Cody et al v. SoulCycle Inc.

 

Area: Class Action & Consumer Protection

Court: Central District of California Federal Court

 

In a relentless effort to maximize its profits, SoulCycle, Inc. requires customers to purchase exercise sessions through an intermediate transaction whereby customers purchase an electronic certificate or credit that can be used to book exercise sessions.  SoulCycle applies onerous and unlawful expiration dates to the money stored on these electronic certificates.  After the certificate expires, SoulCycle removes and causes the forfeiture of the unused balance previously stored on these certificates. 

 

SoulCycle’s expiration dates rob customers of their money, creating windfall profits for SoulCycle – the very harm that Congress and the California legislature intended to prevent by regulating the use of expiration dates on electronic gift certificates.  SoulCycle’s practices violate the Federal Credit Card Accountability Responsibility and Disclosure Act, the Electronic Funds Transfer Act, and  the California Consumer Protection Statute (Cal. Civ. Code § 1749.5).  

SoulCycle’s profitability is driven by selling customers electronic stored value devices that are issued on a prepaid basis in specific denominations, which can be used for exercise sessions (“Series Certificates”).  In 2014, SoulCycle sold roughly 93.7 million dollars of these Series Certificates.  Although SoulCycle is careful to avoid calling these prepaid devices “certificates,” instead referring to the prepaid devices as a “Series,” SoulCycle’s intermediate devices function as a gift certificate as defined under federal law and state law. 

SoulCycle deceptively claims that it offers customers “a pay-as-you-go system.”  However, instead of allowing customers to purchase classes directly or pay for classes when they are booked, SoulCycle forces customers to purchase an intermediary device (the Series Certificate) for specific dollar amounts.  SoulCycle then subjects the balance that is stored on the Series Certificate to onerous and unlawful expiration dates.  Customers unable to use their Series Certificates before the expiration date are penalized by forfeiting the entire balance that has gone unused, which is often hundreds or thousands of dollars.

 News Coverage Of The Case 

 

 Selected Case Documents 

 

Monday, April 24, 2017

SoulCycle Plans To Settle Gift Card Suit Brought By Berger & Hipskind LLP

A proposed class of consumers in a suit claiming SoulCycle Inc. sells illegally expiring gift certificates has reached an agreement in principle to settle with the company, according to a status report filed in California federal court on Friday.  SoulCycle and proposed class representative Rachel Cody filed a joint status report following an April 19 mediation session, saying that they had come to an agreement over a settlement.

Thursday, June 09, 2016

Law360: Review Of Gift Certificate Cases Recognizes Berger & Hipskind LLP's SoulCycle Case

Gift cards have long been a boon for retailers eager to bring more business into their stores. However, estimates suggest that anywhere from six to 10 percent of all gift card sales never result in redemption. This “breakage,” or the portion of gift card balances that consumers fail to redeem for merchandise, can increase the bottom line for many retailers.

 

In Cody v. SoulCycle Inc., the court held in Jan. 2016 that a prepaid pass for indoor cycling classes was a “gift certificate” subject to California’s gift card laws and EFTA.  The court held that the passes were “gift certificates” because they are redeemable for services of a certain value and are “usually” presented as gifts.

Thursday, June 09, 2016

The Hollywood Reporter Cites Berger & Hipskind's SoulCycle Class Action In An Article Entitled "From 'Spin Rage' To Expiration Date Drama"

SoulCycle is currently facing a potential class-action lawsuit from customers who are unhappy with its policies regarding the expiration dates on prepaid packages of classes. They claim the series, as they're called, expire too quickly and result in wasted purchases — in violation of state and federal law. SoulCycle has argued that series shouldn't be treated as gift cards because they can't be used to purchase anything, but U.S. District Court Judge George King denied a motion to dismiss on those grounds.

Monday, April 25, 2016

SoulCycle Gift Payment Class Action Allowed To Roll Forward

SoulCycle Inc.’s latest effort to skirt a proposed class suit by customers who allege it illegally uses a form of expensive gift certificates for payment got slapped down Friday in California federal court with a judge’s ruling that denied all but one of the indoor cycling giant’s claims.  

 

“SoulCycle’s present motion appears to be nothing more than an attempt to get a second bite at the apple,” Judge King said. “While our consideration of the merits of SoulCycle’s motion will not be foreclosed, we strongly disfavor SoulCycle’s apparent attempt to circumvent the rules for a motion for reconsideration.”

Tuesday, March 22, 2016

Customers Slam SoulCycle Bid To Nix Business Model Suit - Law360 Article

A proposed class of SoulCycle Inc. customers on Monday slammed a bid to dismiss their suit alleging the indoor cycling giant operates on an illegal gift certificate-like model, telling a California federal court the chain’s latest filing rehashes arguments it denied months ago.  But in its motion to dismiss filed earlier this month, Soulcycle took aim not at these changes but at Judge King’s earlier order, at some points using language identical to that included in its earlier motion, [Plaintiff] Rachel Cody said Monday.

Monday, November 16, 2015

Law360 Article: Client Says SoulCycle Uses Gift Certificates In All But Name

A Proposed class of SoulCycle clients on Friday told a California federal court that the stationary cycling chain cannot avoid regulations covering the expiration of electronic gift certificates simply by avoiding the term “certificate” and using "series" instead.  The suit said this policy violates the Federal Credit Card Accountability Responsibility and Disclosure Act and the Electronic Funds Transfer Act, as well as California consumer protection laws, because of the short expiration dates the credits carry.

Tuesday, September 01, 2015

ABCNews: Soul Alleged "Illegal" Payment System With Certificates That Expire Quickly, Suit Says

A customer of the popular fitness craze SoulCycle says the company is forcing riders to use an "illegal"
payment system that requires customers to buy certificates with "unreasonably short expiration periods,"
according to a new lawsuit.  Her lawsuit, which alleges SoulCycle certificates have "illegal expiration provisions," was filed on Tuesday in Los Angeles federal court and seeks class action certification.

Friday, August 28, 2015

Time Magazine: Proposed Lawsuit Against Soulcycle Says The Studio "Robs" Customers

Using ‘Series Certificates’ is not a fair and transparent practice, suit alleges.  The SoulCycle IPO just got a little more
interesting. Less than a month after the highend cycling studio filed for an initial public offering, SoulCycle has been hit with a proposed classaction lawsuit, reports Business Insider.


The lawsuit, which was filed by (former) California based customer Rachel Cody, brings seven charges against the studio, although the crux of the lawsuit is the violation of the Credit Card Accountability and Disclosure Act. The law states that businesses must “establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan.”

Friday, August 28, 2015

Fortune: Using "Series Certificates" Is Not A Fair And Transparent Practice, Suit Alleges

The lawsuit accuses SoulCycle of a “relentless effort to maximize its profits” and states that the expiration policies “rob customers of their money, creating windfall profits for SoulCycle.”  Less than a month after the highend cycling studio filed for an initial public offering, SoulCycle has been hit with a proposed classaction lawsuit, reports Business Insider.

Thursday, August 27, 2015

Business Insider: SoulCycle Is Being Sued Over A Clever Policy That Infuriates Cusomers

As SoulCycle prepares to go public, it has been hit with a proposed classaction lawsuit claiming it "robs customers" by requiring them to buy certificates for classes with "unreasonably short expiration periods."  The lawsuit — which accuses SoulCycle of a "relentless effort to maximize its profits" — details the story of California customer Rachel Cody, who paid $30 for a certificate good for a future class.
 

Her pass expired before she could make it to SoulCycle, she claims. SoulCycle offers later expiration dates when customers buy pricier packages for multiple classes, as opposed to a single class.  The lawsuit also brings up how SoulCycle's popularity comes into play. With classes at peak times filling up rapidly, it can become difficult to get into classes, thereby posing more of a risk of wasting classes.

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