Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Fitness center operator allegedly used sham litigation to foreclose competition, (Jan 22, 2016)

By Linda O’Brien, J.D., LL.M.

The operator of fitness centers in the Northeastern United States has engaged in anticompetitive conduct by filing meritless litigation to block a shopping center operator from leasing space to a competing fitness center operator, according to a complaint filed in the federal district court in Newark, New Jersey (Triangle 17 Center, LLC v. Town Sports International Holdings, Inc., January 20, 2016).

Town Sports International (TSI) is the largest operator of fitness centers in the Northeast and Mid-Atlantic regions of the United States. Its brands include New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs, and Washington Sports Clubs. Triangle 17 Center, LLC owns a shopping center in Ramsey, New Jersey.

The complaint states that Triangle 17 entered into an agreement with 24 Hour Fitness to open a fitness center as a co-anchor tenant at the shopping center and sought all the necessary zoning authorization for the operation of the fitness center. The proposed 24 Hour Fitness location is approximately two miles from TSI’s competing New York Sports club. In July 2013, 24 Hour Fitness filed a site plan waiver application with the local planning board in lieu of engaging in formal site plan review. In October 2013, TSI filed suit, challenging the site plan waiver. Triangle 17 then submitted a second site plan waiver application on behalf of 24 Hour Fitness, which proposed interior alterations but did not include any construction changes or expansion.

Throughout the second application process, TSI allegedly engaged in frivolous and unreasonable conduct by objecting to and frustrating Triangle 17’s efforts to obtain approval for the 24 Hour Fitness center. Specifically, TSI wrongly contended to the planning board that the application required formal site plan approval, required the construction of additional parking, and would cause traffic hazards or congestion. However, the Board rejected all of TSI’s arguments and found that Triangle 17 could proceed through a waiver of the site plan, the complaint alleges.

Triangle 17 contends that TSI continued to delay the approval process by challenging the board’s decision in superior court. After a trial, the superior court affirmed the board’s decision. TSI has continued its course of vexatious litigation by filing a notice of appeal with the superior court.

According to the complaint, by targeting the approvals necessary to complete the proposed 24 Hour Fitness location, the defendants’ intent in filing the sham litigation was to prevent any other large fitness centers from competing with them in the relevant market. By blocking a new lease for Triangle 17’s shopping center with 24 Hour Fitness, TSI is delaying or preventing the opening of a competing facility and perpetuating its monopoly control over the large fitness center market.

The plaintiff asserts claims for tortious interference with business relationship, tortious interference with prospective economic advantage, and attempted monopolization in violation of Section 2 of the Sherman Act and the New Jersey Antitrust Act. The action seeks declaratory and injunctive relief, treble and punitive damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:16-cv-355.

Attorneys: Kevin J. Nash and Evan M. Lazerowitz (Goldberg Weprin Finkel Goldstein LLP) for Triangle 17 Center, LLC.

Companies: Triangle 17 Center, LLC; Town Sports International Holdings, Inc.

News: Antitrust NewJerseyNews