The opinion of the court was delivered by: Judge Joan H. Lefkow
On January 15, 2007, plaintiffs in this putative class action, Kathy
D. Wendorf and Thomas J. Wendorf, entered into a signed gym membership
agreement with defendant Gale Landers doing business as Fitness
Formula Oak Park. The agreement stipulated, "Monthly dues will be
charged in advance on the first business day of each month (along with
any services charged the previous month if applicable)." Complaint,
Exhibit A (Dkt. No. Att.1, p. 1 of 2). The agreement was for a minimum
of twelve dues-paying months, after which time membership could be
terminated at any time upon 60 days written notice.*fn1
The membership agreement stated, "We reserve the absolute
right to increase your dues." At some time after the agreement was
entered into, plaintiffs signed an electronic fund transfer ("EFT")
authorization. It stated, "I authorize my bank to make my payments by
the method indicated below and post it to my account." In a letter
dated December, 2009, sent less than 60 days before implementation of
its terms, defendant gave plaintiffs notice that "[i]n lieu of a change in
monthly dues, there will be a nominal one-time charge" of $60 added to
the January monthly dues. Plaintiffs were not asked to agree to the
charge. Plaintiffs notified defendant (whether before or after the
assessment came due is not alleged) that they objected to the $60
charge. Further, defendant declined to permit plaintiffs to terminate
the contract on less than 60 days notice. Pursuant to the EFT
authorization, during the first week of January, 2010 defendant caused
plaintiffs' bank to transfer $60 from their bank account to defendant,
in addition to the regularly monthly membership dues.
Plaintiffs allege that this $60 transfer was a violation of the Electronic Fund Transfers Act ("EFTA"), 15 U.S.C. §§ 1693 et seq.*fn2 Plaintiffs also allege that defendant's activities violated the Illinois Physical Fitness Services Act, 815 Ill. Comp. Stat. 645/1 et seq. ("PFSA"), and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/1 et seq. ("ICFA"). Additionally, plaintiffs allege common law breach of contract and conversion claims against defendant. Defendant has moved to dismiss for failure to state a claim upon which relief may be granted. They contend the facts do not support any of plaintiffs' claims. For the reasons stated below the motion to dismiss is denied.
Because the EFTA claim is the sole basis for this court's jurisdiction, this claim will be considered first. See Doe--2 v. McLean County Unit Dist. No. 5 Bd. of Directors, 593 F.3d 507, 513 (7th Cir. 2010) ("[W]hen a district court dismisses the federal claim conferring original jurisdiction . . . it relinquishes supplemental jurisdiction over any state-law claims under 28 U.S.C. § 1367(c)(3).").
A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In reviewing a Rule 12(b)(6) motion, the court takes as true all facts in the complaint and draws all reasonable inferences in favor of the plaintiff. Dixon v. Page, 291 F.3d 485, 486--87 (7th Cir. 2002). To survive a Rule 12(b)(6) motion, the complaint must provide the defendant with notice of the claims and establish that the requested relief is plausible on its face. Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). At the same time, the plaintiff need not plead legal theories. Hatmaker v. Mem'l Med. Ctr., --- F.3d ----, 2010 WL 3385191, at *1 (7th Cir. Aug. 30, 2010). Rather, it is the facts that count.
Count I: Electronic Funds Transfer Act
The EFTA permits "preauthorized electronic fund transfers," defined as "an [EFT] authorized in advance to occur at substantially regular intervals[.]" 15 U.S.C. § 1693a(9). All debits by defendant to plaintiffs' bank accounts for membership dues were preauthorized EFTs. Section 1693e of the EFTA elaborates on the provisions governing preauthorized transfers:
(a) A preauthorized [EFT] from a consumer's account may be authorized by the consumer only in writing, and a copy of such authorization shall be provided to the consumer when made. . . .
(b) In the case of preauthorized transfers from a consumer's account to the same person which may vary in amount, the financial institution or designated payee shall, prior to each transfer, provide reasonable advance notice to the consumer, in accordance with regulations of the Board, of the amount to be transferred and the scheduled date of transfer.
Plaintiffs' theory of liability is that the one-time charge was not authorized by the EFT agreement because it was neither a monthly dues payment nor a charge for services given the previous month. Plaintiffs thus allege that defendant violated the EFTA's restriction on preauthorized EFTs, which may be permitted by consumers "only in writing," a copy of which must be given "to the consumer when made."*fn3 15 U.S.C. § 1693e(a); accord 12 C.F.R. § 205.10(b); id. Pt. 205 Supp. I, ¶ 10(b)(2). Defendant contends that plaintiffs' EFT authorization for dues and services, plus the agreement that defendant could increase dues, permitted EFTs in any amount.
Plaintiffs have presented facts that, if true, would be sufficient to demonstrate that defendant violated the requirements for preauthorized EFTs established under 15 U.S.C. § 1693e(a). The one-time charge was not covered by the plain terms of the original contract. Indeed, the December letter explicitly stated the charge was not a dues increase. Neither can the charge fairly be classified as a charge for services of the previous month (a term undoubtedly intended to capture services such as classes, personal trainers, and such), particularly where the notice was applicable to the coming year. Under the regulation that authorization terms must be "clear and readily understandable," Commentary to 12 C.F.R. Pt. 205, Supp. I, ¶ 10(b)(6). The authorization does not inform plaintiffs that charges outside dues and service charges were also contemplated. As such, the charge fell outside the scope of plaintiffs' preauthorization.*fn4
Plaintiffs thus state a claim under § 1693m, which confers a private right of action upon consumers against "any person who fails to comply with any provision of this subchapter." Defendant's motion to dismiss the EFTA claim is therefore denied.
Because plaintiffs' sole federal claim survives defendant's Rule 12(b)(6) motion, this court has subject matter jurisdiction over this case ...