Ruiz v. Bally Total Fitness Holding Corp.

• Decision Date: 17 July 2006
• Docket Number: Civil Action No. 05-11052-NMG.
• Citation: 447 F.Supp.2d 23
• Parties: Gisselle RUIZ, Individually and on behalf of all others similarly situated, Plaintiff, v. BALLY TOTAL FITNESS HOLDING CORP. and Holiday Universal, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

447 F.Supp.2d 23

Gisselle RUIZ, Individually and on behalf of all others similarly situated, Plaintiff, v. BALLY TOTAL FITNESS HOLDING CORP. and Holiday Universal, Inc., Defendants.

Civil Action No. 05-11052-NMG.

United States District Court, D. Massachusetts.

July 17, 2006.

COPYRIGHT MATERIAL OMITTED

John J. Roddy, Elizabeth A. Ryan, Roddy, Klein and Ryan, Boston, MA, for Plaintiff.

Howard M. Cooper, Juliet A. Davison, Erica Tennyson, Todd & Weld, Boston, MA, Norman T. Finkel, William R. Klein, Young, Finkel & Silbert Ltd., Chicago, IL, for Defendants.

MEMORANDUM & ORDER

GORTON, District Judge.

The named plaintiff, Gisselle Ruiz ("Ruiz"), brings a putative class action lawsuit on behalf of herself and similarly situated Massachusetts residents against the defendants, Bally Total Fitness Holding Corp. ("Bally") and Holiday Universal, Inc. ("Holiday"). Defendants removed the case from state court on the basis of diversity jurisdiction and have filed a motion to dismiss the complaint for failure to state claims upon which relief can be granted and lack of personal jurisdiction over Bally.

I. Background

Ruiz alleges that Bally and Holiday are affiliated entities responsible for a health club membership contract that she entered into on or about March 11, 2004 (hereinafter, "the Contract"). Under the terms of the Contract, Ruiz was responsible for 1) a membership fee of $1,565 payable with financing at a rate of 14.75% per year for 36 months (hereinafter, "the Membership Fee") and 2) dues of $8 per month. Ruiz's membership was described as "renewable (initial term is one month)". Absent special circumstances, cancellation within 36 months discharged her monthly payment of $8 but did not alter her responsibility for paying the entire Membership Fee. The Contract also contained a provision limiting the liability of the health club "for the loss or theft of, or damage to, the personal property of members or guests".

Ruiz contends that the foregoing provisions of the Contract constitute violations of common law and various Massachusetts consumer protection laws, including the Massachusetts Health Club Services Contracts Act, Mass. Gen. Laws ch. 93, § 78 et seq. (hereinafter, "the Health Club Act"), the Massachusetts Consumer Protection Act, Mass. Gen. Laws ch. 93A (hereinafter, "Chapter 93A"), and Mass. Gen. Laws ch. 93, § 101, which prohibits the waiver of consumer rights provided by Massachusetts statutes.

II. Motion to Dismiss

Defendants have moved to dismiss Ruiz's class action complaint on the grounds that 1) the Court lacks personal jurisdiction over Bally and 2) plaintiff has failed to state claims upon which relief can be granted. The Court first addresses the issue of personal jurisdiction.

A. Legal Standard

A court may not dismiss a complaint for failure to state a claim under Fed.R.Civ.P. 12(b)(6) "unless it appears, beyond doubt, that the [p]laintiff can prove no set of facts in support of his claim which would entitle him to relief." Judge v. City of Lowell, 160 F.3d 67, 72 (1st Cir.1998) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In considering the merits of a motion to dismiss, the court may look only to the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the complaint and matters of which judicial notice can be taken. Nollet v. Justices of the Trial Court of Mass., 83 F.Supp.2d 204, 208 (D.Mass.2000) aff'd, 248 F.3d 1127 (1st Cir.2000). Although a court must accept, all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor, Langadinos v. American Airlines, Inc., 199 F.3d 68, 69 (1st Cir.2000), it need not credit bald assertions or unsupportable conclusions, Banco Santander de Puerto Rico v. Lopez-Stubbe (In re Colonial Mortgage Bankers Corp.), 324 F.3d 12, 15 (1st Cir. 2003).

B. Lack of Personal Jurisdiction

Where personal jurisdiction is contested, the plaintiff may not rest upon the allegations of the complaint but must proffer evidence of specific facts in support of jurisdiction. See Foster-Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 145 (1st Cir.1995) (citation omitted). The court is to accept such evidence "at face value". Id.

Here, defendants do not challenge the assertion of Massachusetts jurisdiction over Holiday but oppose any exercise of jurisdiction over Holiday's parent, Bally. Ruiz must show, therefore, that Bally is subject to the jurisdiction of this Court by virtue of Bally's presence in the Commonwealth or connections therewith in satisfaction of the state long-arm statute and constitutional due process. Andresen v. Diorio, 349 F.3d 8, 12 (1st Cir.2003) (citation omitted).

A court's assertion of personal jurisdiction over a wholly owned subsidiary does not automatically establish jurisdiction over that subsidiary's parent. See, e.g., Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 781 n. 13, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984); Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902, 905 (1st Cir.1980) (citing cases). "There is a presumption of corporate separateness that must be overcome by clear evidence that the parent in fact controls the activities of the subsidiary". Escude Cruz, 619 F.2d at 905 (citations omitted).

The First Circuit Court of Appeals has indicated that personal jurisdiction over parent companies "invariably" depends upon the finding of a "plus" factor, "something beyond the subsidiary's mere presence within the bosom of the corporate family". Donatelli v. Nat'l Hockey League, 893 F.2d 459, 465-66 (1st Cir. 1990). A plus factor of that sort exists 1) where the association between parent and subsidiary demonstrates an agency relationship between the two, 2) where the exercise of control by the parent over the subsidiary goes beyond that "degree of control innately inherent in the family relationship" or 3) where the subsidiary is "merely an empty shell". Id. at 466 (citations omitted). In all such cases, the parent's relationship to the subsidiary implies that it has availed itself of the benefits of the forum state where the subsidiary is subject to personal jurisdiction.

Ruiz alleges that Bally is an "owner" and "operator" of health clubs in Massachusetts and that the Contract which she entered into in Massachusetts is a form agreement created by Bally. She supports those allegations by referring to representations made by Bally 1) in its 2005 Form 10-K annual report filed with the Securities Exchange Commission and 2) on its website. Bally's 10-K, for example, states that it, along with its subsidiaries, "operate[s]" fitness centers in numerous states. The 10-K also describes the kinds of membership plans that Bally offers. Its website indicates that approximately 10 health clubs are operated under the aegis of Bally in Massachusetts. Ruiz contends that those representations not only support a finding of personal jurisdiction over Bally but also that Bally is subject to the Health Club Act as a "seller" which "operates a health club or enters into contracts for health club services". Mass. Gen. Laws ch. 93, § 78.

Bally responds that plaintiffs evidence is insufficient. It notes that because it is a public company whose wholly owned subsidiaries are not themselves publicly traded, its 10-K must present "consolidated" data that should not be deemed to constitute any special degree of control by Bally over its subsidiaries. Furthermore, Bally contends that the website does not demonstrate the operation of Massachusetts health clubs by Bally. Such clubs, rather, are operated by defendant Holiday under the trade name "Bally Total Fitness".

In consideration of 1) the requirement that Ruiz's evidence of jurisdiction be accepted at face value, 2) the fact that Bally has held itself out as a company operating in Massachusetts and 3) the fact that the dispute in this case concerns a form membership contract that, in all likelihood, was developed by the parent corporation and not Holiday, the Court concludes that plaintiff has adequately demonstrated a basis for this Court's exercise of personal jurisdiction over Bally.

C. Merits

1. Massachusetts Health Club Act

The thrust of plaintiffs claim is that the Contract violates § 80 of the Health Club Act which, in pertinent part, forbids health club membership contracts that:

1) exceed a 36-month term 2) "require payments or financing by the buyer over a period that extends more than one month beyond the expiration of the contract", or

3) "contain any provisions whereby the buyer agrees not to assert against the seller ... any claim or defense arising out of the health club services contract or the buyer's activities at the club".

Section 86 of the Health Club Act authorizes private actions by "[a]ny buyer who has suffered an injury as a result of a violation of [the act]".

In their motion to dismiss, defendants contend that the Contract does not violate § 80 and that, in any event, Ruiz lacks standing to sue under the statute because she has not suffered any injury. Furthermore, defendants aver that Bally is not subject to the Health Club Act because it is not a "seller" whose conduct is subject to regulation thereunder. Even though Bally probably qualifies as a "seller" under the statute because of the representations it made (discussed within the section on personal jurisdiction, above), the Court is persuaded by defendants' other contentions that the Health Club Act claim should be dismissed.

Interpretation of an unambiguous contract is a matter of law and may, therefore, be done at the motion to dismiss stage. See Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 761 N.E.2d 946, 951 (2002) (citations omitted). In determining the meaning of any particular contractual term, a court is to look to the agreement as a whole as well as to the context of its creation. See MCI WorldCom Commc'ns, Inc. v. Dep't of Telecomms. & Energy, 442 Mass. 103, 810...