Earlier this fall, we reported on a class action lawsuit alleging that indoor cycling fitness company SoulCycle Inc. ("SoulCycle") violated federal and state law by selling pre-purchased spinning classes with expiration dates ranging from 30 days to one year. Last weekend, in opposition to a motion to dismiss filed by SoulCycle, the lead plaintiff maintained that pre-purchased classes are legally equivalent to gift certificates and, therefore, should enjoy the expiration protections afforded to such instruments.
Are pre-purchased classes gift certificates, or is SoulCycle being taken for a ride?
SoulCycle's Motion to Dismiss
Filed on October 30, 2015, SoulCycle's motion to dismiss argues that the company's sale of indoor group cycling classes is separate and distinct from its sale of gift certificates. According to SoulCycle:
- classes are redeemable solely for admission to an "event" at specific locations;
- customers cannot redeem a pre-purchased class for cash or merchandise; and
- classes cannot be transferred to another person.
SoulCycle claims that pre-sold classes "are not, in fact, the sale of 'gift certificates,' 'gift cards,' or 'Series Certificates' at all. Classes are just that: classes."
Plaintiff: Classes Are Gift Certificates
Last Saturday, the named plaintiff filed her opposition to SoulCycle's motion to dismiss, which maintains that the "onerous and unlawful" expiration dates on SoulCycle's pre-purchased classes violate the Electronic Funds Transfer Act ("EFTA"), as amended by the Credit Card Accountability, Responsibility and Disclosure Act ("CARD Act"), as well as California State law.
The plaintiff's opposition alleges that "[a]lthough SoulCycle is careful to avoid calling these prepaid devices 'certificates' . . . , SoulCycle's [pre-purchased classes] function as a gift certificate as defined under federal law and state law."
Marketers: Stay Tuned
The Court's ruling on SoulCycle's motion to dismiss may be influenced by a federal district court decision out of Minnesota, Hughes v. CorePower Yoga LLC, which held in 2013 that yoga "Class Packs" with expiration dates did not violate the EFTA. While SoulCycle claims that Hughes "is in all material respects 'on all fours'" with the above-mentioned case, the SoulCycle class action plaintiff claims that SoulCycle's pre-purchased classes are distinguishable. This blog will explore the Court's determination in greater detail as more information becomes available.
If you are interested in learning more about this topic, or if you have been served with legal process concerning your marketing practices, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.
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