COVID-Related Refunds Defeat Article III Standing
After gyms closed in mid-March due to the coronavirus pandemic, LA Fitness was among the many fitness facilities faced with unforeseeable closures, outraged members, and class action litigation. Last Thursday, a Florida federal judge ruled that a gym member did not have Article III standing to maintain a class action because he had already received a full refund of membership dues, and another gym member was bound to arbitrate his claims. See Barnett v. Fitness International, LLC, No. 20-cv-60658 (S.D. Fla. Mar. 30, 2020).
On March 30, 2020, Plaintiff Kip Barnett filed a putative class action for negligence and unjust enrichment against Fitness International, LLC d/b/a LA Fitness, alleging that it had voluntarily closed its fitness facilities around the country and kept millions of dollars in unearned membership fees for the month of March. This filing came after LA Fitness told members that it was suspending all billing beginning on April 1, and offered to either extend memberships for longer than the duration of the closure or provide a complimentary three-month membership for a friend or family member. LA Fitness also started providing refunds to all members “in good standing who  made such a request instead of choosing the other benefits offered to them.”
LA Fitness moved to compel arbitration based on an arbitration agreement in Plaintiff Barnett’s personal training agreement, as there was no such clause in his general membership contract.
Shortly thereafter, Plaintiff Barnett filed an amended complaint, adding a second plaintiff (Samuel Enzinna) who had not signed an arbitration agreement. However, at the time of this amended filing, Plaintiff Enzinna had already received a full refund of his March dues.
LA Fitness then moved to dismiss the amended complaint and the Court granted its motion as to both plaintiffs in different orders. First, the Court ruled that Plaintiff Barnett had agreed to arbitration and dismissed his claims without prejudice. Second, the Court found that, because Plaintiff Enzinna had been fully compensated for his alleged loss, he lacked Article III standing. The court also rejected Enzinna’s request for injunctive relief in the form of a guarantee that LA Fitness will not charge membership fees at some future time during the pandemic, finding the argument to be “unduly conjectural and hypothetical” given that LA Fitness had already suspending its billing.
Refund cases make up a majority of COVID-19 class action filings, ranging from suits involving universities, monthly memberships, travel cancellations, and sporting events. This case—one of the earliest decided—suggests that companies that took prompt action to remedy their customers’ injuries may be spared from the time and expense of lengthy class action litigation.