City Attorney David Chiu faces immediate test in major gig economy lawsuit

DoorDash and Grubhub are suing San Francisco over price controls

Will incoming City Attorney David Chiu fight for progressive legislation reining in big tech? We should find out soon.

The food-delivery companies DoorDash and Grubhub are suing The City in a heated gig economy legal battle with some surprising twists and turns.

First of all, the companies have a star witness: Mayor London Breed. The companies based their lawsuit against The City largely on the statements and position of the mayor – who just appointed Chiu.

DoorDash and Grubhub are suing San Francisco over a city law capping the amount restaurants may be charged for delivery at 15% of the total bill. Breed supported a temporary ordinance imposing the cap in 2020 in an effort to support restaurants struggling during COVID-19. But the mayor declined to sign subsequent legislation from the Board of Supervisors that made the cap permanent.

The ordinance became law without Breed’s signature, and the companies sued, seeking damages and the revocation of the ordinance. The companies’ lawsuit directly quotes the mayor’s objections to the permanent cap, and cites her position more than a dozen times.

This week The City sought to have the case thrown out, and District Court Judge Edward Chen set a case management conference for February.

Chiu becomes city attorney Nov. 1. He was tapped for the job by Breed, and both he and Breed have been strongly supported by an early investor in DoorDash, venture capitalist Ron Conway.

Chiu benefited from political contributions from Conway in the race that sent him to the Assembly in 2014. And Conway has donated and strongly supported Breed, pressuring supervisors to support her. Conway was an early investor in DoorDash, and has been cited by its CEO, Tony Xu, as a key supporter throughout the company’s history.

In 2014, when he was president of the Board of Supervisors, Chiu softened legislation regulating Airbnb after Conway and another donor paid about $600,000 for mailers attacking David Campos, Chiu’s opponent in a race for the Assembly.

Chiu told The Examiner he has tangled with powerful business interests and held tech companies accountable. “I have taken on some of the most entrenched corporate powers in America,” he said. “I am going to hold accountable any company not following the law.”

Chiu said his legislation regulating Airbnb was a significant breakthrough. “No one was regulating short-term rentals until I did.” And he said the money spent to attack his opponent was an independent expenditure, not money given to his campaign. “I wasn’t connected to that.”

Progressive politicians — including an author of the contested food-delivery law, Supervisor Aaron Peskin, and Campos — who was attacked in the campaign ads, say they believe the moderate Chiu will not pull punches in court fights with the gig economy.

“I think he has integrity,” Peskin told The Examiner. “I would hope his past political connections will not impact how he acts as city attorney.”

“The city attorney is my attorney,” Peskin said, adding he expects a robust defense of the law he helped to author.

The mayor declined to comment on the ongoing litigation. John Cote, a spokesman for the City Attorney’s Office, told The Examiner “DoorDash and Grubhub chose to file this matter in court, so that is where we will address it.” Conway and his company did not immediately respond to requests for comment.

The companies suing The City were happy to weigh in.

“The City of San Francisco passed hasty, detrimental, and unconstitutional price controls which leave us no choice but to resolve this matter in court,” a DoorDash spokesperson said in a statement to The Examiner.

Grubhub concurred in a statement, saying The City “has absolutely no legal basis for imposing permanent price controls on a private and highly competitive industry.”

An expert on the gig economy says Chiu may have his hands full defending San Francisco’s law.

“The natural inclination to want to help out restaurants makes complete sense but this is not the way to do that,” said Paul Oyer, a Stanford economics professor who has studied the industry at the National Bureau of Economic Research, and as the editor in chief of the Journal of Labor Economics. “It’s hard to argue for price controls here because there is healthy competition among the platforms.”

San Francisco’s restaurants are caught in the middle of the legal fight.

“I’m very unhappy that this is where we’re at,” said Laurie Thomas, executive director of the Golden Gate Restaurant Association and owner of the San Francisco restaurants Rose’s Cafe and Terzo. The court fight is a setback, she says, and came as restaurants were making headway on a compromise with the companies. “I’m very worried it will go back to zero regulation.”

jelder@sfexaminer.com

SF art school investigates theater class practice that had students undressing together

‘I remember being mortified and humiliated’

By Ida Mojadad
Wine in a can: San Francisco startup backed by music heavyweights

Jay-Z and The Chainsmokers backing this year’s hit holiday gift

By Jeff Elder
Is the future of farming moving indoors?

Bay Area startups are using tech to grow food in the face of climate change

By Jessica Wolfrom