Lawsuits have been filed against more than a dozen San Diego restaurants and dining groups claiming they are defrauding their patrons by illegally tacking on a surcharge to customers’ bills that many operators have been using to defray increasing labor costs.

Named in the suits, which have been filed over the last eight months by a local consumer rights law firm, are some of San Diego’s highest profile dining venues, from George’s at the Cove and Mister A’s to Sammy’s Woodfired Pizza & Grill and the Cohn Restaurant Group, which has close to a couple dozen restaurants in the county.

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The surcharges, which can range from 2 percent to 4 percent of the cost of a meal, have become increasingly common since San Diego’s minimum wage jumped to $11.50 an hour in January, which at the time was the second such hike in six months.


The lawsuits allege that the surcharges violate multiple statutes of the state business code, among them false advertising and unfair competition. A section of the California Consumers Legal Remedies Act is also cited in some of the complaints to bolster their claim that the surcharges are unlawful.

Specifically, the complaints assert that the restaurants are deceiving customers by not reflecting the surcharge in the pricing of the individual menu items. The suits, in addition to seeking class action status, are asking for a court order to halt the practice and that consumers be refunded.

“Adding 3 percent to the bill or any percent is duplicitous,” said attorney Robert Hyde, whose firm Hyde & Swigart has filed 15 suits so far on behalf of multiple clients, some of them other attorneys. The firm says it expects to have filed as many as 20 lawsuits by year’s end.

“We’re saying, just be up front with people. Don’t be deceptive. If the steak is $50, say it’s $50, don’t say it’s $50 plus 3 percent. Otherwise, they find out at the end of the meal that the steak is really $51.50. They shouldn’t have to sit there and figure out how much it costs.”


The surcharges also have been the target of a crackdown from the City Attorney’s office.

While City Attorney Mara Elliott’s office has not deemed the charges themselves illegal, she has gone after restaurants that she says have not “clearly and conspicuously” forewarned diners that they are being charged an extra levy.

Elliott filed a civil enforcement action last month against Barefoot Bar & Grill on Mission Bay for allegedly failing to disclose its menu surcharge and then adding it to menus in extremely small print after Elliott had sent an Aug. 30 warning letter.

In a statement responding to the private lawsuits, Elliott said she thinks both her office’s approach and that of the Hyde & Swigart firm are legitimate ways of handling consumer protection issues related to the surcharges.


“The law provides different tactics for addressing deceptive restaurant pricing,” Elliott’s office said. “Our prosecutors have taken one approach, a private law firm has taken another. Both are valid and seek the same outcome, which is for restaurants to tell customers the truth about the price of a meal.”

She noted that since cracking down on restaurants who were not following the law, the office has seen fewer complaints.

“We will watch these private lawsuits with interest, and hope they also lead to greater consumer protection,” Elliott said.

Several of the restaurateurs targeted in the lawsuits declined to comment because the litigation is still ongoing, but one attorney representing several of the restaurants, including George’s at the Cove, rejected the legal claims as being meritless.


“As their complaints are worded, their argument is that restaurants are not notifying customers up front of the charge, which is just an untrue statement,” said attorney Lukas Clary, whose clients also include Galaxy Taco and Rockin’ Baja Lobster. “And the statutes they cite don’t prohibit the practice of a surcharge. If they did, no surcharges could be imposed. Surcharges are a long-established and lawful practice across many industries.”

The California Restaurant Association was more blunt in its assessment of the lawsuits, calling the legal action little more than a shakedown.

“The lawsuits have been filed by a group of trial lawyers trying to extort small businesses,” said Sharokina Shams, vice president for public affairs with the restaurant association. “These are the worst kind of shakedown lawsuits. They are not about standing up for the consumer but achieving a quick payday for a group of people made up of attorneys posing as everyday customers.”

Hyde and his associate Kevin Lemieux, who is handling the surcharge cases, acknowledged that the plaintiffs in a few of the cases are lawyers but noted that they, too, dined at restaurants where they were assessed a surcharge for their meal.


Attorney Mary Livingstone, a plaintiff in lawsuits filed against Tom Ham’s Lighthouse and the Bali Hai, said she did not want to discuss the legal action but said she had taken her children out to brunch at the Bali Hai and only noticed the surcharge after she got home.

Said Hyde, “Oftentimes lawyers come to us and we talk to each other. Certainly, some of these people are people we knew. I understand that people are cynical about lawsuits and the motivations of attorneys, but we’re just really trying to stop this and if they cooperate, we will not sue them. We’re not looking to gouge anyone. They can pay us for our hours and we’ll go away.”

Hyde and Lemieux say they are not aware of any other lawsuits similar to theirs that are challenging the legality of the restaurant surcharges. Attorney Clary characterized the suits as a “novel challenge.”

Restaurateurs in Los Angeles were sued in a complaint last year related to surcharges put in place there to help cover health insurance costs, but the basis for the suit was different than that of the San Diego cases. The L.A. suit alleged the restaurant owners had conspired to violate price-fixing and collusion laws.


When San Diego restaurateurs decided to implement surcharges this year, they said they did so to not only cover minimum wage increases but to narrow the pay gap between their kitchen staff and servers, who earn far more because they are tipped.

Restaurant operators argued that a surcharge allows them to more fairly distribute those revenues to all their workers as the minimum wage continues to climb.

Restaurateur Arsalun Tafazoli, whose firm Consortium Holdings operates a number of high profile restaurants in San Diego, has so far held off levying a surcharge or raising prices but knows he will have to do something to address rising costs.

“I don’t know if a surcharge is the right path or wrong path, but frankly, we’re just procrastinators. I think the mentality of others was to try to get in front of it,” said Tafazoli, whose most recent restaurant opening was the Born & Raised steakhouse in Little Italy. “One aspect of the surcharge I like is there’s a more equitable distribution of the funds. But when I see operators in the industry I think are better at this who have rolled it out and then retracted it, it definitely gives us cold feet.”


Business


lori.weisberg@sduniontribune.com

(619) 293-2251

Twitter: @loriweisberg