Gascho v. Global Fitness Holdings, LLC

• Decision Date: 04 April 2014
• Docket Number: Civil Action 2:11-cv-436
• Parties: AMBER GASCHO, et al., Plaintiffs, v. GLOBAL FITNESS HOLDINGS, LLC, Defendant.
• Court: U.S. District Court — Southern District of Ohio

AMBER GASCHO, et al., Plaintiffs, v. GLOBAL FITNESS HOLDINGS, LLC, Defendant.

Civil Action 2:11-cv-436

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

April 4, 2014

Judge Smith

Magistrate Judge King

REPORT AND RECOMMENDATION

I. Background

A. Procedural History and Third Amended Complaint

Plaintiffs initiated this class action in the Court of Common Pleas for Franklin County, Ohio, on April 13, 2011, against defendant Global Fitness Holdings, LLC, formerly doing business as Urban Active ("Global Fitness" or "defendant"). Defendant removed the action to this Court on May 19, 2011, pursuant to the Class Action Fairness Act, 28 U.S.C. §§ 1332(d), 1453. Plaintiffs are residents of Ohio and Kentucky who signed a gym membership contract and/or a personal training, child care, and/or tanning contract with Global Fitness. Third Amended Complaint, Doc. No. 100, ¶ 2. Defendant is a Kentucky limited liability corporation that operated fitness facilities in Ohio, Kentucky, Georgia, Nebraska, North Carolina, Pennsylvania, and Tennessee until October 2012, when it sold all of its assets to Fitness and Sports Clubs, LLC, doing business as LA Fitness. Id. at ¶ 3.

This action is one of five similar actions pending against Global Fitness. Class Counsel also represented the plaintiffs in an action in Boone County Circuit Court, Commonwealth of Kentucky, titled Tartalia v. Global Fitness Holdings, LLC, No. 11-CI-1121 (the "Tartalia action"). The claims asserted in the Tartalia action were asserted in this action in the Third Amended Complaint, which was filed on September 19, 2013.

The Third Amended Complaint alleges that Global Fitness engaged in common practices of, inter alia, knowingly misrepresenting the terms and conditions of contracts at the time of sale, making unauthorized deductions from plaintiffs' bank accounts, failing to provide consumers with copies of contracts at the time of signing, failing to provide consumers with a list of available plans, selling membership plans that did not appear on required registration statements, failing to orally inform consumers at the time of signing of their right to cancel, failing to provide copies of "notice of cancellation" forms, failing to honor contract cancellations, and failing to perform in good faith its duties under the contracts. See e.g., Third Amended Complaint, ¶ 9. Plaintiffs assert the following claims: breach of contract (Count I), unjust enrichment (Count II), and false, deceptive, and unconscionable consumer practices violative of

the Ohio Consumer Sales Practice Act [CSPA] and Prepaid Entertainment Contract Act [PECA], O.R.C. §§ 1345.02, 1345.03, and 1345.41-1345.45; the Kentucky Consumer Protection Act and Kentucky Health Spa Act, KRS 367.170, 367.910-367.920; the Pennsylvania Health Club Act and Unfair Trade Practices and Consumer Protection Law 73 Pa. Cons. Stat. § 2161 et seq., the North Carolina Prepaid Entertainment Contract Act N.C. Gen. Stat. § 66-118 etseq., the Tennessee Health Clubs Act and Consumer Protection Act Tenn. Code Ann. § 47-18-301 et seq., and the Nebraska Consumer Protection Act, Neb. Rev. Stat. § 59-1601

Third Amended Complaint, ¶¶ 143-173 (footnote omitted) (Counts III and IV). The Third Amended Complaint seeks compensatory and equitable relief, including rescission, as well as an award of costs and attorneys' fees.

On February 2, 2011, i.e., before this action was initiated, Robert J. Zik, April N. Zik, and James Michael Hearon, acting on behalf of themselves and a class of similarly situated persons, filed a complaint against Global Fitness in the Jefferson County Circuit Court, Commonwealth of Kentucky. Zik v. Global Fitness Holdings, LLC, No. 11-CI-7909 (the "Zik action"). See Doc. Nos. 118-1 (docket sheet), 118-2 (amended complaint). The Zik action presented claims of breach of contract, fraud, and violations of the Kentucky Consumer Protection Act ("KCPA"), K.R.S. § 367.170, et seq., premised on the alleged breach by Global Fitness of "its members' membership agreements by charging its members one extra month of membership dues and a $10.00 cancellation fee when members terminate their membership agreement." Doc. No. 118-2, pp. 1, 6. The Zik action sought "compensatory damages for unpaid dues and cancellation fees, interest, and court costs, . . . punitive damages and their attorney's fees." Id. at ¶ 37.

On April 15, 2011, i.e., two (2) days after this action was filed, Phillip S. Robins, proceeding on behalf of himself and others similarly situated, initiated an action against Global Fitness in the Cuyahoga County Court of Common Pleas, which action was thereafterremoved to the United States District Court for the Northern District of Ohio. Robins v. Global Fitness Holdings, LLC, No. 1:11-cv-1373 (N.D. Ohio) ("the Robins action"), Notice of Removal, Doc. No. 1. The complaint in the Robins action alleged

that, contrary to the express terms of Global's Membership Contracts and Personal Training Contracts . . . Global has (1) retained fees paid by members of its health clubs for the period in which they were disabled, deceased, or relocated, (2) collected from Plaintiffs' credit, debit or bank accounts additional fees not part of the agreed-upon monthly fees, and (3) drafted form contracts containing egregious, confusing and misleading cancellation provisions that guarantee members will be charged for one or more months beyond the date they cancel their memberships. Based on these allegations, Plaintiffs assert the following common-law claims against Global: breach of contract (Count One), unjust enrichment (Count Two), and fraud (Count Three). Plaintiffs have also asserted claims against Global for violation of the following state and federal statutes: Ohio's Consumer Sales Practices Act (Count Four), Ohio's Prepaid Entertainment Contracts Act, O.R.C. §§ 1345.41 et seq. (Count Five), Ohio's Deceptive Trade Practices Act, O.R.C. §§ 4165.01 et seq. (Count Six), Kentucky's Consumer Protection Act-Health Spas (Count Seven), the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. ("RICO") (Count Eight), Ohio's version of RICO, O.R.C. §§ 2923.31 et seq. (Count Nine), and the Electronic Fund Transfer Act, 15 U.S.C. §§ 1693 et seq. (Count Ten).

Robins v. Global Fitness Holdings, LLC, 838 F.Supp. 2d 631, 637 (N.D. Ohio 2012). On January 18, 2012, all claims in the Robins action were dismissed, some with prejudice and some without prejudice. Id. at 654. Plaintiffs' appeal from that judgment remains pending. Robins v. Global Fitness Holdings, LLC, Case No. 12-3231 (6th Cir.).

The earliest of the five class actions against Global Fitness was filed by David Seeger and fifteen other named plaintiffs, on behalf of themselves and a class of similarly situated persons, in the Boone County Circuit Court, Commonwealth of Kentucky. Seeger v. GlobalFitness Holdings, LLC, No. 11-CI-7909 (the "Seeger action"). The Seeger plaintiffs asserted claims of forgery, fraud, breach of contract, concealment and non-disclosure, breach of good faith and fair dealing, and violations of K.R.S. §§ 516.030 and 367.170. See Seeger Amended Complaint, Doc. No. 118-12.

The Seeger plaintiffs negotiated a class settlement with Global Fitness and, on December 21, 2012, the Boone County Circuit Court held a fairness hearing to determine whether the settlement was fair, reasonable, and adequate. Counsel for plaintiffs in this action (and in the Tartaglia action) and counsel for plaintiffs in the Zik action appeared at the hearing and objected to the proposed settlement. Order, Doc. No. 118-10. The court in Seeger declined to approve the proposed settlement. Id. In "summarize[ing] the greatest reasons" for rejecting the proposed settlement, the court in Seeger concluded that the release sought by Global Fitness in that action was "overly broad" because it was "unlimited to time or nature of the claims," "includes claims that do not share the identical factual predicate as Plaintiff's claims," and class counsel "had not conducted meaningful and adequate discovery on many of the claims sought to be released." Id. at p. 2. The Seeger court also concluded that the notice of settlement provided to the putative class members was deficient and that the claims process was too cumbersome, resulting in an approval rate of just 0.6 percent of the potential class. Id. Moreover, the proposed settlement had a "lack of value:" it was a "coupon settlement for the most part" and 90 percent of the cash refund claims had been rejected. Id. at pp. 2-3. The Seeger court therefore concluded thatthe settlement was unfair in that too large a group of people were bound to an agreement for which little benefit was given.¹ Id.

On September 12, 2013, the parties to this action executed a settlement agreement, Settlement Agreement and Release ("Settlement Agreement"), Doc. No. 97-1, and shortly thereafter applied to the Court for preliminary approval of the settlement. Joint Motion for an Order Preliminarily Approving the Class Action Settlement, etc., Doc. No. 97. On September 30, 2013, the Court preliminarily approved the proposed settlement, preliminarily certified a class and subclasses for settlement purposes, appointed the named plaintiffs as Class Representatives, appointed lead counsel for the class, approved and directed the issuance of notice to the class, and referred the matter to the undersigned for a fairness hearing

to determine (a) whether the proposed settlement of the action on the terms and conditions set forth in the Settlement Agreement is fair, reasonable, and in the best interest of the Classes and Subclasses and should be finally approved by the Court; (b) whether the Class and Subclasses should be finally certified for settlement purposes; (c) whether the Action should be dismissed with prejudice pursuant to the terms of the Settlement; (d) whether Settling Plaintiffs should be bound by the release set forth in the Settlement

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