Applebee’s Deceptive Mandatory “Tip” Surcharge Class Action

Apple-Metro, Inc. operates 37 Applebee’s restaurants in New York City and surrounding areas, one of which is on Broadway, and another of which is in Times Square. The complaint for this class action alleges that both restaurants engage in deceptive pricing practices by adding a mandatory surcharge to meals, one which is not revealed on the menu. While this surcharge is called a tip, the complaint says, the amount is not discretionary to reflect good or bad service, as tips normally are; consumers must pay a minimum percentage or they cannot cash out at the automated terminals at their tables.

This lawsuit proposes a class and a subclass. The Nationwide Class consists of all persons in the US who have made retail purchases at Applebee’s restaurants, using a credit or debit card, of food and drink with deceptive menu prices, during the applicable limitations period. The New York Class includes all persons in New York who have made retail purchases at Applebee’s restaurants, using a credit or debit card, of food and drink with deceptive menu prices, during the applicable limitations period. (The limitations period has not yet been exactly defined.)

The complaint alleges that the Applebee’s restaurants mentioned engage in deceptive pricing practices because they do not charge patrons the menu prices for their meals but add a mandatory service charge, which is 18% at the Times Square location and 15% at the Broadway location. This service charge, the complaint says, is called a “tip,” a designation that is false because it is not voluntary and based on the quality of the food and service.

The complaint claims that a true tip is voluntary and that consumers tip in different amounts. One evidence of this cited by the complaint is that the IRS requires large restaurants to figure employment taxes by assuming that customers tipped at least 8% of the amounts of their bills over the course of a year. The percentage is this low, the complaint argues, because the IRS recognizes that some customers will pay the recommended 15% or more, while some will pay less.

The percentage charged by the Applebee’s restaurants, the complaint claims, are not tips because they do not allow customers to pay less for unsatisfactory food or service. The service charges are not listed with the prices on the menu and in fact are hidden from customers until they have eaten and are ready to leave. When they attempt to pay at the tabletop terminal, the service charge is added to their bill and they are not permitted to revise it downwards, the complaint says; if they do, they will not be allowed to complete the payment transaction. The complaint thus insists that this is not a tip but a mandatory surcharge that is deceptive because it is not disclosed to customers when they order their meals.

According to the complaint, this practice violates the Deceptive and Unfair Trade Practices Act within New York’s General Business Law.

Article Type: Lawsuit
Topic: Consumer
Tags: Deceptive Business Practices, Deceptive Pricing/Undisclosed Surcharges