Duck,
If what you say is true, I certainly don't blame you for never going there again. I'd probably take the same action if that was my experience. It's especially disturbing to hear that this was done to repeat customers. Sorry to hear about that.
In the several times that we've eaten there, we've always been treated well. Even though she doesn't remember our name, Karen has always made it a point to say that she's recognized us and thanked us for coming again.
I'll definitely return unless something like what you described happens to me or I witness it myself. (Believe me, I have no problem taking my business elsewhere if I'm not treated right - no matter where it is. My wife still thinks I'm crazy because I haven't stepped foot in an Eddie Bauer store in five years! They screwed me on an online purchase and refused to make it right, and since I'm such a stubborn S.O.B., I refuse to spend another dime there!)
So, this leads to the following question: If K&B's is out for you, what's your suggestion for the next best place for Italian?
PS - If that 17% tip sign landed on my table like that, I would asked for my credit slip back, paid the exact amount of the food & beverage, and made sure my server got any tip they deserved in cash, so that management couldn't touch any of it. If my server that night happened to be the owner, it would have been a 0% tip and a "K.M.A." as I walked out the door. Last time I checked, gratuity was optional, and reserved for a job well done.