NOTICE OF PROPOSED SETTLEMENT AND SETTLEMENT HEARING

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Ethan Owens
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1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA X GRACE LAWRENCE, on behalf of herself and all others similarly situated, Plaintiff, Case No. 208-cv JP vs. CLASS ACTION L.A. Fitness International, LLC Defendant. X NOTICE OF PROPOSED SETTLEMENT AND SETTLEMENT HEARING This Notice is directed to (a) all Freeze Fee Sub-Class Members individuals who, according to the database maintained by L.A. Fitness International, LLC (the Company ), (i) enrolled for fitness and/or training services at a Company club located in the U.S. from February 13, 2007 through March 31, 2008 (the Freeze Fee Period ); (ii) during the Freeze Fee Period, paid both a stand-alone freeze fee and a standard, non-pro rated monthly fee of the same type (that is, both fitness or both training) in the same calendar month; and (iii) used a debit card and/or bank account (and not a Discover card, AMEX card or other credit card, personal check, cash or other form of payment) to make the above payments; and (b) all Duplicate Payment Sub-Class Members individuals who, according to the Company s database, (i) enrolled for fitness and/or training services at a Company club located in the U.S. from February 13, 2007 through April 30, 2008 (the Duplicate Payment Period ); (ii) during the Duplicate Payment Period, may have made payments (other than standard monthly fees) for the same purpose in identical amounts within five days of each other through the Company s Dallas, TX or Irvine, CA corporate office; and (iii) did not have a membership constituting (A) a test account; (B) a membership established by a company for an employee wellness program; or (C) a Minnesota family access membership. YOU MAY BE A MEMBER OF THE SETTLEMENT CLASS COMPOSED OF ALL FREEZE FEE SUB-CLASS MEMBERS AND ALL DUPLICATE PAYMENT SUB-CLASS MEMBERS. THIS NOTICE CONTAINS IMPOR- TANT INFORMATION THAT MAY AFFECT YOUR LEGAL RIGHTS. PLEASE READ IT CAREFULLY. THIS IS NOT A NOTIFICATION THAT YOU HAVE BEEN SUED. SUMMARY OF THE LAWSUIT Plaintiff Grace Lawrence initiated a class action lawsuit (the Lawsuit ) and a class arbitration against the Company (the Arbitration ) (together with the Lawsuit, the Proceedings ). Plaintiff contends that language in the Company s fitness and training agreements constitutes a waiver of rights under the federal Electronic Funds Transfer Act, 15 U.S.C. 1693, et seq. (the EFTA ), in violation of the EFTA, and that the Company failed to provide requisite advance written notice of changes in monthly membership fees, also in violation of the EFTA. She asserts that, as a result of the Company s alleged wrongdoing, some Company customers ( Freeze Fee Sub-Class Members ) suffered actual damages by incurring membership fees and freeze fees in the same calendar month and other Company customers ( Duplicate Payment Sub-Class Members ) suffered actual damages by paying twice for the same services. The Company contends that plaintiff s agreements did not contain any waivers prohibited by the EFTA, that all requisite notices were given to its customers and that no Company customers suffered damages of any kind as a result of any Company misconduct. In addition, the Company has established that there are only about 50 Duplicate Payment Sub- Class Members nationwide and it believes that the overwhelming majority of these Duplicate Payment Sub-Class Members did not make duplicate payments for the same services (although it would require an inordinate amount of work to establish that fact). The parties have briefed the waiver issue but no decision has been issued by the Court. They have analyzed and shared information, and plaintiff has taken discovery, bearing on the notice issue and the potential damages that could be recovered in the event that the Proceedings were finally resolved without settlement. 1

2 The Company has at all times denied, and continues to deny, that it has committed any wrongful acts or violations of law of any nature whatsoever or that it has any liability to the plaintiff or the putative class described in the Proceedings. Substantial uncertainty exists as to the potential liability of the Company in the Proceedings and as to the nature and amount of relief, if any, to which plaintiff and the members of the class may be entitled if liability is established. After the parties engaged in extensive arms -length negotiations, they agreed to settle the Proceedings, subject to approval of the Court. Counsel for plaintiff has thoroughly analyzed the applicable law and all of the facts, and has concluded that the proposed settlement is fair and reasonable and in the best interest of the Settlement Class (defined below) because it provides substantial and immediate relief and avoids the considerable risks and delays of further proceedings. While denying any fault, wrongdoing or liability, the Company believes that the settlement is desirable in order to avoid further significant burden, expense and inconvenience of protracted proceedings, and further distraction and diversion of its personnel and resources. Plaintiff seeks to represent the Settlement Class, and the Company agrees that a Settlement Class, composed of two sub-classes, should be certified solely for the purpose of effectuating the settlement. The Court has not ruled on the merits of plaintiff s claims or on the denials of liability and other defenses of the Company in the Proceedings. Therefore, this Notice should not be viewed as an expression of any opinion by the Court on the merits of the plaintiff s claims or the Company s defenses in the Proceedings. I. THE PROPOSED CLASS AND YOUR RIGHT TO BE EXCLUDED For the purposes of settlement only, the Court has provisionally certified a Settlement Class, comprised of a Freeze Fee Sub-Class and a Duplicate Payment Sub-Class, as follows Freeze Fee Sub-Class. All individuals who, according to the database maintained by the Company, (i) enrolled for fitness and/or training services at a Company club located in the U.S. from February 13, 2007 through March 31, 2008 (the Freeze Fee Period ); (ii) during the Freeze Fee Period, paid both a stand-alone freeze fee and a standard, non-pro rated monthly fee of the same type (that is, both fitness or both training) in the same calendar month; and (iii) used a debit card and/or bank account (and not a Discover card, AMEX card or other credit card, personal check, cash or other form of payment) to make the above payments; and Duplicate Payment Sub-Class. All individuals who, according to the Company s database, (i) enrolled for fitness and/or training services at a Company club located in the U.S. from February 13, 2007 through April 30, 2008 (the Duplicate Payment Period ); (ii) during the Duplicate Payment Period, may have made payments (other than standard monthly fees) for the same purpose in identical amounts within five days of each other through the Company s Dallas, TX or Irvine, CA corporate office; and (iii) did not have a membership constituting (A) a test account; (B) a membership established by a company for an employee wellness program; or (C) a Minnesota family access membership. If you fall within the foregoing Settlement Class definition, you will be a Participating Class Member unless you exclude yourself from the Settlement Class. Being a Participating Class Member means that if the settlement is finally approved by the Court, you will receive the payment(s) described below and will be deemed to have provided the release described below. If you do not wish to be a Participating Class Member, you may exclude yourself from the Settlement Class by mailing a notice of exclusion, post-marked not later than April 27, 2009 and addressed to the Settlement Administrator at the address set forth below L.A. FITNESS SETTLEMENT c/o RSM McGladrey, Inc. Settlement Administrator P.O. Box 1387 Blue Bell, PA The notice of exclusion must state your name and address. If you choose to exclude yourself from the Settlement Class, any claims you might have against the Company will not be affected by this settlement. HOWEVER, IF YOU EXCLUDE YOURSELF, YOU WILL NOT BE ABLE TO RECEIVE THE BENEFITS OF THIS SETTLEMENT. If you do not timely exclude yourself from the Settlement Class and the settlement is approved and becomes final, you will be deemed to have entered into the Release described below in Section IV. 2

3 II. TERMS OF THE PROPOSED SETTLEMENT The following description of the proposed settlement is only a summary. For further reference, the Settlement Agreement is on file with the Clerk of the United States District Court for the Eastern District of Pennsylvania, United States Courthouse Second Floor, 601 Market Street, Philadelphia, PA The Company will make the following payments to Participating Class Members (a) To each Freeze Fee Sub-Class Member, 50% of each freeze fee described in subparagraph (ii) of the Freeze Fee Sub-Class description in Section I above. (b) To each Duplicate Payment Sub-Class Member, 100% of each duplicate payment (that is, the second payment, not both) described in subparagraph (ii) of the Duplicate Payment Sub-Class description in Section I above. (c) To each Participating Class Member (whether a Freeze Fee Sub-Class Member and/or a Duplicate Payment Sub-Class Member), $300, divided by the total number of Participating Class Members. This amount is estimated at $ (d) To the extent that any funds remain after distribution to the Participating Class Members, including funds covered by returned checks and checks not cashed within 90 days from mailing, or any other payments that are returned to the Settlement Administrator or the Company, such funds shall be used for a cy pres distribution to Community Legal Services, Inc. of Philadelphia, the Consumer Bankruptcy Assistance Project of Philadelphia, Philadelphia Legal Assistance or some other Pennsylvania-based non-profit organization. (e) The Company shall pay for all costs associated with notice and the administration of the settlement. Subsequent to the initiation of the Proceedings, the Company revised its procedures to commence providing confirmation of any membership freeze (including the start and end dates of the freeze, the freeze fee, and whether it is freezing fitness and/or training services and fees) in the following manner (a) For customers who request a freeze in person, written in-person confirmation and/or confirmation. (b) For customers who request a freeze over the Internet, online confirmation. (c) For customers who request a freeze over the telephone, if the customer has provided his or her address to the Company, confirmation by . (d) For customers who request a freeze over the telephone, if the customer has not provided his or her address to the Company (either previously or during the call), no confirmation. The Company has agreed to continue to provide such confirmations through the end of 2009 and for four years thereafter, provided that, after 2009, the Company may discontinue providing such confirmations if counsel to the Company advises the Company that, in counsel s opinion, compliance with such confirmation requirement is not required to comply with applicable law, including the EFTA. III. ATTORNEYS FEES AND EXPENSES Class members have no obligation to pay Class Counsel any attorneys fees or expenses, and no obligation to pay for the cost of notice or the administration of the settlement. Class Counsel brought the Proceedings on a contingent basis and have not yet received any payment of fees or any reimbursement of their out-of-pocket expenses. As part of the settlement, Class Counsel shall apply for an award of attorneys fees in an amount, plus reimbursable expenses, to be paid by Defendant. Class Counsel intend to apply for an award of attorneys fees and expenses in the range of $265,000 to $320,000. All such requested fees and expenses will be subject to objection by the Defendant and review and approval by the Court, and will in no way reduce the amount of benefits due to the Settlement Class. In addition, Class Counsel will apply for an individual settlement award for Ms. Lawrence in the amount of $7,500 in satisfaction of her individual claims and in recognition of her efforts in obtaining the settlement benefits for the Settlement Class. IV. RELEASE In exchange for the foregoing payments provided by the Company pursuant to the settlement, Ms. Lawrence and all Participating Class Members who do not timely exclude themselves from the Settlement Class, on behalf of themselves, their heirs, executors, administrators, successors and assigns, will be deemed as a result of the settlement to have remised, released and forever discharged the Company and its parents, subsidiaries, affiliates, divisions, predecessors, successors, assignees, present and former officers, directors, employees, shareholders, representatives, insurers, agents and attorneys (collectively the Released Parties ), from any and all causes of action, claims, and demands of any nature whatsoever that were asserted or could have been asserted in the Proceedings out of, or relating in any way to the conduct complained of therein. 3

4 The Company, for itself, and on behalf of the Released Parties, shall release and forever discharge the plaintiff, the Settlement Class and their present and former attorneys, administrators, heirs, agents, insurance carriers, successors, and assigns, from any and all causes of action, claims, and demands of any nature whatsoever, asserted or unasserted, arising out of, or relating in any way to, the institution, prosecution, or resolution of the Proceedings. The Company also agrees that it will not sell any debt that plaintiff may allegedly owe to LAF or BOC or to take any collection action against her, including, but not limited to, reporting any such alleged debt to a consumer reporting agency. V. WHAT THE SETTLEMENT MEANS The proposed settlement is intended to settle all claims and causes of action that plaintiff asserted or could have asserted against the Company in the Proceedings. If you do not exclude yourself from the Settlement Class and the settlement is approved and becomes final, you will be deemed to have entered into the Release described above in Section IV. If the settlement is approved by the Court and becomes final, the settlement will be consummated. If the settlement is not approved by the Court or does not become final for any other reason, the Proceedings will continue. VI. HEARING ON THE SETTLEMENT The Court will hold a fairness hearing on June 23, 2009 at 1000 a.m. in Courtroom 17B, United States Courthouse 601 Market Street, Philadelphia, PA to determine whether the proposed settlement should be approved as fair, adequate and reasonable, and also to determine the amount of attorneys fees and expenses that should be awarded to Class Counsel and the amount of the individual settlement award to Ms. Lawrence. The hearing date may be changed without further notice to you individually. YOU DO NOT NEED TO APPEAR IN COURT. Any Participating Class Member who has not elected to be excluded from the Settlement Class may object to approval of the proposed settlement or to the applications for attorneys fees and expenses and for an individual settlement award to Ms. Lawrence, and may appear at the hearing, individually or through such Participating Class Member s own counsel, but ONLY if such Participating Class Member has submitted a WRITTEN objection and notice of intention to appear. Any objection must be in writing and must be filed with the Clerk of the United States District Court for the Eastern District of Pennsylvania, United States Courthouse Second Floor, 601 Market Street, Philadelphia, PA and must also be mailed to Class Counsel at the address set forth below in Section VII not later than April 27, Any objections shall state the name and number of the Lawsuit (set forth at the top of this Notice), the objecting Participating Class Member s name and address; each specific reason for the Participating Class Member s objection; and any legal authority for such objection. Failure to file timely written objections will preclude a Participating Class Member from objecting at the final approval hearing. VII. ADDITIONAL INFORMATION The pleadings and other records in the Lawsuit, including a copy of the Settlement Agreement, may be examined at any time during regular office hours at the Clerk s Office, United States District Court for the Eastern District of Pennsylvania, United States Courthouse Second Floor, 601 Market Street, Philadelphia, PA If you need additional information, you should call or write to the following attorneys for the Settlement Class below James A. Francis, Esquire David A. Searles, Esquire FRANCIS & MAILMAN, P.C. DONOVAN SEARLES, LLC 100 South Broad Street, 19 th Floor 1845 Walnut Street, Suite 1100 Philadelphia, PA Philadelphia, PA Payments to Participating Class Members will not be made until after the settlement receives final approval from the Court and any appeals have been concluded. PLEASE DO NOT CALL THE COURT, THE CLERK OR THE COMPANY REGARDING THIS SETTLEMENT. DATE March 28, 2009 Clerk of Court United States District Court Eastern District of Pennsylvania 4

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6 L.A. FITNESS SETTLEMENT c/o RSM McGladrey, Inc. Settlement Administrator P.O. Box 1387 Blue Bell, PA IMPORTANT LEGAL INFORMATION

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, SETTLEMENT HEARING AND APPLICATION FOR ATTORNEYS' FEES

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION, SETTLEMENT HEARING AND APPLICATION FOR ATTORNEYS' FEES UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS DIVISION IN RE ULTA SALON, COSMETICS & FRAGRANCE, INC. Master File No. 07 C 7083 SECURITIES LITIGATION CLASS ACTION This Document Relates To: