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McDonald's, local franchisees added to menu of retailers getting sued over 'pop tax' collections

By Jonathan Bilyk | Aug 9, 2017

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McDonald’s and some of its local franchisees have become the next seller of sweetened beverages on the menu of those facing a class action lawsuit over the collection of the Cook County “pop tax.”

On Aug. 8, attorneys Daniel Seidman, of the firm of Seidman, Margulis & Fairman LLP, of Chicago, and Jay Heller, of the firm of Heller & Richmond Ltd., of Chicago, filed suit in Cook County Circuit Court on behalf of named plaintiff Yvan Wojtecki, asserting he and others were being charged too much tax when buying drinks at McDonald’s restaurants in the county.

Other named defendants include a variety of corporate entities associated by the Karavites family, which run nearly two dozen McDonald’s restaurants in Chicago and elsewhere in the county; the Solano Decarrier Management Company, of Chicago; and JDD Investment Co., of Burr Ridge, among others.

Oak Brook-based McDonald’s Restaurants of Illinois Inc. is also a named defendant.

The lawsuit specifically alleges Wojtecki was charged 2 cents too much in tax when he purchased a drink at the McDonald’s restaurant at 23 S. Clark St. on Aug. 8.

The problem, according to the lawsuit, stems from the restaurants’ practice of adding a “beverage surcharge” – meaning, the charge required under Cook County’s sweetened beverage tax – before calculating the sales tax. This means the restaurant was assessing the regular sales tax against the county’s sweetened beverage tax, which is not allowed under the county’s ordinance, the lawsuit alleged.

This, the lawsuit demands, means the court should order McDonald’s and its franchisees to cough up compensatory damages and punitive damages “equal to at least 1 percent of the annual revenue of each of Defendants’ Cook County stores during each year the violations occurred,” plus attorney fees.

According to published reports, McDonald’s locations averaged more than $2.7 million in annual sales as recently as 2015.

The lawsuit launched by Seidman and Heller, two personal injury attorneys whose websites indicate they pursue medical malpractice, premises liability and similar injury cases, is the second such lawsuit filed in Cook County courts against retailers in the week since the Cook County sweetened beverage tax took effect.

On Aug. 4, a class action lawsuit targeted Deerfield-based Walgreens for allegedly improperly charging the sweetened beverage tax on unsweetened drinks.

And the lawsuits come just over a week since a Cook County judge lifted a temporary restraining order and denied an injunction sought by retailers to block the tax. In the process the judge had brushed aside retailers’ concerns they would get sued over the tax collection, because retailers had struggled to bring their registers into compliance with the county’s tax rules, which the retailers said were poorly written and too vague.

“As to the concerns that improper collection of the tax will open the Merchants up to litigation, any such notion is merely speculation at this point and does not render the Ordinance unconstitutionally vague,” Cook County Circuit Judge Daniel Kubasiak had said at the time he dismissed the retailers’ lawsuit against the tax.

The county, at the urging of Cook County Board President Toni Preckwinkle, slapped the special 1-cent-per-ounce tax on the sales of sweetened beverages, including those with added sugar, syrups and artificial sweeteners. County officials claimed the tax would raise $200 million for the county, while also reducing the consumption of sweetened beverages, improving public health.

However, in late June, a group of local grocers and the Illinois Retail Merchants Association filed suit in Cook County court challenging the tax, which they argued was unconstitutional. Kubasiak imposed a temporary restraining order, preventing the county from collecting the tax until late July, when he ultimately dismissed the challenge.

In response to the restraining order, Preckwinkle laid off hundreds of county workers, claiming the delay in enforcing the tax was costing the county at least $17 million a month.


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Organizations in this Story

Cook CountySeidman Margulis & FairmanHeller and Richmond LTDMcDonald's Corporation