Crain’s New York Business: Frivolous suits not funny to eateries
By: Adam Morey
Before opening Union Square Café in 1985, Danny Meyer planned to attend law school. Instead, he decided to skip the entrance exam and pursue a career in hospitality. Thirty years later, his empire boasts the Shake Shack burger chain as well as some of the finest restaurants in New York City.
But now Meyer, like many successful entrepreneurs, has been dogged by litigation. This month he was named in a lawsuit by diner Timothy Brown that might be among the most absurd in history.
Meyer's restaurant group was hit with a bizarre class-action suit claiming that his establishments' switch from tipping to "service included" was part of collusion and conspiracy within the hospitality trade. Among the others named in the suit are David Chang of Momofuku fame, Brooklyn's Andrew Tarlow and the NYC Hospitality Alliance—a trade group whose crime was holding open informational discussions on the benefits and downsides of a no-tipping policy.
The purpose of going gratuity-free is to compensate restaurant workers more fairly and to have menus reflect the actual price that customers pay. It is considered a risky move for eateries, and few have made it. Some who did have switched back to tipping. Yet the lengthy complaint accuses Meyer et al. of a secret price-fixing plot to boost their bottom line.
The lawsuit, which is ridiculous and built on tenuous legal arguments, illustrates how far lawyers can go to make a buck. In fact, food and beverage purveyors and manufacturers are often the hardest hit by abusive litigation. A report by the Institute for Legal Reform found a rise in food-marketing class actions, 22% of which end up in New York courts.
In search of easy settlements, opportunistic attorneys file questionable suits whenever they can find a gray area of law, propose a novel legal theory or stir up conflict. For example, following recent court decisions expanding the scope of the Americans With Disabilities Act, New York retailers and restaurants have been pounded by cut-and-paste lawsuits over their websites' supposed lack of accessibility to the blind.
Lawyers are also quick to smack snack companies with allegations that their packaging contains deceptive amounts of empty space, known as slack-fill. These filings are so common that—although judges often dismiss them—one law firm in New York has sued the makers of Wise chips, Swedish Fish, Sour Patch Kids, Junior Mints and dozens of other snacks.
Lawyers claim that the lawsuits are meant to protect consumers from dishonest businesses, but in many cases, only class counsel benefits in any material way. Attorneys often take home millions of dollars in fees, while most settlements offer little compensation for regular people—the purported victims. In the end, litigation drives up the price of goods and the cost of doing business.
When it comes to the recent allegations against some of the city's most revered restaurants, one should question whether the named plaintiff is the driving force behind the lawsuit or if his lawyers cooked up a claim built on speculation they figured would generate headlines—and a quick settlement.