Settlement posed in Rewards Network suit

As many as 3,000 California restaurateurs could benefit from the $64-million deal that has been accepted in principle by loyalty program provider Rewards Network to settle a class-action lawsuit pending against it.

The suit accused Chicago-based Rewards Network of violating California usury laws.

Plaintiffs√ć attorneys said they were pleased with the settlement proposal, which has yet to be approved in U.S. District Court. Hearings are expected to be scheduled in February or March.

If the deal is approved, California restaurant operators who entered into contracts with Chicago-based Rewards Network between May 2000 and December 2004 may be eligible to participate in the settlement.

Court approval would also bring an end to litigation that began in 2004 with a lawsuit filed by the owners of three Los Angeles-area restaurants: Tournesol Bistro of Studio City, Calif.; the now-defunct Gray Whale in Malibu, Calif.; and Minibar Lounge, also in Studio City.

Those plaintiffs charged that Rewards Network preyed on vulnerable businesses by offering what is essentially a loan in the form of a cash advance and requiring payback of 100-percent interest in food-and-beverage discounts for loyalty program members. California law prohibits non-licensed lenders from charging annual loan interest rates over 10 percent.

Under the agreement, Rewards Network offered eligible class participants a combination of cash and airline miles in three installments over the next three years valued at up to $28 million.

In addition, Rewards Network has agreed to forego collection of amounts above the initial cash advance from certain class participants--valued at about $36 million--as well as paying attorneys fees and administrative costs of the settlement. The company has admitted no wrongdoing.