Several acclaimed Santa Monica restaurants with surcharges for employee health care are being accused of price-fixing.
A lawsuit filed this week in Los Angeles County Superior Court alleges that local restaurateurs illegally conspired together when they added 3-percent surcharges to customers’ bills last year.
Santa Monica establishments named in the complaint include Rustic Canyon, Huckleberry and Milo and Olive, which are all co-owned by Josh Loeb and Zoe Nathan; Melisse, which is run by chef/owner Josiah Citrin; and The Hungry Cat, which is part of David Lentz’s restaurant group.
Also named in the complaint are highly regarded Los Angeles restaurants Animal, AOC, Lucques, Sun of a Gun and Trois Mec.
The class-action suit claims that the collaboration of the restaurants, which came amid broad discussions across the country about the implementation of the Affordable Care Act, violates California antitrust law.
“There was a lot of talk about Obamacare, but not a lot of focus on the fact that they agreed to do it in unison,” said attorney Daniel Sterrett, whose San Francisco-based firm filed the suit on behalf of restaurant patron Margaret Imhoff. “That’s the core of the case. You cannot get with your competitors and agree to raise or change prices.”
The plaintiff is seeking an end to the surcharge practice as well as monetary damages exceeding $25,000 and a jury trial, according to the complaint.
Loeb, reached Wednesday morning, said he had heard about the complaint but would not comment on the allegations. Citrin declined to comment, according to a spokeswoman. Lentz, through a spokeswoman, also declined to commentWednesday.
Last year, Loeb reached out to “like-minded” restaurant owners about working together on a plan to pay for employees’ health care coverage, according to the complaint and multiple media reports.
“It looked like we weren’t going to have to do it but we looked at each other and said, ‘This is something we want to do,'” Loeb told the Daily Press last September. “We want to be able to grow up as a restaurant. The wellbeing of our staff is an incredibly important thing for us.”
Loeb also said at the time that implementing a 3-percent surcharge instead of raising menu prices was part of an effort to be more transparent to customers.
Banding together on a surcharge kept any of the participating restaurants from being at a competitive disadvantage, the suit alleges.
“We decided it would be a good thing to do it as a group,” Citrin, of Melisse, told the Los Angeles Times last year. “Usually when lots of people do things it’s easier to make change.”
Sterrett, the attorney, said he was approached by the plaintiff and investigated the matter to determine whether a legally sound case could be built.
He noted that there are several other restaurants in the Los Angeles area with health care surcharges, but they are not named in the suit because he doesn’t have evidence that they conspired with competitors.
Sterrett added that he thinks the fee works against restaurant workers who receive tips.
“People tend to reduce their tips when they see this surcharge,” he said. “We believe it’s actually taking money out of the employees’ pockets.”
Contact Jeff Goodman at 310-573-8351, email@example.com or on Twitter.