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| IHRSA Report | In Brief I


Business and Retail Groups Praise National Policy Developments


In the court case AT&T v. Concepcion, the U.S. Supreme Court was asked to determine whether a retail business could prevent customers from initiating a claim as part of a class lawsuit. Or, said another way: could a retail business choose to deal with each consumer complaint on an individual basis, rather than as part of a mammoth lawsuit involving a number of consumers? The issue is important because the time and expense required to adjudicate one


class lawsuit would, in all probability, be much greater than that involved in dealing with individual claims directly—it’s the difference between resolving a dispute in small claims court vs. the legal expense of full-blown, multiyear litigation. Since health clubs are considered a retail business, this case and decision are


applicable to our industry. The origins of the case date back to 2002, when Vincent and Liza Concepcion


signed a mobile-service agreement with AT&T that included a free cell phone. The phone was indeed free, but AT&T charged the Concepcions $30.22 in sales tax, based on the fair market value of the phone. In 2006, the Concepcions joined a class-action arbitration case to recover their $30.22, alleging both “false advertising” and “fraud.” AT&T countered that, under the terms of the original agreement, the Concep-


cions were barred from resolving the issue through a class action. Specifically, the agreement stated that the Concepcions could file a claim only in their “individual capacity, and not as a plaintiff or class member in any purported class or repre- sentative proceeding.” The issue quickly reached a federal district court, which was


asked to decide whether AT&T could lawfully prevent consumers from resolving disputes through a class-arbitration process. The district court held that the AT&T arbitration agreement was “uncon- scionable” and, therefore, invalid. On appeal, the Ninth Circuit Court of Appeals agreed with the district court and ruled in favor of the Concepcions. In a 5-4 ruling, however, the Supreme Court sided with AT&T,


holding that, “requiring the availability of class-wide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA [Federal Arbitration Act].” Following the ruling, the National Chamber Litigation Center,


an affiliate of the U.S. Chamber of Commerce, commented, “The Supreme Court’s ruling once again vindicates the primacy of federal arbitration laws over inconsistent state laws that attempt to limit the availability of private arbitration as a fast, fair, and efficient alternative to costly litigation in the courts.” Brian T. Fitzpatrick, a law professor at Vanderbilt University,


in Nashville, Tennessee, characterized the ruling, in an article in The New York Times, as “a game-changer for business” and “one of the most important and favorable cases for businesses in a very long time.” Consumer-interest groups, for their part, expressed concern


that the ruling would limit consumers’ ability to seek restitution from large corporations. The case has significant implications for the health and fitness industry. Principally, the Concepcion ruling confirms a


club’s right to prohibit members from bringing a claim as part of a class lawsuit. It’s important to note, however, that a club must explicitly describe this prohibition in its membership agreement—it’s not a right that can be claimed in the absence of a specific contract clause. —|


.org 96 Club Business Internat ional | SEPTEMBER 2011 |


Do you have a question about an industry legal issue? Is there a topic you’d like to see covered in “In Brief”? Contact IHRSA public policy at gr@ihrsa.org


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