By Joyce Hanson

Law360 (April 8, 2021, 11:33 PM EDT ) Grubhub has asked a Colorado federal judge not to let restaurant owners in an Illinois suit get in on a settlement that ends claims accusing the food delivery giant of falsely claiming competitor restaurants are closed during the coronavirus pandemic, saying their intervention would compromise settlement efforts.

Lynn Scott LLC and The Farmer's Wife LLC, who are not parties in the Colorado suit but are suing Grubhub Inc. in Illinois federal court and claim their interests might not be protected in the Colorado deal, wrongly seek to disrupt the proposed classwide settlement reached between Grubhub and Denver bar and restaurant Freshcraft after three full-day mediation sessions and subsequent negotiations, the online food-ordering company said.

The restaurant owners in the Illinois suit won a stay on March 22 of their competing proposed nationwide class action in Illinois federal court pending the Colorado court's review of the Freshcraft deal, according to Grubhub. The Illinois court found "sufficient overlap" between the actions to justify a stay, but the owners' bid to intervene to conduct discovery into the fairness of the settlement negotiated on their behalf is untimely, unnecessary and prejudicial to the Colorado parties, Grubhub said.

"Movants have not requested, reviewed, or otherwise have any knowledge of the terms of the settlement," Grubhub asserted. "They have curiously raised their purported need to intervene irrespective of the settlement terms and only after the parties engaged in months of arm's-length negotiations. Intervention would only serve to prejudice these extensive settlement efforts."

Grubhub has been knowingly lying to customers to steer them to its partner restaurants by telling its users that other estasblishments are either closed or not accepting online orders, even when they are, Freshcraft alleged in its proposed class action filed on May 11.

Since that lawsuit was filed in May, the proposed class definition has been expanded to include the named plaintiffs in the Illinois case and the 150,000 restaurants they seek to represent, Lynn Scott, the owner of Antonia's restaurant in North Carolina, and the California-based Farmer's Wife restaurant said in their March 18 motion to intervene.

Yet Freshcraft failed to timely file a notice of the related case, and the Illinois plaintiffs were not a part of the settlement discussions, which began before they were members of the class, the Illinois eateries said, asking to be allowed to intervene and conduct discovery in the settlement process.

The Illinois case is significantly larger in scope than the Freshcraft one, they said, and there are notable differences between the two. Freshcraft is only trying to stop Grubhub from falsely representing that certain restaurants are closed, while the Illinois restaurants and owners want to stop the app from including any unaffiliated restaurants on its platform, regardless of context, they said.

A lawyer for the Illinois litigants, Geoffrey A. Munroe of Gibbs Law Group LLP, told Law360 in an email Thursday that when Freshcraft filed its case and began settlement discussions with Grubhub, the case did not include The Farmer's Wife, Antonia's or tens of thousands of other restaurants that were listed on Grubhub's platform without their consent.

"As our complaint alleges, Grubhub generated billions of dollars in revenue by improperly using these restaurants' names, logos, and strong local reputations, and we are concerned that Grubhub is now trying to improperly settle those valuable claims to the detriment of our clients and other affected restaurants," Munroe said.

The Colorado lawsuit focuses on the false advertising prong of the Lanham Act, while the Illinois action focuses on the trademark prong and Grubhub's "unauthorized use of their names and logos in a manner that causes customer confusion and suggests an affiliation where none exists," according to the Illinois eateries' March 18 motion.

Further, the Illinois plaintiffs are also seeking a court order requiring Grubhub to disgorge all profits it earned by using restaurants' names and logos without authorization and to compensate restaurants for reputational harm, they said.

It's "concerning" that Freshcraft and Grubhub didn't inform the Colorado court about the Illinois case, the Illinois plaintiffs said, even though those two parties already cooperated to seek a stay of the case in the Northern District of Illinois.

Freshcraft's willingness to settle "on such a large scale" without conducting formal discovery and before Grubhub filed a responsive pleading "may be yet another indication that it failed to adequately represent class movants' interest," they said.

Freshcraft alleged in its suit that, while it believes Grubhub has been using the false advertising tactic since before the coronavirus pandemic, the impact of its practice now is especially damaging to restaurants that are "struggling to stay afloat."

The family-owned restaurant filed suit on behalf of all restaurants in the U.S., claiming Grubhub created landing pages for non-partner restaurants that misrepresented them as being closed or not accepting online orders, when they actually were accepting orders. The suit is seeking to bar Grubhub from continuing its alleged false advertising and pay damages to the restaurants it has purportedly lied about.

Counsel for Grubhub and Freshcraft did not immediately respond Thursday to requests for comment.

Freshcraft is represented by Ross Ziev of the Law Offices of Ross Ziev PC and Laura L. Sheets of Liddle & Dubin PC.

Grubhub is represented by Jean Marie French, Meredith C. Slawe and Michael W. McTigue Jr. of Cozen O'Connor.

The Illinois movants are represented by Paul F. Lewis, Michael D. Kuhn and Andrew E. Swan of Lewis Kuhn Swan PC and Steven M. Tindall, Geoffrey A. Munroe and Alex J. Bukac of Gibbs Law Group LLP.

The Colorado case is CO Craft LLC d/b/a Freshcraft v. Grubhub Inc., case number 1:20-cv-01327, in the U.S. District Court for the District of Colorado.

The Illinois case is Lynn Scott LLC et al. v. Grubhub Inc., case number 1:20-cv-06334, in the U.S. District Court for the Northern District of Illinois.

--Additional reporting by Lauren Berg and Celeste Bott. Editing by Michael Watanabe.

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