SoulCycle, 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.