14-Apr-16 – Two New Jersey residents suing Restaurant.com will leave it up to a federal judge how much money the Chicago company must pay them but their attorney says it should be substantial.

Henry Wolfe says Restaurant.com was “deceptive” and “unremorseful” when it sold gift certificates with fine print in violation of New Jersey law. In his motion for summary judgment, filed late Friday night, Wolfe asked Judge Michael Shipp to consider an amount as high as $10,000 per gift certificate and reimbursement of attorney’s fees and expenses of more than $600,000.

Larissa Shelton and Gregory Bohus filed their class action lawsuit in 2010. Between December 9, 2007, and September 9, 2009, Shelton purchased ten $25 gift certificates from Restaurant.com, redeemable at various restaurants in New Jersey. On October 14, 2009, Bohus purchased one $10 gift certificate redeemable at Calico Grill in Princeton, New Jersey.

Each of the gift certificates included text stating it “expires one year from date of issue, except in California and where otherwise provided by law,” and is “void to the extent prohibited by law.” (Right) With numerous terms and conditions, a $25 gift certificate for a restaurant in Medford, New Jersey, purchased in 2007 from Restaurant.com, now evidence in the federal lawsuit against the company. (Click on image to view larger version.)

Wolfe says language on the Restaurant.com certificates violated at least three provisions of New Jersey’s Truth in Consumer Contract, Warranty, and Notice Act, any one of which entitles the consumer to a civil penalty of at least $100 plus any actual damages, attorney’s fees, and court costs.

At issue is how to interpret the civil penalty provision of the state law. Even if the amount is just $100 it would expose Restaurant.com to an estimated $1 million in claims from every resident of New Jersey who purchased a gift certificate from them between March 7, 2004, and February 16, 2010.

On May 19, 2010, Restaurant.com changed its policy, updating the terms and conditions page on its website to say their gift certificates do not expire. The company also sent an email (above) to owners of unredeemed certificates to make sure they knew about the change.

Penalty must deter others, says plaintiff attorney

The penalties should be “substantially higher” than $100, says Henry Wolfe, “or else they will not serve their legislative purposes.”

He says the Truth in Consumer Contract, Warranty, and Notice Act is meant “to prevent deceptive practices in consumer contracts” and is entitled to broad interpretation. The penalty amount, he says, must be “high enough to serve as a true deterrent” to prevent similar misconduct.

“Defendant’s violations of New Jersey’s gift certificate statute…were not harmless or innocent,” says Wolfe (left), “but were the result of defendant’s deceptive business practices. Restaurant.com sells consumers products prominently labelled and advertised as $25 and $10 ‘gift certificates’ that defendant itself claims [to state regulators] are not ‘gift certificates,’ but something much less valuable, like free ‘grocery store coupons.’”

He says Restaurant.com depicts their certificates as “a wonderful bargain” to consumers but “a promotional gimmick” to its restaurant clients, resulting in “considerable consumer dissatisfaction” as evidenced by “overwhelming negative reviews” on two websites that rate online resellers.

“Defendant has unapologetically persisted in this duplicitous characterization of its gift certificates even after the New Jersey Supreme Court ruled that they are ‘gift certificates,’” says Wolfe. “Such lack of remorse for its violations of [New Jersey law] favors a substantial civil penalty for the named plaintiffs.”

Wolfe does not offer a specific amount but does say, “there are no constitutional limitations to an award of civil penalty in excess of $10,000.”

In support of an award by the court of attorney’s fees, Wolfe summarized the work of his firm and two others on the complaint in New Jersey Superior Court, United States Court of Appeals, New Jersey Supreme Court, and United States District Court for the district of New Jersey. He provided documentation showing more than 1,028 hours invested in the case, with attorney’s fees and expenses totaling $659,981.

Opposing counsel: RDC slow to settle

Wolfe says in six years they received one settlement offer from Restaurant.com, which was not accepted. On November 6, 2015, the company, according to Wolfe, offered $100 for each certificate and attorney’s fees of $10,000.

Prior to a settlement conference scheduled for February 17, 2016, the court ordered both parties to submit confidential settlement proposals but after receiving them, the court cancelled the settlement conference.

As of Thursday morning, any new filings by Restaurant.com had not been made public by the court.

Restaurant.com is owned by Dr. Kenneth Chessick, a lawyer who lives at Marina City in River North and is the company’s CEO. His wife, Ellen Chessick, is president of Marina Towers Condominium Association and is identified as vice president of Restaurant.com in a document filed with the Securities and Exchange Commission in 2012, although more recently, she has denied being an owner of the company.

(Right) Ellen and Kenneth Chessick from a 2013 video produced by Northern Illinois University about the Chessicks receiving its “NIU Foundation Award for High Impact Philanthropy.”