Vaughn v. LA Fitness: Settlement Reached in Auto-Billing Class Action

In a trio of class action cases consolidated in Pennsylvania’s Eastern District in which the plaintiffs alleged that automatic credit card charges continued beyond the cancellation of a gym membership and that cancellation procedures were excessively onerous, the parties have agreed to terms whereby LA Fitness will provide the class members with combinations of a 45-day LA Fitness pass and a refund for the dues that were automatically charged after memberships were cancelled. See National Class Action Settlement and Release, Vaughn v. L.A. Fitness Int’l, LLC, No. 11-2644 (E.D. Penn. Mar. 13, 2013) (available here). This settlement is expected to influence other consumer class actions in which it is alleged that automatic credit card charges continued beyond the cancellation of a membership, and/or that cancellation procedures are unduly cumbersome.

Specifically excluded from the virtually nationwide settlement are California residents, likely because California has recently enacted among the strictest laws governing the cancellation of automatic monthly payments. Widely known as the “California Gym Cancellation Law,” the Health Studio Services Contract statute (Cal. Civil Code §§ 1812.80-1812.97) would likely have made approval of the Vaughn settlement vulnerable to choice of law doctrines. Also excluded are New Jersey residents, who are class members in a separate class action in which settlement has been reported to be imminent.

The Vaughn complaint, filed in Florida federal court, explained the swiftness with which new members could be signed up, and contrasted that with LA Fitness’ arduous and hard-to-find cancellation procedures: “[W]hile it takes minutes for LA Fitness to sign up a person for a monthly dues membership, it is virtually impossible for a person to cancel the membership and stop paying dues when they want to.” Complaint at ¶ 4, Vaughn v. L.A. Fitness Int’l, LLC, No. 11-0457 (M.D. Fla. Filed Mar. 4, 2011) (available here).

The crux of the allegations in Vaughn and the two other settled actions is that LA Fitness’ representation of a “monthly” contract was deceptive, because as a practical matter new members were obligated to pay dues for a minimum of three months, not merely one month – if they could even effectuate the labyrinthine cancellation procedures. Complaint at ¶¶ 5-7; 19-27. The cancellation procedure was thus designed to “extract dues” and frustrate cancellation, rather than facilitating members’ cancelling a membership they no longer wanted. Complaint at ¶ 7. Exemplifying a growing trend, the plaintiffs made considerable use of online forums in which LA Fitness customers frustrated by their cancellation experiences detailed their attempts to cancel. Complaint at ¶¶ 42-55.