Lawsuit over surprise 'mandatory' restaurant tips can proceed - N.Y. judge

By Jonathan Stempel

NEW YORK (Reuters) - Many restaurants now require minimum tips, but a federal court ruling in Manhattan on Friday suggests that customers ought to be told about them up front.

U.S. District Judge Paul Oetken said Applebee's customers may pursue claims that the operator of some 35 of the chain's restaurants in the New York City area unfairly surprised them after they ate by not letting them tip what they wanted.

The plaintiffs, Kendall Ghee and Yang Shen, complained after computer tablets used to pay their bills at two Applebee's near Times Square instructed them to "enter a higher amount" when they tried to tip less than 18 percent and 15 percent, respectively.

They called this an illegal "mandatory surcharge," and sued on behalf of Applebee's diners nationwide and in New York.

Apple-Metro Inc, the restaurant operator, countered that its tipping policy was adequately disclosed, citing the 2014 dismissal of a lawsuit over mandatory 18 percent tips at Olive Garden and Red Lobster, and that tipping was a "well-accepted" custom.

But the judge said the Olive Garden and Red Lobster tips were "conspicuously" disclosed on menus, while Applebee's menus simply said that prices did not include gratuities. He also said customers expect the right to leave lower tips for poor service.

"The fact that tipping is a well-accepted social norm does not defeat plaintiffs' claims," Oetken wrote.

"This being New York City, 15 percent may indeed be a threshold beneath which no self-respecting diner would dip," he added. "Nevertheless, the social norm is that tips are expected but subject to the customer's discretion. At least that is what the complaint alleges."

Oetken said it didn't matter that mandatory tips might prevent wait staff from being "stiffed by uninformed tourists."

Lawyers for Apple-Metro had no immediate comment. Lawyers for Ghee and Shen did not immediately respond to requests for comment. Applebee's parent DineEquity Inc is not a defendant.

The case is Ghee et al v Apple-Metro Inc et al, U.S. District Court, Southern District of New York, No. 17-05723.

(Reporting by Jonathan Stempel in New York; Editing by David Gregorio)