24 Hour Accused of Bank, Wire Fraud

LOS ANGELES -- 24 Hour Fitness, San Ramon, CA, is facing another lawsuit claiming the company has taken monthly payments out of members’ accounts after they have canceled their memberships.

The recent class-action lawsuit, Friedman vs. 24 Hour Fitness USA Inc., was filed on behalf of 1.5 million former 24 Hour members in U.S. District Court, Central District of California. The suit claims 24 Hour Fitness violated the Racketeer Influenced and Corrupt Organization Act (RICO) and the Electronic Fund Transfer Act (EFTA).

A similar lawsuit involving approximately 1.8 million current or former 24 Hour members was settled in 2007 in San Francisco Superior Court.

Last week, the U.S. Court of Appeals, Ninth Circuit, rebuffed 24 Hour’s petition to appeal the class-action certification order. This was 24 Hour’s final attempt to prevent a trial prior to the case going to trial, which could happen next year, according to Robert Esensten of Wasserman Comden & Casselman, the law firm representing the plaintiffs.

“24 Hour Fitness is the modern-day Al Capone, using the electronic banking and credit card system as Al Capone and his mob used the Tommy gun,” Esensten said. “This is exactly what the RICO laws were designed to stop. Apparently, 24 Hour Fitness’ annual revenues of over $1 billion a year are not enough for its owners, despite the fact that today’s consumers are struggling to make every dollar count.”

In a statement, 24 Hour says the claims are without merit and the company “will continue to vigorously defend this case.”

“24 Hour Fitness is fully committed to open and transparent communication regarding cancellation procedures for our members,” the company said in the statement. “The terms for cancellation are clearly communicated to our members when they join and are followed consistently by 24 Hour Fitness.”

Esensten and Melissa Harnett, also of Wasserman, say the case is not focused on what 24 Hour members did or did not understand about the cancellation policy. The attorneys claim 24 Hour defrauded payment processors Paymentech, now owned by JP Morgan Chase, and LaSalle, now owned by Bank of America, under the RICO statutes. Chase Paymentech processes credit and debit card transactions using Visa and MasterCard systems. Bank of America processes Automatic Clearing House (ACH) transactions from bank accounts.

“The largest volume of complaints [24 Hour] receives are about the added 30 to 60 days of extra charges, plus people dispute that they owe this money,” Esensten says.

The lawsuit was first filed in 2006 as a punitive class-action on behalf of six plaintiffs, including Daniel Friedman. Earlier this year, the U.S. District Court ruled that this case was appropriate to proceed at the class-action level and involve 1.5 million former members, Harnett says. 24 Hour presented an estimate of 1.2 million to 1.5 million members to the U.S. Court of Appeals, she added.

If 24 Hour is found in violation of the RICO laws, the company faces potential liability of more than $100 million, Esensten says.
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