On June 8, the United States District Court for the Northern District of Georgia dismissed with prejudice a putative class action filed on behalf of individuals who worked for Levy Restaurants as luxury suite attendants at the Georgia Dome, Philips Arena, and the Atlanta Motor Speedway. The seven named plaintiffs asserted four common law causes of action – breach of contract, breach of third-party beneficiary contract, unjust enrichment/quantum meruit, and conversion – based on their assertion that Levy wrongfully retained a 20 percent service charge on all in-suite food and beverage purchases. At the heart of their protest was Levy’s representation to suite owners and patrons, through posted policies and language on menus, that such charges were “shared in the form of higher wages for all suite employees.”
Shortly after removing the case to the Northern District of Georgia, Levy, on behalf of itself and its parent company, Compass Group USA, Inc., filed a motion to dismiss. In granting the motion, the Court agreed that each of the plaintiffs’ four claims failed to provide a legal basis for relief. First, with respect to the breach of contract claim, Levy argued that there was no contract with the plaintiffs regarding the service charge, as the policies and menus were provided and directed to suite owners and patrons, not the plaintiffs. The Court agreed, explaining that the plaintiffs’ “awareness of the policy [did] not transform an agreement between [Levy] and suite owners/patrons to one between [Levy] and plaintiffs.”
Second, Levy argued that the plaintiffs’ third-party beneficiary contract claim failed because its written statements providing that the charge would be “shared in the form of higher wages” did not equate to a promise to suite owners and patrons that the charge itself would be paid to the plaintiffs. Again, the Court agreed, noting further that “the plaintiffs [were] not seeking to enforce a promise to share the service charge through an increase in their hourly wage,” but rather were “claim[ing] entitlement to the entire service charge.”
Third, with respect to the unjust enrichment claim, Levy argued that the claim failed because the plaintiffs did not allege that they conferred a benefit on Levy for which they were not reasonably compensated. The Court agreed here as well, specifically noting that the plaintiffs did not allege that they were not paid for all of the hours they worked.
Finally, Levy argued that the conversion claim failed under well established authority that such a claim is reserved for where the aggrieved has been deprived of specific property to which it was entitled, not a mere failure to pay money under a contract. The Court agreed, adding that the plaintiffs, with their contract claims having failed, had no valid theory of ownership over the disputed funds.
All in all, the Court’s June 8th order represents a significant win not only for these defendants, but also for the hospitality industry generally. Similar service charge practices have, in recent years, attracted the attention of a handful of creative plaintiffs’ attorneys across the country, who have advanced novel arguments like those in this case for the position that wait staff, room service attendants, suite attendants, banquet servers, and other employees who share in service charges (including sky caps) are entitled to retain the service charges paid by customers to their employers. Some states provide statutory guidance that governs the distribution of service charges to such employees. For those states that do not provide guidance, where common law claims may be advanced like those brought against Levy in Georgia, this decision may help to leverage what most members of this industry would believe to be a common sense result: Service charges are not to be kept by the employees; they are amounts to be used by the employer for the purpose of ensuring better services for its customers.