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Law360 (March 18, 2021, 8:41 PM EDT) -- Restaurant owners suing Grubhub in Illinois federal court are looking to intervene in a Colorado action accusing the food delivery giant of falsely claiming that competitor restaurants are closed during the coronavirus pandemic, saying their interests might not be protected in the deal reached in that case.
The food delivery app has been knowingly lying to customers to steer them to its partner restaurants by telling them others are either closed or not accepting online orders, even when they are, Denver bar and restaurant Freshcraft alleged in its proposed class action.
Since that lawsuit was filed in May, the proposed class definition has been expanded to include the named plaintiffs in the Illinois case and the 150,000 restaurants they seek to represent, Lynn Scott LLC and The Farmer's Wife LLC said Thursday.
Yet Freshcraft failed to timely file a notice of the related case, and the Illinois plaintiffs were not a part of the settlement discussions, which began before they were members of the class, the Illinois eateries said, asking to be allowed to intervene and conduct discovery in the settlement process.
"If the court approves Freshcraft's proposed settlement, movants and the restaurants they represent in Lynn Scott will be bound by that settlement and their claims will be released," they said. "Even if movants were to opt out, their ability to obtain adequate relief in the Lynn Scott case would be severely compromised."
The Illinois case is significantly larger in scope than the Freshcraft one, they said, and there are notable differences between the two. Freshcraft is only trying to stop Grubhub from falsely representing that certain restaurants are closed, while the Illinois restaurants and owners want to stop the app from including any unaffiliated restaurants on its platform, regardless of context, they said.
The Colorado lawsuit focuses on the false advertising prong of the Lanham Act, while the Illinois action focuses on the trademark prong and Grubhub's "unauthorized use of their names and logos in a manner that causes customer confusion and suggests an affiliation where none exists," according to the motion.
Further, the Illinois plaintiffs are also seeking a court order requiring Grubhub to disgorge all profits it earned by using restaurants' names and logos without authorization and to compensate restaurants for reputational harm, they said.
It's "concerning" that Freshcraft and Grubhub didn't inform the Colorado court about the Illinois case, the Illinois plaintiffs said, even though those two parties already cooperated to seek a stay of the case in the Northern District of Illinois.
Grubhub has already pointed to the amended class definition in the Colorado lawsuit to argue the Illinois case is duplicative, they said.
"Freshcraft has agreed to settle its individual claim against Grubhub and will remain free to do so even if movants are permitted to intervene," they said. "The question now is not whether Freshcraft's rights have been infringed by Grubhub's conduct, but whether the parties' private settlement of that issue should be binding on absent class members — and if so, whether the class bound by the settlement should be extended to cover movants and the 150,000 restaurants they represent in the Northern District of Illinois."
Freshcraft's willingness to settle "on such a large scale" without conducting formal discovery and before Grubhub filed a responsive pleading "may be yet another indication that it failed to adequately represent class movants' interest," they said.
Freshcraft alleged in its suit that, while it believes Grubhub has been using the false advertising tactic since before the deadly coronavirus pandemic, the impact of its practice now is especially damaging to restaurants that are "struggling to stay afloat."
The family-owned restaurant filed suit on behalf of all restaurants in the U.S., claiming Grubhub created landing pages for non-partner restaurants that misrepresented them as being closed or not accepting online orders, when they actually were accepting orders. The suit is seeking to bar Grubhub from continuing its alleged false advertising and pay damages to the restaurants it has purportedly lied about.
Freshcraft is represented by Ross Ziev of the Law Offices of Ross Ziev PC and Laura L. Sheets of Liddle & Dubin PC.
Grubhub is represented by Jean M. French, Meredith C. Slawe, Michael W. McTigue Jr. and Mira E. Baylson of Cozen O'Connor.
The Illinois movants are represented by Paul F. Lewis, Michael D. Kuhn and Andrew E. Swan of Lewis Kuhn Swan PC and Steven M. Tindall, Geoffrey A. Munroe and Alex J. Bukac of Gibbs Law Group LLP.
The case is CO Craft LLC d/b/a Freshcraft v. Grubhub Inc., case number 1:20-cv-01327, in the U.S. District Court for the District of Colorado.
--Additional reporting by Lauren Berg. Editing by Philip Shea.
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