Ruiz v. Bally Total Fitness Holding Corp.

Citation496 F.3d 1
Decision Date30 July 2007
Docket NumberNo. 06-2254.,06-2254.
PartiesGisselle RUIZ, Plaintiff, Appellant, v. BALLY TOTAL FITNESS HOLDING CORP. et al., Defendants, Appellees.
CourtU.S. Court of Appeals — First Circuit

John Roddy, with whom Gary Klein, Elizabeth Ryan, Shennan Kavanagh, and Roddy, Klein & Ryan were on brief, for appellant.

Norman T. Finkel, with whom William R. Klein, Schoenberg, Finkel, Newman & Rosenberg, LLC, Howard M. Cooper, Juliet A. Davison, Erica Tennyson, and Todd & Weld LLP were on brief, for appellees.

Before LIPEZ and NEWMAN,* Circuit Judges, and SELYA, Senior Circuit Judge.

SELYA, Senior Circuit Judge.

This appeal requires us to determine whether a health-club services contract conforms with various Massachusetts consumer protection statutes. After studying the pertinent contractual and statutory provisions, we find no nonconformity. Accordingly, we affirm the district court's dismissal of the action.

I. BACKGROUND

Because this appeal follows the granting of a motion to dismiss, see Fed. R.Civ.P. 12(b)(6), we rehearse the facts as elaborated in the operative pleading (here, the plaintiff's amended complaint). See Palmer v. Champion Mortg., 465 F.3d 24, 25 (1st Cir.2006). We recognize, however, that our obligation to approach the facts from this plaintiff-friendly vantage does not require us to credit "bald assertions, unsupportable conclusions, and `opprobrious epithets.'" Chongris v. Bd. of Appeals, 811 F.2d 36, 37 (1st Cir.1987) (quoting Snowden v. Hughes, 321 U.S. 1, 10, 64 S.Ct. 397, 88 L.Ed. 497 (1944)).

In March of 2004, plaintiff-appellant Gisselle Ruiz signed a contract for health-club services (the Contract) with Holiday Universal, Inc., a wholly-owned subsidiary of Bally Total Fitness Holding Corp.1 The Contract allowed the plaintiff access to one of Bally's facilities for 36 months in exchange for payment of a one-time membership fee of $1,565, followed by monthly dues of $8. Rather than pay the membership fee up front, the plaintiff chose to finance the sum (less a down payment of $150) over a 36-month period at an annual percentage rate of 14.75%. Under that arrangement, she was to pay Bally $48.88 per month (in addition to her monthly dues).

Although the Contract contained a multiplicity of provisions, we enumerate here only those that are directly relevant to our analysis. Under the Contract, the plaintiff was free to stop paying her monthly dues at any time by submitting written notice to Bally, with the understanding that she would then forfeit her right to use the health-club facilities. The plaintiff was not free to discontinue the deferred payments on the membership fee; refund of the membership fee could be triggered only by certain identified events (e.g., long-term disability or relocation to an area remote from any of Bally's locations). So long as the Contract remained in full force and effect, the plaintiff had the option, at the end of the initial 36-month period, to extend her membership from month to month by paying increased dues of $12 or $17 per month (depending upon the payment method that she elected). Finally, the Contract contained a provision specifying that Bally would not be liable for personal property that the plaintiff chose to bring to the club.

Sometime later in 2004 — the exact date is obscure — the plaintiff purported to cancel the Contract and requested that Bally refund the balance of her membership fee. Bally refused her request.

Undaunted, the plaintiff repaired to a Massachusetts state court and filed a putative class action. Her complaint contained a myriad of claims. Two of them comprise the focal point of this appeal: (i) that the Contract violated a provision of the Massachusetts Health Club Services Contracts Act (the HCSCA) prohibiting the required financing of a health-club contract for more than one month beyond the expiration of that contract, see Mass. Gen. Laws ch. 93, § 80; and (ii) that the Contract transgressed the HCSCA's prohibition on waiver of consumer claims, see id. Relatedly, the plaintiff alleged that these infractions also implicated the Commonwealth's general consumer protection statute. See Mass. Gen. Laws ch. 93A (Chapter 93A). The plaintiff sought damages for herself and for the putative class members, multiplied under Chapter 93A, see id. § 9(3) and the penalty-free opportunity for all class members to rescind their health-club contracts.

Bally removed the case to the federal district court under the diversity of citizenship statute. See 28 U.S.C. § 1332(a); see also id. §§ 1441(a), 1446. Shortly thereafter, it moved to dismiss, asserting among other things that the plaintiff lacked standing to pursue the action and that, in all events, the Contract did not offend the HCSCA. The district court agreed with these arguments and dismissed the action. See Ruiz v. Bally Total Fitness Holding Corp., 447 F.Supp.2d 23, 31 (D.Mass.2006). This timely appeal ensued.

II. ANALYSIS

We review the district court's dismissal for failure to state a claim de novo. See Arruda v. Sears, Roebuck & Co., 310 F.3d 13, 18 (1st Cir.2002). In that process we, like the district court, must assume the truth of all well-plead facts and give the plaintiff the benefit of all reasonable inferences therefrom. See Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.1999). We may consider not only the factual allegations of the amended complaint but also any matters fairly incorporated within that pleading. See In re Colonial Mortg. Bankers Corp., 324 F.3d 12, 15 (1st Cir. 2003). And, finally, because this is a diversity case, we must apply the substantive law of the forum state (here, Massachusetts). See Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 217 F.3d 8, 10 (1st Cir. 2000).

With this framework in place, we turn to an evaluation of the plaintiff's claims. In so doing, we bear in mind that we are not bound by the district court's decisional calculus but, rather, may affirm the decision below on any ground made manifest by the record. See United States v. Cabrera-Polo, 376 F.3d 29, 31 (1st Cir. 2004); InterGen N.V. v. Grina, 344 F.3d 134, 141 (1st Cir.2003).

A. Standing.

As an initial matter, we address the contention that the plaintiff lacks standing to sue under the relevant statutory provisions because she has not asserted any injury resulting from the alleged infractions. See Mass. Gen. Laws ch. 93, § 86 (providing a private right of action for any consumer who has "suffered any injury as a result of a violation [of the HCSCA]"); Mass. Gen. Laws ch. 93A, § 9(1) (providing "[a]ny person . . . who has been injured" by a practice declared unlawful under Chapter 93A with a private right of action). In the context of a Massachusetts consumer protection statute, the term "injury" has two components. In the first instance, it denotes "an invasion of a legally protected interest." Leardi v. Brown, 394 Mass. 151, 474 N.E.2d 1094, 1101 (1985); see Aspinall v. Philip Morris Cos., 442 Mass. 381, 813 N.E.2d 476, 490-91 (2004). To be actionable, however, that invasion must cause a loss (either economic or noneconomic) to the holder of the legally protected interest. See Hershenow v. Enter. Rent-a-Car Co., 445 Mass. 790, 840 N.E.2d 526, 532-35 (2006).

The plaintiff's primary claim of injury runs along the following lines. If, as she contends, certain provisions of the Contract violate the HCSCA, the Contract is unenforceable. See Mass. Gen. Laws ch. 93, § 85 ("Any contract for health club services which does not comply with the applicable provisions of this chapter shall be void and unenforceable as contrary to public policy."). Yet, Bally refused to honor her request to cancel the Contract. Thus, the enduring obligation to make the subsequent payments called for by the Contract constitutes a cognizable injury.

We agree with the premise on which this rationale rests. While the facts relating to the plaintiff's attempted cancellation are as yet undeveloped, the plaintiff is entitled, on a Rule 12(b)(6) motion to dismiss, to all reasonable inferences from the facts alleged in her amended complaint. See Rogan, 175 F.3d at 77. Here, it plausibly may be inferred from the factual averments in the amended complaint that the plaintiff tried to cancel the Contract because she believed that it did not conform to the requirements of Massachusetts law. If that belief proves to be well-founded — that is, if the Contract is found to violate the plaintiff's rights under the HCSCA — that violation would necessarily constitute an invasion of a legally protected interest. See Leardi, 474 N.E.2d at 1101. In that event, the plaintiff would be facing a causally related economic loss in the form of the obligation to make future payments under the Contract.

In an effort to parry this thrust, Bally counters with a pair of Massachusetts cases. First, it laments that, under the plaintiff's theory of injury, any consumer who has made payments under a contract alleged to violate the HCSCA would have standing to sue. This result, Bally asserts, would render the statutory injury requirement meaningless.

This lamentation relies heavily on an unpublished trial court decision allowing a motion for summary judgment against a plaintiff who alleged violations of the HCSCA. See Albats v. Town Sports Int'l, Inc., No.2002-04910, slip op. (Mass.Super.Ct. May 10, 2004).2 In that case, the only injury claimed by the plaintiff was that she had lost certain protections under the law. Id. at 5-6, 9. In concluding that the plaintiff had not alleged an adequate injury, the Albats court emphasized that the plaintiff had continued to use the health-club facility after filing her initial complaint. Id. at 7. Moreover, she had not manifested a desire to be released from her contractual obligations. Id.

Here, however, the facts are materially different. The plaintiff in this case, unlike the plaintiff in Albats, attempted to cancel the Contract before filing suit. Although sh...

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