For the second time in less than a year, a federal judge has withheld her approval of a proposed class action settlement with food delivery platform Grubhub that would address the company’s practice of listing restaurants with inaccurate information or without their consent.

U.S. District Court Judge Nina Y. Wang found the terms of the settlement agreement to be largely acceptable. However, she rejected the parties’ belief that no notice is required to the approximately 150,000 food establishments the settlement would cover.

In a June 1 order, Wang noted that the proposed agreement requires objecting restaurants to satisfy a gauntlet of requirements, including mailing the objection to four separate addresses, attaching necessary paperwork and providing “proof of membership” in the class of affected businesses.

“It is unclear to the Court how any objecting class member could reasonably be expected to comply with all of these requirements without any notice of the Proposed Settlement Agreement and these stringent requirements,” she wrote. “Without notice, any opportunity to object is illusory.”

Wang also directed the parties who negotiated the settlement to clarify that restaurants will still have the ability to sue Grubhub for illicitly profiting off of their trademarks.

The underlying lawsuit has been pending for more than three years in Colorado’s federal trial court. 

Freshcraft, a now-shuttered eatery in Denver, originally accused Grubhub of creating “landing pages” for restaurants that never consented to having Grubhub carry out their deliveries. In particular, Freshcraft was concerned that its landing page on Grubhub said the restaurant was “closed” or “not taking online orders,” which was untrue.

Freshcraft sued for false advertising under the federal Lanham Act on behalf of all restaurants whose landing pages on Grubhub contained untrue information. The restaurant argued Grubhub’s deceptive advertising made it less likely customers would order from businesses wrongly identified as being closed.

With the assistance of a retired federal magistrate judge, the parties reached a tentative settlement to give restaurants greater control over their Grubhub listings. However, two other businesses – Lynn Scott, LLC and The Farmer’s Wife – sought to intervene. They had filed a similar, separate lawsuit in federal court in Illinois seeking to “disgorge all profits” Grubhub allegedly earned through the unauthorized use of restaurant names and logos.

In July 2022, U.S. District Court Judge Regina M. Rodriguez, who was handling Freshcraft’s lawsuit at the time, refused to sign off on the proposed settlement. She directed the parties to address the issue raised by the intervenors: whether restaurants could still sue Grubhub for monetary damages or whether they would give up that right.

Months later, the plaintiffs – with The Piper Inn of Denver joining the lawsuit in light of Freshcraft’s closure – and Grubhub submitted a new class action settlement. The terms would allow restaurants to request updates to landing pages or removal from Grubhub altogether, and Grubhub would add a disclaimer clarifying it is not affiliated with restaurants.

The parties added, in a separate statement, that the restaurants, convenience stores and markets covered by the settlement will retain their ability to sue Grubhub for damages, including disgorgement of profits.

The intervening restaurants again challenged the agreement, accusing the plaintiffs’ attorneys of colluding with Grubhub to get a settlement that provides “nothing” to food service establishments. Dozens of other restaurant owners submitted statements also slamming the settlement.

“Restaurants shouldn’t have to worry about being listed on Grubhub without permission. This settlement doesn’t stop Grubhub from doing that,” wrote Thuan Luu, owner of the Ragin Crawfish restaurant in Oxnard, Calif. “I am frustrated and baffled by this settlement. I don’t understand how it helps restaurants.”

Although class action settlements are subject to a final hearing where class members can air their objections, Wang took a detailed look at the proposed agreement and the work that went into it. She noted that Grubhub and the plaintiffs exchanged certain pieces of information, but there was never any formal discovery of evidence – which called into question the fairness of the final product.

However, she believed the agreement provided tangible relief to affected restaurants, and “the proposed settlement does not extinguish class members’ ability to bring any claims for monetary relief in any form.”

Wang did raise two concerns that precluded her from moving the settlement forward. First, she asked the parties to explicitly clarify in the agreement itself that lawsuits seeking money from Grubhub are permitted. Second, the 150,000 members of the class should receive notice of the settlement.

“(T)he Court will not preliminarily approve any amended proposed settlement agreement” that does not contain those provisions, she warned.

Days after Wang’s order, Lynn Scott, LLC and The Farmer’s Wife moved to resume their own lawsuit in Illinois, which a judge placed on pause while the Colorado litigation unfolded.

The case is CO Craft, LLC et al. v. Grubhub, Inc.