Bally Class Action Defense Cases-Phillips v. Bally Total Fitness: Illinois State Court Affirms Dismissal Of Named Plaintiffs From Class Action Litigation Based On Lack Of Standing

Apr 9, 2007 | By: Michael J. Hassen

Class Action Plaintiffs who are Residents of Colorado and Missouri Lacked Standing to Prosecute Class Action Complaint Alleging Violations of Illinois State Statutes

Plaintiffs filed a putative class action in Illinois state court against Bally Total Fitness for violations of the state’s Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) and Physical Fitness Services Act (Fitness Act). Phillips v. Bally Total Fitness Holding Corp., ___ N.E.2d ___ (Ill.App. March 26, 2007) [Slip Opn., at 1]. Defense attorneys moved to dismiss from the class action plaintiffs Aaron Stone of Colorado and Teresa Brown of Missouri on the grounds that they lacked standing as out-of-state residents to prosecute the class action, id., at 4; the trial court granted the motion and the appellate court affirmed, id., at 1. The class action complaint was not dismissed in its entirety because the defense had not challenged the standing of the two named plaintiffs who are residents of Illinois. Id.

The class action complaint alleged that the principal place of business and corporate headquarters of Bally Total Fitness is in Illinois, and that Bally has 4 million members at 420 fitness centers in 29 states as well as international locations. Phillips, at 2. Plaintiff Stone joined a Colorado facility in March 2001, agreeing to pay $1900 for 3 years; he alleged that his contract was month-to-month and could be canceled at any time, and could be transferred to another fitness center if he moved. Id. When Stone moved to Denver, he could not find a Bally facility in his area and tried to cancel his membership; Bally refused to honor the cancellation request, demanded payment in full, and then sold the debt to a collection agency. Id. Stone’s contract gave a Colorado address for the company, and Bally’s statements and correspondence with Stone gave a California address. Id., at 2-3.

The allegations in the class action complaint concerning plaintiff Brown were that she joined a Bally facility in St. Louis, signing a contract in June 1994 agree to pay $1200 for three years and providing that was to be “governed by the laws of the state in which it was signed.” Phillips, at 3. Bally agreed to cancel Brown’s contract if she moved and no other facility was available. Id. Brown moved one year later, and Bally canceled her contract: however, four years later she contacted by a collection agency concerning a debt alleged owed to Bally, though it accepted her explanation that she had no such obligation; and five years later another collection agency obtained a default judgment against her based on that alleged debt, though she retained counsel and got the judgment set aside. Id. Brown’s contract gave a Missouri address for the company, and Bally’s statements and correspondence with Brown also provided a Missouri address. Id.

In moving to dismiss the claims of Brown and Stone, defense attorneys argued that they had joined facilities (Vic Tanny of Missouri and Holiday Health Clubs of Colorado, respectively) that did not do business in Illinois, and that each signed contracts to be governed by the laws of the states in which they were executed. Phillips, at 4. There was thus no nexus with Illinois, requiring that they be dismissed from the class action. Id. The trial court agreed. Plaintiffs appealed, arguing that Illinois law permits non-residents to assert claims under the Consumer Fraud Act and that the trial court erred in finding that their claims “did not occur ‘primarily and substantially’ in Illinois.” Id., at 5. The appellate court rejected these arguments and affirmed the order of dismissal.

The appellate court first held that Avery v. State Farm Mut. Auto. Ins. Co., 835 N.E.2d 801 (Ill. 2005), does not give out-of-state residents automatic standing under the Consumer Fraud Act; rather, “‘a fraudulent transaction may be said to take place within a state if the circumstances relating to the transaction occur primarily and substantially within that state.’” Phillips, at 7 (quoting Avery). Under that test, the court had no difficulty in affirming the trial court’s judgment. Id., at 8-9. Nor did the court accept plaintiffs’ invitation to rely on Massachusetts decisional law in evaluating whether their case “primarily and substantially” involved Illinois, holding that Avery provided the only authority needed to resolve that inquiry. Id., at 10.

Finally, plaintiffs argued that the trial court should have granted them permission to conduct additional discovery; the appellate court disagreed, citing to the mountain of information already available to plaintiffs and the fact that the only information still within the defendants’ control would not affect the outcome of the case. Phillips, at 9-10.

NOTE: Defense attorneys also moved to dismiss the claims of the other named plaintiffs as well as the class, but the trial court denied that motion and that ruling was not part of this appeal. Phillips, at 4-5.

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