JASON ROTHMAN V. EQUINOX HOLDINGS, INC.
Case No. 2:20-cv-09760-CAS-MRWx
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
January 13, 2021
CHRISTINA A. SNYDER
CIVIL MINUTES - GENERAL ‘O’
| Catherine Jeang | Not Present | N/A |
| Deputy Clerk | Court Reporter / Recorder | Tape No. |
Attorneys Present for Plaintiffs: Not Present
Attorneys Present for Defendants: Not Present
Proceedings: (IN CHAMBERS) - DEFENDANTS MOTION TO DISMISS (Dkt. [8], filed October 30, 2020)
I. INTRODUCTION
The Court finds this motion appropriate for decision without oral argument.
On August 7, 2020, plaintiff Jason Rothman filed a class action complaint in Los Angeles Superior Court against defendant Equinox Holdings, Inc. and Does 1 through 100. Dkt. 1-1 (Compl.). Defendant removed the action to this Court on October 23, 2020. Dkt. 1. Plaintiff brings suit on behalf of himself and all others similarly situated who are members of defendant‘s Equinox branded fitness clubs (the Equinox clubs), located in California, who did not receive a refund of unused membership dues for any period during which the Equinox clubs were closed, from March 2020 to present. Compl. ¶ 28. The gravamen of plaintiff‘s complaint is that defendant made false and misleading representations in its membership agreement regarding the issuance of refunds for prepaid membership dues in the event of the closure of one or more of its Equinox clubs. Id. ¶¶ 4-6. In particular, plaintiff asserts claims for: (1) violation of the Consumer Legal Remedies Act,
Having carefully considered the parties’ arguments, the Court finds and concludes as follows.
II. BACKGROUND
Plaintiff alleges the following facts.
A. The Parties
Plaintiff Rothman is an individual member of defendant‘s Glendale, California Equinox club. Compl. ¶ 11. Plaintiff alleges that, in exchange for access to the club, he pays defendant monthly membership dues of $169.00. Id.
Defendant Equinox Holdings, Inc. is a Delaware corporation, headquartered in New York City, that—through subsidiary clubs—provides fitness services at Equinox clubs on a membership basis. Id. ¶ 13. Defendant currently operates more than 100 subsidiary Equinox clubs in the United States, which it advertises as high-end gym[s] that offer a range of personalized services, including personal training sessions, curated nutrition and regeneration programs, private Pilates sessions, and signature group fitness classes. Id. ¶ 15. Plaintiff alleges that defendant directs all operations of the subsidiary Equinox clubs, including membership offerings and dues, refund policies, and gift card offerings. Id. ¶ 16. The Doe defendants are allegedly in some manner proximately responsible for plaintiff‘s injuries. Compl. ¶ 14.
B. Membership Terms
Plaintiff alleges that all members must enter into an Equinox Membership Agreement with defendant and prepay their monthly membership dues in order to use the Equinox clubs. Id. ¶¶ 18, 19. The complaint alleges that Equinox club members are generally required to commit to a twelve-month membership term, which thereafter renews on a month-to-month basis until terminated with 30 days’ notice. Id. ¶ 18. Plaintiff alleges that membership dues are automatically charged on a fixed date each month, via a periodic credit card charge or electronic funds transfer from a bank account. Id. ¶ 3.
In deciding whether to make payments on an installment basis, Buyer should be aware that if the Club closes, although the Club will remain legally liable to Buyer for a refund, Buyer may risk losing his or her money if the Club is unable to meet its financial obligations to Members.
Id. Plaintiff alleges that, through that representation, Defendants warranted and advertised that members would receive refunds if the Equinox clubs closed. Id. Defendant allegedly knew or should have known that stated refund policy was misleading because defendant do[es] not provide such refunds. Id. ¶¶ 41, 51. Plaintiff further alleges that he and other members of the class were among the intended targets of defendant‘s representations regarding its refund policy and necessarily and reasonably relied on defendants statements regarding the refund policy contained in the Membership Agreement. Id. ¶ 42.
C. Closure Due to COVID-19
Plaintiff alleges that on March 16, 2020, defendants announced that all Equinox clubs in California would be closed indefinitely, effective March 17, 2020, due to the impact of the COVID-19 pandemic in California. Id. ¶ 5. Plaintiff alleges that on March 19, 2020, California Governor Gavin Newsom issued Executive Order N-33-20 (the Stay at Home Order), which required all gyms and fitness facilities to close until further notice and remained in effect until June, 2020. Id. ¶ 22.
Plaintiff alleges that in response to the closures, defendant announced that all Equinox Memberships would be ‘frozen’ as of the day the clubs closed, such that no additional payments would be required until the Equinox clubs reopened. Id. ¶ 5. Plaintiff further alleges that defendant‘s membership freeze did not include a plan[] to provide refunds for the membership dues members had prepaid for use of the Equinox clubs in March, 2020, which included dues for periods during which [the Equinox clubs] were closed. Id. Plaintiff averts that, under the terms of the Equinox Membership agreement, he and other members were entitled to a refund for any portion of their membership dues during which the [Equinox clubs] were closed but that defendant did not provide any monetary refund as they were required and as was previously represented under that
Plaintiff alleges that defendant would only issue a gift card for future goods and services as compensation for the period during which the club was closed, instead of a monetary refund. Id. ¶ 25. The gift cards issued by defendant on June 16, 2020 carried an expiration date of November 19, 2020, which plaintiff alleges is a violation of
With respect to his own membership, plaintiff alleges that he had prepaid his March membership dues at the time that the Equinox clubs were closed, and that [d]efendants did not refund the portion of [p]laintiff‘s March monthly membership dues covering the period during which the Equinox clubs were closed. Id. ¶ 12. Plaintiff further alleges that, in lieu of a refund, defendant provided him with a gift card for the amount of $84.19 that can be used at Defendants’ businesses but may not be used for future membership dues, and which carried an expiration date of November 19, 2020. Id.
III. LEGAL STANDARD
A motion pursuant to
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all material allegations in the complaint, as well as all reasonable inferences to be drawn from them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, a court considering a motion to dismiss can
Unless a court converts a Rule 12(b)(6) motion into a motion for summary judgment, a court cannot consider material outside of the complaint (e.g., facts presented in briefs, affidavits, or discovery materials). In re American Cont‘l Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev‘d on other grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court may, however, consider exhibits submitted with or alleged in the complaint and matters that may be judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).
In addition,
As a general rule, leave to amend a complaint which has been dismissed should be freely granted.
IV. DISCUSSION
Plaintiff alleges violations of the Consumer Legal Remedies Act,
A. Standing pursuant to the CLRA, UCL, and FAL
As a threshold matter, plaintiff must establish statutory standing to bring claims for violations of the CLRA, FAL, and UCL. To establish standing under the UCL and FAL, a plaintiff must demonstrate that he suffered injury in fact and has lost money or property as a result of the unfair competition.
A plaintiff seeking to establish statutory standing pursuant to the CLRA must likewise allege that she relied on the defendant‘s alleged misrepresentation. Coleman-Anacleto v. Samsung Elecs. Am., Inc., No. 16-CV-02941-LHK, 2016 WL 4729302, at *10 (N.D. Cal. Sept. 12, 2016) (citing Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1367 (2010) (holding that plaintiff‘s CLRA claim failed because plaintiff failed to allege facts showing that he relied on any representation by defendant)).
Here, other than plaintiff‘s claim under the UCL‘s unlawful prong based on defendant‘s alleged violation of
Defendant argues that plaintiff lacks statutory standing to assert his claims based on an alleged misrepresentation or omission pursuant to the UCL, FAL, and CLRA here because plaintiff‘s complaint does not allege actual reliance. Specifically, defendant argues that the complaint does not contain any non-conclusory allegation that Plaintiff actually read and relied upon the refund language before purchasing his Equinox club membership. Reply at 11; see also Mot. at 11-12. In opposition, plaintiff appears to contend both that he has sufficiently pled that he individually relied on and was deceived by the refund guarantee and that actual reliance may be inferred in this case because
First, a careful reading of the complaint reveals that plaintiff does not allege that he saw or heard any statements, contract terms, advertising, or other representations by defendant regarding defendant‘s refund policy before purchasing his Equinox club membership. See generally Compl. Plaintiff identifies only a single alleged affirmative representation in the complaint: the provision of the Equinox Membership Agreement that allegedly provides as follows:
In deciding whether to make payments on an installment basis, Buyer should be aware that if the Club closes, although the Club will remain legally liable to Buyer for a refund, Buyer may risk losing his or her money if the Club is unable to meet its financial obligations to Members.
Compl. ¶ 20. However, plaintiff does not allege that he saw, read, or was informed of this statement or otherwise relied on it before deciding to purchase his Equinox club membership. See Phillips v. Apple Inc., No. 15-CV-04879-LHK, 2016 WL 1579693, at *7 (N.D. Cal. Apr. 19, 2016) (finding no reliance where plaintiffs alleged that a misleading statement was posted to defendant‘s website, but failed to plead that they read or relied on this statement when choosing to download and use defendant‘s software); Low v. LinkedIn Corp., 900 F. Supp. 2d 1010, 1027 (N.D. Cal. 2012) (dismissing on reliance grounds where complaint described the privacy policy at issue, but failed to allege that plaintiffs saw or read it); accord Coleman-Anacleto, 2016 WL 4729302, at *11. Moreover, it is not enough to ‘receive’ a misrepresentation in a document; a plaintiff must see, read, or hear the alleged misrepresentation and rely on it. Graham v. VCA Antech, Inc., No. 2:14-CV-08614-CAS-JC, 2016 WL 5958252, at *5 (C.D. Cal. Sept. 12, 2016), aff‘d sub nom. Graham v. VCA Animal Hosps., Inc., 729 F. App‘x 537 (9th Cir. 2018).
Although plaintiff‘s opposition briefing argues that he has pleaded injury-in fact by pleading that he viewed and relied upon Defendant‘s refund guarantee and that the complaint alleges plaintiff relied on Defendant‘s misrepresentations when deciding whether to purchase the membership Agreement, see Opp‘n at 2, 5-6, no such allegations appear on the face of his complaint. See generally, Compl. To the contrary, plaintiff‘s only allegation that he relied on defendant‘s representation is a statement that Consumers, including plaintiff and members of the Class, necessarily and reasonably relied on Defendant‘s statements regarding the Membership Agreement‘s refund policy. Id. ¶¶ 42, 77. That conclusory allegation, which specifies neither when—if at all—plaintiff viewed
Moreover, to the extent that plaintiff contends he is entitled to an inference of reliance based on his allegation that the alleged misrepresentation is material because the reasonable consumer would be misled into purchasing from Equinox in reliance on the refund guarantee, he is mistaken. Opp‘n at 5. Although the California Supreme Court has observed that an inference of reliance arises wherever there is a showing that a misrepresentation was material, the named plaintiff in a class action lawsuit is nevertheless required to plead and prove that the defendant‘s misrepresentations were an immediate cause of the injury-causing conduct. In re Tobacco II Cases, 26 Cal. 4th at 328; see also In re iPhone Application Litig., 6 F. Supp. 3d at 1026 (explaining that Tobacco II does not stand for the proposition that [p]laintiffs can claim to have relied on misrepresentations they never saw and therefore concluding that an inference of reliance cannot arise from misrepresentations [p]laintiffs did not see.). In limited circumstances, where the misrepresentations at issue are part of an extensive and long-term advertising campaign, Tobacco II holds that a plaintiff may be excused from the require[ment] to necessarily plead and prove individualized reliance on specific misrepresentations or false statements. Id. No such extensive and long-term advertising campaign is at issue here. Accordingly, plaintiff is not entitled to an inference that he relied on defendant‘s statements—however material—absent an allegation that he actually viewed those statements in advance of his membership purchase. See e.g. Rojas-Lozano v. Google, Inc., 159 F. Supp. 3d 1101, 1114 (N.D. Cal. 2016) (plaintiff who failed to allege what she saw, what she believed as a result, [or] how knowledge would impact her behavior not entitled to inference of reliance).
Because plaintiff has not adequately alleged actual reliance upon any representation or omission by defendant, plaintiff has failed to allege statutory standing for each of his
B. Remaining UCL Claim
As noted above, plaintiff further alleges a claim pursuant to the UCL‘s unlawful prong based on defendant‘s alleged violations of the CLRA, the FAL, and
Here, because the Court finds that plaintiff‘s CLRA and FAL claims do not withstand defendant‘s motion to dismiss the complaint, plaintiff has not pled unlawful conduct pursuant to those statutes to serve as the basis of a claim under the UCL‘s unlawful prong. Accordingly, plaintiff does not state a claim under the UCL‘s unlawful prong for violation of the CLRA or FAL. See e.g. Rice v. Sunbeam Prods., Inc., No. CV 12-7923-CAS-AJWx, 2013 WL 146270, at *8 (C.D. Cal. Jan. 7, 2013).
Defendant argues that plaintiff‘s claim pursuant to the UCL‘s unlawful prong premised on violation of § 1749.5 also fails to state a claim because Equinox did not ‘sell’ Plaintiff a ‘gift certificate’ under the plain meaning of the statute. Mot. at 12. As relevant here, § 1749.5 makes it unlawful for any person or entity to sell a gift certificate to a purchaser that contains [...] an expiration date, but does not explicitly define the term
In opposition, plaintiff argues that he has sufficiently alleged that the credit issued by defendant is a gift certificate that falls within the meaning of § 1749.5 both because he alleges that he effectively purchased the credit and because it is possible to gift the credit. Specifically, plaintiff argues that when Plaintiff‘s cash refund was converted to a gift card, Plaintiff effectively purchased it for value that matched that of the unusable portion of Plaintiff‘s membership payment. Opp‘n at 20. Plaintiff further argues that because the ‘credit’ allows for the purchase of independent contractor services and those services can be gifted to a member‘s guests, the credit is a ‘gift certificate’ under California law. Id. at 21. In support of his position, plaintiff cites to Cody v. SoulCycle, Inc., a case where the defendant indoor cycling studio sought to dismiss a UCL claim founded on a violation of § 1749.5 on the grounds that its ‘class credits’ did not qualify as a gift certificate because they were not purchased or presented as a gift. No. CV 15-6457-GHK-JEMx, 2016 WL 4771392, at *9 (C.D. Cal. Jan. 11, 2016). The court found that argument unavailing in
Here, the Court concludes that plaintiff has sufficiently pled that the credit he received from defendant is a gift certificate purchased for value that carries an unlawful expiration date. Specifically, plaintiff pleads that defendant issued him a gift card in an amount equivalent to the $84.19 portion of Plaintiff‘s March monthly membership dues that were unused due to the Equinox gym closures, which suggests that plaintiff‘s credit was not issued as a gratuity, but rather was purchased for value with his unused membership dues.4 Compl. ¶ 12. The complaint alleges that plaintiff‘s gift card carried an expiration date of November 19, 2020—a date which has now passed. See id. In addition, plaintiff has sufficiently pled that $84.19 gift card is capable of being redeemed for plaintiff or for another individual of plaintiff‘s choosing such that it falls within the scope of gift certificates subject to § 1749.5. Notably, plaintiff pleads throughout his complaint that the credit he received was in the form of a gift card, a term which itself suggests that the credit is capable of being gifted and allowing the recipient to redeem the value, and which the Court must accept as true for purposes of a motion to dismiss. See e.g Gift Card Definition, MIRIAM-WEBSTER.COM, https://www.merriam-webster.com/dictionary/gift%20card (last visited January 11, 2021) (defining gift card as a card entitling the recipient to receive goods or services of a specified value from the issuer). Moreover, the Equinox Membership Agreement—upon which the complaint necessarily relies—provides that members are permitted to invite guests into the Equinox club and to acquire services of independent contractors working within the Equinox club for their guests, which could reasonably be inferred to include fitness instruction services for which plaintiff‘s gift card is redeemable. Dkt. 8-1 at 4; see also Cody, 2016 WL 4771392 at *9. The Court therefore concludes that plaintiff has pled a violation of § 1749.5 that is sufficient to support a claim for violation of the UCL‘s unlawful prong.
C. Punitive Damages
Defendant seeks dismissal of plaintiff‘s prayer for punitive damages, arguing both that plaintiff has not alleged individual willful and malicious conduct that would support an award of punitive damages pursuant to
Accordingly, the Court GRANTS as unopposed defendant‘s motion to dismiss plaintiff‘s prayer for punitive damages, with leave to amend.
V. CONCLUSION
In accordance with the foregoing, the Court orders as follows:
- The Court GRANTS defendant‘s motion to dismiss as to Claims 1, 2, 4, and 5 of the complaint, with leave to amend.
- The Court GRANTS IN PART defendant‘s motion to dismiss as to Claim 3, to the extent that plaintiff‘s claim rests on a violation of the CLRA or FAL, with leave to amend. The motion is DENIED IN PART, to the extent that Claim 3 rests on violation of § 1749.5.
- The Court GRANTS as unopposed defendant‘s motion to dismiss plaintiff‘s prayer for punitive damages, with leave to amend.
IT IS SO ORDERED.
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