Class Action Complaint Accuses Food Delivery Services of Predatory Behavior During Pandemic

A class action complaint alleged on Tuesday that despite local legislation, New York City eateries suffered at the hands of third-party delivery app companies during the COVID-19 pandemic because of the fees they were charged. 

The lawsuit brought claims for relief under New York City ordinances enacted last year and named Grubhub and its subsidiary Seamless, Uber and its subsidiaries Uber Eats and Postmates, and DoorDash as defendants. According to the complaint, the defendants reportedly represent the four major third-party delivery platforms in New York City. Grubhub and Seamless represent 37% of sales, DoorDash 34%, Uber Eats 28%, and Postmates 1% as of April. 

The filing explained the timeline of events leading up to the conduct at issue, starting with New York Governor Andrew Cuomo’s declaration of a statewide state of emergency on March 7, 2020, as the COVID-19 pandemic emerged. A week later, Cuomo prohibited restaurants and bars from serving food and drink at their locations.

On May 13, 2020, the New York City Council reportedly passed emergency legislation placing a cap on the “exorbitant delivery fees” that the defendants were exacting from restaurants for their services. The local government allegedly did so “in an effort to curb the imbalance of power  between small locally owned restaurants and powerful national third-party delivery companies.”

Effective June 2, 2020, the city council enacted legislation capping all fees that the defendants could charge eateries at 20%, with a specific cap on deliveries at 15%, and marketing, credit card processing, and other fees at 5%. Amended, non-retroactive legislation passed in September 2020 allowed “pass-through” costs, such as credit card fees, to be charged to restaurants above the specific caps.

The filing alleged that the 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.” The delivery companies reportedly did so by charging a flat 20% service fee without clearly identifying what the fee was for, which allegedly violated both the delivery fee and the additional fee cap as neither may be greater than 20%, or by keeping their delivery fee under the 15% cap, but then overcharging the plaintiff with respect to other non-delivery fees.

Additionally, the complaint claimed, the defendants “fraudulently inflated their credit card processing fees in order to further extort fees” from New York City restaurants. The plaintiff seeks to certify a class composed of all New York City food service establishments that contracted with the defendants for delivery services and were improperly charged for those services. 

The filing seeks declaratory and injunctive relief, several types of damages, disgorgement of ill-gotten gains, and an award of attorneys’ fees and costs. The plaintiff is represented by Helbraun & Levey LLP.