Pulcini v. Bally Total Fitness Corp. Modified on Denial of Rehearing - replaces opinion filed 11/5/04

Citation: Not availableDocket: 1-03-3501 Rel

Court: Appellate Court of Illinois; December 16, 2004; Illinois; State Appellate Court

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Nora Bucher and Krista Pulcini filed a lawsuit against Bally Total Fitness Corporation, alleging violations of the Physical Fitness Services Act and the Automatic Contract Renewal Act. The Circuit Court dismissed their complaint for failure to state a cause of action. However, the appellate court found that both plaintiffs presented valid claims under these acts. 

Pulcini's contract, signed on October 18, 1999, included a $957 membership fee with monthly payments of $8, and she opted for an automatic payment plan of $37.99 covering both dues and fees. The contract specified default conditions, stating that failure to pay within 30 days could lead to membership denial and forfeiture of down payments, and obligations remained regardless of club usage. Cancellation rights were limited to specific circumstances, including relocation, club closure, or member disability.

Bucher’s contract, signed on September 16, 2002, required a $2,130 membership fee with monthly payments of $63.99. It contained similar terms regarding defaults, cancellation, and automatic payments as Pulcini's contract. The court's decision to allow the appeal indicates potential grounds for further legal examination of the contracts and the adherence to relevant consumer protection laws.

Bucher provided Bally with her checking account information, allowing Bally to automatically withdraw monthly payments when funds exceeded the payment amount. The contract stipulated penalties for Bucher if her bank failed to make these payments. Bucher and Pulcini filed a lawsuit on March 24, 2003, aiming to represent a class of individuals in Illinois who entered into automatic payment renewable membership plans with Bally after March 24, 1998. They alleged that the contracts violated the Fitness Act by establishing an initial service term of three years and breached the Renewal Act due to automatic renewal provisions. Bally moved to dismiss the complaint for failing to state a cause of action, asserting that the contract actually provided for an initial term of one month, renewable monthly, which did not violate the Fitness Act or the Renewal Act. The trial court agreed, leading to a dismissal of the complaint.

On appeal, the review was conducted de novo, meaning the appellate court evaluated the dismissal without deference to the trial court's decision. The Fitness Act prohibits contracts for physical fitness services that require payment over three years and limits the initial service term to two years, allowing for optional yearly renewals at a reasonable consideration of at least 10% of the initial fee. Bally contended that its contracts were compliant because they specified a one-month initial term with monthly renewals. Plaintiffs argued Bally's interpretation failed to meet the 10% consideration requirement for renewals, but Bally claimed this point was waived since it wasn't raised in the trial court. Citing case law, Bally maintained that plaintiffs did not provide sufficient factual basis to support their argument in the complaint. The appellate court affirmed the dismissal under section 2-615 of the Code of Civil Procedure, emphasizing that it would only affirm if no facts could support a cause of action based on the pleadings.

Bally contends that the plaintiffs’ contracts impose membership renewal fees exceeding 10% of the initial membership price after a three-year term, which violates section 8(b) of the Fitness Act. Bally advocates for interpreting the contracts as having an initial one-year term with one-year renewals but fails to provide contractual support for this claim. The payment structure indicates that Bally charges a monthly renewal fee shortly after the membership begins. The Fitness Act mandates that renewal periods cannot exceed one year, but shorter periods are permissible; here, the contracts specify one-month renewal periods. The Act requires renewal prices to be 'reasonable consideration' of no less than 10% of the original membership price. Legislative history indicates that the Fitness Act was designed to prevent fitness centers from binding members to long-term contracts. If the original price covered multiple renewals, it effectively creates a long-term contract, undermining members' cancellation options. 

Specifics from the contracts reveal that Pulcini's initial one-month membership cost $957, with a renewal fee of $8, significantly under the 10% threshold, while Bucher's original cost of $2,130 had a renewal fee of $5, also below 10%. Thus, plaintiffs present a viable claim for violating the Fitness Act. Additionally, Bucher argues her contract breaches the Renewal Act, which stipulates that automatic renewal provisions must be clearly stated. If a contract fails to comply, the renewal provisions are unenforceable by the drafting party. Pulcini acknowledges her contract does not violate the Renewal Act since it predates its enactment. Bally asserts Bucher's contract lacks automatic renewal because payment is required each month. However, the contract indicates that non-payment can lead to default, granting Bally the right to deny access to its facilities.

The contract in question mandates automatic monthly payments from Bucher's checking account for a duration of 36 months, covering both membership fees and monthly dues. This arrangement allows Bally to withdraw funds without Bucher's action unless she actively cancels her membership, which illustrates a clear automatic renewal process. Bally contends that Bucher has not provided sufficient grounds for a violation of the Renewal Act, claiming it has not enforced the renewal provisions. However, each monthly withdrawal constitutes enforcement of this provision, despite Bucher's non-use of facilities. The contract imposes financial penalties should Bucher attempt to stop payments. Bally asserts compliance with the Renewal Act, arguing that the contract clearly states automatic renewal terms, although its legal team had previously overlooked this clarity. The court finds that Bucher's allegations could support a cause of action for a Renewal Act violation, as well as a potential violation of the Fitness Act, due to the low renewal pricing that effectively binds members to long-term contracts. Bucher's claim of insufficient clarity regarding automatic renewal is acknowledged as viable, while Pulcini's related claim is dismissed. The court affirms the dismissal of Pulcini's claim but reverses and remands other aspects for further proceedings.