Life Time Fitness, Chanhassen, MN, will pay from $10 million to $15 million to settle a class action lawsuit alleging the company violated the Telephone Consumer Protection Act (TCPA).
About 593,000 class members contended that the company violated the act by "blasting unsuspected individuals with text messages to their cell phones advertising deals on enrollment fees, personal training packages and other 'exclusive offers'," according to a recent article on Law360.com.
According to the complaint, Life Time "has a practice of sending unsolicited text messages to individuals' cell phones." The fitness company is accused of sending text messages to thousands of cell phone numbers either simultaneously or in rapid succession between January and April 2014. Recipients of some of the texts filed suit in federal courts in Illinois, Minnesota and Missouri. In October 2014, a judicial panel consolidated the cases in Minnesota.
TCPA and Federal Communication Commission (FCC) rules ban most commercial text messages sent to a mobile phone. The only two exceptions are if the message is being sent for emergency purposes or if the recipient has given consent to receive the message.
Life Time Fitness asserted that because the members gave the company their cell phone numbers, they consented to be contacted. After Oct. 16, 2013, however, the TCPA required companies to get written consent to send messages. Life Time Fitness attorneys asserted that the "new regulation didn't apply to cancel consent it received before the new regulation became effective."
The purpose of the TCPA, according to the complaint, is to prevent advertisers from unfairly shifting the cost of their advertisements to consumers. Because the members had to pay their wireless carriers for the messages, they originally sought a minimum of $500 in damages. On Wednesday of last week, the parties reached a settlement of less than the $500 to $1,500 that plaintiffs could have potentially received based on TCPA rules as part of the settlement because "they would face significant challenges if the litigation continued," according to Law360.com. As a result, the federal court approved Life Time's motion to offer the class members one of three options: a free three-month membership at Life Time Fitness Gold Club, a $250 credit to be applied to a new or existing membership, or a $100 cash award. Life Time Fitness also will be responsible for covering the court costs, and in turn, the plaintiffs must drop their claims against the company.
In a fourth quarter 2014 financial call last week, Eric Buss, executive vice president and CFO of Life Time, said that in the fourth quarter, the company recognized $4.7 million in expenses related to this class-action litigation.
"While the company denied the allegations, we agreed to settle the matter," Buss said during the call. "The settlement agreement is still subject to approval from the court, but we believe the amount recorded represents a reasonable estimate of our potential exposure."
Equinox, New York, also faces a class action suit related to the TCPA. That suit was filed in October 2014.