NYSC Gym Owner Settles Billing Dispute, Wins Bankruptcy Approval

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Town Sports International Holdings, the operator of New York Sports Clubs, had its bankruptcy plan approved after settling objections from two states over its billing of members while its gyms were closed during the Covid-19 pandemic.

Federal bankruptcy Judge Christopher Sontchi approved the company’s Chapter 11 plan Friday in a court filing. His decision was delayed earlier this week by attorneys general from Massachusetts and the District of Columbia, who objected that club members had been unfairly charged dues when the gyms were shut. Town Sports operated Washington Sports Clubs, Boston Sports Clubs as well as the Lucille Roberts and Total Woman chains.

A group of lenders that includes Tacit Capital agreed to exchange about $80 million in Town Sports debt for control of the gym chain. As for the dispute over dues, the order said Town Sports “will reasonably cooperate with the offices of the Massachusetts and Washington D.C. Attorneys General to resolve consumer complaints.”

Gym chains have been hit hard by the Covid-19 outbreak amid on-again, off-again shutdowns ordered by governments, and the reluctance of members to come because of fears they’ll be infected. Among those that have filed for bankruptcy are 24 Hour Fitness Worldwide, Gold’s Gym International and, earlier this week, In-Shape Health Clubs.

The Washington attorney general’s office claimed NYSC failed to abide by the promises it made to gym members while its facilities were closed and estimated the district is entitled to civil penalties and fees over $5 million. Massachusetts said it received over 2,000 complaints from consumers about billing and cancellation practices.

Lawyers for the company and the states said at a hearing Thursday that they were close to settling the matter. The judge’s order establishes a process for gym members to email the company at TSIClaims@hcg.com to resolve billing issues.

The case is Town Sports International LLC, 20-12168, U.S. Bankruptcy Court, District of Delaware. To view the docket on Bloomberg Law, click here.

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