SR-208-003
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CA:RMM:rmd154/hpca
City Council Meeting 2-11-86
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Santa
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"2 to 5 ~~ D fEB 11 1986
STAFF REPORT
TO:
Mayor and City council
FROM:
City Attorney
SUBJECT:
Recommendation to Direct city Attorney to
Prepare an Ordinance Relating to Health
Clubs
In the last three years, the City Attorney has had
substantial involvement in responding to consumer complaints
concerning the closure of health clubs within the city of Santa
Monica. During this time period, three health clubs have closed
within the city, generating substantial consumer complaints. The
recent closure of the Beverly Hills Workout has thus far
generated over 900 consumer inquiries with the City Attorney's
office.
In 1983, the Jack LaLanne European Health Spa closed after
its location was bought by Santa Monica Hospital for use as a
cardiac rehabilitation center.
Over 400 complainants notified
the City Attorney's office that they were dissatisfied with
LaLanne's offer that members could use other facilities. After
negotiations with the owners, the club agreed to a proposal
whereby those who were unwilling or unable to utilize alternative
facilities were either provided with transportation assistance or
a refund.
fL,-o
fEB 11 1986
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In 1984, Shirle's Fitness Center abruptly ceased operations
and another health club, Today's Woman, opened shortly thereafter
in the same location.
It also went out of business.
After
receiving over 200 complaints, the city Attorney filed a lawsuit
alleging unfair business practices and false advertising against
the owners. In a settlement of that action, the owners paid to
the City $10,500 in restitution monies which were distributed by
this office to over 225 victims. Additionally, the city received
$1,788.30 in back taxes, $2,228.83 in costs, and $5,000 in civil
penalties.
The County of Los Angeles, which consented to this
office's request for civil penalties, also received $5,000 in
civil penalties, bringing the total amount of the settlement to
$24,517.13. According to consumer reporter David Horowitz, this
represented the first time full restitution and civil penalties
had been obtained by a consumer affairs agency upon filing a
lawsuit in a health club dispute.
The latest Santa Monica club to close is the Beverly Hills
Workout.
This club ceased operations on December 9, 1985,
resulting in over 903 requests for claim forms being directed to
this office. On January 10, 1986, this office filed a lawsuit
against the owners of the club seeking restitution and civil
penalties for alleged acts of unfair business practices and false
advertising.
The owners have filed for bankruptcy thereby
complicating the pending litigation and diminishing the chances
of obtaining restitution for affected consumers. On January 28,
1986, an amended complaint was filed adding as a defendant the
successor owner of the Beverly Hills Workout Brentwood location.
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In order to respond to these ongoing consumer problems, the
city Attorney believes that an ordinance should be adopted
providing greater local regulation of health clubs. Accordingly,
the City Attorney seeks authorization to prepare an ordinance
that would include the following provisions:
1.
Police Permit.
Require a police permit prior to the
issuance of a business license for a health club. Currently, a
number of businesses are required to obtain police permits. The
police permit process enables the Chief of Police to do
background investigations on those persons who are seeking
authority to engage in certain businesses in the city.
(Types of
businesses currently required to seek police permits include
taxicab operators, bars, and massage establishments.)
A new
police permit would be required prior to a change of ownership of
the facility.
2.
Bond.
The ordinance would require that health clubs
post with the City adequate security, such as a performance bond,
to help ensure refund of any unused membership fees in the event
of closure of the health club.
The amount of the bond would
depend upon the size of the health club.
In drafting the ordinance, the City Attorney would meet with
local health clubs to seek their input.
RECOMMENDATION
It is respectfully recommended that the city Council direct
the City Attorney to prepare an ordinance as outlined in this
staff Report.
PREPARED BY: Robert M. Myers, City Attorney
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