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Dimond v. Darden Restaurants, Inc.

United States District Court, S.D. New York

July 9, 2014

TED DIMOND, individually and on behalf of all others similarly situated, Plaintiff,
DARDEN RESTAURANTS, INC., et al., Defendants.



Plaintiff Ted Dimond brings this class action individually and on behalf of all others similarly situated, alleging that certain of Defendants' restaurants have violated two New York City rules and regulations, as well as Section 349 of New York State's General Business Law, by imposing an 18% gratuity on customers' bills and by failing to list the purchase price of certain beverages on the restaurants' menus. Defendants have moved to dismiss Plaintiff's Fourth Amended Complaint ("FAC"), claiming that it fails to state a claim of relief and that Plaintiff lacks standing to pursue one of his claims. Because Plaintiff fails to state a claim as to Defendants' 18% gratuity charge, the Court dismisses Count I of the FAC. Similarly, because Plaintiff lacks standing to pursue a cause of action regarding Defendants' unlisted beverage prices, and because he fails to state a claim upon which relief can be granted in any event, the Court dismisses Count II of the FAC.


A. Defendants' Restaurants and Menus

Defendants Darden Restaurants, Inc., GMRI, Inc., d/b/a Olive Garden and Red Lobster, and Darden Concepts, Inc. (collectively, "Defendants")[2] operate several restaurants, including Olive Garden and Red Lobster restaurants, in Manhattan (the "Restaurants"). ( See FAC ¶ 16). The menus at many of the Restaurants state that "[a]n 18% gratuity will be added to all guest checks." ( See id. at ¶ 17). To that end, when a bill is presented to customers at these restaurants, the 18% gratuity is automatically added and calculated on a pre-tax basis. ( See id. at ¶ 18). Customers are also provided with the opportunity to leave an additional tip. ( See id. ).

At the Restaurants, certain beverage prices, such as beer and nonalcoholic beverages, are not listed on the menu. ( See FAC ¶ 20).

B. Plaintiff's Allegations

Plaintiff Ted Dimond is a resident of the City and County of New York and a previous customer at several of Defendants' restaurants. (FAC ¶ 7). As a customer of some of Defendants' restaurants, Plaintiff paid the 18% gratuity, and was not asked whether that gratuity was satisfactory or whether he wanted to pay a lesser gratuity. ( Id. at ¶ 19). Although the FAC is silent as to whether Plaintiff purchased a beverage at Defendants' restaurants, in opposing Defendants' motion to dismiss, Plaintiff submitted a receipt that he received after a meal at Red Lobster on June 5, 2013, which receipt purports to show that Plaintiff purchased a Coke for which he paid $3.09. (Abrams Decl. ¶ 5 & Ex. D).

Plaintiff has styled this lawsuit as a class action on behalf of himself and all other persons similarly situated (the "Class") who (i) have been customers of Defendants; (ii) paid their restaurant bills with credit cards, charge cards, or debit cards at Defendants' restaurants in New York City from June 27, 2010, to the present; (iii) were charged an automatic, non-discretionary gratuity based on a percentage of the cost of a meal; (iv) were presented with menus that offered beverages whose prices were not indicated; and (v) suffered damages as a result of Defendants' violations of the consumer protection laws of the State and City of New York. (FAC ¶ 1).

Plaintiff alleges that Defendants' conduct in (i) charging customers the 18% gratuity on all purchases and (ii) failing to disclose the prices of certain of the Restaurants' beverages on the menus, violated Section 5-59 of Title 6 of the Rules of the City of New York ("RCNY § 5-59"), and Section 20-700 of New York City's Consumer Protection Law, N.Y. Admin. Code, tit. 20, Ch. 5, §§ 20-700-20-706 ("NYCAC § 20-700"). (FAC ¶ 2). With respect to Defendants' alleged violation of RCNY § 5-59, Plaintiff claims that Defendants' automatic addition of a gratuity violated § 5-59, and that Defendants' gratuity charge does not fall within the exception set out in § 5-59(b) because there is no additional "service" provided by the Restaurants for which they may be lawfully compensated. ( Id. at ¶ 26). With respect to the undisclosed beverage prices, Plaintiff alleges that

By failing to list prices for beers and non-alcoholic beverages on their menus, the Restaurants have violated [NYCAC § 20-700] since the absence of these prices has the capacity, tendency and effect of misleading customers into believing that prices for the drinks and the beers on the menu are the same when in reality [the restaurant] can charge any price for any item.

( Id. at ¶ 32 (internal quotation marks omitted)).

Plaintiff further alleges that "[a]s a result of [Defendants'] violation of § 5-59 and § 20-700, Defendants violated New York General Business Law (GBL') § 349." (FAC ¶ 3). As ostensible support, Plaintiff notes that on December 14, 2009, the Olive Garden restaurant located on the Avenue of Americas in New York City was issued a violation by the Department of Consumer Affairs ("DCA") pursuant to RCNY § 5-59 for "Gratuity Added Without Permission, " and that on January 23, 2008, and April 29, 2010, the Red Lobster restaurant located in Times Square was twice issued a Notice of Violation for "listing of drinks without prices" in violation of NYCAC § 20-700. ( See id. at ¶¶ 21-23).

As for damages, Plaintiff demands that he and the Class members be reimbursed for the gratuity charged and for the price charged for any items for which no price was listed on the menus. (FAC ¶¶ 29, 35).

C. The Procedural History

The procedural history of this action is more extensive than typical for a case at this procedural juncture, due to the numerous amended complaints that have been filed. To start, on June 27, 2013, Plaintiff commenced this class action in the Supreme Court of the State of New York, County of New York, against multiple restaurants and restaurant owners operating in New York City, including those restaurants named here and others not named. (Dkt. #1-1). On July 16, 2013, less than one month later, Plaintiff filed an amended complaint in the same court that named additional defendants and included additional causes of action. (Dkt. #1-2).

On July 26, 2013, DineEquity, Inc., a defendant named in the amended state court complaint, removed the action to this Court by filing a Notice of Removal (the "Notice"). (Dkt. #1). DineEquity alleged that this Court had subject matter jurisdiction over the class action pursuant to the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. §§ 1332(d), 1453, 1711-1715. (Notice ¶ 6). Between August 23, 2013, and September 5, 2013, Plaintiff voluntarily dismissed a number of defendants who were named in the amended state court complaint. ( See, e.g., Dkt. #12, 17, 24). During that same time, on September 3, 2013, Plaintiff filed a motion for leave to amend the state court complaint. (Dkt. #22). Then, on September 26, 2013, Plaintiff requested permission to withdraw the motion in order to re-file that motion at a time agreed to by the parties. (Dkt. #29). The Court granted Plaintiff's request to withdraw his September 3 motion for leave to amend, but ordered that instead of re-filing that motion, in accordance with Federal Rule of Civil Procedure 15(a)(1), Plaintiff should file and serve a second amended complaint by October 14, 2013. ( Id. ).

Plaintiff filed his second amended complaint on October 15, 2013. (Dkt. #30). On October 21, 2013, Defendants filed a letter requesting a pre-motion conference on their anticipated motion to dismiss the Second Amended Complaint. (Dkt. #31). In response, Plaintiff requested leave to file a third amended complaint, citing information received after the filing of the Second Amended Complaint; Defendants consented to this request. (Dkt. #34, 35). The Court granted Plaintiff's request on October 24, 2013, and ordered that Plaintiff file his third amended complaint by November 8, 2013. (Dkt. #36).

Plaintiff filed his Third Amended Complaint on November 4, 2013. (Dkt. #41). Shortly thereafter, on November 12, 2013, Plaintiff requested permission to withdraw the Third Amended Complaint due to information obtained after filing that complaint. (Dkt. #48). Plaintiff asked that the operative complaint be the previously filed Second Amended Complaint, or that Plaintiff be permitted to file a fourth amended complaint. ( Id. ). On November 13, 2013, Defendants again consented to Plaintiff's request in order to minimize motion practice and to conserve judicial resources. (Dkt. #46). On November 14, 2013, the Court granted Plaintiff's request, allowing Plaintiff to withdraw his Third Amended Complaint, and ordering that if no fourth amended complaint were filed by November 22, 2013, then the Second Amended Complaint would become the operative complaint in this action. (Dkt. #50).

Plaintiff filed the FAC on November 22, 2013. (Dkt. #54).[3] It asserts two causes of action: Count I claims violations of RCNY § 5-59 and GBL § 349 stemming from Defendants' charging customers an 18% gratuity; and Count II claims violations of NYCAC § 20-700 and GBL § 349 stemming from Defendants' not listing prices for certain beverages on their menus.

On December 16, 2013, Defendants submitted a letter requesting a premotion conference on their anticipated motion to dismiss the FAC. (Dkt. #55). Plaintiff responded to Defendants' request on December 20, 2013 (Dkt. #56), and the Court held a pre-motion conference on January 6, 2014, during which time the Court entered a scheduling order for Defendants' anticipated motion to dismiss (Dkt. #57).

In accordance with the scheduling order, Defendants filed their motion to dismiss on February 11, 2014 (Dkt. # 61), Plaintiff filed his opposition on March 10, 2014 (Dkt. #63), and the motion was fully submitted when Defendants filed their reply on March 25, 2014 (Dkt. #65).


A. Applicable Law

1. Motions Under Federal Rule of Civil Procedure 12(b)(6)

When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court should "draw all reasonable inferences in Plaintiff['s] favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief." Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ("To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." (internal quotation marks omitted)). A plaintiff is entitled to relief if he alleges "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) ("While Twombly does not require heightened fact pleading of specifics, it does require enough facts to nudge plaintiff's claims across the line from conceivable to plausible." (internal quotation marks omitted) (citing Twombly, 550 U.S. at 570)). A court is not, however, bound to accept "conclusory allegations or legal conclusions masquerading as factual conclusions." Rolon v. Henneman, 517 F.3d 140, 149 (2d Cir. 2008); see also Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) ("[A]lthough a court must accept as true all of the allegations contained in a complaint, that tenet is inapplicable to legal conclusions, and threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." (internal quotation marks omitted) (quoting Iqbal, 556 U.S. at 678)).

"In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint." DiFolco v. MSNBC Cable LLC, 622 F.3d 104, 111 (2d Cir. 2010). "Even where a document is not incorporated by reference, the court may nevertheless consider it where the complaint relies heavily upon its terms and effect, ' which renders the document integral' to the complaint." Chambers v. Time Warner, ...

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