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California Consumer Class Action Alleges Violations of State and Federal Gift Card Laws

A putative class action lawsuit filed in a California federal court claims that the defendant, a fitness company, is in violation of multiple statutes governing the issuance of gift certificates and gift cards. Cody v. SoulCycle, Inc., No. 2:15-cv-06457, complaint (C.D. Cal., Aug. 25, 2015). By requiring customers to purchase “series certificates” with expiration dates in order to participate in exercise classes, the defendant allegedly violated the Credit Card Accountability and Disclosure (Credit CARD) Act and the Electronic Funds Transfer Act (EFTA), 15 U.S.C. § 1693 et seq. The plaintiff further alleges that the acts of the defendant violated the California Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200 et seq.; the Consumers Legal Remedies Act (CLRA), Cal. Civ. Code § 1750 et seq.; and gift card statutes in California and six other states.

The defendant operates a chain of locations in at least seven states, including California, where it offers indoor cycling classes, commonly known as spinning classes. According to the plaintiff, customers cannot “purchase specific exercise sessions,” despite the defendant’s claim that it offers a “pay-as-you-go system.” Cody, complaint at 3. Customers must purchase “series certificates” entitling them to participate in a specific number of classes.

Series certificates are “gift certificates” within the meaning of both federal and California law, according to the plaintiff. 15 U.S.C. § 1693l-1(a)(2)(B), Cal. Civ. Code § 1749.5. Both statutes restrict the ability of merchants to set expiration dates on gift certificates. The plaintiff alleges that the series certificates have expiration dates that are often as soon as 30 days after the date of purchase, meaning that the customer has a limited time to attend the number of classes on the series certificate. Because of the popularity of the classes, a customer may not be able to schedule all of the classes before the expiration date. Any remaining value is lost when the series certificate expires.

The plaintiff’s complaint describes other ways in which customers might not receive the full benefit of the amounts paid for series certificates, and in which the defendant “confirms that Series Certificates have an associated value.” Cody at 18. The defendant allows customers to transfer series certificates purchased at one location to other locations for “sessions of equal or lesser value.” Id. at 17. If, for example, “a customer uses a 40-dollar Series Certificate to purchase a 30-dollar exercise session,” the customer forfeits $10. Id. at 18. This results in “windfall profits” for the defendant. Id. at 19.

The lawsuit claims that, by setting expiration dates less than five years from the date of purchase, the defendant violates the Credit CARD Act and EFTA. 15 U.S.C. §§ 1693l-1(a)(2)(B) and (c)(1), 12 C.F.R. § 205.20(e)(1). It further alleges violations of the USL; the CLRA; California’s gift card statute, Cal. Civ. Code § 1749.5(a)(1); and the gift card statutes of Connecticut, Florida, Illinois, Maryland, Massachusetts, and New Jersey. The plaintiff is requesting declaratory relief under Cal. Code Civ. P. § 1060 and is asserting common-law causes of action for unjust enrichment and breach of the implied covenant of good faith and fair dealing.

If you or your business is dealing with a legal claim or other dispute, a knowledgeable and experienced business and commercial law attorney can advise you of your rights and protect your interests. Cirrus Law PC has represented San Francisco Bay Area businesses since 1976. Contact us online or at (925) 463-1073 today to schedule an initial confidential consultation.

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