SoulCycle Pushes Back Against Alleged Gift Card Violations
In August, a proposed class action was filed in federal court against SoulCycle, a high-end fitness company specializing in cycling, Pilates and yoga classes. The proposed class action alleges that SoulCycle sells gift certificates for these classes, the terms of which violate federal and state law. Specifically, the plaintiff argues that SoulCycle violates the CARD Act and state gift card laws, which require a five-year expiration period, by selling gift certificates that expire within 30 days of issuance. The practice, according to the plaintiff, helps SoulCycle maximize its profits by leaving it free to hold onto the unused gift certificate funds or “breakage.”
SoulCycle responded to the complaint, arguing that the product the plaintiff bought was not a gift certificate but something more akin to a ticket for entry into a particular event. As evidence for this position, SoulCycle points out that the item the plaintiff bought reserved a bike for her in a particular class, at a particular time, at a specific place and within a specified time period. According to SoulCycle, the plaintiff could not state a claim for violation of gift card laws because she had not purchased a gift certificate or card.
SoulCycle also points out apparent misstatements in the plaintiff’s complaint, stating that the plaintiff doctored screenshots of the SoulCycle Website to superimpose misleading markings that appear to label the photos with “Series Certificates” in an apparent effort to make it appear that SoulCycle labels its product as “certificates,” which SoulCycle claims it does not.
For her part, the plaintiff claims that SoulCycle is well aware how difficult it is for customers to use their purchased bike ride time in the time period allotted and that classes are often oversold.
Industry participants will be interested to see how the case develops as it could impact how they characterize and structure their products to gain a potential exemption from the application of federal and state gift card laws.
