Fox v. Ritz-Carlton Hotel Co., No. 19-10361
| Decision Date | 29 September 2020 |
| Docket Number | No. 19-10361 |
| Citation | 977 F.3d 1039 |
| Parties | Michael FOX, Plaintiff-Appellant, v. The RITZ-CARLTON HOTEL COMPANY, L.L.C., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Edward A. Coleman, Lewis J. Saul, Lewis Saul & Associates, PC, New York, NY, James A. Francis, David A. Searles, Francis Mailman Soumilas, PC, Philadelphia, PA, David M. Marco, SmithMarco, PC, Chicago, IL, for Plaintiff-Appellant.
Rebecca M. Plasencia, Scott Daniel Ponce, Rodolfo Sorondo, Jr., Holland & Knight, LLP, Miami, FL, Richard C. Hutchison, Holland & Knight, LLP, West Palm Beach, FL, for Defendant-Appellee.
Before LUCK, ED CARNES, and MARCUS, Circuit Judges.
If a Florida restaurant is going to add "an automatic gratuity or service charge" to a customer's bill, it must give notice "on the food menu and on the face of the bill" that the automatic gratuity is included. Fla. Stat. § 509.214. If a restaurant in Miami-Dade County adds an "automatic tip," it must post a notice "conspicuously, either on a sign or in a statement on the business's menu or price listing in the same form and manner as the other items on the menu or price listing, and written in a legible manner in English, Spanish and Creole." Mia.-Dade County, Fla., Code of Ordinances § 8A-110.1(3). And a Florida restaurant cannot include a gratuity or tip as part of the taxable sales price for food and drinks if the gratuity is separately stated on the customer's receipt and the restaurant receives no benefit from the gratuity. Fla. Admin. Code § 12A-1.0115(7)(a).
Michael Fox, according to the allegations in his class action complaint, ate at three restaurants over two days at the Ritz-Carlton Hotel Company, LLC's Key Biscayne location. At the first restaurant, Fox was charged an automatic gratuity without notice. At the second restaurant, Fox was charged an automatic gratuity with an inadequate and deceptive notice. And at the third restaurant, Fox had to pay an automatic gratuity with an inadequate and deceptive notice, and he had to pay sales tax on the gratuity. Fox, for himself and all the others who paid illegal automatic gratuities and sales taxes at Ritz-Carlton's forty-nine restaurants in Florida over the last four years, sued the hotel for violating the Florida Deceptive and Unfair Trade Practices Act and Florida's tax regulations. Fox sought damages, a tax refund, and declaratory and injunctive relief.
The district court dismissed the complaint for lack of subject-matter jurisdiction because Fox did not have standing to sue on behalf of the customers that paid automatic gratuities at Ritz-Carlton restaurants that Fox did not visit and because Fox's class claims did not meet the $5 million jurisdictional trigger under the Class Action Fairness Act. The district court also dismissed the tax refund claim for lack of subject-matter jurisdiction because Fox did not exhaust his administrative remedies.
We affirm the dismissal of the tax refund claim on exhaustion grounds. But we agree with Fox that the district court erred in finding that he did not have standing to represent the class because he only paid the illegal automatic gratuity at three of Ritz-Carlton's restaurants. And we agree with Fox that the class complaint alleged in good faith that the amount-in-controversy for the hundreds of thousands of Ritz-Carlton guests in Florida that unlawfully paid an automatic gratuity over the last four years exceeded $5 million. We reverse that part of the district court's order and remand for further proceedings.
The complaint's allegations
Fox, on April 5 and 6, 2017, ate at three of Ritz-Carlton Key Biscayne's restaurants. First, on April 5, he ate at Key Pantry. Fox's bill, in addition to his food and drinks, included an eighteen percent automatic gratuity. The printed and online menus for Key Pantry, however, did not mention the automatic gratuity. Still, Fox paid the entire bill.
Later on April 5, Fox ate at the Cantina Beach restaurant. The menu explained in small type, "A suggested [eighteen percent] gratuity will be added to your check for your convenience." But the gratuity was not suggested—the bill included eighteen percent as an automatic gratuity, which Fox paid.
And on April 6, Fox ate at the Lightkeepers restaurant. On the menu, printed in small, italicized type, it read: But the bill included a mandatory eighteen percent gratuity that Fox could not raise, lower, or remove. The gratuity was included in the sales tax calculation, even though the menu said that any automatic fee would be a nontaxable gratuity. The Lightkeepers restaurant also added a line below the bill total for an additional gratuity.
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. And Ritz-Carlton would improperly charge sales tax on its automatic gratuities.
Fox filed this class action complaint against Ritz-Carlton on behalf of himself and all the others who, over the last four years, paid the illegal automatic gratuity and sales tax under the hotel's practice at its forty-nine Florida restaurants. Count one alleged a per se violation of the Florida Deceptive and Unfair Trade Practices Act because Ritz-Carlton did not give "adequate notice" of "an automatic gratuity or service charge," in violation of section 509.214 of the Florida Statutes and section 8A-110.1(3) of the Miami-Dade County Code of Ordinances. Count two alleged a violation of the Florida Deceptive and Unfair Trade Practices Act because Ritz-Carlton failed to give adequate notice of its mandatory gratuities, deceived customers about the ability to raise or lower the automatic tip, and solicited an additional gratuity on top of what was already included in the bill. Count three claimed that Ritz-Carlton violated rule 12A-1.0115 of the Florida Administrative Code by charging sales tax on the mandatory gratuities.
Fox alleged that the district court had subject-matter jurisdiction over his class action complaint under the Class Action Fairness Act, 28 U.S.C. § 1332(d). Fox alleged that the parties were diverse because he was a citizen of New York and Ritz-Carlton was a citizen of Delaware and Maryland. And Fox claimed that the amount-in-controversy was more than $5 million because the class included hundreds of thousands of Ritz-Carlton customers who were charged illegal automatic gratuities and sales tax at its ten hotels and forty-nine restaurants in Florida over a four-year period.
The district court dismissed the complaint
The district court dismissed counts one and two of Fox's complaint for lack of subject-matter jurisdiction. First, the district court ruled 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. And third, the district court found that Ritz-Carlton "could only be liable to a given class member for the amount of gratuity the class member paid in excess of what he or she would have paid in gratuity absent the allegedly deceptive automatic [eighteen percent] gratuity." The district court found that many customers would have tipped at least fifteen percent and up to twenty-five percent. Because Fox only had standing to bring claims on behalf of customers who dined at the three restaurants at the Key Biscayne hotel and only on the days Fox dined at those restaurants and because the damages amount was limited to the difference between what customers would have paid as gratuity and what they were illegally required to pay, the district court concluded that the good faith allegations in the complaint did not allege a class damage amount of more than $5 million, as required by the Class Action Fairness Act. See 28 U.S.C. § 1332(d)(2).
The district court also dismissed count three for lack of subject-matter jurisdiction. The district court ruled that Florida law provided no private right of action for violations of rule 12A-1.0115. And even if it did, the district court explained, Fox had not exhausted his administrative remedies before filing suit for a refund of the taxes paid on the automatic gratuities, as required by Florida law. The district court dismissed the complaint and closed the case. Fox appeals the dismissal for lack of subject-matter jurisdiction.
We review de novo a district court's dismissal for lack of subject-matter jurisdiction. Est. of Bass v. Regions Bank, Inc., 947 F.3d 1352, 1358 (11th Cir. 2020).
Fox contends that the district court erred in finding that he did not meet the $5 million amount-in-controversy requirement under the Class Action Fairness Act, which was in turn based on the court's error in concluding that he did not have standing to represent the class members who paid illegal gratuities at the Florida Ritz-Carlton's restaurants where Fox had not dined. Fox also argues that the good-faith allegations in the complaint showed that the class paid more than $5 million in illegal gratuities. Finally, Fox contends that the district court erred by dismissing his tax refund...
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