Court Opinion

ID: 3193649
Source: CourtListenerOpinion
Date Created: 2016-04-13 18:00:47.986388+00
Date Added: 2024-06-11T14:36:16.698631
License: Public Domain

Case: 15-10309   Document: 00513462618      Page: 1   Date Filed: 04/13/2016

        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT      United States Court of Appeals
                                                                             Fifth Circuit

                                                                            FILED
                                                                         April 13, 2016
                                 No. 15-10309
                                                                         Lyle W. Cayce
                                                                              Clerk
RUSSELL WENDT, Individually, and on behalf of all others similarly
situated; OMAR JASSO, Individually, and on behalf of all others similarly
situated,

             Plaintiffs - Appellants

v.

24 HOUR FITNESS USA, INCORPORATED,

             Defendant - Appellee

                 Appeal from the United States District Court
                      for the Northern District of Texas

Before DAVIS, SMITH, and HIGGINSON, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
      Russell Wendt and Omar Jasso (“Plaintiffs”) appeal the district court’s
order dismissing their suit against 24 Hour Fitness USA, Inc. (“24 Hour”) for
lack of Article III standing. We affirm.

                                       I.
      24 Hour operates a chain of health clubs. Plaintiffs entered into written
membership contracts with 24 Hour, pursuant to which they paid 24 Hour
membership dues and fees. In exchange, 24 Hour gave Plaintiffs access to its
facilities for their entire membership period.
     Case: 15-10309        Document: 00513462618          Page: 2     Date Filed: 04/13/2016

                                        No. 15-10309
       Plaintiffs now claim that their membership contracts with 24 Hour did
not strictly comply with several technical provisions of the Texas Health Spa
Act (the “Act”). 1 Although Plaintiffs effectively concede that 24 Hour’s alleged
statutory violations did not adversely impact them in any way, 2 they
nevertheless request a judicial declaration that their membership contracts
were void ab initio. 3 They also seek to recover all membership fees they paid
to 24 Hour in the past two years, as well as punitive damages, interest, costs,
and attorney’s fees. 4
       The district court concluded that Plaintiffs had suffered no injury-in-fact.
The court reasoned that “[r]egardless of alleged deficiencies in the contractual
language, Plaintiffs received what they bargained for: use of a health club

       1Specifically, Plaintiffs claim that their membership contracts violate the Act in the
following respects:

       (1) The contractual language deviates slightly from mandatory statutory
       language regarding cancellations, refunds, and prepayment that the Act
       requires membership contracts to reproduce verbatim;
       (2) The contracts purport to limit the venue in which members may sue 24
       Hour, in contravention of the Act’s broad venue provision;
       (3) The contracts purport to limit the member’s ability to sue 24 Hour for
       fraudulent inducement, in contravention of the Act’s anti-waiver and anti-
       fraudulent inducement provisions;
       (4) The contracts contain a severability clause in contravention of the Act’s
       anti-waiver and voiding sections; and
       (5) The contracts purport to limit 24 Hour’s liability to “actual compensatory
       damages,” in violation of the Act’s authorization of punitive damages, fees, and
       costs.

        See TEX. OCC. CODE ANN. §§ 702.304, 702.305, 702.401, 702.402(a)(2).
        2 As Plaintiffs admit in their appellate brief, they “have never denied that the specific

violations [of the Act] themselves did not injure them.”
        3 See TEX. OCC. CODE ANN. § 702.311(1) (providing that a health club membership

contract is void if it does not comply with the Act).
        4 Plaintiffs also sought to certify a class action against 24 Hour. Because the district

court dismissed the case for lack of Article III standing, it denied Plaintiffs’ motion for class
certification as moot.
                                               2
     Case: 15-10309       Document: 00513462618         Page: 3     Date Filed: 04/13/2016

                                       No. 15-10309
facility.” The court therefore dismissed the case without prejudice for lack of
Article III standing.

                                             II.
       A plaintiff must have Article III standing to maintain an action in federal
court. 5 To establish Article III standing, the plaintiff must show (among other
things) that he has suffered an “injury in fact.” 6 An injury-in-fact constitutes
“an invasion of a legally protected interest which is (a) concrete and
particularized, and (b) actual or imminent, not conjectural or hypothetical.” 7
The plaintiff, as the party invoking federal jurisdiction, bears the burden of
establishing an injury-in-fact. 8 “[T]he jurisdictional issue of standing is a legal
question for which review is de novo.” 9

                                             III.
       We agree with the district court that Plaintiffs suffered no injury-in-fact.
24 Hour’s alleged violations of the Act did not harm Plaintiffs in any way. To
the contrary, 24 Hour gave Plaintiffs exactly what they paid for: access to a
gym. 10 Plaintiffs therefore lack Article III standing, and the district court
properly dismissed the case.

       5 E.g., Crane v. Johnson, 783 F.3d 244, 255 (5th Cir. 2015).
       6 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
       7 Id. (internal citations and quotation marks omitted).
       8 Id. at 561 (citing FW/PBS Inc. v. Dallas, 493 U.S. 215, 231 (1990); Warth v. Seldin,

422 U.S. 490, 508 (1975)).
       9 Crane, 783 F.3d at 250 (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83,

102 (1998)).
       10 Plaintiffs maintain that the Court may not consider whether they received the

benefit of their bargain in exchange for their membership dues.
       Generally, “[o]nce injury is shown, no attempt is made to ask whether the injury is
outweighed by benefits the plaintiff has enjoyed from the relationship with the defendant.”
Texas v. United States, 809 F.3d 134, 155-56 (5th Cir. 2015), cert. granted, 136 S. Ct. 906
(2016) (quoting 13A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE §
3531.4, at 147 (3d ed. 2015)).
                                              3
     Case: 15-10309        Document: 00513462618           Page: 4      Date Filed: 04/13/2016

                                         No. 15-10309
       Plaintiffs nonetheless argue that they have suffered an injury-in-fact in
two respects. They first assert that they have suffered an economic injury
because the Act and Texas common law entitle them to a full refund of their
membership dues. Secondly, Plaintiffs argue that 24 Hour’s mere violation of
the Act constitutes an invasion of their legally protected rights sufficient to
constitute injury-in-fact for the purposes of Article III standing. As explained
below, neither of these arguments has merit.

                                                A.
       Plaintiffs first argue they have suffered injury by paying funds to 24
Hour that 24 Hour could not legally collect from them because the Act renders
their membership contracts void ab initio. 11 Because the contracts are void,
Plaintiffs claim that 24 Hour must have provided its facilities to Plaintiffs
gratuitously and voluntarily. Plaintiffs therefore claim they are entitled to a
complete refund of all amounts paid under the contracts, even though it is
undisputed that they received access to 24 Hour’s facilities. According to
Plaintiffs, their entitlement to a complete refund of all of the fees they paid
under their void membership contracts constitutes an economic injury that
satisfies Article III standing.
       The Act does not support Plaintiffs’ claim to the windfall they seek. The
text of the Act does not authorize a complete refund for negligible technical

       However, when “the costs and benefits ar[i]se out of the same transaction,” the Court
may consider the benefits the plaintiff received to determine whether the plaintiff has
“demonstrated injury” for the purposes of Article III standing. Id. (citing Henderson v.
Stalder, 287 F.3d 374, 379-81 (5th Cir. 2002)).
       In this case, all of the costs and benefits arise from a single transaction: Plaintiffs paid
24 Hour membership fees, and in return 24 Hour gave them access to its facilities. We may
therefore consider whether those benefits fully offset Plaintiffs’ costs. They do.
       11 Like the district court, we assume without deciding that the membership contracts

are void. We do not reach 24 Hour’s argument that the Act renders noncompliant membership
contracts voidable rather than void.
                                                4
     Case: 15-10309        Document: 00513462618           Page: 5      Date Filed: 04/13/2016

                                         No. 15-10309
violations that otherwise cause no harm to the customer. Rather, the Act’s civil
remedy provision authorizes only “(1) actual damages; (2) equitable relief; (3)
punitive damages; or (4) reasonable attorney’s fees and court costs to the
prevailing party.” 12 Because Plaintiffs have not sustained any actual damages
as a result of 24 Hour’s alleged violations, and because the plain text of the Act
does not entitle them to disgorgement of their membership dues, Plaintiffs
have not suffered an economic injury that would give rise to Article III
standing.
       Plaintiffs also maintain that Texas contract law entitles them to recover
the entirety of their membership dues. That too is incorrect. Texas case law
permits a plaintiff to recover the purchase price he paid under a void contract
only if the defendant fails to give the plaintiff all or part of what he paid for, 13
or if the statute that renders the contract void explicitly provides that the
plaintiff is not liable to pay for any past services rendered by the defendant. 14
Neither of those predicates for liability applies here. 24 Hour gave Plaintiffs
exactly what they paid for, and the Act does not provide that a health club
member is not liable for the payment of any past services rendered under a

       12  TEX. OCC. CODE ANN. § 702.503.
       13  See In re Tex. Ass’n of Sch. Bds., Inc., 169 S.W.3d 653, 659 (Tex. 2005); Hudson v.
Belikoff, No. 14-96-01551-CV, 1999 WL 212201, at *1–2 (Tex. App.―Houston [14th Dist.] Apr.
8, 1999, no pet.) (not designated for publication); Quintanilla v. Almaguer, No. 13-96-455-CV,
1998 WL 35276214, at *1–3 (Tex. App.―Corpus Christi May 12, 1998, no pet.) (not designated
for publication); First Sec. Bank & Tr. Co. v. Roach, 493 S.W.2d 612, 617–19 (Tex. Civ.
App.―Dallas 1973, writ ref’d n.r.e.); Causeway Inv. Co. v. Nass, 111 S.W.2d 703, 705 (Tex.
1938); Am. Nat’l Ins. Co. v. Smith, 13 S.W.2d 720, 723 (Tex. Civ. App.―El Paso 1929, writ
ref’d); Rayner Cattle Co. v. Bedford, 44 S.W. 410, 411–13 (Tex. Civ. App.―Fort Worth), writ
ref’d, 45 S.W. 554 (Tex. 1898).
        14 See Reyelts v. Cross, 968 F. Supp. 2d 835, 843-44 (N.D. Tex. 2013), aff’d, 566 F. App’x

316 (5th Cir. 2014) (citing TEX. INS. CODE ANN. § 4102.207(b), which, unlike the Act,
specifically provides that “[i]f a contract is voided under this section, the insured is not liable
for the payment of any past services rendered” under the void contract).
                                                5
     Case: 15-10309       Document: 00513462618          Page: 6     Date Filed: 04/13/2016

                                       No. 15-10309
void membership contract. 15 Thus, Texas law does not support Plaintiffs’ claim
of injury.
       Because Plaintiffs are not entitled to a full refund of their membership
dues, and because 24 Hour’s alleged violations of the Act did not cause
Plaintiffs actual damages or any other form of economic harm, Plaintiffs have
sustained no economic injury. Consequently, they may maintain this lawsuit
only if they have suffered some non-economic injury that confers Article III
standing.

                                              B.
       Plaintiffs next argue that a mere violation of the Act constitutes a
cognizable injury-in-fact even in the absence of economic injury.
       It is true that “[t]he actual or threatened injury required by Art. III may
exist solely by virtue of ‘statutes creating legal rights, the invasion of which
creates standing.’” 16 “Congress 17 may create a statutory right or entitlement
the alleged deprivation of which can confer standing to sue even where the

       15  Compare TEX. INS. CODE ANN. § 4102.207(b).
       16  Warth, 422 U.S. at 500 (quoting Linda R.S. v. Richard D., 410 U.S. 614, 617 n.3
(1973); Sierra Club v. Morton, 405 U.S. 727, 732 (1972)).
        The Supreme Court recently granted certiorari in Spokeo, Inc. v. Robins, Docket No.
13-1339, to consider “[w]hether Congress may confer Article III standing upon a plaintiff who
suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a
federal court, by authorizing a private right of action based on a bare violation of a federal
statute.” This case does not implicate that question because, for the reasons explained below,
the Texas legislature has not authorized a private right of action based on a bare violation of
the Act.
        17 We assume without deciding that the Texas legislature, like Congress, also has the

power to elevate otherwise trivial inconveniences to legally cognizable injuries-in-fact. See
Scanlan v. Eisenberg, 669 F.3d 838, 845 (7th Cir. 2012) (citing FMC Corp v. Boesky, 852 F.2d
981, 993 (7th Cir. 1988)); Katz v. Pershing, LLC, 672 F.3d 64, 75 (1st Cir. 2012). But see
Finkelman v. Nat’l Football League, 810 F.3d 187, 196 n.65 (3d Cir. 2016) (stating that
permitting a state legislature to “elevate harms to the status of Article III injuries” would
“raise serious federalism concerns”).
                                              6
     Case: 15-10309      Document: 00513462618        Page: 7     Date Filed: 04/13/2016

                                     No. 15-10309
plaintiff would have suffered no judicially cognizable injury in the absence of
statute.” 18
       “[W]here, as here, a plaintiff’s claim of injury in fact depends on legal
rights conferred by statute, it is the particular statute and the rights it conveys
that guide the standing determination.” 19 “Essentially, the standing question
in such cases is whether the . . . statutory provision on which the claim rests
properly can be understood as granting persons in the plaintiff's position a
right to judicial relief.” 20 “Hence, the ‘injury in fact’ analysis for purposes of
Article III is directly linked to the question of whether” the plaintiff “has
suffered a cognizable statutory injury under the” statute in question. 21
       We conclude that Plaintiffs have suffered no cognizable statutory injury
under the Act. The Act explicitly provides: “A member may file suit against a
seller if: (1) the seller violates [the Act]; and (2) the seller’s violation causes
injury to the member.” 22 The italicized phrase establishes that a violation of
the Act, standing alone, does not constitute a freestanding injury that
authorizes a member to bring suit. Thus, the Act does not authorize members
to sue health clubs for technical statutory violations which cause the member
no harm.
       Moreover, the Act does not authorize health club members to recover
statutory or nominal damages for mere technical violations. 23 To reiterate, the

       18 Warth, 422 U.S. at 514 (citing Linda R.S., 410 U.S. at 617 n.3).
       19 Donoghue v. Bulldog Inv’rs Gen. P’ship, 696 F.3d 170, 178 (2d Cir. 2012) (citing
Warth, 422 U.S. at 500).
       20 Warth, 422 U.S. at 500.
       21 Robey v. Shapiro, Marianos & Cejda, L.L.C., 434 F.3d 1208, 1212 (10th Cir. 2006).

       For that reason, we reject Plaintiffs’ argument that the district court erroneously
conflated statutory standing with Article III standing.
       22 TEX. OCC. CODE ANN. § 702.501(a) (emphasis added).
       23 Whereas the Texas Attorney General may potentially recover civil penalties for a

health club’s violation of the Act which causes no economic or other harm to its members,
individual health club members may not. See id. §§ 702.552, 702.553.
                                            7
     Case: 15-10309      Document: 00513462618         Page: 8    Date Filed: 04/13/2016

                                      No. 15-10309
Act instead limits recovery to “(1) actual damages; (2) equitable relief; (3)
punitive damages; or (4) reasonable attorney’s fees and court costs to the
prevailing party.” 24 This bolsters our conclusion that the Act does not elevate
standalone statutory violations to cognizable injuries in fact.
       Thus, the Act cannot “properly . . . be understood as granting persons in
[Plaintiffs’] position a right to judicial relief.” 25 To the contrary, the Act
requires a health club member to be injured by a statutory violation before he
may bring suit. As explained above, 24 Hour’s alleged violations of the Act did
not injure Plaintiffs in any way. Because Plaintiffs did not suffer an injury
within the meaning of the Act, they lack Article III standing. 26
       AFFIRMED.

       24 Id. § 702.503.
       25 See Warth, 422 U.S. at 500.
       26 Plaintiffs argue that they have standing to pursue their claim under Texas’s

Deceptive Trade Practices Act and their claim for “money had and received” even if they lack
standing to bring a claim under the Act. Plaintiffs have offered no persuasive argument to
support that contention, so we reject it.
                                             8