Wheeler v. The Fitness Formula, LTD. et al
Filing
107
MEMORANDUM Opinion and Order. Signed by the Honorable Mary M. Rowland on 3/30/2020. Mailed notice. (dm, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MARK WHEELER,
Plaintiff,
Case No. 18-cv-00582
v.
THE FITNESS FORMULA, LTD,
doing business as FITNESS
FORMULA CLUBS, and
LAKEVIEW FITNESS EAST, LLC,
doing business as FFC-EAST
LAKEVIEW and FITNESS
FORMULA CLUBS-EAST
LAKEVIEW,
Judge Mary M. Rowland
Defendants.
MEMORANDUM OPINION & ORDER
Plaintiff Mark Wheeler (“Wheeler”) brings this class action lawsuit against
Defendants the Fitness Formula, LTD and Lakeview Fitness East, LLC, collectively
the Fitness Formula Club (“FFC”), alleging violations of the Electronic Funds
Transfer Act, 15 U.S.C § 1693 et seq. (Count I) and the Illinois Consumer Fraud Act,
815 ILCS 505/2 (Count 2). Before this Court is Defendants’ motion for partial
summary judgment on Count I. (Dkt. 79.) For the reasons stated below, Defendants’
motion is denied.
BACKGROUND
The following facts are taken from the parties’ statements of undisputed facts.
Defendants FFC are a fitness club chain with locations throughout Chicago. (Dkt. 91
at ¶2.) Plaintiff Mark Wheeler joined the FFC’s Lakeview East facility in 2014 and
signed a membership agreement detailing the terms and conditions of his use of
FFC’s facilities. (Id. at ¶1.) In February 2017, Wheeler executed a new membership
agreement with FFC, adding his spouse to his account. (Id.) The membership
agreement contains a “Payment Preauthorization” section which states in relevant
part:
Monthly membership fees and the Annual Fee are charged prospectively and
on the first business day of each month along with charges for any additional
services received by Member during the previous month. Member authorizes
Club or its agent(s) to make an EFT or ACH withdrawal on the first business
day of the month from the bank or credit card account specified below by
Member for any amount due from Member under this Agreement on that
date.
(Id. at ¶7.) EFT stands for electronic funds transfer. Wheeler furnished a Visa card
linked to a checking account to pay for these charges. (Dkt. 95 at ¶7.) In the case that
payments are rejected by members’ banks, the agreement provides:
If any check or credit/debit card draft payable to the Club is not honored, the
Club will: (a) assess a return fee for each check or credit card rejected to
reimburse the Club for the cost of collection, and (b) collect the current and
past-due balance in any subsequent month.
(Dkt. 91 at ¶11.)
Under the membership agreement, Wheeler’s monthly membership dues were
$79.95 for himself and $55.00 for his spouse, for a total of $134.95 per month. (Id. at
21.) In August 2017, FFC discovered that it had erroneously been double-billing
Wheeler for his individual membership dues for six months. (Id. at ¶¶22-23.) On
August 3, 2017, FFC credited Wheeler’s account to correct for the overbilling. (Id. at
¶23.) On September 2, 2017, FFC charged Wheeler $134.95 in membership dues,
which was offset to $115.05 due to a remaining credit balance on the account. (Id. at
¶24.) Wheeler, however, had cancelled the card he provided to FFC, and thus, the
charge was declined and FFC assessed a $30 return fee to his account. (Id. at ¶25;
Dkt. 95 at ¶13.)
On October 2, 2017, FFC charged Wheeler $280 ($134.95 in monthly
membership dues, plus the past-due balance of $145.05). (Dkt. 91 at ¶26.) Once again,
the charge to Wheeler’s card was declined and FFC assessed a $30 return fee. (Id. at
¶27.) On November 2, 2017, FFC charged Wheeler $444.95 ($134.95 in monthly
membership dues, plus the past-due balance of $310). (Id. at ¶29). This charge was
again declined and FFC assessed a $30 return fee. (Id. at ¶30.) FFC sent Wheeler’s
account with a remaining balance of $474.95 to collections. (Id. at ¶¶30-31.)
On January 26, 2018, Wheeler sued FFC claiming that the membership
agreement and charges assessed to him violated the Electronic Funds Transfer Act
(“EFTA”), 15 U.S.C § 1693 et seq. and the Illinois Consumer Fraud Act, 815 ILCS
505/2. This Court previously held that Wheeler lacked a valid EFTA claim based on
the double-billed charges to his account prior to and in August 2017. (Dkt. 59.) Thus,
the present motion for summary judgment on Count I concerns only the charges
assessed to Wheeler in October and November 2017 pursuant to the membership
agreement.
LEGAL STANDARD
Summary judgment is proper where “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986). A genuine dispute as to any material fact exists if “the evidence is such
that a reasonable jury could return a verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The substantive law controls which facts
are material. Id.
The party seeking summary judgment has the burden of establishing that
there is no genuine dispute as to any material fact. See Celotex, 477 U.S. at 323 (1986).
After a “properly supported motion for summary judgment is made, the adverse party
must set forth specific facts showing that there is a genuine issue for trial.” Anderson,
477 U.S. at 250 (quotation omitted). Construing the evidence and facts supported by
the record in favor of the non-moving party, the Court gives the non-moving party
“the benefit of reasonable inferences from the evidence, but not speculative inferences
in [its] favor.” White v. City of Chi., 829 F.3d 837, 841 (7th Cir. 2016) (internal
citations omitted). “The controlling question is whether a reasonable trier of fact
could find in favor of the non-moving party on the evidence submitted in support of
and opposition to the motion for summary judgment.” Id. (citation omitted).
ANALYSIS
Wheeler asserts that FFC violated the EFTA when, without notice, they
charged him fees that varied from the amount he preauthorized in his membership
agreement. The EFTA “protects consumers by providing a ‘basic framework
establishing the rights, liabilities, and responsibilities of participants in electronic
fund transfer systems.”’ Bass v. Stolpher, Koritzinsky, Brewster, & Neider S.C., 111
F.3d 1322, 1328 (7th Cir. 1997) (citing 15 U.S.C. § 1693b). It “is a remedial statute
accorded a broad, liberal construction in favor of the consumer.” Clemmer v. Key Bank
Nat. Ass'n, 539 F.3d 349, 353 (6th Cir. 2008) (internal quotations and citation
omitted). Section 1693e of the EFTA permits companies like FFC to initiate
“preauthorized electronic fund transfers” defined as “electronic fund transfer[s]
authorized in advance to recur at substantially regular intervals.” 15 U.S.C. §§
1693a(10); 1693e. If an EFT varies from the preauthorized amount, the company is
required to provide the consumer with notice:
In the case of preauthorized transfers from a consumer’s account to the same
person which may vary in amount, the financial institution or designated
payee shall, prior to each transfer, provide reasonable advance notice to the
consumer, in accordance with regulations of the Bureau, of the amount to be
transferred and the scheduled date of the transfer.
Id. at §1693e(b).
While there is scant federal case law interpreting or applying § 1693e(b), at
least two federal courts have applied the statutory provision in cases that provide the
court some guidance. First, in Robins v. Glob. Fitness Holdings, LLC, 838 F. Supp. 2d
631, 653-54 (N.D. Ohio 2012), a class of gym members sued a fitness club alleging
that in addition to monthly dues, the club had automatically debited their bank
accounts for a semiannual facility management fee of $15.00 and a $10.00
cancellation fee without providing advance notice. Dismissing the members’ §1693e
claims, the district court found that notice of these charges was not required because
the club’s membership agreement, which was signed by all class members, stated that
such fees would be collected and the membership agreement identified the specific
amount ($15.00 and $10.00, respectively) that would be charged. 1 Id.
Similarly, in Bultmeyer v. Fitness. All., LLC, No. CV-12-2619-PHX-LOA, 2014
WL 667585 (D. Ariz. Feb. 20, 2014), gym members sued a fitness club alleging that
the club’s membership agreement violated the EFTA by making members waive their
rights to receive notice of varying transfers under § 1693e(b). The membership
agreement authorized the club to electronically debit (1) biweekly membership dues
in the amount of $18.00, (2) a biannual facility improvement fee of $15.00, (3) past
due balances and (4) a $25 service fee if an electronic debit was rejected. Id. at *1.
The provision at issue provided that although the member “is entitled to notice of all
varying charges and withdrawals under the EFT,” the member “waives the right to
receive prior notice for charges or withdrawals made with respect to any uncollected
monthly dues payments or portions of the balance due described above and the
corresponding service charges, both of which Buyer [member] agrees are not varying
charges or withdrawals.” Id. at *2. The district court held that members were not
entitled to notice of debits of these fees because they were “specifically pre-authorized
and identified in certain sum amounts” in the membership agreement. Id. at *4
(“[I]dentified fixed fees and other charges are simply not ‘varying’ charges prompting
the advance written notice required by § 1693e(b)”). The court also found it compelling
that members acknowledged in the membership agreement that debits of past due
The court dismissed without prejudice, however, the EFTA claims of two class representatives that
complained the club unilaterally increased their membership dues by $1.00 without providing
advance notice. While the court recognized that this varying amount could trigger the notice
requirement, it concluded that the increase was de minimus.
1
balances and service fees were not varying within the meaning of § 1693e(b) 2. Id. at
*5. Because the fees at issue did not vary from the preauthorized amount specified in
the membership agreement, the court concluded that the waiver provision in the
agreement did not constitute an improper waiver of the right to notice of varying
charges. Id. at *4.
Here, the parties dispute whether the October 2 and November 2 charges to
Wheeler’s account varied from the amount he preauthorized under the membership
agreement, so as to trigger the notice requirement of § 1693e(b). FFC argues that the
charges did not vary from the preauthorized amount because they were comprised
only of fees that Wheeler had authorized in the membership agreement, namely
monthly dues, past due balances, and return fees. Wheeler maintains that he only
preauthorized a charge of $134.95 in monthly dues, and because the charges on
October 2 ($280.00) and November 2 ($444.95) varied from that amount, he was
entitled to notice. According to Wheeler he did not preauthorize the $30.00 return fee
or the electronic debiting of past due amounts.
The parties’ dispute as to the preauthorized amount, particularly with respect
to the return fee, precludes summary judgment. Although Wheeler authorized the
collection of return fees in his membership agreement, it is not clear that Wheeler
authorized the amount of those charges. Unlike the fixed and specified fees at issue
in Robins and Bultmeyer, FFC’s membership agreement does not specify that the
As the Bultmeyer court noted, the membership agreement in Robins also contained a similar
provision providing that the electronic debiting of past due balances and service/return fees did not
constitute “varying” charges. 2014 WL 667585 at *6.
2
return fee amount is $30.00, such that this Court may conclude as a matter of law
that the debiting of that fee did not give rise to a variance from the preauthorized
EFT amount. Neither does FFC’s membership agreement include a provision
explaining that return fees are not “varying” such that members should expect prior
notice of them. A reasonable factfinder could conclude that the EFTs on October 2
and November 2, which included charges for return fees, varied from the amount
Wheeler preauthorized in his membership agreement such that prior notice was
required. 3 FFC’s motion for partial summary judgment is denied. 4
CONCLUSION
For the foregoing reasons, Defendants’ motion for partial summary judgment
is denied.
The Court is also persuaded by the fact that the accompanying implementing regulation to the
EFTA requires return fees to be specified in their exact amount: “The person initiating an electronic
fund transfer to collect a fee for the return of an electronic fund transfer or a check that is unpaid,
including due to insufficient or uncollected funds in the consumer's account, must obtain the
consumer's authorization for each transfer. A consumer authorizes a one-time electronic fund
transfer from his or her account to pay the fee for the returned item or transfer if the person
collecting the fee provides notice to the consumer stating that the person may electronically collect
the fee, and the consumer goes forward with the underlying transaction. The notice must state that
the fee will be collected by means of an electronic fund transfer from the consumer's account if the
payment is returned unpaid and must disclose the dollar amount of the fee.” 12 C.F.R. § 1005.3
(emphasis added).
4 In its motion for summary judgment, FFC also contests Wheeler’s status as an adequate class
representative. The Court agrees with Wheeler that it is inappropriate to consider this issue on a
motion for summary judgment and declines to opine on it at this time. The Court also declines to
reach Wheeler’s argument that summary judgment on Count I is inappropriate because FFC’s
membership agreement violates the EFTA by requiring a waiver of notice of a variance. (Dkt. 90 at
11).
3
E N T E R:
Dated: March 30, 2020
MARY M. ROWLAND
United States District Judge
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