Lawsuit Against San Francisco Over Online Food Ordering Platform Fee Cap Paused as New Legislation Moves Forward

A joint agreement ratified by the court before the holiday weekend said that Doordash Inc. and Grubhub Inc. and defendant City and County of San Francisco have agreed to halt their dispute pending the passage of a proposed city ordinance. The new law would exempt platforms from the 15% cap on per-order fees provided they make certain concessions.

In their 2021 suit, Doordash and Grubhub took issue with the city’s pandemic-era ordinance capping the fees they could charge contracted restaurants after the legislation became permanent. The parties disputed the constitutional validity of the law, with Judge Edward M. Chen finding parts of it objectionable in his March dismissal ruling.

Specifically, the court denied the motion as to the plaintiffs’ Takings Clause and Due Process claim based on the legislation’s purported “confiscatory effect.” In so finding, Judge Chen said that there were outstanding factual questions as to the ordinance’s economic impact and whether it interfered with investment-backed expectations. 

In late June, San Francisco Supervisor Aaron Peskin proposed an amendment to the current law that would eliminate the blanket cap if third-party food delivery services make two changes. First, they must offer restaurants the option to obtain only core delivery services at no more than 15% of the purchase price of an online order without requiring the purchase of additional services. Second, third-party platforms’ contracts with a covered establishment must clearly define the fees, commissions, or charges associated with their services.

The stipulation said that should the legislation pass, acknowledging that it could take months to do so, the defendants would dismiss the suit. 

Doordash and Grubhub are represented by Gibson Dunn & Crutcher LLP. The city is represented by the San Francisco City Attorney’s Office.