Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D.N.J.: Planet Fitness released from consumer fraud claims, (Aug 1, 2016)

By Greg Hammond, J.D.

Allegations that a health club franchisor and its franchises violated New Jersey’s Consumer Fraud Act (CFA) and Health Club Services Act (HCSA) were dismissed by the federal district court in Trenton, New Jersey. The consumer failed to adequately allege that the health club franchisor and franchises engaged in an unlawful practice by obligating her to renew her contract, or that she suffered an ascertainable loss caused by the alleged unlawful practices, the court concluded (Truglio v. Planet Fitness, Inc., July 28, 2016, Wolfson, F.).

Planet Fitness, Inc. sells Planet Fitness health club franchises. A consumer filed a class action against Planet Fitness and various franchisees, claiming that she entered into a gym membership contract, which contained terms that violated the HCSA and CFA by: (1) failing to state that a bond or other security was filed with the Director of the Division of Consumer Affairs and failing to maintain such bond or other security; (2) failing to conspicuously disclose the consumer’s total payment obligation; (3) obligating their customers to renew their contracts; and (4) using misleading cancellation provisions to force customers to pay for additional months of membership dues. Planet Fitness moved to dismiss.

The court preliminarily noted that although the HCSA has not yet been addressed in a published federal or state decision, it is one of several expansions to the CFA made by the New Jersey legislature. The expansions were added to address "particular areas of concern and to include them specifically within [the CFA’s] protective sweep," according to the court.

Unlawful practice. The consumer alleged that the Planet Fitness defendants effectively obligated her to renew her contract by imposing unreasonable and unduly onerous requirements to cancel her health club membership. The HCSA, however, states that a membership agreement must, by its own terms, obligate the customer to renew in order to violate the CFA. Mere difficulty to cancel the membership agreement was not enough, according to the court, demonstrating that the consumer failed to adequately allege an unlawful practice in violation of the HCSA and CFA.

Ascertainable loss. The consumer also failed to allege ascertainable loss under the HCSA and CFA. In particular, the court found that the consumer failed to allege that she incurred a wrongful debt or charge in the form of an additional month of dues because she did not claim that she cancelled or attempted to cancel her membership agreement. Her theory, according to the court, was that she could be charged an extra month of dues under certain circumstances, rather than she will be obligated at some point to pay an extra month of dues.

The consumer also alleged that her ascertainable loss was the entire amount paid under the contract, which was the measure of damages, because the consumer fraud occurred in the actual contract or at the time of contracting. This argument failed, according to the court, because the complaint was silent as to how the mere offering of the membership agreement, containing allegedly unlawful terms and omissions, caused the consumer to suffer any ascertainable loss. She did not allege that she paid more than she bargained for, or that she missed out on an opportunity to make a claim against the bond required by the CFA because she did not receive proper notice of it. The mere offering of a contract with allegedly illegal terms was not, in and of itself, an ascertainable loss under the CFA, the court concluded.

The case is No. 15-7959 (FLW)(LHG).

Attorneys: Benjamin Jarret Wolf (Jones, Wolf & Kapasi, LLC) for Marni Truglio. Craig R. Tractenberg (Nixon Peabody, LLP) for Planet Fitness, Inc.

Companies: Planet Fitness, Inc.

Cases: StateUnfairTradePractices NewJerseyNews