New Jersey Appellate Division Affirms Class Certification of Consumer Fraud Claims in Class Action Against Retro Fitness Related to Cancellation Policy

Poulos LoPiccolo PC, along with The Wolf Law Firm LLC and Jones Wolf & Kapisi, LLC, successfully argued that the New Jersey Superior Court correctly certified a class action the firms brought against Retro Fitness, its franchises and ABC Financial Services Company related to their violations of the New Jersey Consumer Fraud Act (the “CFA”) for engaging in unconscionable commercial practices in charging members monthly dues or annual fees even after the member notified Retro of their desire to cancel or not continue their membership.

The case was filed in January 2014.  After years of vigorous litigation, the Superior Court of New Jersey granted Plaintiffs’ motion for class certification.  Defendants appealed.  After 15 months of deliberation, the Appellate Division agreed that the New Jersey Superior Court correctly certified a class of “all members who cancelled or attempted to cancel their Membership Agreement, and who were charged additional monthly payments and/or an annual rate guarantee fee after the cancellation date” in violation of the CFA.

In its discussion, the Appellate Division pointed out the absurdity of the Defendants’ cancellation policy which requires members to cancel only by registered mail, return receipt requested:

The Clubs’ cancellation policies take advantage of the likelihood that a significant number of consumers will overlook or forget about the advance notice provisions nine, ten, or eleven months after signing the Membership Agreements.  Moreover, the cancellation terms prevent members from cancelling their memberships by email or in person at the Club they joined.

The unreasonableness of restricting cancellation in such a way – especially prohibiting in-person cancellation – is easily illustrated by hypothesizing a similar requirement for members when they first appear at a club to join.  Would the concept of fairness encompass a procedure that required prospective members to pick up an application at a club, leave, prepare a transmittal letter, and return the application by registered or certified mail, rather than simply signing the application at the club?  The concept, though absurd, illustrates the point.

The point, of course, is that Membership Agreements that impose unduly restrictive cancellation requirements can readily be viewed as frustrating cancellation, thus evidencing the absence of good faith, honesty in fact, and observance of fair dealing; or, in CFA terms, an unconscionable commercial practice intended to extract extra dues from consumers.

The case will now move forward as a certified class action consisting of over 70,000 members seeking close to $10 million in damages.  Joseph LoPiccolo, Chair of the Class Action Group at Poulos LoPiccolo, commented, “the Appellate Division stated what we have been saying since we filed this case – the onerous cancellation policy was put in place by the Defendants to squeeze extra months of fees out of consumers at the end of their memberships.  This is a great decision for our clients and all consumers damaged by this unconscionable practice.”