July 19, 2017

gift-card-class-actionSoulCycle, Inc. (“SoulCycle”) has agreed to pay up to $9.2 million to settle a gift card class action lawsuit in California.

What were the allegations of wrongdoing against SoulCycle and what are the terms of settlement?

 

As we previously blogged, the class action lawsuit against SoulCycle alleged that the fitness company fraudulently sold illegally expiring gift cards and gift certificates to its consumers.  For its part, SoulCycle argued that it did not sell gift cards and that customers had merely mistaken their spin class purchases for gift cards.  However, allegations that participation in SoulCycle classes required riders to purchase fitness classes in advance and that SoulCycle recouped unused balances if not redeemed within extraordinarily short windows (often as brief as 30 days), ultimately allowed the class action to survive SoulCycle’s earlier motion to dismiss.

 

Following a lengthy litigation process, involving extensive discovery, SoulCycle agreed to settle the action.  Pursuant to the terms of the settlement, SoulCycle has agreed to reinstate up to two expired classes per customer or, alternatively, reimburse the customers $25 for each of those classes.  Additionally, SoulCycle has agreed to enact various policy changes designed to ensure that its customers understand that the purchase of SoulCycle classes is not the equivalent of purchasing a gift certificate or a gift card, including associated revisions to its website and mobile app terms and conditions.

 

Protect Your Business Against a Gift Card Class Action

 

Electronic Funds Transfer Act (“EFTA”) lawsuits, under which companies are often accused of gift card-related misconduct, have grown in prominence with the explosion in popularity of gift cards as a form of currency and promotion.  As the sizeable SoulCycle settlement demonstrates, the legal pitfalls associated with gift cards can result in crushing liability when EFTA wrongdoing is alleged.  As a result, it is critical that businesses work closely with knowledgeable counsel before and throughout any marketing campaign or business venture intended to offer customers the convenience of using gift cards and/or gift certificates.

If you are interested in learning more about this topic, need to review your marketing practices and procedures or if you are facing an investigation from the FTC or other regulatory agency, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

 

The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney. 

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