Darden wins dismissal of New York lawsuit over automatic tips

NEW YORK (Reuters) - Darden Restaurants Inc, the parent of Olive Garden and Red Lobster, won the dismissal of a New York lawsuit accusing it of illegally adding an automatic 18 percent tip to diners’ bills and failing to list beverage prices on its menus.

A man talks on his mobile phone in front of the Times Square Olive Garden in New York, June 23, 2010. REUTERS/Keith Bedford

In a decision made public on Thursday, U.S. District Judge Katherine Polk Failla in Manhattan rejected claims by plaintiff Ted Dimond, who sought to represent diners in a class-action, that Darden’s practices violated state consumer protection laws.

Dimond claimed it was deceptive for Darden to refer to the mandatory tip it imposed in some restaurants as a “gratuity,” which he called a “voluntary act.”

But the judge said Darden “conspicuously” showed the tip on its menus before diners placed their orders, and that diners were free to leave if they disapproved.

She also said New Yorkers often leave tips of 18 percent to 20 percent, undercutting the argument they might feel “tricked” into having to fork over tips at the low end of that range.

While New York City has its own laws on menu surcharges, private diners cannot use them as a basis to sue, Failla said.

The judge also said failing to list beer and soft drink prices by itself caused no harm, and was not misleading because reasonable customers could get those prices by asking.

Failla’s 34-page decision is dated July 9.

Jeffrey Smith, a lawyer for Dimond, said he was disappointed with the decision, and that his client would review his options.

The case is Dimond v. Darden Restaurants Inc et al, U.S. District Court, Southern District of New York, No. 13-05244.

Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker