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06.28.17

Fitness Center to Pay Millions to Settle Lawsuit Involving Gift Certificates

SoulCycle Inc., a New York City-based high-end fitness company with studios in several U.S. states, agreed June 16 in California Federal Court to pay up to $9.2 million to settle a class action lawsuit, reports Law360.

The legal action stems from allegations that the business was selling illegally expiring gift certificates in violation of the Federal Credit Card Accountability Responsibility and Disclosure Act, the Electronic Funds Transfer Act and the California Consumer Protection Statute, according to Berger & Hipskind LLP, the law firm representing the plaintiffs.

In a “relentless effort to maximize its profits,” SoulCycle required customers to purchase exercise sessions using gift certificates, or what the company called “series certificates,” instead of allowing customers to use cash or payment cards to purchase exercise sessions, according to a court document. The certificates had “unreasonably short expiration periods”—as few as 30 days—and customers who couldn’t attend the number of exercise sessions on their certificates before the expiration date forfeited the unused balance. In the first nine months of 2015, SoulCycle customers purchased $99 million of the company’s certificates and the forfeiture of customers’ certificates because they expired contributed to SoulCycle earning $25 million in net income, the document alleges.

When the class action was filed in 2015, SoulCycle argued that consumers were not buying gift certificates but something similar to a ticket to an event because the certificate reserved a bike for a particular class, at a particular time, at a specific place and within a specified time period. A California federal judge decided in early 2016 that SoulCycle was selling gift certificates subject to the CARD Act and state gift card laws.

As part of the settlement, customers with unused, expired gift certificates will receive up to two SoulCycle classes, which cost $30-$40 per session, according to Law360. Or, customers can receive up to $50 by submitting a claim form.

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