MCCARTHY et al v. EQUINOX HOLDINGS, INC. et al
Filing
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OPINION & ORDER denying Pltfs' request for leave to file a sur-reply w/respect to NJ state law causes of action; granting 16 Motion to Dismiss w/respect to Pltfs' TILA cause of action; dismissing Pltfs' TILA claim; that the Court declines supplemental jurisdiction on the remaining state law claims, and closing case. ***CIVIL CASE TERMINATED. Signed by Judge Faith S. Hochberg on 2/9/15. (dc, )
NOT FOR PUBLICATION
CLOSED
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
:
LESLEY MCCARTHY and KIM KENNEDY on
:
behalf of themselves and all others similarly situated, :
: Civil Case No. 14-37 (FSH)(JBC)
Plaintiff(s),
:
: OPINION & ORDER
v.
:
: February 9, 2015
EQUINOX HOLDINGS, INC., AND JOHN DOES :
1-25,
:
:
Defendant(s).
:
:
HOCHBERG, District Judge;
This matter comes before the Court upon Defendant Equinox Holdings Inc.’s
(“Equinox”) motion to dismiss (Dkt. No. 16) pursuant to Federal Rule of Civil Procedure
12(b)(6). The court has reviewed the submissions of the parties and considers the motion
pursuant to Federal Rule of Civil Procedure 78.
I.
BACKGROUND1
Plaintiffs Lesley McCarthy and Kim Kennedy and putative class members originally filed
a Complaint against Defendant Equinox alleging only state-law causes of action, including
purported violations of the Health Club Services Act, N.J.S.A. 56:8-39, et seq.; the Consumer
Fraud Act, N.J.S.A 56:8-1, et seq.; the Retail Installment Sales Act, N.J.S.A 17:16C-1, et seq.;
and the Truth-in-Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:12-14, et seq. The
Court sua sponte issued an order to show cause why the Court should not dismiss for lack of
1
These facts are taken from Plaintiffs’ amended complaint (Dkt. No. 8), unless otherwise noted.
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subject matter jurisdiction because diversity was lacking. Plaintiffs amended their complaint to
contain a federal cause of action, the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”),
and asserted supplemental jurisdiction over all state law claims. Equinox moved to dismiss both
the federal and state law claims of Plaintiffs’ Amended Complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6).
On October 10, 2013 Lesley McCarthy became a member of the Equinox health club in
Summit, New Jersey, by signing a membership agreement.2 The membership agreement
specifies the member’s payment obligations, including: (1) the club initiation fee; (2) the prorated initial month fee; (3) the regular monthly membership fee; and (4) the sales tax. The
agreement states that there is a minimum membership commitment of twelve months, unless the
member is able to meet one of several statutory exceptions, including the member’s relocation or
disability. (Am. Compl. Ex. A. ¶ 2; Ex. B. ¶ 2).3 Equinox may cancel membership at any time
but must refund payment for unused services. (Am. Compl. Ex. A. ¶ 24; Ex. B. ¶ 22). The
membership agreement provides that monthly dues must be paid in advance. An outstanding
balance in any month precludes the member from using the club until the balance is paid in full.
(Am. Compl. Ex. A ¶ 13; Ex. B ¶ 12).
The membership agreement purportedly does not compute the “total payment obligation”
Plaintiffs will be assessed over the twelve-month minimum membership. It states: “[T]he
monthly dues will be “$144.00, plus $10.08 (7.00) sales tax, and will be transferred on the 23rd
2
Similarly, on June 10, 2013, Plaintiff Kennedy entered into a membership agreement with the
same Equinox health club located in Summit, NJ. The membership agreement contains
substantially the same language as the McCarthy agreement.
“[D]ocument[s] integral to or explicitly relied upon in the complaint may be considered without
converting the motion [to dismiss] into one for summary judgment.” In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.1997) (internal citations and quotation marks
omitted).
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day of each month beginning November 2013.” (Am. Compl. ¶ 34). Plaintiffs allege this violates
numerous state statutes because it purportedly requires Plaintiffs to multiply the monthly rate
including sales tax by the number of months, add the initiation fee, and add a pro-rated firstmonth fee, rather than plainly stating the “total payment obligation.”
II.
STANDARD OF REVIEW
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.
Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also
Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (“[S]tating . . . a claim requires
a complaint with enough factual matter (taken as true) to suggest the required element. This
does not impose a probability requirement at the pleading stage, but instead simply calls for
enough facts to raise a reasonable expectation that discovery will reveal evidence of the
necessary element.”) (internal quotations omitted).
When considering a motion to dismiss under Iqbal, the Court must conduct a two-part
analysis. “First, the factual and legal elements of a claim should be separated. The District
Court must accept all of the complaint’s well-pleaded facts as true, but may disregard any legal
conclusions. Second, a District Court must then determine whether the facts alleged in the
complaint are sufficient to show that the plaintiff has a plausible claim for relief.” Fowler v.
UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (internal citations and quotations
omitted). “A pleading that offers labels and conclusions or a formulaic recitation of the elements
of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions
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devoid of further factual enhancement.” Iqbal, 129 S. Ct. at 1949 (internal quotations and
alterations omitted).
“As a general matter, a district court ruling on a motion to dismiss may not consider
matters extraneous to the pleadings. However, an exception to the general rule is that a
‘document integral to or explicitly relied upon in the complaint’ may be considered ‘without
converting the motion [to dismiss] into one for summary judgment.’” In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (internal citations omitted) (emphasis in
original).
III.
DISCUSSION
The Defendant moves to dismiss Plaintiffs’ claims under the Truth in Lending Act, 16
U.S.C. 1601, et seq. (“TILA”) and state law statutes.
a. The Federal Truth in Lending Act
The Truth in Lending Act (“TILA”), and the regulations promulgated thereunder, seek to
“protect . . . consumer[s] against inaccurate and unfair credit billing and credit card practices”
and promote “the informed use of credit” by “assur[ing] a meaningful disclosure” of credit
terms. 15 U.S.C. § 1601(a). It requires that a creditor make certain disclosures including, but not
limited to: (1) The identity of the creditor; (2) the amount financed; (3) the finance charge; (4)
the total of payments; (5) the number, amount, and due dates or period of payments scheduled;
and (6) the total sale price. See 12 C.F.R. § 226.18; see 15 U.S.C. § 1604. TILA’s requirements
apply only to “creditors” that engage in “consumer credit transactions.” See Pollice v. Nat’l Tax
Funding, L.P., 225 F.3d 379, 409 (3d Cir. 2000). The statute defines “creditor” as a person who:
“(1) regularly extends, whether in connection with loans, sales of property or services, or
otherwise, consumer credit which is payable by agreement in more than four installments or for
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which the payment of a finance charge is or may be required, and (2) is the person to whom the
debt arising from the consumer credit transaction is initially payable on the face of the evidence
of indebtedness or, if there is no such evidence of indebtedness, by agreement.” 15 U.S.C. §
1602(g). “Credit” is defined as “the right granted by a creditor to a debtor to defer payment of
debt or to incur debt and defer its payment.” 15 U.S.C. § 1602(f).
Defendant contends that TILA is inapplicable to this gym service membership, arguing
that the payment of monthly fees for monthly access to the facility is not a “consumer credit
transaction” and does not create a “debtor” and “creditor” relationship.
“A ‘consumer credit transaction’ involves the offer or extension of ‘credit’ to a
consumer,” which necessarily “involves the granting of a right to defer payment of ‘debts.’”
Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 379, 410 (3d Cir. 2000) (quoting 15 U.S.C. § 1602).
Applying the above definition of “credit,” the Third Circuit concluded that a firm which bills
customers for a service, wherein the customer has no right to defer payment for such services, is
not a “creditor” extending “consumer credit” within TILA or the Equal Credit Opportunity Act.
Riethman v. Berry, 287 F.3d 274, 277 (3d Cir. 2002). There, although a law firm “provid[ed]
legal services without requiring immediate payment,” payment was due when services were
rendered with no right to defer; if payment was not made within thirty days, interest was charged
on the balance. Thus, the firm “did not grant clients the right to defer payment. It follows that the
TILA is inapplicable.” Id. at 279; cf. Pollice, 225 F.3d at 409 (finding that establishing a
deferred payment plan for past-due water and sewer obligations created a “consumer credit
transaction”).
Here, Plaintiffs purchased a gym membership with a monthly fee. Each member
authorized his or her bank to make monthly payments on the billing date set forth in the
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membership agreement. (Am. Compl. ¶¶ 34, 51). The membership agreement, as pled in the
Complaint, states: “UNPAID BALANCES; Members will not be permitted to use any club until
all fees are current.” (Am. Compl. Ex. A ¶ 13; Ex. B ¶ 12). Thus, until Plaintiffs pay for each
month of membership, they may not use Defendant’s services. Taking the facts as alleged in the
Complaint as true for the purposes of this Motion to Dismiss, Plaintiffs have failed to plead that
the agreement gives Plaintiffs any good or service for which they may defer payment under 15
U.S.C. § 1602. See Riethman, 287 F.3d at 277. Instead, payment is required in advance, or
contemporaneously with, each month of service. (See Compl. ¶ 50 (“(1) Months Advance
Payment”)).
Although the membership agreement requires a minimum commitment of twelve months,
at no point does any Plaintiff receive the benefit of its bargain while deferring a debt. Nor has
Plaintiff asserted it received any service for which payment was deferred, nor have they cited any
legal authority to support that Defendant provided a “consumer credit transaction.” As alleged,
the dues paid each month applied only towards the use of the health club for that month. A
transaction without the right to defer payment is outside TILA’s definition of “credit.” Riethman,
287 F.3d at 277; see Shaumyan v. Sidetex Co., 900 F.2d 16, 18 (2d Cir. 1990) (applying nearly
identical definition of “credit” under Equal Credit Opportunity Act and finding that $14,800
home improvement contract with progress payments obligated plaintiffs to make “incremental
payments as the work progressed,” not to “defer payment”); Ysasi v. Nucentrix Broadband
Networks, Inc., 205 F. Supp. 2d 683, 688 (S.D. Tex. 2002) (“Plaintiffs make monthly payments
‘in advance’ on their leased receiving equipment, no credit is being extended from Nucentrix to
Plaintiffs.”).
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b. The Remaining State Law Allegations
“Supplemental jurisdiction allows federal courts to hear and decide state-law claims
along with federal-law claims when they are so related to claims in the action within such
original jurisdiction that they form part of the same case or controversy.” Wis. Dept. of
Corrections v. Schacht, 524 U.S. 381, 387 (1998) (citation and internal quotation marks
omitted). Where a district court has original jurisdiction pursuant to 28 U.S.C. § 1331 over
federal claims and supplemental jurisdiction over state claims pursuant to 28 U.S.C. § 1367(a),
the district court has discretion to decline to exercise supplemental jurisdiction if it has dismissed
all claims over which it has original jurisdiction. 28 U.S.C. § 1367(c)(3); Growth Horizons, Inc.
v. Del. County, Pa., 983 F.2d 1277, 1284–85 (3d Cir. 1993). In exercising its discretion, “the
district court should take into account generally accepted principles of ‘judicial economy,
convenience, and fairness to the litigants.’” Growth Horizons, 983 F.2d at 1284 (quoting United
Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966)). Where the federal claims are dismissed at an
early stage in the litigation, courts generally decline to exercise supplemental jurisdiction over
state claims. Gibbs, 383 U.S. at 726; Growth Horizons, 983 F.2d at 1284-85.
In this case, the Court is dismissing every claim over which it had original subject matter
jurisdiction at the motion to dismiss stage, and declines to exercise supplemental jurisdiction
over Plaintiffs’ state law claims pursuant to 28 U.S.C. § 1367(c)(3).
IV.
CONCLUSION & ORDER
For the foregoing reasons, Plaintiffs’ Amended Complaint is dismissed.
IT IS on this 9th day of February, 2015
ORDERED that Plaintiffs’ request for leave to file a sur-reply with respect to New Jersey state
law causes of action is DENIED; and it is further
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ORDERED that Equinox’s motion to dismiss (Dkt. No. 16) is GRANTED with respect to
Plaintiff’s TILA cause of action; and it is further
ORDERED that Plaintiff’s TILA claim is DISMISSED; and it is further
ORDERED that the Court declines supplemental jurisdiction on the remaining state law claims;
and it is further
ORDERED that the Clerk of the Court mark this case CLOSED.
IT IS SO ORDERED.
/s/ Faith S. Hochberg__________
Hon. Faith S. Hochberg, U.S.D.J.
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