IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

JENNIFER GRABIANSKI and JACK

STAPLETON, EUGENE FRIDMAN, EDWARD

RAECEK, BRIAN M. DROMGOOLE, RONNIE

KEHATI, AND JOSEPH V. ESPOSITO,

on behalf of themselves and others

similarly situated,

Plaintiffs,

v.

BALLY TOTAL FITNESS HOLDING CORP.,

and L.A. FITNESS INTERNATIONAL, LLC,

and FITNESS INTERNATIONAL, LLC

Defendants.

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MEMORANDUM OPINION AND ORDER

On October 11, 2012, plaintiffs filed an amended complaint

pursuant to my dismissal of their original complaint with leave to

replead. See Grabianski v. Bally Total Fitness Holding Corp.,---

F.Supp.2d—, 2012 WL 3987747 (N.D. Ill. Sept. 11, 2012). The amended

complaint asserts six counts. The first two are breach of contract

claims asserted against Bally (count I), and, in the alternative,

against LA Fitness International and Fitness International

(collectively, “LA Fitness”) (count II). The next two counts, both

against LA Fitness, assert breach of an implied contract (count

III), and a breach of the November 30, 2011, Asset Purchase

Agreement (“APA”) between Bally and LA Fitness, as to which

plaintiffs claim the status of third-party beneficiaries (count IV). 

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The fifth and sixth counts, against Bally and LA Fitness

respectively, both assert violations of the Arizona, Florida,

Illinois, New Jersey, and New York consumer protection statutes. 

Bally and LA Fitness have moved to dismiss the complaint in its

entirety. For the following reasons, I grant each of their motions

in part.

I.

Because the factual background to plaintiffs’ claims remains

largely unchanged from how I described it in Grabianski, I need not

rehearse it again in great detail. In short, plaintiffs allege that

between 1986 and 2002, they entered into membership agreements with

Bally,1 an expansive fitness outfit operating a chain of health

clubs across the United States. Plaintiffs purchased “Premier Plus”

or “Premier” membership plans, which entitled them to use (with

immaterial exceptions) any club in Bally’s nationwide network. Some

plaintiffs purchased their memberships from Bally, while others

purchased them on the secondary market, pursuant to provisions in

the membership agreements explicitly permitting transfer of “Premier

Plus” and “Premier” plans. Some plaintiffs made substantial upfront payments to obtain their memberships--as much as $2,500 in one

plaintiff’s case–-and all pay modest annual maintenance fees--

between ten and sixty dollars per year.

1In one instances, the original agreement was with a Bally

predecessor. 

2
Then Bally went bankrupt. After emerging from bankruptcy in

2009, Bally downsized, selling 171 of its roughly 271 clubs to LA

Fitness. An Asset Purchase Agreement effectuating the sale closed

on November 30, 2011. Plaintiffs allege that pursuant to the APA,

LA Fitness assumed responsibility for their membership agreements.

Nevertheless, after the APA closed, plaintiffs became unable

to access the clubs they had customarily used–-now owned by LA

Fitness--or any Bally club reasonably convenient to them. This,

despite plaintiffs’ continued payment of maintenance fees pursuant

to their membership agreements, and despite defendants’ public

statements that LA Fitness would “assume” those agreements. When

plaintiffs tried to use the newly-converted clubs, they were denied

access on the basis that their “home clubs” had not been acquired

as part of the APA. According to defendants, plaintiffs’ “home

clubs” were the clubs at which their memberships had originated,

even if those clubs were hundreds of miles away and had never been

used by plaintiffs. This was the case, for example, for plaintiff

Grabianski, an Illinois resident who purchased her membership on the

secondary market from a Bally member in New York. It was also the

case for plaintiff Stapleton, an Illinois resident who bought his

membership from a former Bally member whose plan originated at a

club in St. Louis, Missouri that, at least as of the APA, was no

longer open. And it was the case for plaintiff Fridman, whose

membership was purchased as a gift at a Bally club in Texas, and who

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later moved to Arizona. In all of these instances, and in similar

ones alleged by other plaintiffs, LA Fitness informed plaintiffs

that it would not honor their membership agreements.2 Although

plaintiffs could, theoretically, continue to access Bally gyms that

had not been sold to LA Fitness, none were located anywhere near

where plaintiffs live.

II. 

Bally asserts at the outset that all of the claims brought by

plaintiffs Fridman, Raecek, Dromgoole, Kehati, and Esposito (the

“Fridman plaintiffs”) are precluded by the order of dismissal in

Fridman et al. v. Bally Total Fitness Holding Corp. et al., No.

2:12-cv-707-ODW (C.D. Cal. Sept. 25, 2012). In that case, which

asserted federal jurisdiction based on diversity, Judge Wright

dismissed the case sua sponte without prejudice on the ground that

no individual plaintiff’s claim satisfied the minimum amount in

controversy, and that Ninth Circuit law precluded aggregating their

damages for jurisdictional purposes. Bally argues that because

Judge Wright’s ruling was final and appealable, the Fridman

plaintiffs have “no legal right” to join the present case.

Bally’s argument is meritless. Although its motion states that

“well-settled principles of claim preclusion” bar the Fridman

2

In the cases of plaintiffs Stapleton, Fridman, and Raecek,

LA Fitness ultimately agreed to “transfer” their membership

agreements. I agree with plaintiffs, however, that if they

prevail on their claims, they may nevertheless be entitled to

damages for the time they were unable to access the clubs.

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plaintiffs from bringing their claims in this forum, Bally nowhere

identifies any framework for effectuating these principles or

explains why the relevant legal standard is met in this case. 

Indeed, the precise theory under which Bally travels is murky. 

While its motion asserts claim preclusion, its brief cites,

seemingly indiscriminately, some cases involving claim preclusion

and others involving issue preclusion, though these are distinct

legal principles that must be analyzed and applied differently.

Bally conspicuously does not argue that I lack subject matter

jurisdiction over this case (and, indeed brings its motion under

Rule 12(b)(6), not Rule 12(b)(1)). Yet that is the only issue

susceptible to preclusion. As one of Bally’s own authorities

recognizes, “a jurisdictional dismissal precludes only the

relitigation of the ground of that dismissal.” Okoro v. Bohman, 164

F.3d 1059, 163 (7th Cir. 1999) (citing cases). Accordingly, Okoro

explains, a jurisdictional dismissal “has collateral estoppel (issue

preclusion) effect rather than the broader res judicata effect that

nowadays goes by the name of claim preclusion.” Id. The only

issue arguably precluded by Judge Wright’s order, then, is whether

that court had subject matter jurisdiction over the Fridman case,

not whether I have jurisdiction over this case. See Magnus

Electronics v. La Republica Argentina, 830 F.2d 1396, 1400 (7th Cir.

1987) (“[a] judgment dismissing a suit for lack of jurisdiction does

not preclude a party from litigating the same cause of action in a

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court of competent jurisdiction...however, it does ‘preclude

relitigation of the issue of whether the first tribunal had

jurisdiction.’”) (citations omitted) (original emphasis). 

Accordingly, Judge Wright’s order does not preclude the Fridman

plaintiffs from joining this case. 

Of course, were I to conclude, independently of Bally’s

arguments, that I lacked subject matter jurisdiction over this case,

I would be required to dismiss it sua sponte. But I discern no

basis on the record as it now stands for doing so under the law of

this circuit.

Bally next argues that plaintiffs’ contract claims must be

dismissed on the ground that those claims seek to enforce

obligations that Bally never undertook, and that were not within the

scope of the parties’ membership agreements. Bally characterizes

“the gravamen of Plaintiffs’ amended complaint” as the claim that

“Bally breached Plaintiffs’ ‘Premier Plus’ membership contract by

closing clubs, thereby not providing clubs convenient to them.” 

Bally’s Mem. at 6. But this plainly misreads plaintiffs’ claims. 

Plaintiffs do not complain that Bally closed clubs. What plaintiffs

complain about is that defendants denied them access to open clubs

(which are, in fact, convenient to them), in violation of their

contractual rights, which include the right to access any Bally club

in the nation. See Cmplt., Exh. A at ¶ 20 (describing “Premier

Plus” and “Premier” membership plans as providing members “with the

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use of all local and nationwide Bally Total Fitness clubs”). 

Plaintiffs further characterize Bally’s breach as the

unilateral termination of plaintiffs’ membership agreements on a

basis that is not authorized on the face of the agreements and is

inconsistent with the agreements’ stated terms. Specifically,

plaintiffs allege that Bally imported into the agreements a “home

club” restriction that does not appear in, and was not contemplated

by, the agreements, then relied upon that restriction as a purported

basis for extinguishing plaintiffs’ contractual rights. It is true

that the term “home club” does not appear anywhere in the contracts.

Both Bally and LA Fitness insist that they cannot, as a matter

of law, be held liable for breach of contract based on these

allegations because they were entitled to terminate the membership

agreements for any reason whatsoever, or for no reason at all. 

Illinois law compels this conclusion, defendants contend, because

the membership agreements are of indefinite duration and therefore

terminable at will. 

Defendants point to provisions articulated in ¶¶ 6-8 of the

membership agreements, which enumerate circumstances in which

members “may” cancel their contracts. These paragraphs state that

members may cancel their contracts in the event of the following

circumstances: the member’s death or disability (¶ 6); the member’s

relocation to an area not within twenty-five miles of the member’s

“club of enrollment” or “any other club which Member is entitled

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to use” under his or her membership plan, or “any club with

comparable facilities and services which will honor the membership

at no additional charge” (¶ 7); or the closure of the member’s “club

of enrollment” or “any other club which Member is entitled to use”

under his or her membership plan, “or any club with comparable

facilities and services which will honor the membership at no

additional charge” (¶ 8). Bally further cites ¶ 21, which states,

“[m]onthly dues charges will continue to be due each month

regardless of your use of the club until you notify us in writing

that you wish to cancel this Contract,” then explains the logistics

of how to effectuate the cancellation. According to defendants,

these paragraphs establish their “express, unfettered right to

terminate the agreement upon proper notice.” Bally’s Memo. at 6.

I disagree. Defendants liken the membership agreements to the

contract at issue in Jespersen v. Minn. Mining & Mfg. Co., 700 N.E.

2d 1014 (Ill. 1998), which the Illinois Supreme Court held was

terminable at will because its duration was indefinite. But the

contract in Jespersen expressly provided that it “shall continue in

force indefinitely,” unless terminated pursuant to certain events,

all of which amounted to material breaches. The membership

agreements here, by contrast, contain no such terms. It is true

that the contracts do not specify any fixed duration. They do,

however, set forth explicit circumstances in which members may not

invoke the cancellation rights established in ¶¶ 7-8 (dealing with

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member relocation and club closures): “[i]f any of these clubs are

within 25 miles of [the new/your] residence, you will not be

permitted to cancel the membership” (emphasis added). These

explicit restrictions on termination cannot be squared with Bally’s

proffered interpretation of the membership agreements as granting

both parties the “express, unfettered right to terminate the

agreement on proper notice.” Jespersen, 700 N.E. 2d at 1017. 

While the “general rule” may be that contracts of indefinite

duration are construed as terminable at will, in this case–unlike

in Jespersen–affirmative contractual provisions militate against

such a construction. Jespersen is further distinguishable (as is

Profile Products, LLC v. Soil Management, 155 F.Supp.2d 280, 883

(N.D. Ill. 2001)), in that here, the cancellation provisions do not

entitle members to terminate the agreement only in the event of

circumstances amounting to a material breach. Accordingly, those

provisions are not mere “transcrpition[s]” of the universal rule

that “any contract is terminable upon the occurrence of a material

breach.” Jespersen, 700 N.E. 2d at 1016-17 (original emphasis). 

Nor does ¶ 21 of the membership agreement establish the

“express, unfettered right” to terminate the agreement. On its

face, that paragraph simply specifies that monthly dues are payable,

and will be charged to members, until such time as cancellation is

effected. It says nothing about the circumstances under which

cancellation is allowed under the agreements. Bally’s construction

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of ¶ 21 as authorizing either party to terminate the agreement at

will would render the cancellation provisions of ¶¶ 6-8 superfluous,

and would eviscerate entirely the portions of those provisions that

state instances in which members are “not permitted” to cancel.3

Courts “must, of course, interpret a contract as a whole, and we

must try to give meaning and effect to each provision in the

contract,” Echo, Inc. v. Whitson Co., Inc., 121 F.3d 1099, 1105 (7th

Cir. 1997). Read in the context of the membership agreements as a

whole, ¶ 21 cannot reasonably be construed as establishing

defendants’ “express, unfettered right,” as a matter of law, to

terminate the membership agreements.

LA Fitness additionally argues that it cannot be liable for

breaching the membership agreements because plaintiffs’ allegations,

together with the APA, establish conclusively that LA Fitness did

not acquire those agreements. But I agree with plaintiffs that they

are entitled to discovery to determine whether their membership

agreements were, in fact, assigned to LA Fitness. Among other

issues that cannot be ascertained from the record as it currently

stands are the meaning defendants attributed to the phrase “members

assigned to any Seller Club,” within the APA’s definition of the

term “Acquired Members,” and the process defendants used for

3

I note that the agreements contain other

provisions–including the description of membership plans as

“renewable” or “nonrenewable”–that, while less directly contrary

to defendants’ asserted construction, nevertheless undermine

their characterization of the agreements as indefinite. 

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effectuating such “assignments.” See Cmplt., Exh. B, Definitions. 

Nothing on the face of plaintiffs’ membership agreements purports

to “assign” their memberships to any particular club. Some

membership plans identified in ¶ 20 expressly restrict members’ use

of Bally’s facilities to the “club of enrollment.” But even if this

distinct phrase were somehow interpreted to mean the members’ clubs

of “assignment,” no such restrictions apply to the Premier Plus and

Premier plans plaintiffs purchased. How defendants determined

plaintiffs’ club assignments, and whether those assignments were

consistent with plaintiffs’ rights under their membership

agreements, are questions that cannot be answered at this stage.

LA Fitness next argues that the third count of plaintiffs’

amended complaint, which claims that LA Fitness breached an implied

contract, is fatally flawed because plaintiffs have not alleged any

consideration to support the formation of an implied contract. This

challenge has merit. LA Fitness cites, inter alia, Brody v. Finch

Univ. of Health Sci./The Chicago Med. Sch., 689 N.E. 2d 257, 265

(Ill. App. Ct. 1998), which held that “[a] contract implied in fact

contains all of the elements of an express contract,” including “an

offer, a strictly conforming acceptance to the offer, and supporting

consideration.” Id. at 265 (emphasis added). Plaintiffs do not

dispute that no consideration was exchanged with LA Fitness, but

they argue that the consideration supporting their original

contracts with Bally is sufficient to create an implied contract

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with LA Fitness. They offer no authority, however, for this novel

legal theory. Indeed, plaintiffs cite only one case, Wood v. Wabash

County, 722 N.E. 2d 1176 (Ill. App. Ct 1999), in response to LA

Fitness’s argument. But “[t]he only issue raised” in that case was

“whether the language of defendant’s personnel policy handbook

contained a sufficiently clear promise” to give rise to an implied

contract. Because the court made no mention at all of the obviously

distinct issue of consideration LA Fitness raises, plaintiffs’

citation to this case does not advance their cause. 

LA Fitness next argues that plaintiffs’ fourth count, which

plaintiffs assert as putative third-party beneficiaries of the APA,

and alleges a breach of that agreement is fatally flawed for several

reasons. I need not grapple with all of their arguments because I

am persuaded that the APA, on its face, negates plaintiffs’ claim

to third-party beneficiary status.

Regardless of whether Illinois law or Delaware law governs the

issue (I need not decide because the result is the same in either

event), plaintiffs’ own authorities reinforce LA Fitness’s

characterization of courts in both jurisdictions as “cautious” and

“reluctant” to accord third-party beneficiary status to noncontracting parties. Indeed, in both of the cases plaintiffs cite

that apply Delaware law (their favored jurisdiction), as in all of

the cases LA Fitness cites from both Delaware and Illinois, the

court rejected claims brought by putative third-party beneficiaries. 

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See Insurance Co. of North America v. Waterhouse, 424 A.2d 675 (Del.

Super. Ct. 1980) (acknowledging general rule that “a third-party may

recover on a contract made for his benefit” but declining to accord

third-party beneficiary status where “there [was] nothing to

indicate” that contracting party intended to confer benefit to third

party); American Financial Corp. v. Computer Sciences Corp., 558 F.

Supp. 1182, 1185 (D. Del. 1983) (same). 

The parties agree that the issue turns on the intent of the

contracting parties. Here, the parties memorialized their intent

with respect to this very issue in § 12.3 of the APA which states,

“[n]otwithstanding any other provision of this Agreement, this

Agreement shall not create benefits on behalf of any other Person

not a party to this Agreement.” Plaintiffs insist that boilerplate

disclaimers such as this do not constitute an “absolute bar” to

claims brought by putative third-party beneficiaries. But the

authorities on which they rely are not only from Georgia and

Pennsylvania, they are distinguishable on their facts. In

plaintiffs’ first case, the putative “no third party beneficiary”

clause conflicted with other specific contractual provisions.

Vaughn, Coltrane & Associates v. Van Horn Construction, Inc., 563

S.E.2d 548 (Ga. App. Ct 2002) (contractual clause excluded some

third-party claims, but other provisions of the agreement

specifically contemplated certain third-party benefits). Their

second case, Ario v. Reliance Ins. Co., 981 A.2d 950 (Pa. Commw. Ct.

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2009), involved a reinsurance agreement, and the issues involved

were so distinct as to offer little guidance in the present case. 

In any event, even if true as a general matter, plaintiffs’

insistence that the APA’s generic “no third party beneficiaries”

clause “cannot nullify [LA Fitness’s] specific statements in the APA

concerning its intent to benefit Bally Premier members” rings hollow

in view of their failure to identify any such specific statements. 

I now move on to plaintiffs’ statutory consumer fraud claims,

which I conclude cannot proceed past the pleading stage. To begin,

I agree with both defendants that the conduct plaintiffs assert in

support of these claims is generally the same conduct underlying

their contractual claims. “When allegations of consumer fraud arise

in a contractual setting, the plaintiff must prove that the

defendant engaged in deceptive acts or practices distinct from any

underlying breach of contract.” Greenberger v. GEICO General Ins.

Co., 631 F.3d 392, 399 (7th Cir. 2011). Indeed, “a ‘deceptive act

or practice’ involves more than the mere fact that a defendant

promised something and then failed to do it. That type of

‘misrepresentation’ occurs every time a defendant breaches a

contract.” Id. (quoting Avery v. State Farm Mutual Automobile

Insurance Co., 835 N.E.2d 801, 844 (2005)). Nor do plaintiffs’

allegations that defendants’ conduct amounted to a “pattern and

practice” of breach, or their conclusory assertion that the conduct

“implicates consumer protection concerns,” suffice to bring their

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claims into the realm of consumer fraud. Greenberger, 631 F.3d at

400. 

Second, although plaintiffs nowhere refer to the elements they

must establish to prevail under any of the consumer fraud statutes

they assert, they acknowledge that they must show “more than broken

promises.” In Illinois, for example, plaintiffs must allege that

defendants intended plaintiffs to rely on their deceptive acts or

practices. Avery, 835 N.E. 2d at 850. But the complaint, read in

its entirety, does not reasonably suggest that defendants harbored

such an intent. Plaintiffs argue that defendants’ conduct

“induc[ed] them to enter into new membership agreements, and paying

additional fees that were not required under the agreements.” Pl.’s

Opp. at 27 (original emphasis). But not only does this argument

find no factual mooring in the complaint (which does not allege that

any plaintiff in fact entered into such a new membership agreement,

or paid any additional fees), the allegedly unfair conduct occurred

years after the plaintiffs purchased their memberships. Even if

defendants wrongfully terminated or abridged plaintiffs’ contractual

rights after the Asset Purchase Agreement closed in November of

2011, nothing in the complaint suggests that defendants intended,

at the time plaintiffs entered into their respective membership

agreements (in 1986, 1989, 1991, 1995, 1999 or 2000, and 2002,

according to the complaint), to dupe plaintiffs into purchasing

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something that they knew would one day be worthless.4 See Hausen

v. PS Illinois Trust, No. 11 C 6888, 2012 WL 266169 at *6 (N.D. Ill.

Jan. 29, 2012) (Kennelly, J.) (“a plaintiff seeking to make a ICFA

claim relating to a contract must allege that the ‘defendant planned

in advance not to honor the representations it made in the contract

or that it would not have been possible or feasible to do so.’”

(Citations omitted). In fact, plaintiffs themselves emphasize that

they “used and enjoyed” Bally’s facilities pursuant to the terms of

their membership agreements for many years. 

While not all of the state statutes plaintiffs assert require

similar intent, plaintiffs do not dispute that courts in each

jurisdiction require consumer fraud claims to allege something more

than merely broken contracts. Here, the only wrongful conduct

plaintiffs attribute to defendants that is even arguably separate

from the conduct underlying their breach of contract claims is

“concealing...the cut-off date for transferring memberships from

members’ ‘home clubs’” and “concealing...the procedures LA Fitness

required of Bally Premier and Premier Plus members so that they

could maintain and use their memberships in the vicinity of their

homes and businesses.” But even assuming that defendants could be

found liable under the asserted statutes for affirmatively

4

As Bally observes, this theory is especially implausible as

to plaintiffs Grabianski and Stapleton, as they purchased their

memberships on the secondary market from other members, not from

Bally.

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concealing this information, plaintiffs’ conclusory allegations of

“concealment” are insufficient to raise plaintiffs’ right to relief

on this theory “above the speculative level.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007). To be sure, plaintiffs allege

that defendants’ employees informed them that their Bally

memberships could not be transferred to LA Fitness, either because

the time for doing so had expired, or because according to

defendants’ records, plaintiffs’ memberships did not entitle them

to do so. But these allegations fall short of plausibly alleging

that defendants intentionally concealed information in an effort to

extract “new membership agreements” or “additional fees ”from

plaintiffs. 

III.

For the foregoing reasons, defendants’ motions to dismiss are

granted in part. Plaintiffs’ breach of contract claims asserted in

counts I and II of the amended complaint may proceed. The remainder

of their claims are dismissed.

ENTER ORDER:

 ____________________________

 Elaine E. Bucklo

 United States District Judge

Dated: February 21, 2013

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