Hillstone Restaurant Group faces price-gouging lawsuit over 15% takeout fee

Hillstone Restaurant Group, the national dining chain behind restaurants such as Houston’s, Honor Bar and R+D Kitchen, has been hit with a class action lawsuit alleging the company unlawfully hiked prices in California during the coronavirus pandemic.

The suit, filed last week by Pasadena law firm Bezdik Kassab, claims that Hillstone charged customers a “service or packaging fee” of 15% on takeout orders despite “no change in the quality or quantity of the food sold or the packaging being offered,” a move that it argues violates price-gouging laws put in place after Gov. Gavin Newsom declared a state of emergency in March.

According to California penal code 396, it is unlawful for any business to sell food for a price higher than 10% of its immediate prior cost during a declared state of emergency. An exception applies only if the seller can prove that the price increase is related to additional costs related to labor or materials.

“It’s our position that Hillstone implemented this fee in July as a disguised end run around California’s price-gouging statute,” Bezdik Kassab attorney Raffi Kassabian said. “I don’t believe they will be able to show that food and packaging costs have gone up enough since the pandemic began to justify this large of a fee.”

Hillstone currently notes on its menus and website that “a 10% packaging charge is added to all take home orders.”

Kassabian said he does not know exactly when the fee was reduced from 15% to 10%, but that until last month the group’s website stated that the packing and service fee functioned “in lieu of gratuity” and was “shared amongst the culinary and take home support staff.”

Although many restaurant employees have expressed concerns over reduced tipping during the pandemic, it’s legally unclear whether the inclusion of a mandatory gratuity charge would fall under California’s definition of price-gouging.

“Throughout the pandemic, Hillstone has maintained the highest standards for safety and quality, without compromising its fair treatment of guests and staff members alike,” Hillstone vice president W. Glenn Viers said in a statement. “The complaint’s allegations are singularly without merit and will be defeated in court.”