By Failing to Honor Cancellation Requests, TSI Treated Members Like Guests At “Hotel California”: “You Can Check Out Any Time You Like, But You Can Never Leave”
New York Attorney General Letitia James today filed a lawsuit against the parent company of New York Sports Clubs (NYSC) and Lucille Roberts for unlawfully charging monthly dues to members and for partaking in a variety of illegal and fraudulent practices involving consumers’ cancellation rights. In her proceeding against Town Sports International Holdings, Inc. (TSI Holdings) and Town Sports International, LLC (TSI LLC) — collectively TSI — Attorney General James alleges that the company violated the law by continuing to charge consumers dues and fees, despite the fact that all health clubs and gyms in the state were ordered closed after the coronavirus disease 2019 (COVID-19) pandemic began to spread widely across New York in March. After Attorney General James sent the company a letter in early April, stating she would take necessary steps to protect consumers, TSI implemented a freeze of membership fees and dues on April 8, 2020 and promised consumers they would provide credits in the future, but, on or around September 1, 2020, the company unlawfully resumed charging consumers and never provided them with the promised credits, even charging some consumers who are members of clubs that have yet to open. In connection with today’s proceeding, Attorney General James also seeks a temporary restraining order in an effort to immediately block TSI from continuing to charge any dues or fines to New York members who submitted cancellation requests or charging any dues or fines to members in New York whose primary — or home — gym remains closed. The temporary order is subject to court approval.
“Since the COVID-19 pandemic began, New York Sports Clubs and Lucille Roberts have done everything possible to flout their obligations and take advantage of members,” said Attorney General James. “Time and again, these gyms have illegally sought to lift up their precarious financial state at their members’ expenses, even though many of these very members were simultaneously being crushed under the weight of financial hardships. Today’s suit aims to end TSI’s illegal efforts to run its members ragged, simply to spot its bottom line.”
From March 16, 2020 until August 24, 2020, all gyms in New York were closed by executive order due to the COVID-19 pandemic. But, unlike most gyms in New York that automatically froze memberships at no cost to members until gyms reopened, TSI did not automatically freeze memberships and didn’t even do so when consumers asked the company to do so. When consumers contacted TSI to request a freeze or cancellation — in the rare circumstance where they got through — TSI provided differing and often false information that prevented consumers from cancelling, such as telling consumers that cancellations were subject to 45-day advance notice requirements and subject to $10 or $15 cancellation processing fees.
Despite all New York clubs being closed in March, TSI went ahead and charged its members April dues. In early April, Attorney General James sent a letter to TSI, reminding the company that New York’s Health Club Law authorizes gym members to cancel their membership when services are no longer available due to a substantial change in operation. On April 8, 2020, TSI announced that it had implemented a membership freeze at no cost to members and promised that “members will receive additional days of membership access equal to the number of days paid for while the clubs were closed in your area.” TSI also advised members that they could cancel their membership online and receive an email confirmation. Yet, despite these commitments, after some TSI clubs reopened on August 24, 2020, the company went ahead, on or about September 1, 2020, and — without notice to members — charged September dues, even charging those consumers who attempted to cancel their memberships or whose home clubs remained closed, thus potentially risking consumer safety by forcing many members to take public transportation to use an alternate gym at a location further away from their homes.
On September 14, 2020, TSI LLC and other subsidiaries of TSI Holdings filed petitions for bankruptcy; TSI Holdings has not filed for bankruptcy. That same day, TSI filed a motion to reject certain leases, including leases for nine NYSC locations in New York, for which TSI LLC has already relinquished the keys. There is no indication that TSI exempted members from these nine permanently closed gyms from being charged September dues or that they have contacted members about cancelling their memberships before October dues are charged.
To date, TSI has refused to refund member dues for the time period from March 16, 2020 to April 8, 2020, when members were charged dues despite the fact that all NYSC locations were closed. And, contrary to the commitments made on April 8, 2020, TSI does not appear to have given any members credits for the March to April time period when facilities began to reopen in August.
In today’s suit, Attorney General James charges TSI with violating numerous New York state laws by charging consumers membership dues for services not being offered; failing to issue credits as promised; imposing unlawful fees and advance notice requirements on cancellation requests; misleading consumers about their rights to cancel their memberships; and refusing to honor cancellation requests.
Attorney General James’ suit seeks to enjoin TSI from violating New York law, including, but not limited to, charging consumers dues for clubs that have not yet reopened, failing to provide credits for the period from March 16, 2020 through April 8, 2020, and failing to honor consumers’ statutory rights to cancel their contracts; restitution for New York consumers; disgorgement; costs; penalties; and the transfer of the $250,000 bond TSI posted pursuant to the Health Club Law to the OAG.
New York’s Health Club Law authorizes gym members to cancel their membership under certain circumstances, including “after the services are no longer available or substantially available as provided in the contract because of the [gym’s] permanent discontinuance of operation or substantial change in operation,” and requires gym owners to provide prorated refunds for such cancellations within 15 days. Additionally, the law further prohibits misrepresentations about consumers’ cancellation rights. Finally, the Health Club Law requires that health clubs and gyms post a bond, letter of credit, or certificate of deposit payable in favor of the people of the state of New York for the benefit of any member injured in the event that the gym goes out of business prior to the expiration of the member’s contract, or otherwise fails to provide a refund after the member cancels in accordance with the Health Club Law.
TSI owns and operates nearly 100 gyms and fitness clubs in New York state doing business under the brand names New York Sports Clubs and Lucille Roberts.