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## QLexae DAN MORALES August 26,1992 \‘,‘I,,“SkI <itSEllA,. Honorable John Hannah Office ofthe Secretary ofState Executive Division State ofTexas P.0. Box 12697 Austin, Texas 7871l-2697 Opinion No.DM-157

Re: Whether a health spa exempted from the security deposit requirement by the 1985version ofthe Health Spa Act is exempt under the 1989revision ofthe act and related questions (RQ-306)

Dear Mr. Hannah:

Your question concerns the security deposits that health-spa owners must file under article 52211,V.T.C.S., the Health Spa Act. In particular, you wish to know whether anyhealth spasare exempted from the security-deposit requirement.

Article 52214V.T.C.S.,which is designed to protect customers ofhealth-spa services, was adopted in 1985. Acts 1985,69th Leg., ch. 13. It was substantially amended in 1989by House Bill 863 ofthe 71st Legislature. Acts 1989,71st Leg., ch. 1039. Responsibility for administering itsprovisions, initially vested inthe Texas Department ofLabor and Standards, wastransferred to the Office ofthe Secretary ofState by the 1989legislation. Health spas must file a registration statement with the secretary of state before offering to sell or selling memberships. V.T.C.S. art. 52211,s 8. In addition, a security bond must be filed withthe secretary ofstate.
Section 10 of article 52211,V.T.C.S., which sets out the security bond requirements, was amended in 1989. Prior to this amendment, section 10included the following“grandfather clause”:

(a) Except mprovided bySubsection (d) ofthissection, on or before the 30th day after the date ahealth spa opens itsfacilities for the use of its members, the health spa shall file with the department [of Labor and Standards] a surety bond..

. . The bond

.. .shall be payable in favor ofthe state and shall be held for the benefit of any members of the health spa who suffer financial lossesdue to the insolvency or cessation ofoperation of the health spa. “Financial losses”shall mean and be limited to

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any unused or unearned portion of such member’s dues or fees.

. .. (d) A health spa ir exemptfrom the security requirements of thissection ifthe owner ofthe health spaownsat least one other spa in this state which has operated at one location for at least the two years preceding then effective date of this Act [September 1.19851and againstwhichnone ofitsmembers have initiated litigation or filed a complaint with any governmental authority in this state relating to the failure to open or the closingofthe health spa. Acts 1985,69th Leg.,ch. 13(emphasis added).

Section 10(d) of the 1985enactment provided a complete exemption from the surety-bond requirements for any new spa opened by the owner of a spa that had operated since September 1,1983 in compliance with the stated conditions. In 1989the legislature repealed section 10(d)and deleted the reference to it in section lo(a). Acts 1989,71st Leg.,ch. 1039,#3.17.

The section 10(d) “grandfather clause”has been removed from the statute, but House Bill 863 included a savings clause, and you wish to know whether it preserved section 10(d) for anypurpose. The savingsclause reads asfollows:

Sec. 6.09. Health spas. (a) The security requirements imposed under Section 10,‘Health Spa Act

. . . as amended by this Act, apply to a health spa that opens an initial facility on or after September 1.1989, and to each additional location opened
on or after September 1, 1989,by a health spa that opens an initial facility on or after September 1.1989. (b) A health spa in operation before September 1, 1989, and any additional location opened by that health spa on or after September 1, 1989,is subject to the security requirements in effect on August 31.1989, and the former law iscontinued in effect for that purpose. Acts 1989.71st Leg.,ch. 1039,s 6.09.

A brief received in connection with this request argues that the language of section 6.09(b) preserves the language offormer section 10(d), so that spas exempt

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under that provision from filinga security deposit on August 31.1989 continue to be exempt under the present version ofthe statute. To state this argument in terms of section 6.09(b), the version of section 10(d) applicable on August 31, 1989 established “security requirements” for spas within its provisions on that date, and the former “grandfather clause”iscontinued forthose spas.
Your position is that section 6.09establishes two different classes ofhealth spas for the purpose of determining security deposit requirements. One class, described by subsection (a), consists of spas that open an initial facility on or after September 1, 1989.and ofany additional location opened by those spas. The spas within section 6.09(a) are subject to the new security requirements adopted in 1989. The other class, described by subsection (b), consists of spas in operation before September 1, 1989, and of any new location opened by such spas after that date. Spas in this group are subject to the security requirements in effect on August 31, 1989. You believe that there is no longer any exemption from the security requirement of section 10,and that all spas in operation before September 1, 1989
are required to have a seciuity bond on file.

We believe that the absence. of an express savings clause for those spas formerly “grandfathered” by subsection 10(d)indicates that the legislature no longer wished them to be exempt from the security requirement. See State v.Body, 118 S.W. 128 (Tex. 1909) (savings clause of a repealing statute is strictly construed). Section 6.09(b) states that the spas it applies to are “subject to the security requirements in effect on August 31, 1989.” Thus, it indicates that all spas in that category are subject to security requirements, the amount of which shall be determined by reference to former law. The grandfather clause, strictly speaking,
was not a “security requirement” of the former law, but an exemption from the security requirement; thus, section 6.09(b)does not keep that clause ineffect.
Moreover, we believe that your interpretation of the savings clause is consistent with the legislative intent underlying House Bill 863. An express purpose of the Health Spa Act is to “safeguard the public against fraud, deceit, imposition, and financial hardship” in the field ofhealth spa services by prohibiting contractual and marketing practices that had injured the public. V.T.C.S. art. 52211,52. The act isto be liberally construed and applied topromote thispurpose. Id 54.

One purpose ofthe 1989legislation wasto improve the consumer protection aspects ofthe Health Spa Act. House Comm. on Governmental Organization, Bill Analysis, H.B. 863, 71st Leg. (1989). The security deposit provision provides a

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source from which health-spa members may recover any unused portion of their dues or fees if the health spa becomes insolvent or ceases operations. The 1985 version of subsection 10(d) allowed the owner of any health spa that had been satisfactorily established since September 1, 1983 to open new spas without any security deposit. Your reading of section 6.09 extends the security deposit requirement to all spas nowopen orto be opened inthe future. This reading serves the consumer-protection purpose ofthe Health Spa Act and the 1989amendments because it accords to all consumers of health-spa services a means of recouping unused dues or feespaid to a spathat becomes insolvent or ceases operations. Accordingly, we agree that section 6.09creates only two categories ofhealth spas, one subject to the security requirements that became effective on September 1, 1989, and the other subject to the security requirements in effect on August 31, 1989. No health spas,even those grandfathered by the prior version ofarticle 52211, V.T.C.S., are nowexempt from the securitydeposit requirement.

You inquire about the amount of security deposit to be Sled under the Health Spa Act by a health spa that was exempt from the security-deposit requirement by the former version ofthe statute. When the Health Spa Act was adopted in 1985,it required security in the amount of 20 percent ofprepayments, but not less than $20,000 or more than $50,000. Acts 1985, 69th Leg., ch. 13 (formerly codified as V.T.C.S. art. 52214 3 10(b)). This security requirement applied to the spa for twoyears after the filing date, and thereafter only $5,000in security had to be maintained. Id (formerly codified asV.T.C.S.art. 522lZ,9 10(c)). The 1989enactment establishes a uniform $20,000security deposit for all spas and requires maintenance of security in this amount for two years after the spa ceases business or until claims against it are satisfied or foreclosed by law. Acts 1989,71st Leg., ch. 1039,g3.17 (codified as V.T.C.S. art. 52211.5 10(b), (c)). You contend that a spa that was previously exempt from the security deposit requirement must initially file $20,000before itcanbe eligiblefor the reduction to $5,000.

A health spa that wasexempt from the security deposit prior to September 1, 1989is subject to the security deposit requirements in effect on August 31, 1989. Former section 10required the security bond to be filed by the 30th day after the health spa opened its doors and set it as 20 percent of the total value of the prepayments received by the spa, but not less than $20,000or more than $50,000. Acts 1985,69th Leg., ch. 13. “Prepayment”was formerly defined as “apayment for all services or for the use offacilities made by members ofa health spa before the first day the services or facilities are made available to the members.” Id After

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maintaining the minimum $20,000 security for two years, the health spa is to maintain security inthe amount of$5.000.

A health spa that was exempt from the initial security bond requirement under the former lawcamrot nowcomplywith the requirement that it file a security bond within 30 days after opening the spa. Moreover, the former law based the amount of security bond on prepayments received prior to opening, an amount unlikely to be relevant to any present exposure for unpaid fees and dues for health spas that have operated since 1983. The spas that were formerly “grandfathered had operated at one location for two years prior to the effective date of the 1985 statute without any member filing a lawsuit or a complaint with a governmental authority relating to the failure to open or the closingofthe health spa. Acts 1985, 69th Leg., ch. 13. That twoyears ofoperation without such complaints or lawsuits appears to serve the same purposes as the requirement that a spa maintain at least $20,000in security for the first twoyears ofoperation. In our opinion, health spas that were exempt from all security deposits under the now-repealed section 10(d)
are nowrequired to maintain security in the amount of $5,000without first filing a security deposit of$20,000.

If a spa in operation on August 31, 1989 opens a new location after September 1,1989, the new spa location willbe able to file a security deposit by the 30th day after opening. The new spa location will therefore be required to file an initial security deposit of 20 percent of the total value of the prepayments it has received, but not less than $20,000nor more than $50,000. It must maintain this amount ofsecurity for twoyears after the date the security isfiled, and thereafter, it must continuously maintain security inthe amount of$5,000.


### SUMMARY

V.T.C.S. article 52211,the Health Spa Act, as amended in 1989.effective September 1, 1989,requires every health spa in the state to file a surety bond with the secretary of state. The security requirements imposed by the present version ofthe law applies to a health spa that opens an initial location on or after September 1.1989, and to each additional location opened after that date by such spas. A health spa in operation before September 1, 1989,and any additional location opened by that health spa on or after September 1, 1989, is subject to the security requirements in effect on August 31, 1989. An

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exemption for some health spas from all security requirements included in the prior version of the Health Spa Act has been repealed and is not continued in effect by the savingsclause in the 1989 amendments. Health spas that were formerly exempted from the security requirement no longer have the benefit ofthat exemption. Health spas that were exempt from all security deposits under the repealed provision are now required to maintain security in the amount of $5,000without first filing a security deposit of $20,000. If a spa in operation on August 31, 1989 opens a new location after September 1, 1989, the new spa location must file an initial security deposit of20percent ofthe total value ofthe prepayments it has received, but not less than $20,000nor more than $50,000. It must maintain this amount of security for twoyears after the date the security deposit is filed, and thereafter,. it must continuously maintain security in the amount of$5,000.

DAN MORALES Attorney General ofTexas
WILL.PRYOR First Assistant Attorney General
MARY KELLER Deputy Assistant Attorney General
RENEA HICKS Special Assistant Attorney General
MADELEINE B.JOHNSON Chair, Opinion Committee Prepared by Susan L Garrison Assistant Attorney General

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