On August 25, 2015, a putative class action lawsuit was filed against SoulCycle, Inc. (“SoulCycle”) in the United States District Court for the Central District of California, alleging violations by SoulCycle of the Credit Card Accountability, Responsibility and Disclosure Act (“CARD Act”), the Electronic Funds Transfer Act (“EFTA”), and various state statutes. The lawsuit essentiality alleges that SoulCycle sold “gift cards” to consumers that include expiration dates that were less than the five (5) year period allowed under various statutes. SoulCycle has yet to respond to the lawsuit, but may move to dismiss on the ground that it does not sell “gift cards” as defined by statute.
Do SoulCycle’s 30-day Expiration Periods violate state and federal law?
SoulCycle Accused of Violating Various Laws in Class Action Lawsuit
According to the complaint, SoulCycle offers spin classes to consumers. Consumers may only attend SoulCycle spin classes by purchasing “Series Certificates” at specific values in advance of attending classes. The majority of Series Certificates sold by SoulCycle, according to the complaint, expire 30 days after purchase, with no warning to the consumer of the pending expiration date. Although the Series Certificates have varying expiration dates depending on the value purchased, in all instances the Series Certificates expire too quickly according to the complaint, in violation of federal and state laws. This is especially problematic because, according to the class action papers, classes are hard to get into by virtue of their popularity, thus increasing the likelihood that consumers will not be able to redeem the Series Certificates before they expire.
The named plaintiff argues that the Series Certificates are gift cards under various state and federal laws because the Series Certificates are: “(a) redeemable at a single merchant; (b) issued in a specified amount that may not be increased or reloaded; (c) purchased on a prepaid basis in exchange for payment; and (d) honored upon presentation by such single merchant or affiliated group of merchants for goods or services.” The complaint relies on SoulCycle’s Securities and Exchange Commission filings to argue that SoulCycle has reaped over $25 million in profits as a result of the quick expiration dates of Series Certificates. The complaint alleges that SoulCycle has not only violated the EFTA and CARD Act, but also state statutes in California, Connecticut, New Jersey, Massachusetts, Florida, Illinois and Maryland, respectively. SoulCycle has not responded to the complaint.
SoulCycle will likely argue that its Series Certificates do not constitute gift cards under any federal or state law. A determination by the Court that the Series Certificates are indeed gift cards could throw SoulCycle for a spin. We will monitor this action for further developments.