Legal Activist Battles 'Junk Fees' in Bay Area Restaurants and Arcades

San Francisco has dynamic and diverse offerings in the restaurant and entertainment sectors. The city is home to a wide array of dining establishments with food from all over the world, ranging from Michelin-starred to casual eats. But whatever they serve and at what price, many have been involved in controversies over undisclosed surcharges.

Hidden fees, often called "junk fees," are additional charges that appear on a customer's bill without prior disclosure. In the case of restaurants, these fees typically manifest as surcharges added to the final bill, ostensibly to cover costs such as employee health care benefits mandated by local ordinances. For instance, some restaurants apply a "San Francisco Surcharge," a percentage of the total bill, to help comply with the city's Health Care Security Ordinance. While some see these fees as necessary for covering operational costs, critics argue they are misleading to consumers who are not informed of the charges upfront.

But no one likes getting more than what they thought they’d bargained for on the bill, so it’s no surprise that these fees have been a point of contention.

Local Legal Watchdog, Xue

California's Senate Bill 478 was introduced to address this issue by banning such fees unless they are clearly and conspicuously disclosed on menus and advertisements. However, the law has faced pushback, resulting in exemptions for certain fees as long as they are properly disclosed. The bottom line is that junk fees in restaurants hasn't been an issue that the state government has been able to resolve. 

As such, some restaurant-goers are taking matters into their own hands—and to court. Legal actions by individual residents of California have argued that these restaurants are being deceptive and not clearly communicating fees to customers. One of those litigious Californian foodies is You You Xue.

A restaurant owner and legal activist, Xue has been at the forefront of a campaign against undisclosed surcharges in San Francisco's restaurant industry. Xue has filed numerous lawsuits against restaurants for these undisclosed charges, claiming they constitute unfair business practices.

Xue's legal actions began after he encountered a "San Francisco Surcharge" at Sacred Taco, which was not disclosed on the menu or by staff. Believing this practice to be deceptive, Xue filed a lawsuit against the restaurant, claiming the fee was illegal and characterizing it as an unfair business practice. He has since filed numerous lawsuits against other establishments, including Il Casaro Pizzeria, San Tung, and the Public Izakaya, seeking punitive damages and refunds for the fees.

Despite the upcoming implementation of Senate Bill 478, which aims to ban such fees unless clearly disclosed, Xue continues his legal pursuits, arguing that the practice is dishonest and insulting. His efforts have drawn criticism from some restaurant owners who accuse him of exploiting the legal system for settlements. However, Xue maintains that his lawsuits are about principle and has pledged to donate any financial awards to charity.

New Arcade Draws Youths

SF isn’t just known for its trendy restaurants, either. Its burgeoning entertainment sector has a little bit of something to offer everybody. A recent example of the fun little niches to be found in the Bay is the new Round 1 Entertainment in Stonestown, which has transformed the basement of Stonestown Galleria's former Nordstrom into a bustling, neon-lit playground.

Opened just last month, this 50,000-square-foot arcade has quickly become a cultural hotspot, drawing crowds from across Northern California. The arcade's allure lies in its games, claw machines, bowling alley, and vibrant atmosphere.

To no one’s surprise, a large part of the appeal was for young people. Rico Smith, a City College graduate, traveled from Roseville to experience the new location, noting it felt "more low-key." Neil Dulce, a San Francisco State graduate, had long petitioned for Round 1 to come to Stonestown, aligning with the mall's cultural revitalization.

And as you’ll remember from your own childhood, no arcade would be complete without the love-hate relationship with a classic arcade feature, the claw machine. Round 1 is no exception, and its claw machines have quickly become a focal point of excitement and frustration. Rows of the machines challenge players to snag plush toys with a mechanical claw, a task that often proves elusive. Tony Dang, a student from Galileo High School, managed to win several Squishmallows after spending approximately $70, using a strategic approach to leverage one toy against another. On the other hand, a patron named Rachel and dubbed the "claw machine queen" has perfected her technique, winning around 800 stuffed animals over the years.

Despite the difficulty, the allure of these machines continues to draw crowds, each hopeful for a triumphant grab. But one kid’s treasure is an adult’s lawsuit. It wouldn’t be long before local activist Xue would be alerted to the gimmicks of the new arcade.

Xue to the Rescue?

After he got wind of Round 1, Xue wasted no time filing a lawsuit against the arcade, targeting its claw machines. Xue alleges that the machines are rigged, claiming they operate like a "casino for children" by being programmed to prevent the player from “winning” until a specific “profit threshold” is met. In other words, it’s allegedly not about your skill at all.

After spending $52 and winning only one stuffed animal during a visit on December 7, Xue argues that he was misled by the arcade's deceptive practices. The lawsuit claims that by having such machines, Round 1 is violating California consumer protection laws, including unfair competition and false advertising.

Interestingly, Xue's political ambitions have also come to the fore. As he runs for Millbrae City Council, his platform notably omits mention of his legal crusades, focusing instead on local issues such as downtown revitalization and crime reduction. This marks his third attempt at securing a council seat, following previous unsuccessful bids in 2018 and 2020. Will his watchdog tactics win him supporters or alienate the locals in one of America's most dynamic urban centers?

Related Resources:

• Gambling Addict Makes High-Stakes Appeal to Third Circuit (FindLaw's Federal Courts)
• What Is Gaming Law? (FindLaw's Learn About the Law)
• Is It Legal To Gamble With Other People's Money? (FindLaw's Law and Daily Life)