Madison - St. Clair Record

Saturday, July 20, 2019

Club Fitness alleges personal training company breached contract, underreported revenue

Lawsuits

By John Breslin | Jun 21, 2019


The owner of two dozen fitness centers accuses a personal training company that operated for many years within its premises of breach of contract and fraud.

Club Fitness, headquartered in St. Louis but with facilities in Missouri and Illinois, filed suit against personal trainers, Dynamic Fitness Management (DFM), and owners Chad Remley and Brian DeMuth in Madison County Circuit Court. Remley owns 90 percent of the shares in DFM, while DeMuth, an attorney in Morris, Ill., holds 10 percent, according to the complaint.

The plaintiff accuses DFM, which was contracted to provide personal training within Club Fitness facilities, of under reporting revenue, and more recently of setting up a rival business in breach of an agreement between the two companies.

Club Fitness accuses the defendants of breach of contract, unjust enrichment and fraud. 

Tom Patterson, of the Patterson Law Firm in Chicago, an attorney speaking on behalf of DFM, said the company's position is that the law suit is "without merit."

"In fact, Club Fitness breached the contract and (DFM) is looking forward to its day in court," Patterson told the Record.

Patterson further claims that the lawsuit, the "guts" of which is not true, was filed so that Club Fitness can show it to its personal trainers in order to stop them leaving the company.

Club Fitness operates out of the 24 locations in Illinois and Missouri. Its founder, John Crocker, died in late May.

The complaint states that Club Fitness and DFM first agreed to a deal in 2004, under which the latter would have the exclusive right to provide personal training to the former's members at all current and future facilities.

DFM agreed to pay ten percent of all monthly revenue up to $40,000 per facility, the complaint states.

Partly due to the personal friendship between Crocker and Remley, Club Fitness trusted it was paid in full per the contract, the plaintiff alleges.

While Club Fitness spent $19 million on marketing and advertising between 2004 and 2013, DFM allegedly did not spend any money on attracting customers. A further $20 million was spent by the center operators on constructing super clubs between 2017 and 2019.

Details of the alleged under reporting of the income came after owner, Crocker, decided to hand over control of the company to his employees under an employee share ownership plan (ESOP).

It is claimed records show that DFM understated revenue by $10 million between 2013 and 2016, and that Club Fitness was therefore owed $1.2 million. The complaint alleges Club Fitness is also owed a further $1 million for the years 2004-2012, the suit states.

Remley allegedly agreed that he underpaid the company, transferred $200,000 and agreed to pay another $800,000.

In May, Club Fitness told DFM it was taking over the personal training of members, but Remley and his company could operate out of two smaller facilities that would not be competitors.

However, the suit states that DFM was planning to open new facilities in competition with Club Fitness and actively attempting to recruit the fitness center owner's employees.

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