In a lawsuit filed with the New York State Supreme Court Tuesday, third-party delivery giant DoorDash has accused b2b software company Olo of fraudulently charging them higher fees than their competitors. The lawsuit claims that the fees are in breach of their 2017 contract with DoorDash’s Rails and Dispatch platform, which allegedly says that the fees on their orders would never be higher than those charged to competitor delivery platforms. DoorDash said they will be “seeking punitive damages for fraudulent concealment and fraudulent inducement.”
“To maximize revenues for its IPO, Olo cheated its largest business partner,” DoorDash said in the lawsuit, adding that DoorDash is Olo’s biggest customer, constituting almost 20% of their revenue.
The lawsuit was filed in response to Olo’s attempt to dismiss DoorDash’s initial claim, which was discovered last year when the company acquired former competitor Caviar and noted that their delivery fees were “significantly lower” than DoorDash’s. If they were charged at the same rate, DoorDash claims they would have saved $7 million in fees.
“For more than three years, Olo has overcharged DoorDash—inflating its own revenues by collecting from DoorDash tens of millions of dollars more than what DoorDash should have paid had Olo honored its MFN bargain,” the lawsuit read.
In addition to breach of contract, Olo is arguing that DoorDash breached the “implied covenant of good faith and fair dealing” and is claiming “fraudulent inducement and concealment.”
The news was revealed amidst Olo’s successful initial public offering on March 17, raising $450 million in its IPO of 18 million shares at $25 each.
Olo disclosed their legal battle with DoorDash ahead of their IPO, stating that DoorDash was seeking damages upward of $7 million, but stating they felt the lawsuit “was without merit.”
“As Olo has already set forth, DoorDash’s allegations are baseless,” Olo said in a statement emailed to Nation’s Restaurant News. “Despite all of DoorDash’s litigation rhetoric, the evidence speaks for itself. Olo will not comment further on ongoing litigation. Olo looks forward to continuing to work with DoorDash for the benefit of the restaurant industry.”
DoorDash did not respond to request for comment in time for publication.
The contract between Doordash and Olo currently runs through March 2022.
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