Wednesday, June 26, 2013

Supreme Court Rules Against Italian Colors in AmEx Suit

Plus SpoonRocket delivery service takes off in Berkeley.

By Luke Tsai
Wed, Jun 26, 2013 at 4:00 AM

It's not every day that an Oakland restaurant headlines a Supreme Court ruling, but that's what happened last Thursday when, with little fanfare, the court handed down its decision for American Express v. Italian Colors Restaurant. The case hinged on whether Italian Colors (2220 Mountain Blvd.) and several other restaurants could file a class-action suit against American Express for what they believed to be unjust fees — despite the fact that they'd all signed a contract specifically waiving their right to class-action arbitration.

If you accept Italian Colors chef-owner Alan Carlson's characterization of the lawsuit as a case of "David and Goliath," well, in this instance Goliath won out: The court voted 5 to 3 in favor of American Express, with the conservative majority ruling, essentially, that the contract that Carlson and other restaurant owners had signed took precedence over all other considerations.

"[The ruling is] very unfair," Carlson — who is also a partner in James Syhabout's new Rockridge restaurant venture Box and Bells — told What the Fork. "It's in favor of big business and against small business."

The crux of the argument that Carlson, along with the other claimants in the suit, put forth is that American Express is wielding monopolistic powers by forcing restaurants to pay very high — and often obscure or hidden — fees and then also refusing to allow class-action arbitration. As Justice Elena Kagan pointed out in her dissenting opinion, the most that Italian Colors stood to win from its suit against AmEx was $38,549. However, the cost of putting together an expert report to prove that American Express had violated antitrust laws would have been at least several hundred thousand dollars. "So the expense involved in proving the claim in arbitration is ten times what Italian Colors could hope to gain, even in a best-case scenario," Kagan wrote.

Despite those numbers, which showed that one-on-one arbitration was essentially untenable for small businesses like Italian Colors, the court ruled that the initial contract — in which restaurant owners agreed never to file a class-action lawsuit — needed to be upheld.

The Italian Colors case was tied up in the lower courts in New York (where AmEx is based) for years, and more than ten years have passed since Carlson first filed the suit in 2003. It has been such a long haul that Carlson stopped following the case's progress and only found out about Thursday's Supreme Court decision when a customer told him. Although the ruling is a serious blow, Carlson believes that small businesses like his still have future recourse. Perhaps — as Philip Bump of The Atlantic Wire surmised, Congress could pass a measure to clarify that antitrust regulations ought to prevent a powerful company like American Express from avoiding even the possibility of class-action arbitration. As Bump noted, however, "Whether or not the current Congress takes such concerns to heart is another question entirely."

Mostly, Carlson is hoping that the public backlash against the Supreme Court decision will force American Express to change its policies. But, given the relative paucity of media coverage of the ruling thus far, how realistic that expectation is remains to be seen.

For what it's worth: Italian Colors still accepts American Express, and Carlson said that, despite this ruling, the restaurant has no immediate plans to stop doing so.

SpoonRocket Launches

You might call Anson Tsui and Steven Hsiao the kings of late-night food delivery for UC Berkeley and its immediate surroundings. Since the pair graduated from Cal in 2009, they've built up an impressive mini-empire, marketed under the Late Night Option brand name (tagline: "Your Late Night Delivery Food Court"). To their initial pho delivery service, Pho Me Now, Tsui and Hsiao have added businesses that specialize in burritos, rice bowls, and other convenience foods that appeal to hungry college students. All of the food is prepared, boxed up, and delivered — until 4 a.m. every night — out of a commercial kitchen in Berkeley.

Now, the ambitious young entrepreneurs are hoping to tap into a slightly older market demographic: young professionals who don't have time to cook, but who might have more refined tastes. Their new company, SpoonRocket, offers gourmet meals — cooked by a chef with a fine-dining background — delivered to customers in Berkeley and Emeryville in ten minutes or less, via or a corresponding app. According to Tsui, the prices will always be reasonable: under $10 for a complete meal.

The venture marks a big shift for Tsui and Hsiao, in that the food is a lot healthier. For instance, one of their other delivery services, Munchy Munchy Hippos, deals in such gut-busting specialties as deep-fried Oreo cookies and "Philly Nacho Cheese Steak Fries."

"Part of us is like we're selling all this really greasy food, and we want to change the way people eat," Tsui told What the Fork. (That said, he and his partner aren't planning on discontinuing their other, less-than-healthful delivery services.)

For SpoonRocket, there's a rotating selection of two dishes available each day, one of which is always vegetarian. Recent offerings include spicy braised spare ribs served with a potato and yam gratin, and roasted eggplant and wild mushrooms in a phyllo crust.

Chef David Cramer said the biggest challenge with the quick-delivery approach is to create dishes that can be held, and quickly reheated, within a four-hour window — to make sure that meats are cooked with enough moisture that they don't dry out, for instance. "There's a lot of stuff I'd love to make, but I can't," he explained.

Tsui said SpoonRocket will eventually charge a $40 annual membership fee. For now, though, the company is offering free lifetime memberships.

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