery companies by passing emergency legislation that placed a cap on the exorbitant delivery fees that the entities could charge, the lawsuit relays:
“Effective June 2, 2020, Local Law No. 52 of 2020, Council Int. No. 1908-B of 2020 (the ‘Delivery App. Legislation’) placed a twenty percent (20%) cap on all fees that Defendants could charge their customers with a specific cap of fifteen percent (15%) on all fees charged for delivery and a five percent (5%) cap for any additional fees including for marketing, credit card processing or any other fees.”
The city’s delivery app legislation was amended, effective September 14, 2020, to allow for “pass-through” costs, such as credit card fees, to be charged to a restaurant above the 15-percent and five-percent cap fees, the suit notes.
With the spike in demand for delivery and takeout in New York during the pandemic came what the lawsuit alleges are flagrant violations of the city’s fee legislation. Per the complaint, the 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.” To thank for this success is the defendants’ allegedly brazen flouting of legislation aimed at protecting restaurants, according to the lawsuit.
The companies named as defendants in the lawsuit are Grubhub, Inc.; Seamless North America, LLC; Uber Technologies Inc.; Uber Eats; Postmates LLC; and Doordash Inc. The lawsuit looks to represent 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 companies for delivery fees.
Law360 reports that Grubhub has denied the allegations levied in the proposed class action.
“The lawsuit is meritless,” the spokesperson said. “We look forward to responding to these baseless allegations.”
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