Those Healthcare Surcharges You’ve Been Seeing on Bills Might Stick Around

A class-action lawsuit against a notable group of Los Angeles restaurant owners over healthcare-related surcharges lost some serious steam this week. In 2015, a group of plaintiffs sued the owners of multiple restaurants, including Rustic Canyon, Lucques, and Son of a Gun, alleging that they collectively participated in “price-fixing” to cover employee healthcare costs. The case has been winding through the courts for years, but on Monday the restaurants moved a step closer to victory when a judge removed the lead plaintiff, a diner named Margaret Imhoff, from the suit.

LA restaurants are struggling to cover healthcare costs for employees, meet an increased minimum wage, and equalize pay to all staff while minimizing costs. Many have attempted to counter these increased costs by adding small and often optional surcharges, fees, or service charges on the final bill — but not all customers have responded positively to the new charges.

After having a meal at Rustic Canyon in Santa Monica in 2015 and seeing the three percent healthcare charge on the bill, Imhoff thought it was a mandatory fee, and filed suit against the defendants. In 2018, Margaret Imhoff v. Suzanne Goin turned into a class action lawsuit, where the plaintiffs alleged that a group of restaurants worked together to increase prices by three percent. They accused Rustic Canyon Group’s Josh Loeb of violating anti-trust laws by collaborating with restaurant owners such as Melisse’s Josiah Citrin, Jon Shook and Vinny Dotolo of Jon & Vinny’s, and AOC’s Suzanne Goin to pass on the overall cost to customers.

In October 2019, lawyers for the restaurant filed a motion to invalidate, or decertify Imhoff, who filed for personal bankruptcy during the proceedings. The defendant’s lawyers argued that Imhoff’s bankruptcy gave her no standing as lead plaintiff, since she allegedly failed to disclose her bankruptcy to the court before the class action certification was granted. The invalidation leaves the case without a lead plaintiff. Law360 first noticed Monday’s decision, in which Los Angeles Superior Court Judge Maren E. Nelson agreed, dealing a serious blow to the plaintiffs’ case. Judge Maren’s arguments did not appear to favor amending the complaint with a new plaintiff.

Restaurant surcharges and fees are fairly common throughout Los Angeles. Restaurateurs argue that they help to keep individual dish prices reasonable, while helping to explain the costs associated to running a restaurant to customers. These charges are often optional and can be removed by request. A number of LA restaurants outside of the class action suit utilize surcharges or adjust their tipping model as a result. For example, Steve Samson’s Rossoblu includes a four percent surcharge to cover increasing costs and the minimum wage increase, and the now-closed Tartine and Alameda Supper Club at the Row implemented a five percent surcharge on each bill.

All that being said, Margaret Imhoff v. Suzanne Goin is not over yet, as Judge Nelson did not dismiss the case entirely. Plus, the remaining plaintiffs may choose to file another certification to continue with the class action suit. But if the plaintiff wins, that could change things significantly for any restaurant using the surcharge model. To avoid any lawsuit, they might be forced to remove the surcharge model altogether.

• Top LA Eateries Win Decertification In Price-Hike Suit [Law360]
• Courts Confirm Class Action Status of Price-Fixing Lawsuit Against LA Restaurants [ELA]