Grubhub, a national online food delivery service, has agreed to pay $3.5 million to settle a lawsuit accusing it of overcharging struggling restaurants for delivery of meals during some of the darkest days of the pandemic.
The company was named in a 2021 lawsuit brought by the Massachusetts attorney general’s office for charging hundreds of restaurants fees of 18 percent on food orders despite an emergency state law that limited fees to 15 percent.
The 15 percent cap was enacted into law by the state Legislature in early 2021 in an effort to help prop up the restaurant industry, which was hit hard by a series of public health emergency orders that banned or strictly limited in-restaurant dining to slow the spread of COVID.
Under the settlement agreement, the Chicago-based company will pay more than $3.3 million to the impacted restaurants and $125,000 to the attorney general’s office. The $3.3 million equals the amount the company overcharged restaurants plus interest, according to the settlement agreement.
Steve Clark, CEO of the Massachusetts Restaurant Association, whose members first complained to the attorney general’s office of being overcharged three years ago, said as many as 1,000 restaurants across the state will receive payments of thousands of dollars each under the settlement.
“We are grateful that funds will go back to the restaurants that were working so hard to survive and serve customers during the pandemic,” Clark said.
The lawsuit was brought by Governor Maura Healey when she was attorney general.
“Our restaurants have been hard hit by this pandemic and we will do everything we can to help get them the relief they need to recover,” Healey said at the time.
Healey’s successor as attorney general, Andrea Joy Campbell, announced the settlement on Friday.
“Grubhub took advantage of restaurants during a public health emergency that devastated much of this industry,” she said in a statement.
A Grubhub spokesperson said the company is “ready to move forward from this situation and continue providing Massachusetts restaurants with the best possible service.”for
Nevertheless, the company “maintains that Grubhub did not violate” the Massachusetts delivery cap and that it “complied with the plain language” of the law, the spokesperson said.
In-person dining closed in March 2020 due to the COVID pandemic, but many restaurants stayed open for takeout meals, which was deemed by public health officials to be an essential service.
At the time, delivery services charged as much as 30 percent in fees.
As the pandemic continued, some cities across the country criticized some delivery fees as excessive and imposed limits.
In late 2020, the state Legislature passed a law capping delivery fees at 15 percent, effective Jan. 15, 2021, until then-Governor Charlie Baker lifted the state of emergency. It was lifted on June 15, 2021.
Despite the law, Grubhub charged restaurants 18 percent, which it said covered credit card processing fees and the costs it incurred due to fraudulent and undeliverable orders. It argued that the extra 3 percent was separate from the 15 percent delivery fee it was allowed under the emergency law.
But the lawsuit brought by Healey’s office against Grubhub resulted in a 25-page ruling by Suffolk Superior Court Judge Robert B. Gordon that found the company in violation of the delivery fee cap law.
The law, he wrote, “broadly, explicitly and without exception caps” allowable delivery fees at 15 percent.
The law “served a significant and legitimate public interest by at once promoting public health and economic well-being of both a broad industry and local communities,” Gordon wrote.