Plaintiff Had Standing to Represent Customers Who Paid Automatic Gratuities at All 49 Hotel Locations in Florida, Holds Eleventh Circuit

In Fox v. The Ritz-Carlton Hotel Company, LLC, No. 19-10361 (11th Cir. Sept. 29, 2020), the Eleventh Circuit reverses dismissal of a putative class action, holding that the class representative – who ate at three Ritz-Carlton restaurants, and alleged violations of the Florida Deceptive and Unfair Trade Practices Act – could bring a claim on behalf of customers of all 49 Florida locations.

Over the course of three days, plaintiff Fox paid for meals at three South Florida Ritz-Carlton locations. “Fox alleged that Ritz-Carlton engaged in a pattern of deceptive practices across forty-nine of its Florida restaurants. He alleged that Ritz-Carlton had a practice of adding automatic gratuities without an adequate disclosure and of adding automatic, mandatory gratuities after telling customers that they were only suggested. The hotel also purportedly had a practice of informing customers of an automatic gratuity, but when the bill came it would refer to the automatic gratuity as a ‘service charge’ and would solicit an additional gratuity.”

The complaint alleged that the district court had subject-matter jurisdiction under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d), which has an amount-in-controversy threshold of over $5 million. But the court dismissed, holding that “Fox did not suffer an injury-in-fact fairly traceable to the forty-six Ritz-Carlton restaurants that he did not visit and thus did not have standing to bring those claims on behalf of the class. Second, the district court found that Fox did not have standing to represent class members who ate at the same three restaurants he did but on different days because notice of the mandatory gratuity could have changed throughout the class period.”

The Eleventh Circuit reverses. Under CAFA, the amount-in-controversy is calculated by aggregating the entire class’s dollar claims. The district court found that the drastically-reduced class, owing to the plaintiff’s limited standing, could not rise to the $5 million level.

First, the panel holds that the plaintiff sufficiently alleged standing to brings claims against all 49 locations because “the hotel employed those same practices at all forty-nine of its restaurants in Florida across a four-year period and that the class members therefore suffered the same economic injury from the illegal automatic gratuities … Fox and the class members have suffered the same economic injury from Ritz-Carlton’s gratuity … practices across its properties in Florida. While those injuries may have occurred on different days at different restaurants, those facts do not change what injuries Fox alleged those class members suffered.” Class representatives need not “suffer injury at the same place and on the same day as the class members,” as long as they have “the same interest and suffered the same injury as the class members.”

Second, with the class properly defined, the amount-in-controversy was met in good faith. “[E]ven if we assume that Florida law limited damages to the difference between what customers would have tipped and what they were required to tip, and that the district court’s finding about the tipping habits of Florida customers was not complete speculation, the allegation that the amount-in-controversy exceeded $5 million would still have been made in good faith. Fox alleged that forty-nine Ritz-Carlton restaurants improperly charged an automatic gratuity and sales tax to hundreds of thousands of customers across a four-year period. Even though class members may have overpaid only some percentage of the total bill each time they ate at the hotel’s Florida restaurants, added up over hundreds of thousands of customers across four years at ten Ritz-Carlton hotels and forty-nine restaurants, we do not need to suspend reality to conclude that the overpayment was more than $5 million.”

The panel affirms dismissal of a related sales tax refund claim, though, holding that the plaintiff failed to exhaust administrative remedies.

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