News Release: Court-Approved Settlement Ensures Continued Services At Health ClubPosted on Sep 13, 2013 in News Releases
DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS
Office of Consumer Protection
BRUCE KIM KEALII S. LOPEZ
OFFICE OF CONSUMER PROTECTION DIRECTOR
Phone (808) 586-2630 Phone: (808) 586-2850
Fax: (808) 586-2640 Fax: (808) 586-2856
FOR IMMEDIATE RELEASE: Sept. 13, 2013
Court-Approved Settlement Ensures Continued Services At Hawaii
Health Club Company
Health Club Privileges to be Honored at Island Club & Spa
HONOLULU – The United States Bankruptcy Court for the Central District of California, San Fernando Valley Division, has approved a settlement between Hawaii’s Department of Commerce and Consumer Affairs’ (“DCCA”) Office of Consumer Protection (“OCP”), Meridian Sports Clubs California, LLC (“Meridian”), the former owner of the Honolulu Club, and the Unsecured Creditors Committee in Meridian’s Chapter 11 case.
The settlement affects consumers who purchased Gold Club Memberships for health club privileges at the Honolulu Club. As part of its plan to reorganize in Chapter 11 bankruptcy, Meridian, the former operator of the Honolulu Club, terminated its relationship with Honolulu Club and moved to reject its contracts with its Gold Club Members. At the same time, the new owners of Island Club & Spa gave assurances that they would provide Gold Club Members privileges at Island Club & Spa in order that they not be injured by Meridian’s bankruptcy.
OCP opened an investigation into the matter after receiving complaints from Gold Club Members. Notwithstanding that privileges at Island Club & Spa were offered by the new owners of Island Club & Spa, OCP determined that Meridian’s Gold Club Memberships appeared to violate certain State consumer protection statutes governing health clubs.
OCP filed a proof of claim in Meridian’s bankruptcy, seeking restitution and prejudgment interest on behalf of an estimated 334 Gold Club Members, as well as civil fines and penalties, and attorneys’ fees and costs. The settlement resolves these claims. As part of the settlement, the court approved the offer by the new owners of Island Club & Spa to allow Gold Club Members health club privileges at Island Club & Spa for 36 months at no charge.
The court also approved OCP’s claim for $2,015,500 in civil fines, penalties, and attorneys’ fees and costs. Meridian consented to such claim because it will be subordinated to other unsecured creditors’ claims and will receive specified treatment as provided by the settlement, which will result in actual recovery of approximately $25,000.
“OCP is pleased to have protected the rights of 334 Hawaii consumers regarding their health club memberships and minimized the impact of the bankruptcy upon them,” OCP Executive Director Bruce Kim said. “The outcome for this bankruptcy could have been very different for consumers had Island Club & Spa not agreed to assist the Gold Club Members in this settlement.”
The new owners of Island Club & Spa said they were also pleased to facilitate the resolution and look forward to welcoming the Gold Club Members to Island Club & Spa.
Consumers should know that all Hawaii health club membership contracts must be in writing; no contract may extend beyond three years; only contracts lasting not more than one year may be prepaid in full; and no more than 20 percent may be prepaid for contracts lasting more than one year but not more than three years. The laws applicable to health clubs can be found in Hawaii Revised Statutes Chapter 486N and is available for review on the DCCA’s website.
Gold Club Members may call Island Club & Spa located at 1177 Queen St. at 543-3900 for information about their membership rights under the settlement.
The Office of Consumer Protection was represented in the bankruptcy case by OCP staff attorney James F. Evers.
For media inquiries, please contact:
Communications Officer, DCCA