By Joyce Hanson

Law360 (April 9, 2021, 8:17 PM EDT ) Restaurants suing GrubHub for false advertising in Colorado federal court have joined the food delivery giant in opposing a bid by eateries in an Illinois suit to get in on a proposed settlement, saying they can state their case later if the deal wins approval.

The proposed classwide settlement reached between GrubHub Inc. and lead plaintiff Freshcraft, a Denver bar and restaurant, would provide "significant, sweeping relief" to the class and resolve their claims accusing the online food-ordering company of falsely stating that competitor restaurants are closed during the coronavirus pandemic, according to Freshcraft's Thursday brief opposing the Illinois intervention bid.

The lead plaintiffs in the Illinois case — Lynn Scott, the owner of Antonia's restaurant in North Carolina, and the California-based Farmer's Wife restaurant — have failed to show how they're entitled to intervene in the Colorado suit on claims that their interests might not be protected in the Colorado deal, Freshcraft asserted.

Their bid to intervene is untimely and would derail months of negotiations, Freshcraft said, adding that Lynn Scott LLC and The Farmer's Wife LLC haven't even seen or asked to see the Colorado agreement. The Illinois plaintiffs should wait to see if the court gives preliminary approval to the settlement, at which point they can decide whether to remain members of the class, or to opt out or object, according to Freshcraft.

"Negotiations were conducted at arms' length and continued over the course of many months," Freshcraft said. "This is a well developed case, as parties on both sides extensively advocated for their respective positions and analyzed each side's strengths and weakness. Moreover, this is not a 'large scale settlement' disposing of movants' rights; they are entirely free to opt out of the settlement agreement."

GrubHub also asked the judge Wednesday not to let the restaurant owners in the Illinois suit intervene in the presentment of the proposed settlement, saying their intervention would compromise settlement efforts. Lynn Scott and The Farmer's Wife wrongly seek to disrupt the proposed classwide settlement reached between GrubHub and Freshcraft after three full-day mediation sessions and subsequent negotiations, the food-ordering company said.

The restaurant owners in the Illinois suit won a stay last month 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 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.

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

Since that lawsuit was filed, 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 and Farmer's Wife 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.

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' 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.

Freshcraft's willingness to settle "on such a large scale" without conducting formal discovery and before GrubHub filed a responsive pleading may be an indication "that it failed to adequately represent class movants' interest," Lynn Scott and Farmer's Wife 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 nonpartner 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 recover damages for the restaurants it has purportedly lied about.

Counsel for the Illinois plaintiffs declined to comment Friday. Counsel for GrubHub and Freshcraft did not respond immediately 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 dba 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 Breda Lund.

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