(CN) – Despite his concerns about a “misleading” $3.8 million settlement for gym members who claim L.A. Fitness overcharged them to cancel, a federal judge gave it final approval.
Sophia Martina filed a putative class action against L.A. Fitness International LLC in March 2012 in New Jersey.
The amended federal complaint alleges that Martina paid about $288, covering her first and last month’s membership dues, in February 2008 to join the health club.
After Martina notified L.A. Fitness that she wanted to end her membership a few months later, however, it charged her for an extra month, according to the complaint.
Martina said she had postmarked her notice 30 days in advance, as required by her membership agreement, but that the club charged her credit card about $40 for a wait time because it did not receive the letter until about a month later.
The complaint alleges violations of New Jersey’s Consumer Fraud Act and other laws on behalf of those who were overcharged for canceling memberships begun between February 2006 and March 2012, or signed contracts for personal training sessions during that time.
After Senior U.S. District Judge William Walls refused to dismiss the complaint in September 2012, he preliminarily approved the class settlement in May.
L.A. Fitness agreed to pay up to 46,000 class members an aggregate amount of $3.8 million, plus attorneys’ fees and more than $11,000 to resolve Martina’s credit card charges.
Under the settlement, members of the membership agreement class will receive 45-day access coupons and possible reimbursement for one-third of a month’s dues, while the fitness service class may receive either two free 25-minute personal training sessions or a $100 credit toward a new monthly membership.
With some reservation, Judge Walls gave the settlement final approval on Oct. 8. He noted that L.A. Fitness’s actual exposure is “nowhere near” $3.8 million.
“The parties’ suggested values of $52.48 for the 45-Day pass and $100 each for the personal training sessions and gym membership credit may be appropriate for consumers, but the costs to defendant are much lower,” the unpublished ruling states. “Defendant already has health clubs operating in New Jersey; given these sunk costs, the marginal cost of a few hundred extra visits by holders of the 45-Day Passes is close to zero.
“Defendant could surely withstand a greater judgment,” Walls added.
The judge also noted that class members are “not enthusiastic” about the settlement.
“Though there have been no objections and only one opt out, fewer than 3 percent of the class has stepped forward to claim relief,” according to the ruling.
The court awarded class counsel $200,000 in fees and costs.
“Unfortunately, class members have claimed cash and coupons worth only $68,000, creating a distasteful scenario where the fee awarded to counsel ($200,000) exceeds the value of the relief which class members have claimed by a factor of three,” Walls wrote. “But that blame must ultimately lie with the duly notified class members. Counsel’s labors have been fruitful and their request is modest, so it is granted.”
The judge also awarded Martina a $3,000 incentive award.
“Though the parties’ claimed value for the settlement of $3.8 million is inflated and misleading – based, as it is, on a faulty assumption that 100 percent of class members will claim their relief – the settlement is fair enough, especially given the risks of litigation,” Walls wrote.
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