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Jury Awards Franchisees 80 Percent of Net Operating Losses; Curves Appeals

In a closely watched trial by many Curves fitness franchise owners across the country, a jury returned a unanimous verdict in favor of 52 qualifying franchisees, awarding them 80 percent of their net operating losses, totaling approximately $1.6 million. Curves International immediately vowed to appeal the decision.

Jonathan E. Fortman, representing the franchisee plaintiffs, said he believes this is a complete and total vindication for his clients. "The jury listened carefully to the evidence over two weeks.  After 9 hours of deliberation, the jury reached a decision that condemned the actions of Curves and found that it did not provide reasonable support to the franchisees and its own brand.  We are confident that the jury's decision will stand on appeal." Fortman explained that there were a few franchisees who actually had some small operating gains who were not awarded any damages. 

The Curves lawsuit, first filed in Missouri state court on June 1, 2015 by 111 franchisees who owned 83 franchised fitness centers, alleged 165 courts against the franchisor and its founder Gary Heavin. They claimed that Curves misrepresented information relevant to their decision to enter franchise agreements with Curves, and that Curves later violated those agreements. The franchisor then move the case to Texas federal court. The parties agreed to file a stipulation to dismiss all claims against Curves founder Howard "Gary" Heavin and Curves International Holding Inc., and on June 20, 2016 they were dismissed with prejudice. 

Curves declares it will challenge verdict

In a press release issued the day of the court decision, Curves stated it planned to "challenge the portion of a recent jury verdict that found for some of the plaintiffs in a Texas lawsuit disagreeing with how the fitness company in the past supported a group of its franchisees." Curves also asserted that "even though the plaintiffs won less than 10 percent of what they originally sought, Curves disagrees with the preliminary court rulings that allowed even the reduced claim to go to the jury, in addition to the part of the verdict for any plaintiff awarded any fraction of its claim." 

Curves also said that the basis for its challenge will be "the legally-flawed rulings before and during the trial that forced the jury to address arguments that did not have proper evidentiary support and flew in the face of the franchise agreements between the parties." It added, "Curves strongly disagrees with any argument that it failed to support any of the former franchisees involved in the case, who represent less than one percent of the franchisees of Curves. 

Attorney Fortman said he feels the press release was misleading and inaccurate. His clients were awarded 80 percent of their net operating losses, so he has no idea how they came up with the 10 percent. And, where Curves says it will appeal "partial verdict" Fortman again states he has no idea what a "partial" verdict is.

Monty Sharma, CEO and president of Curves stated that they have thousands of very successful franchisees around the globe. He said, "We strongly disagree with the decision reached and plan to take this case as far as we can in the court system. We will file post-trial motions with the trial court promptly and, if necessary, an appeal requesting that the verdict in the case be set aside. We are confident that the law will be followed and the verdict will not be allowed to stand." 

When asked if other franchisees would be filing new lawsuits in light of this verdict, Fortman said only time will tell. "At this point, I am concentrating on  obtaining recovery for my clients in this case."

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.