COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, SS.

SUPERIOR COURT DEPARTMENT OF THE TRIAL COURT CIVIL ACTION NO.

________________________________________________ ) COMMONWEALTH OF MASSACHUSETTS, ) Plaintiff, ) ) v. ) ) BOSTON FITNESS, LLC, ) D/B/A GOLD’S GYM DOWNTOWN CROSSING, ) and MARC ORLANDELLA, ) Defendants. ) ) ________________________________________________)

COMPLAINT

I. INTRODUCTION

1. This is a civil action brought in the public interest by the Attorney General on behalf of the Commonwealth of Massachusetts, pursuant to G.L. c. 93A, § 4, the Massachusetts Consumer Protection Act, and G.L. c. 93, §§ 78-88, the Health Club Services Contract statute. Defendants have committed unfair and deceptive acts and practices in violation of the Massachusetts Consumer Protection Act, and have violated specific provisions of the Health Club Services Contract statute, in connection with the operation, promotion, and customer contracting of the Gold’s Gym at Downtown Crossing, 52 Summer Street, Boston, Massachusetts (“Gold’s Gym Downtown Crossing”). More specifically, Defendants have violated state law by, among other practices: (1) selling health club memberships to consumers without first obtaining a bond, in violation of G.L. c. 93, § 79; (2) misrepresenting the opening

date of, and the services available at the health club; (3) making electronic withdrawals from consumers’ bank accounts prior to the opening of the health club and then refusing to provide refunds to these consumers when the health club failed to open as promised, in violation of G.L. c. 93, § 82; (4) employing a health club contract for Gold’s Gym Downtown Crossing which misrepresents the consumer’s right to cancel the contract, in violation of G.L. c. 93, §§ 81, 82, and 84; and (5) employing a health club contract for Gold’s Gym Downtown Crossing which provides that the consumer waives his rights against the health club for any injury or loss of property, in violation of G.L. c. 93, § 80. 2. Pursuant to G.L. c. 93, §§ 85-87, and G.L. c. 93A, § 4, the Attorney General seeks appropriate injunctive and other equitable relief, including having Defendants’ contracts with consumers deemed void and unenforceable, as well as restitution for injured consumers, civil penalties, the costs of investigating and prosecuting this action, and attorneys’ fees. II. JURISDICTION AND VENUE 3. This court has jurisdiction over this matter pursuant to G.L. c. 93A, § 4, G.L. c. 93, §§ 78-88 and G.L. c. 214, § 1. 4. Venue is proper in Suffolk County pursuant to G.L. c. 93A, § 4. III. PARTIES 5. The Plaintiff is the Commonwealth of Massachusetts (hereinafter “the Commonwealth”), represented by its Attorney General, Thomas F. Reilly, who brings this action in the public interest pursuant to the authority granted him under G.L. c. 93A, § 4 and G.L. c. 93, §§ 78-88. 6. Defendant Boston Fitness, LLC is a domestic limited liability company, organized

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under the laws of the Commonwealth of Massachusetts, and which does business as Gold’s Gym Downtown Crossing, located at 52 Summer Street, Boston, Massachusetts, 02110. 7. Defendant Marc Orlandella (“Orlandella”) is a natural person residing at 16 Oakridge Drive, Saugus, Massachusetts 01906. Orlandella is the principal and organizer of Boston Fitness, LLC. 8. Defendant Orlandella was and is personally involved in the day-to-day operations, management, and day-to-day business activities of Boston Fitness, LLC, and Gold’s Gym Downtown Crossing. IV. FACTS A. Acquisition of Bond, Sale of Memberships and Failure of Club to Open 9. G.L. c. 93, § 79 requires that before a health club can enter into contracts with consumers, it must have a surety bond in the amount of at least $25,000, or $100,000, depending upon the duration of the customer contracts, for the benefit of consumers who suffer any loss or damage because the health club ceases operation, fails to open or fails to honor a consumer’s right to cancel their health club contract. 10. At least as early as September, 2003, defendants Orlandella and Boston Fitness, LLC (hereinafter “defendants”) commenced selling “pre-sale” or “introductory” memberships to Gold’s Gym Downtown Crossing, and entered into contracts with customers for health club services, without first obtaining a surety bond as required by law. 11. Upon information and belief, defendants have, to date, failed to obtain the required surety bond.

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12. In their pre-opening marketing, advertisements and contracts with consumers, Defendants represented to consumers that the health club would open on November 15, 2003. Consumers who entered in contracts with the health club paid a $39.00 “processing fee” and agreed to pay $39.00 monthly club membership fees. Many of these consumers agreed to have their monthly fees electronically debited from their bank accounts. However, the health club did not open on November 15, 2003 as promised. Consumers who called or visited the location were told by defendants, including defendant Orlandella, that the club would not open until December 15, 2003. However, the health club did not open on that date either. This time consumers were told that the health club would open on January 15, 2004. Once again, the health club did not open on that date, and consumers were told that the health club would open in mid-February. While some consumers received a letter and coupons from defendants, informing them of the initial delays in opening, most consumers who had paid for memberships received no such notice of the delayed openings during this period. 13. Despite the fact that the health club did not open as promised in marketing materials and consumer contracts, and was not available for consumers to use in November 2003, December 2003, January 2004, and at least parts of February 2004, the defendants continued to electronically debit the club membership fees for these months directly from consumers’ bank accounts. 14. Many consumers repeatedly contacted the health club by e-mail, letter, and in person, to cancel their memberships, to terminate the electronic debits, and/or to receive refunds. In many cases, the defendants failed to respond to consumers, failed or refused to cancel memberships, and/or failed to refund consumers, and upon information and belief many

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consumers who sought refunds many months ago have not yet received them. B. Terms of Contract Offered 15. Under the Attorney General’s Retail Advertising Regulations, 940 C.M.R. 6.05(4)(b)(5), it is an unfair or deceptive act for a health club to make a pre-opening introductory offer unless it provides each purchaser with a written pre-opening price protection guarantee, which is designed to ensure that consumers entering into introductory offers actually get the best price. Defendants, in the advertising and sale of club memberships before the opening of the health club, offered consumers an introductory rate of $39.00 a month for “Gold VIP Membership,” while failing to provide these consumers with the required written pre-opening price protection guarantee. 16. Under the statute regulating contracts for health club services, consumers are afforded the right to cancel their health club memberships under certain, specified circumstances, including, among other circumstances, if the health club does not open as planned, and if the consumer moves his residence more than 25 miles from the health club. G.L. c. 93, §§ 81-82. The health club is also required to clearly and conspicuously disclose these cancellation rights in the customer contract, including the requirement that a specific cancellation notice be provided in 10 point bold type. Defendants’ customer contracts failed to meet these requirements by, among other things, failing to include the required cancellation disclosure in 10 point bold type; by failing to include a disclosure that consumers can cancel the contract based upon the failure of the club to open, a substantial change to the operation of the club, or permanent discontinuance of the health club; and by specifically requiring that consumers must move permanently both their residence and place of work more than 25 miles from the club to be able to cancel the

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contract. 17. G.L. c. 93, § 80 also prohibits a health club from including a provision whereby the consumer agrees not to assert against the health club any claim or defense arising out of the health club services contract or the consumer’s activities at the health club. Defendants, however, specifically included just such a provision in their contracts with consumers. 18. As of June 22, 2004, the Office of the Attorney General had received 49 written complaints against defendants from consumers alleging many of the acts and practices described above. As of June 22, 2004, the Better Business Bureau had on its website a statement that “[based] on BBB files, this company [Gold’s Gym Downtown, 52 Summer Street, Boston, Massachusetts] has an unsatisfactory record with the Bureau due to unanswered complaints.” Upon information and belief, many more consumers have been harmed by defendants’ practices. 19. Defendants knew or should have known that their actions violated the Consumer Protection Act and/or the Health Club Services Contract statute. 20. On March 2, 2004, which was at least 5 days prior to the commencement of this action, the Attorney General sent letters to the defendants informing them that he intended taking legal action against them pursuant to G.L. c. 93A, and offered the defendants an opportunity to confer with the Attorney General’s designee to discuss the proposed action.

V. CAUSES OF ACTION Violations of G.L. c. 93A, § 2 and G.L. c. 93, §§ 78-88 21. The Commonwealth hereby realleges and incorporates herein paragraphs 1 through 20 above.

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22. The Consumer Protection Act, G.L. c. 93A, § 2(a) prohibits unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. Section 2(c) of the Act grants the Attorney General power to make rules and regulations interpreting the Consumer Protection Act. The Attorney General has promulgated a number of regulations further defining what acts or practices are unfair or deceptive under the Consumer Protection Act. Among those regulations are the General Regulations, 940 C.M.R. 3.00 et seq. and the Retail Advertising Regulations, 940 C.M.R. 6.00 et seq. In addition, the legislature, in enacting the Health Club Services Contract statute, determined that violations of that statute constitute unfair and deceptive practices enforceable by the Attorney General under the Consumer Protection Act. G.L. c. 93, §§ 84-85. 23. Defendants’ conduct in the marketing and operation of Gold’s Gym Downtown Crossing, including but not limited to (i) defendants’ withdrawal of money from consumers’ bank accounts for processing and monthly fees despite the fact that the health club did not open as promised in marketing materials and consumer contracts, and was not open during some or all of the months billed for, (ii) defendants failure to notify consumers of delays in opening the health club, and (iii) defendants failure to provide timely refunds to consumers, constitute unfair and deceptive practices in violation of the Consumer Protection Act, G.L. c. 93A, § 2(a). 24. Defendants have also violated the Consumer Protection Act, G.L. c. 93A, § 2(a), by engaging in various unfair or deceptive acts or practices specifically prohibited under the Attorney General’s Regulations, including but not limited to: a.

advertising pre-sale or introductory membership prices without providing the written price protection guarantee required by 940 C.M.R. 6.05(4)(b)(5);

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b.

misrepresenting directly or indirectly, by advertising, promotional materials or otherwise, the opening date for the facility, and failing to advise consumers of their rights to cancel contracts, in violation of 940 C.M.R. 3.05 (1) and 940 C.M.R. 6.04; and

c.

misrepresenting consumers’ cancellation and refund rights and failing to provide required refunds, in violation of 940 C.M.R. 3.13 (4).

25. Defendants have also violated the Consumer Protection Act, G.L. c. 93A, § 2(a), by engaging in various unfair or deceptive acts or practices specifically prohibited under the Health Club Services Contract statute, G.L. c. 93, §§ 78-88, including but not limited to: a.

entering into contracts with consumers without first obtaining a surety bond in the amount of at least $25,000, or $100,000, depending upon the duration of the customer contracts, for the benefit of consumers who suffer any loss or damage because the health club ceases operation, fails to open or fails to honor a consumer’s right to cancel their health club contract in violation of G.L. c. 93, § 79;

b.

failing to return all monies due consumers within 15 business days of receipt of the consumer’s notice of cancellation and request for a refund, in violation of G.L. c. 93, §§ 81-82;

c.

employing a contract for health club services which does not clearly and conspicuously disclose all cancellation rights, including failing to disclose certain required cancellation rights in 10 point bold type; failing to include a disclosure that consumers can cancel the contract based upon the failure of the club to open,

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a substantial change to the operation of the club, or permanent discontinuance of the health club; and by specifically requiring that consumers must move permanently both their residence and place of work more than 25 miles from the club to be able to cancel the contract, in violation of G.L. c. 93, §§ 81-82; and d.

employing a contract for health club services that contains a provision whereby the buyer agrees not to assert against the seller any claim or defense arising out of the health club services contract or the buyer’s activities at the health club, in violation of G.L. c. 93, § 80. VI. PRAYER FOR RELIEF

WHEREFORE, the Commonwealth requests that this Court grant the following relief: 1.

After a trial on the merits: a.

Order an appropriate injunction against defendants prohibiting the specific unfair and deceptive acts alleged in the Complaint;

b.

Order that every contract with consumers that does not comply with the Health Club Services Contract statute, G.L. c. 93, §§ 78-88 is void and unenforceable by defendants, pursuant to G.L. c. 93, § 85;

c.

Order defendants, jointly and severally, to make full and complete restitution to each person injured by their unfair and deceptive practices;

d.

Order defendants, jointly and severally, to pay the Commonwealth civil penalties and reasonable costs of the investigation and litigation of this matter, including reasonable attorney and investigative fees pursuant to G.L. c. 93A, § 4;

e.

to the extent defendants have obtained a surety bond in place, order that the bond

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be paid over to the Commonwealth to use to make full restitution to injured consumers; and f.

Grant such other and further relief as this Court deems equitable and proper.

COMMONWEALTH OF MASSACHUSETTS THOMAS F. REILLY ATTORNEY GENERAL

By:

____________________________________ Jesse M. Caplan, BBO # 645615 Assistant Attorney General Consumer Protection and Antitrust Division One Ashburton Place Boston, MA 02108 (617) 727-2200

Dated: June ___, 2004

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