The suit describes SoulCycle’s business practices as a “relentless effort to maximize its profits” at the expense of customers and points to the $25 million SoulCycle earned in expired certificates off of the $93 million in certificates it sold in 2014. SoulCycle knows it’s often difficult for customers to use their certificates within the allotted time frame, which can be as low as 30 days, because they offer few available classes, the suit claims.
SoulCycle Inc. has agreed to a deal valued between $6.9 million and $9.2 million that would resolve a nationwide putative class action alleging the indoor cycling fitness company sells illegally expiring gift certificates, according to court documents filed in California federal court Friday.
Under the deal, SoulCycle agreed to reinstate up to two expired classes per customer or reimburse those customers $25 for each of those classes. The company also agreed to adopt policy changes to ensure consumers fully understand that purchasing a class or series of SoulCycle classes does not constitute the purchase of a gift certificate or gift card.
“The proposed settlement provides significant economic consideration to settlement class members and meaningful changes to SoulCycle’s business practices,” the motion for preliminary settlement approval says.
If approved, the deal would resolve class action claims brought by lead plaintiffs Rachel Cody and Lindsey Knowles. The February 2016 second amended complaint accuses SoulCycle of defrauding customers by forcing them to buy gift certificates with short enrollment windows and keeping the expired certificates’ unused balances in violation of the U.S. Electronic Funds Transfer Act and California’s Unfair Competition Law.
The suit describes SoulCycle’s business practices as a “relentless effort to maximize its profits” at the expense of customers and points to the $25 million SoulCycle earned in expired certificates off of the $93 million in certificates it sold in 2014. The company knows it’s often difficult for customers to use their certificates within the allotted time frame, which can be as low as 30 days, because they offer few available classes, the suit claims.
Since the suit was first filed in August 2015, SoulCycle has maintained that its business complies with the law, and it has argued that it sells classes on its website, not gift cards, and so it is not subject to the EFTA. After surviving multiple bids to toss the suit, the parties announced in April they struck a settlement to avoid costs and risks associated with continued litigation.
Under the terms of the deal, which was disclosed in court documents Friday, customers who had unused, expired gift cards will receive up to two reinstated SoulCycle classes in their accounts. Alternatively, those customers can elect to receive up to $50 by submitting a claim form. The price for comparable SoulCycle classes are $30-$40, according to court documents.
Overall, the settlement provides for up to 229,646 reinstated classes, depending upon the number of consumers who elect the cash option, and the parties estimate the deal is valued between $6.9 million and $9.2 million, court documents show.
SoulCycle also said it would change its terms and conditions to reinforce that its classes and SoulCycle gift cards are not the same product and that its gift cards never expire, although its classes do. It will also denote class passes by geographical region and eliminate its class transfer features so that classes purchased in a more expensive region will no longer be transferrable to less expensive regions.
The parties also asked the court to certify a nationwide class of SoulCycle customers who purchased an unused pass that expired between Aug. 25, 2014, and Feb. 10 of this year and a California class of customers who purchased expired, unused passes between Feb. 1, 2012, and Feb. 10, 2017.
Counsel for the customers and representatives for SoulCycle did not immediately respond to requests for comment Monday.
The customers are represented by Daniel P. Hipskind and Dorian S. Berger of Berger & Hipskind LLP and Nicholas Diamand of Lieff Cabraser Heimann & Bernstein LLP.
SoulCycle is represented by Shirli F. Weiss, Keara M. Gordon and Katherine J. Page of DLA Piper.
The case is Rachel Cody et al. v. SoulCycle Inc., case number 2:15-cv-06457, in the U.S. District Court for the Central District of California.
“SoulCycle shouldn’t be able to profit from selling exercise classes that it knows will expire before a customer has a chance to redeem them,” Dorian Berger, a lawyer for the plaintiff, said in a statement.