A U.S. District Court judge here has granted class-action status to a lawsuit by three local restaurateurs who allege that discount-dining promoter Rewards Network Inc. violated California usury laws by charging excessive loan interest.
The Oct. 11 ruling could add 3,000 to 5,000 California restaurant operators as co-plaintiffs and open the door for damage claims of up to $300 million, attorneys in the case said.
The complaint, first filed in state court here in May 2004, claims the Chicago-based defendant, operating as iDine Restaurant Rewards Network Inc. and Transmedia Restaurant Co., preys on financially vulnerable operators. The plaintiffs charge that Rewards Network runs a "loan-sharking operation" by offering cash advances that are little more than loans that must be paid back with 100-percent interest in the form of food-and-beverage redemptions by dining-club members.
California law prohibits non-licensed lenders from charging annual rates exceeding 10 percent.
Any California restaurant operator who participated in the defendant's cash advance program between May 2000 and May 2004 may be eligible to join the complaint. Damages in the case could reach $100 million to $300 million, plaintiffs' co-counsel Anat Levy of Beverly Hills said. A trial date is set for April 24, 2006. Levy said she and co-counsel Dan Brockett of Quiun Emanuel Urquhart Oliver & Hedges in Los Angeles are looking at the potential for lawsuits in other states with similar usury laws.
In a Securities and Exchange Commission filing following the ruling, Rewards Network officials called the lawsuit "without merit" and stated plans to defend vigorously against it. "The ultimate cost to the corporation from this action is not possible to predict and may not be determined for a number of years," said the filing by Bryan Adel, Rewards Network's senior vice president and general counsel.
The plaintiffs who originated the lawsuit are Tournesol Bistro of Studio City, owned by Patrice Lambert; the now-defunct Gray Whale in Malibu, owned by Thomas Averna; and Minibar Lounge in Studio City, owned by Rebekah Barrows.
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