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Rewards Network / iDine California Class Action thread

Rewards Network / iDine California Class Action thread

Old May 4, 06, 5:20 pm
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Exclamation Rewards Network / iDine California Class Action thread

It has been mentioned elsewhere, but I have not found a specific thread dedicated to this - and I think we want to keep abreast of this item.

Rewards Network / iDine was sued May 2004 by a group of California restaurants claiming they were loan sharked, essentially, as the corporation is (they claim) advancing money as a loan, but is unlicensed to do business as a lender in California and is in essence charging over 10% interest maximums allowed unlicensed lenders.

The restaurants have pressed a class action suit that they believe will be worth $250 million to them, as they see the "advances" as loans with short repayment periods and 100% interest rates. Stroock & Stroock & Lavan LLP is representing Rewards Network, and according to the Los Angeles Business Journal (pay article) on May 1, they have declined to comment. The restaurants are represented by Quinn Emanuel Urquhardt Oliver & Hedges LLP, and the suit was certifed as a class action October 2005.

Theoretically, the suit could go to court October 2006, though both parties have filed for summary judgment. I believe this one is worth keeping our eyes on, needless to say!

An article in the August 29, 2005 "Nation's Restaurant News" says, in part:

"...The case was first filed in state court here in May 2004 by the local restaurateurs, who claim the Chicago-based defendant, operating as iDine Restaurant Rewards Network Inc. and Transmedia Restaurant Co., preys on financially vulnerable operators. The plaintiffs said Rewards Network extends cash advances that must be repaid with 100-percent interest in the form of food-and-beverage redemptions by its dining-club members.

Pressing the litigation are Tournesol Bistro in Studio City, Calif. owned by Patrice Lambert; the now-defunct Gray Whale in Malibu, Calif., owned by Thomas Averna; and Minibar Lounge in Studio City, owned by Rebekah Barrows. They contend that California law prohibits non-licensed lenders from charging interest exceeding 10 percent..."

http://www.findarticles.com/p/articl...9/ai_n15341273

Last edited by JDiver; May 4, 06 at 5:39 pm Reason: add info
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Old May 11, 06, 3:51 pm
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What happened since 8/05?
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Old May 12, 06, 11:25 am
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How are they charged 100% interest rates?
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Old May 12, 06, 12:01 pm
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I think iDine advances the restaurant, say, $10 grand. Then they have to provide $20 grand in dining credits when the customers dine(us).

If they do $20K of iDine biz in 6 months, it would be 200% annual interest, roughly speaking. Two years, 50% APR. One of the reasons a restaurant is not listed in every program imho, to adjust the recovery rate.
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Old May 12, 06, 3:35 pm
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Many small buisnesses fall prey to such schemes by CC providers-or the companies that facilillitate the CC transactions.
Is it legal?Probably not.But these "loans"are often lifelines that struggling buisnesses grasp for in order to keep the doors open during slow times.
I do not like these practices of course-but many small retailers/restauranters are not very buisness savy and really have no buisness being in buisness.
Ego is a horrible buisness partner.And having someone else to blame when you fail is cold comfort-but it is some comfort.
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Old May 12, 06, 4:09 pm
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Originally Posted by gardener
I think iDine advances the restaurant, say, $10 grand. Then they have to provide $20 grand in dining credits when the customers dine(us).

If they do $20K of iDine biz in 6 months, it would be 200% annual interest, roughly speaking. Two years, 50% APR. One of the reasons a restaurant is not listed in every program imho, to adjust the recovery rate.
I'm not clear how that is a 200% annual interest rate over six months. The cost to the restaurant for the $20K of dining credits can't be $20K -- otherwise the restaurant will never make money, even on non-iDine dines.

I'm not sure what restaurants customarily do for markup. If the cost for $20K of dining credits is much closer to $10K, then the effectual interest rate would be significantly less than 200%. Alternatively, perhaps this can be viewed as iDine paying in advance in exchange for discounted meals.
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Old May 12, 06, 10:29 pm
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Originally Posted by gardener
I think iDine advances the restaurant, say, $10 grand. Then they have to provide $20 grand in dining credits when the customers dine(us).

If they do $20K of iDine biz in 6 months, it would be 200% annual interest, roughly speaking. Two years, 50% APR. One of the reasons a restaurant is not listed in every program imho, to adjust the recovery rate.
But remember that part of what the restaurant is paying for is our miles. So not all of what iDine is charging is for interest. They have to buy the miles they give to us. Also, iDine provides advertising for the restaurant. Their websites cost money to create and maintain and present, and those booklets they mail to us and those emails they send us are not free. And their customer support people who deal with our complaints don't work for free. This is probably a major issue in the lawsuit - determiming what the miles and advertising are worth. Should be interesting.
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Old May 14, 06, 5:35 pm
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Gary-excellent observations. Probably the restaurants forget these.
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Old May 24, 06, 10:58 am
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iDine should fry

I think iDine is going to go down for this- those poor restaurants, iDine comes along and offers them cash up front, which must be very tempting, and then the contract just says that the money will be repaid by claiming a percentage of sales from diners who use registered credit cards. The restaurants have no way of knowing this means that they will have to pay the money back.

Sure, the terms of the deal peg essentially peg the repayment schedule as a percentage of the restaurant's sales, something no bank would ever do, but it's just not fair for iDine to offer that deal to unsophisticated restaurant companies. Just like with investments, there should be some kind of test to make sure the restaurant companies understand the contract before they can take iDine's money.

Sneaky iDine then goes out and spends all kinds of money to try to make the restaurant's sales go up so they get repaid faster- giving away all these miles plus bonus promotions designed to get people to go to the restaurant and spend more money. iDine has a lot of nerve doing that; it should be ashamed of itself for taking advantage of those restaurant companies by making their sales go up like that, just so iDine can get repaid faster.

Hopefully the outcome of this suit will be that iDine has to give its money back to the restaurants and then they can repay iDine when they want to, no matter how much additional business iDine sends to them.

The real problem is that banks are mean and won't lend money to restaurants. If banks could be required to give money to restaurants then the restaurants wouldn't have to take money from iDine.
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Old May 24, 06, 1:55 pm
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[QUOTE=wrose99Just like with investments, there should be some kind of test to make sure the restaurant companies understand the contract before they can take iDine's money.
[/QUOTE]

I gave tests like that all the time when I taught high school math. Those who failed were put on warning by their grade that they shouldn't borrow money without further education.

Reading teachers give tests, too. As I understand it, this is not a lawsuit over contract performance. So I conclude that all of the details of the deal are in the contract.
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Old May 25, 06, 7:55 am
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I haven't really been to any iDine restaurants outside of Miami so I can't comment on those... but in Miami, some of the affiliated restaurants are by no means "struggling" or "poor."
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Old May 25, 06, 12:10 pm
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What happened with lawsuits?
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Old Jul 20, 06, 4:37 pm
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Rewards Network Announces Court Ruling in Bistro Executive Litigation
Thursday July 20, 6:03 pm ET

CHICAGO--(BUSINESS WIRE)--July 20, 2006--Rewards Network Inc., a leading provider of marketing and loyalty programs to the restaurant industry, announced that the United States District Court for the Central District of California has today issued a decision denying Rewards Network's motion for summary judgment and granting plaintiffs' motion for summary judgment in the case Bistro Executive, Inc. et al v. Rewards Network Inc. The court did not reach any determination regarding monetary relief.

Rewards Network disagrees with this decision and is evaluating its response to it. Rewards Network will continue operating its business as usual, serving its merchants and members across North America.
Press Release
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Old Jul 21, 06, 9:30 am
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Angry

Originally Posted by LRD

Hope they stay in business long enough for me to get my 25k United bonus. Oh well.
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Old Jul 21, 06, 10:50 am
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Idine will be out of business pretty soon over this, IMO. Really a deathblow when you look at their business model and likelihood of prevailing now (very low).
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