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SIXTH DIVISION
December 17, 2004

No. 1-03-3501

Nora Bucher and Krista Pulcini (some documents in therecord, including the complaint, misspell the name as Palcini)sued Bally Total Fitness Corporation, charging that theircontracts with Bally violated the Physical Fitness Services Act(Fitness Act) (815 ILCS 645/1 et seq. (West 1998)) and theAutomatic Contract Renewal Act (Renewal Act) (815 ILCS 601/1 etseq. (West 2002)). The trial court dismissed the complaint forfailure to state a cause of action. On appeal, we find thatplaintiffs have stated viable causes of action for violation ofboth acts.

Pulcini signed her contract with Bally on October 18, 1999. The contract sets a membership fee of $957 and monthly dues of$8. Pulcini paid $50 toward her membership fee and she agreed topay off the balance by paying $29.99 each month for the following3 years. She accepted Bally's automatic payment plan for her"Monthly Payment" of $37.99, which covered the monthly dues andthe payment for the membership fee.

The contract further provided:

"You will be in Default *** if you fail to pay anyinstallment within 30 days after the date when suchinstallment is due. If you are in Default, yourmembership privileges may be denied and any partialdownpayment forfeited. *** We may get a court judgmentagainst you for the amount you still owe ***.

*** Other than in the event of permittedcancellations described below, Buyer shall not beexcused from the obligation to make any payment inaccordance with this Contract, and Buyer may not reducethe amount of any payment for any reason includingMember's failure to use any club. ***

***

*** You have the right to cancel this Contract bysending written notice of intent to cancel within threebusiness days after the first business day after thisContract is signed ***.

***

*** If Buyer or Member dies or Member becomesdisabled *** Buyer may cancel Member's membership bysending written notice of cancellation ***.

*** Buyer may cancel Member's membership if Memberpermanently relocates his or her residence more than 25miles from either the club of enrollment or any otherclub which Member is entitled to use under themembership plan chosen ***.

***

*** You may cancel this Contract if your club ofenrollment permanently closes and Member lives morethan 25 miles from any other club which you areentitled to use under the membership plan you havechosen ***.

*** Buyer agrees to pay a $25.00 fee *** [for] anyAutomatic Payment authorized by Buyer which is rejectedor not honored by Buyer's bank *** for any reason,along with any costs or expenses incurred in connectionwith collection ***.

*** Monthly dues charges will continue to be dueeach month regardless of your use of the club until younotify us in writing that you wish to cancel thisContract. *** If you fail to pay any monthly duespayment within 30 days after the date such payment isdue, your membership privileges may be cancelled andyou may have to reapply for membership at the prices weare then charging new members or, if available, pay areinstatement fee which may include unpaid dues todate. ***

*** If you have elected the Automatic PaymentPlan, you are authorizing us, or our agents, to makecharges or withdrawals to the accounts you havespecified for membership fee (until paid in full),monthly dues and tax payments and all other chargespermitted under this Contract."

Bucher signed a very similar contract with Bally onSeptember 16, 2002. The contract set the membership fee for theplan Bucher selected at $2,130. For the first 36 months of thecontract, Bucher agreed to pay $63.99 per month, itemized as$58.99 for the membership fee plus $5 for monthly dues. Thecontract included clauses with the same effect as the clausesfound in Pulcini's contract regarding default, grounds forcancellation without default, monthly dues, and automaticpayment.

Like Pulcini, Bucher accepted the automatic payment option. Bucher gave Bally her checking account information, permittingBally to obtain the monthly payment directly from her account,whenever the funds in her account exceeded the amount of hermonthly payment. The contract provided for assessment ofpenalties against Bucher if her bank ever failed to pay Bally theautomatic monthly payment.

Bucher and Pulcini filed this lawsuit on March 24, 2003. They sought to represent the class of all persons in Illinoiswho, after March 24, 1998, entered into renewable membershipplans with Bally, with an automatic payment plan and a period ofmore than two years for payment of the membership fee. Theyclaimed that the contracts violated the Fitness Act because theyestablished an initial service term of three years, and theautomatic renewal violated the Renewal Act.

Bally moved to dismiss the complaint for failure to state acause of action. 735 ILCS 5/2-615 (West 2002). The trial courtaccepted Bally's argument that the contract provides for aninitial service term of one month, renewed by payment of monthlydues. The court found that the contracts violated neither theFitness Act nor the Renewal Act, and therefore the courtdismissed the complaint.

Because the trial court dismissed the complaint pursuant tosection 2-615 of the Code of Civil Procedure, we review thedismissal de novo. Beahringer v. Page, 204 Ill. 2d 363, 369(2003). We will not affirm the dismissal "unless it clearlyappears that no set of facts can be proved which will entitle theplaintiff to recover." Beahringer, 204 Ill. 2d at 369.

Section 8 of the Fitness Act provides:

"No contract for physical fitness services shallrequire payments or financing over a period in excessof 3 years from the date the contract is entered into,nor shall the term of any such contract be measured bythe life of the customer. The initial term of servicesto be rendered under the contract may not extend over aperiod of more than 2 years from the date the partiesenter into the contract; provided that the customer maybe given an option to renew the contract forconsecutive periods of not more than one year each fora reasonable consideration not less than 10% of thecash price of the original membership." 815 ILCS645/8(b) (West 1998).

Section 9 establishes the penalty:

"Any contract for physical fitness services whichdoes not comply with the applicable provisions of thisAct shall be void and unenforceable." 815 ILCS645/9(c) (West 1998).

Bally argued successfully in the trial court that itscontracts do not provide for an impermissible initial serviceterm of three years; instead, they provide for an initial term ofone month renewable each month. On appeal plaintiffs point outthat under Bally's construction of the contract, theconsideration for monthly renewal falls far short of 10% of theinitial membership fee, in violation of section 8(b) of theFitness Act.

Bally responds that plaintiffs waived the issue by failingto identify this particular violation of the Fitness Act in thetrial court. In support, Bally cites Eagan v. Chicago TransitAuthority, 158 Ill. 2d 527 (1994), in which our supreme courtaffirmed a dismissal under section 2-619 of the Code of CivilProcedure (Ill. Rev. Stat. 1987, ch. 110, par. 2-619). The courtfound that the plaintiff waived an argument raised on appealbecause the complaint did not state sufficient facts to supportthe argument and the plaintiff had not moved to amend hiscomplaint to state the facts on which his argument relied. Eagan, 158 Ill. 2d at 534-35.

Plaintiffs here rely on no facts outside of those shown bytheir complaint and the contracts appended to the complaint. Bally cites no case in which the court reviewing a dismissalunder section 2-615 refused to consider, as waived, an argumentshowing that the facts stated in the complaint sufficed to statea cause of action. The de novo standard of review does notpermit us to disregard any theory of recovery supported by thefactual allegations of the complaint. We will affirm a dismissalunder section 2-615 only if the record clearly shows that the plaintiffs can prove no set of facts under the pleadings thatwill entitle them to recover. American National Bank & Trust Co.v. City of Chicago, 192 Ill. 2d 274, 279 (2000).

Bally next claims that under both of plaintiffs' contracts,a membership renewal for a full year after the initial three-yearperiod of their contracts cost more than 10% of the initialmembership prices. But if the contract establishes an initialterm of services of three years, it violates section 8(b) of theFitness Act, just as plaintiffs claimed in the trial court. Bally also argues for an initial term of one year with one yearrenewals, but Bally cites no language in the contract to supportthe claim that the initial membership fee pays for one year'smembership. The payment schedule shows that Bally beginscharging a monthly renewal fee within a month after initiatingthe membership. Thus, Bally must still rely on its contentionthat the initial service period for each contract is one month,subject to monthly renewal.

The Fitness Act provides that a contract's renewal periodmust not exceed one year, but the statute permits renewal periodsof any lesser length. The contracts here established renewalperiods of one month, equal to the duration of the initialservice period. The Fitness Act requires the price for eachrenewal period to be "reasonable consideration not less than 10%of the cash price of the original membership." 815 ILCS 645/8(b)(West 1998).

Although the legislative history of the Fitness Act does notaddress this particular provision, the "Bill was introduced inresponse to *** abuses" (82d Ill. Gen. Assem., House Proceedings,April 2, 1981, at 48 (statements of Representative Jaffe)) reported with regard to contracts of physical fitness centers. In response legislators worked with the Attorney General's officeto establish "contract limitations and *** prohibitedprovisions." 82d Ill. Gen. Assem., House Proceedings, April 2,1981, at 48 (statements of Representative Jaffe). Section 8(b)of the Fitness Act restricts the power of fitness centers to tiemembers to long-term contracts. If the original membership pricepays for many subsequent renewal periods, the contracteffectively ties the member to a prohibited long-term contract. The requirement that a renewal must cost more than one-tenth ofthe cost of the initial period assures that the member has asignificant cancellation option at the end of each renewalperiod.

Pulcini's contract set an initial service period of onemonth with a membership price of $957. The renewal for the firstrenewal period, one month later, cost $8, which was considerablyless than 1% of the cost of the original membership. Forpayments to reach the same total as provided in Pulcini'scontract, without interest, for 36 months with monthly renewal,the initial membership fee cannot exceed $276.67, with monthlydues of at least $27.67. Bucher's contract shows an originalmembership cost of $2,130, and a monthly renewal fee of $5, whichis barely 0.2% of the membership fee. Plaintiffs have stated aviable cause of action for violation of the Fitness Act.

Bucher also argues that her contract violates the RenewalAct, which provides:

"If a contract is subject to automatic renewal,the clause providing for automatic renewal must appearin the contract in a clear and conspicuous manner." 815 ILCS 601/10 (West 2002).

Section 15 of the Renewal Act sets the penalty for a violation ofsection 10:

"If a contract does not comply with this Act, theautomatic renewal provisions are not enforceable by aparty who prepared the contract or directed itspreparation." 815 ILCS 601/15 (West 2002).

Pulcini concedes that her contract does not violate the RenewalAct, because she signed her contract before the Renewal Act tookeffect. See 815 ILCS 601/20 (West 2002).

Bally argues that Bucher's contract does not provide forautomatic renewal because Bucher had to pay dues each month torenew her membership. The contract provides that the monthlycharge consists of a payment for the original membership fee plusmonthly dues. If one fails to pay any part of the monthlycharge, without cancellation on one of the limited groundspermitted by the contract, the member has defaulted under thecontract. According to the contract, Bally then has many rightsto exercise at its discretion, including the right to deny themember access to its clubs. The contract does not provide fornonpayment of the monthly dues without default for the entire 36months set for payment of the original membership fee.

Moreover, Bucher's contract provides for automatic payment,directly from her checking account, of the monthly payment,including both a portion of the membership fee and the monthlydues. Thus, if Bucher does nothing whatsoever, Bally takes hermoney each month, including the monthly dues, and renews hermembership indefinitely. Bucher must actively cancel hermembership to prevent Bally from continuing to drain cash fromher bank account. Bucher's contract epitomizes automaticrenewal.

Bally argues that Bucher has failed to state a cause ofaction for violation of the Renewal Act because Bucher has notalleged that Bally has attempted to enforce the automatic renewalprovisions. The Renewal Act limits its remedy to disallowingenforcement of renewal provisions. 815 ILCS 601/15 (West 2002). But Bally effectively enforces the automatic renewal provisionevery time it obtains the monthly payment from Bucher's checkingaccount. According to the contract the monthly payment Bally cantake from the bank includes the monthly dues, even if Bucher doesnot use any of Bally's facilities. And if Bucher takes any stepsto prevent the bank from making the complete monthly payment,including the monthly dues, the contract provides for furtherfinancial penalties against Bucher.

In a petition for rehearing Bally argues that the contractcomplies with the Renewal Act because it clearly andconspicuously provides for automatic renewal. Although Bally'slawyers read the contract and did not see that it provided forautomatic renewal at all, let alone clearly and conspicuously, wedo not intend to foreclose Bally from raising any viable defensesto the complaint. Bally also claims that the contract does notlimit the available grounds for cancellation of membership, andit does not provide for automatic payment of monthly dues, and itdoes not tie members to impermissible long-term contracts with alarge membership fee and renewals at less than 10% of the initialmembership. We do not foreclose Bally from showing that thecontract renders inoperative the provisions quoted aboveconcerning grounds for cancellation, automatic payment, andrenewal. We find here only that Bucher has stated facts whichcould support a cause of action for violation of the Renewal Act,and both plaintiffs have stated a viable cause of action forviolation of the Fitness Act.

Because the contracts apparently set renewal prices far lessthan 10% of the initial membership fee, effectively tying plaintiffs to prohibited long-term contracts, plaintiffs havestated a viable cause of action against Bally for violation ofthe Fitness Act. The automatic payment provision permits Ballyto take Bucher's money every month until she cancels thecontract. Because she adequately pled that the contract does notclearly and conspicuously provide for automatic renewal, Bucherhas stated a viable cause of action against Bally for violationof the Renewal Act. Pulcini does not contest dismissal of herclaim for violation of the Renewal Act. We affirm that aspect ofthe trial court's decision. We reverse the decision in all otherrespects and we remand for proceedings not inconsistent with thisopinion.

Affirmed in part and reversed in part; cause remanded.

FITZGERALD SMITH, P.J. and O'MARA FROSSARD, J., concur.