You know those tacked-on fees and surcharges that show up on your restaurant bill with no warning? In another few weeks, they’ll be illegal in California. But You You Xue can’t wait that long.
In recent weeks, Xue has embarked on a quixotic legal campaign, spending nearly $2,000 in court filing fees over a small surcharge restaurants use to help pay for employees’ health care.
When Xue visited Sacred Taco in Cow Hollow last month, his $153 check came with an additional “San Francisco Surcharge,” equivalent to 5% of his total before tax and tip. After failing to find any notice on the menu or in the restaurant, Xue said he was incorrectly told by Sacred Taco staff that the additional fee was a tax imposed by the local government.
In fact, like many restaurants, Sacred Taco uses the fee to defray the costs of complying with San Francisco's Health Care Security Ordinance, which requires businesses of a certain size to set aside money for employee health care.
So he paid $435 to file a lawsuit in San Francisco Superior Court over that $5.80 fee, claiming it was illegal and characterizing it as an unfair and deceptive business practice. In that suit—and in the similar ones he filed against Il Casaro Pizzeria in North Beach, San Tung in the Inner Sunset and the Public Izakaya in Nob Hill—he asked for punitive damages on top of having the fees refunded.
Xue, himself a restaurant owner with businesses in Millbrae, Foster City, Mountain View and Las Vegas, says he’ll donate any award to charity. “It’s not about the money,” he said. “It’s about being charged and treated correctly.”
Principle admits no compromise, but to the degree that Xue’s efforts are aimed at protecting other innocent diners, it might appear the law has them pretty well covered. SB 478 is set to go into effect on July 1 and would eliminate junk fees, or tacked-on customer charges. That includes San Francisco Mandate fees.
In Xue’s eyes, that’s not soon enough to end a practice he calls “dishonest” and “insulting.”
“It’s shocking how the SF Mandate became tolerated and commonplace,” Xue said. “It’s just fake virtue signaling.”
Kevin Chen, one of the partners in the Public Izakaya, said he’s skeptical of Xue’s stated motivations and has heard several restaurant owners complain about his behavior. Chen’s theory is that Xue’s efforts are meant to shake down restaurants for a quick settlement, comparing him to those using the Americans with Disabilities Act for similar purposes.
“If they’re scared or don’t know what’s going on, you can make folks pay a couple thousand to make it go away,” Chen said. “It’s a bad situation.” (Asked about this, Xue reiterated his claim that any proceeds will go to charity and the settlement payments are meant to discourage bad behavior.)
Xue’s complaint against the Public Izakaya was filed on May 1, but Chen said to his knowledge the restaurant hasn’t been served with the lawsuit.
Zach Georgopoulos, a partner with Georgopoulos & Economidis, said that businesses can be at legal risk if they don’t highlight the fees ahead of time, due to the state’s general laws regarding disclosure of all items being charged.
Xue, who is referred to by his legal name Alexander in legal documents, filed the lawsuits himself, noting he was unlikely to get an attorney to pick up the campaign. Xue previously went through the San Francisco District Attorney’s Office to pressure restaurants to change their practices but resorted to filing lawsuits after recent attempts to contact the DA’s mediator were unsuccessful.
Ironically, Xue’s own opinions about SB 478 are mixed, even though it would ban the exact kind of fees he is so enraged about. That’s because at his restaurants he has replaced voluntary tipping with an 18% service fee, which would also be prohibited. He hopes the measure can be amended to make such fees legal.
Even with the July 1 deadline impending, Xue said he doesn’t expect his campaign against the SF Mandate to end anytime soon. During his interview with The Standard, Xue said he remembered the next San Francisco restaurant he plans to sue.