Health Club Membership Agreements Are Not Retail Installment Sales Contracts

Mellet v. Aquasid, LLC, ___ N.J. Super. ___ (App. Div. 2017).  The decision in this consumer protection case was issued in June as an unpublished opinion.  Defendant then asked the Committee on Opinions to designate it for publication, pursuant to Rule 1:36-2(c).  Plaintiffs were not made aware of that request.  The Committee authorized publication, and the ruling appeared as a published opinion this week.  Meanwhile, plaintiffs had petitioned for certification, but the Supreme Court denied that petition right around the time that the published opinion appeared.

Plaintiffs were both members of the defendant health club, pursuant to written contracts.  They each sought to cancel their memberships.  Defendant declined to cancel, and continued to charge them dues and other fees.  Plaintiffs filed a putative class action, asserting that defendant’s contracts violated the Retail Installment Sales Act, N.J.S.A. 17:16C-1 et seq. (“RISA”), the Health Club Services Act, N.J.S.A. 56:8-39 et seq. (“HCSA”), and the Truth in Consumer Contract, Warranty, and Notice Act, N.J.S.A. 56:12-14 et seq. (“TCCWNA”).  Plaintiffs moved for class certification and defendant moved for summary judgment.  The Law Division denied class certification and granted summary judgment to defendant.  Plaintiff appealed, but Judge Mawla, writing for the Appellate Division, affirmed the summary judgment ruling below after applying de novo review.  The panel did not address the class certification issue.

The Law Division rejected the RISA claim because although the statute does cover services, such as health club services, plaintiffs’ did not contract did not contemplate that they were buying an ownership interest in any object or service at the end of those contracts.  Judge Mawla agreed that “the entire premise of the installment sales contract contemplated by RISA is possession and eventual ownership of a specified good by a buyer.”  Though RISA is to be construed broadly, the statute itself refers only to a “security agreement, chattel mortgage, conditional sales contract or other similar instrument.”  The contracts here did not resemble any of those instruments, so the RISA claim failed.

Plaintiffs’ TCCWNA claim was that the contracts’ exculpatory clause violated that statute.  Judge Mawla examined the cases cited by plaintiffs, and concluded that the TCCWNA claim could not stand.  Unlike in those cases, the exculpatory clause here “neither broadly waives exercise-related injuries, nor negates defendant’s ordinary duty of care, which may not be waived as contrary to public policy.”

As to their HCSA claim, plaintiffs asserted that the Law Division failed to give reasons for rejecting that claim, which was that the agreements failed to include the total payment obligation on the first page of those documents, as the HCSA requires.  Judge Mawla agreed that the court below had not offered reasons as required.  But the panel elected to exercise original jurisdiction and, finding that in fact “the record reveals plaintiffs’ health membership agreements contained the total amount owed on a monthly basis on the first page of their contract,” affirmed summary judgment as to the HCSA claim.

There are apparently other cases pending, also involving health clubs, that raise issues similar to those presented here.  Whether plaintiffs will seek reconsideration based on the fact that the opinion is now published, and therefore of more effect as a precedential ruling, remains to be seen.

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