San Diego Restaurants Prevail in Restaurant Surcharge Class Action Suits

FOR IMMEDIATE RELEASE
January 29, 2019

CONTACT
Sharokina Shams ▪ 916-431-2749 ▪ sshams@calrest.org

Today, the San Diego Superior Court entered several more judgments in favor of San Diego restaurants like Shelter Island, Gaslamp Baja Lobster, and Karl Strauss and against the plaintiffs who filed class action lawsuits challenging the legality of restaurant surcharges.  These judgments follow several other judgments recently entered against the plaintiffs and in favor of restaurants including Galaxy Taco and Sammy’s.

In 2017, using personal friends and colleagues like attorneys Daniel Vespi, John McCurley, and Mary Livingstone as the named plaintiffs, attorney Kevin Lemieux and the Hyde & Swigart firm filed 15 class action lawsuits in San Diego Superior Court against local restaurants. Lemieux’s class action lawsuits alleged that the restaurants’ surcharges were unlawful and sought damages on behalf of all California consumers who paid a surcharge at one of the defendant restaurants. Daniel Vespi, who was the named plaintiff in three of these lawsuits, paid 35 cents in surcharges to Galaxy Taco. In August 2018, the judge denied class certification in the test cases against Galaxy Taco and 7th & C Investments, finding that the “plaintiffs have failed to carry their burden of establishing the propriety of class treatment” and “essentially conceded that these cases are not amendable to class treatment.” Ultimately, the Hyde & Swigart firm voluntarily dismissed the class claims in all of the other surcharge lawsuits pending in the San Diego Superior Court.

Galaxy Taco, led by the legal team of Bruno Katz (Wilson Elser Moskowitz Edelman & Dicker) and Marisa Janine-Page (Caldarelli Hejmanowski Page & Leer), argued to the Court that surcharges are not illegal but rather have been used for years in many industries, such as transportation, hospitality, and telecommunications as transparent means of dealing with increased operating costs. In November, the San Diego Superior Court agreed, finding that “there is no statute or case law that provides that the surcharge is unlawful.” The Honorable Timothy B. Taylor ruled that “the undisputed evidence establishes that the surcharge is not unlawful as a matter of law.” On November 30, 2018, the Court entered judgment in favor of Galaxy Taco and against Daniel Vespi, who now must pay Galaxy Taco thousands of dollars for its costs of defense.  

Since the Galaxy Taco judgment, the San Diego Superior Court has entered judgments in favor of the San Diego restaurants and against the plaintiffs in ten of the surcharge class action lawsuits.  The Hyde & Swigart firm voluntarily dismissed the other four lawsuits that were still pending in the San Diego Superior Court.

DOES THIS MEAN SURCHARGES WILL REMAIN ON RESTAURANT MENUS IN SAN DIEGO?

San Diego is only the most recent metro area in California where restaurants have adopted a surcharge as a way to contend with rising costs. Surcharges have been used by businesses in Los Angeles and are common at businesses in San Francisco. Moreover, surcharges are not exclusive to restaurants. They’ve been used in transportation, hospitality, and even by government agencies. This legal decision means the businesses named in the lawsuits can continue to be transparent in addressing increased operating costs, with surcharges being one available option.

“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. It’s telling that the lawyers bringing these actions selected their own personal coworkers and friends to act as plaintiffs – and that several of these friends were the named plaintiffs in multiple lawsuits. Perhaps they were hoping for quick settlements, but what they got instead was a lengthy, costly court process that ended with a message that everyone has known for years: surcharges are lawful.”