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BUTTERFLY LIFE: Franchisees Lose Arbitration?

March 15, 2009

BUTTERFLY LIFE: Franchisees Lose Arbitration?

Originally published:  March 15, 2009

Archived copy reinstated from March 27, 2009

Several comments were posted yesterday regarding the beyond-troubled fitness franchise Butterfly Life.  Both spelled further trouble for the Butterfly Life franchisees struggling for survival.

The first was from the attorney representing BFI against the franchisees:

Update on the franchisee class action arbitration: The franchisees’ claims are being terminated and dismissed because they failed to pay their allocated share of the arbitration fees. Several motions were pending against the franchisees when the arbitration proceedings were terminated.

Scott Hammel

Attorney for Butterfly Fitness, Inc.

On the Butterfly Life and ShapeXpress discussion pages, Slim Buster confirmed Hammel’s statement, and added that Butterfly Life has been acquired by Diversified Health & Fitness… a controversial company that buys up distressed fitness franchise chains:

Heard that BFL’s check bounced and the AAA dismissed the case. Also, heard that BFL was sold to the franchise equivalent of ambulance chasers!!!! Should we listen to the sirens?????

…all you [Diversified] are is a “legal” collection agency taking advantage of failing franchisees. Now you’ve obtained Butterfly Life and I’m sure you’ll be coming after the 75+ franchisees who got smart and decided to break away from Mark Golob and gang.

WHAT IS GOING ON WITH BUTTERFLY LIFE?

DOES ANYONE HAVE EXPERIENCE WITH DIVERSIFIED? PLEASE SHARE INSIGHTS BELOW.

Written by ADMIN · Filed Under 30 Minute Fitness, ALL POSTS, Butterfly Life

15 Responses to “BUTTERFLY LIFE: Franchisees Lose Arbitration?”

  1. Slim Buster on March 15th, 2009 8:11 pm

    NO……the franchisees did not lose arbitration……it never got started! To clarify in a very condensed version – the franchisees did not pay anymore into the arbitration after finding out from the AAA that BFL’s check bounced, and therefore, that the arbitration would be suspended. Why would the franchisees put anymore of their hard earned money into the arbitration if BFL can’t even make good on their filing fee? I’m surprised that Diversified would purchase BFL without doing their “due diligence.” Not only did they buy the name, they bought all the trouble that goes with it.

  2. ADMIN on March 15th, 2009 8:52 pm

    Slim Buster:

    You are saying that Butterfly Fitness, Inc.’s (the franchisor’s) check bounced, so the franchisees, in turn, decided to abandon their bid for arbitration?

    Where does this leave the franchisees? Has your AAFD chapter disbanded?

    How many clubs are still operating?

  3. Scott Hammel on March 16th, 2009 11:17 am

    Once again the franchisees are receiving wrong information. In the class action arbitration by the franchisees, Butterfly Fitness, Inc. paid its arbitration fees and the arbitration is being terminated because the franchisees did not pay their allocated fees – while several motions were pending against the franchisees (including motions to strike and dismiss their improper claims). The arbitrators did not rule on the motions because the franchisees did not pay their arbitration fees. These are the true facts that the franchisees apparently have decided to ignore and could easily be confirmed by the franchisees’ attorney, Mario Herman, and the American Arbitration Association.

  4. ADMIN on March 16th, 2009 11:44 am

    Scott:

    Thanks for helping to clear up this confusion. Here are some of the rumors perhaps you (or others) can address:

    > The check that Butterfly Fitness, Inc. used to pay its arbitration fees bounced

    > Area franchise reps filed a civil suit against Butterfly Fitness, Inc. about a month ago. Franchisees see this and other suits as being a more expeditious use of resources than arbitration.

    Has your firm or BFI issued a press release regarding any of these developments?

    Thanks for your participation

  5. Scott Hammel on March 16th, 2009 12:13 pm

    The arbitration brought by Butterfly Fitness, Inc. against certain franchisees has been temporarily suspended. However, the class action arbitration (a separate arbitration proceeding initiated by Butterfly Fitness, Inc. against franchisee Elizabeth Tomei, that generated a class action counterclaim on behalf of virtually all Butterfly Life franchisees), is being terminated because the franchisees failed to pay their arbitration fees (at a time when several motions were pending against the franchisees, that their attorney(s) did not oppose). Certain area franchise reps did file a lawsuit against current and former Butterfly Fitness, Inc. employees, but not against Butterfly Fitness, Inc. We believe this lawsuit is without merit and that it should proceed to AAA arbitration (a petition to compel arbitration is currently pending before the court). We are not aware of any “other suits” referenced in your comment. It is unfortunate that franchisees continue to receive incorrect information (through the rumor mill, their attorneys, or others) and/or that they choose to ignore the true facts.

  6. Wondering on March 16th, 2009 1:40 pm

    Never thought I would see the day that Tom and Mark’s attorney would start blogging. Interesting! I wonder if they have to pay for this service?

  7. Scott Hammel on March 16th, 2009 1:50 pm

    Just trying to set the record straight, since so many franchisees appear to have been misinformed about the class arbitration.

  8. PMG on March 16th, 2009 2:37 pm

    Can someone explain who Scott Hammel is? Is he an attorney, a representative of BFI or Mark or Tom? What’s his purpose in the comments he’s making on this site?

    I haven’t followed the whole arbitration thing too closely for one simple reason, I didn’t have any money left o be apart of it. BFI mislead us and pursued us to become a franchisee. When after six weeks we could not get a small business loan, Taylor Golob call us and suggested that we tap our retirement savings and the equity in our home to buy the franchise. Oh how I wish he had never called. To top things off, the landlord had offered us a three year lease, but BFI stepped in to help us negotiate and low and behold it became a five year lease. So when our fanchised failed after 18 months because virtually all the branding promises BFI made it broke, the landlord still expected us to cover the remaining 42 months of rent, instead of 18 months if the lease had been left the way it was. We filed for bankruptcy, having lost all of our meager cash savings, our retirement savings and the equity in our home, and still we are only scraping by and in danger of losing our home.

    I would really like to see someone put these guys in financial traction like they’ve put us, but I too broke to do much about it. Maybe that was their plan all along. As we included BFI in the bankruptcy I believe the Federal Bankruptcy Laws trump CA Arbitration statues. So I don’t know why they’ve continued to include us in their arbitration proceeding or what they hope to gain. Perhaps someone here can explain it to me. I guess I need to check with the bankruptcy attorney to see if this is not illegal harassment.

  9. Wondering on March 16th, 2009 3:28 pm

    Scott, I’m still not sure you’ve set the record straight. You stated, and I quote ” that generated a class action counterclaim on behalf of virtually all Butterfly Life franchisees” yet Tom Gergley constantly underplayed this lawsuit and continually stated that it was just a group of “10″ disgruntled early franchise owners! So how does it go from 10 people to “vertually all Butterfly Life franchisees”. If I’m misinformed, it is becuase of what Tom told me…not a lawyer nor another franchisee!

    PMG – I would check with your attorney too. I have been looking into brankruptcy too and have been told that the calls and demands for payment stopped once you filed.

  10. clb on March 16th, 2009 5:19 pm

    I’ve seen this before. A company has a lawsuit (or two) filed against it/them and they (in turn) go “on the attack”. They file “counter claims” with the hope that the financial obligation and long drawn out process wears down the opposing people. Not surprising out of two people with the moral compass of thieves.

  11. Scott Hammel on March 16th, 2009 9:44 pm

    The Butterfly franchisees filed a class arbitration counterclaim against Butterfly Fitness, Inc that they were not willing (or able) to pursue (they failed to pay the arbitration fees required to arbitrate their claims) and their claims are being terminated and dismissed. As the old saying goes, “put up or shut up.”

  12. enough on March 16th, 2009 9:51 pm

    Scott,

    I think the whole Butterfly Life saga has a more important issue to a consider, and frankly, it is an issue that lawyers like yourself are adept at stepping around. I am a former BFL franchise owner. I was sold on this business opportunity by many promises of ongoing support, of new ideas, expertise, etc. None of those promises, virtually none, were kept. Your response would certainly be that those promises were not in the final document which I signed, and therefore are not legally binding. But based upon a certain trust that I felt at the time, as did hundreds of others, I lost a lot of money and a lot of my life works. I feel blessed. Many others lost all of their money and their financial futures, and one case, the whole situation contributed to the loss of a life.

    Does BFL have a moral obligation to live up to their words? Do they have a responsibility to deliver on promises? Do they have a human responsibility to inform potential franchisees on the true state of their operation?

    And what are your moral obligations in this whole matter? Do you have a responsibility to do research into the claims made by BFL? Or is it simply your job to provide legal services to those who have the most money?

    I guess I don’t really expect an answer, but it would be nice if you and your clients would look at and realize the devastation their sales tactics have caused.

  13. In the Know on March 16th, 2009 10:37 pm

    Mr. Hammel,

    I’m guessing that ambulance chasing has slowed quite a bit since you are blogging with we lowly franchisees! Or did Mark and Tom leave you out in the cold too and now you are scrounging for your fee.

    For a lawyer you use contextually wrong dialog or maybe its purpose is incendiary. How can an individual or a group LOSE a case, a fight , a game that has never taken place? Non payment could very well have been part of a strategy and that efforts are now moving in a different direction. It must be the same strategy your clients utilized by bouncing their check in the mass arbitration filed against 70 or so franchisees. Which by its group nature was directly in violation of their own franchise agreement. Funny you fail to mention that. As to the filings group or otherwise, we all could have helped you with names, addrsses etc. as that was an abomination, but reflective of the BFL record keeping. If they would just read their mail they would find out so much about their former franchise system. It could have saved them time and money.

    You went through all that education couldn’t you use it for the positve. It must be very depressing constantly harrassing school districts and bankrupt franchisees. Doesn’t yield alot of money either.

  14. Wondering on March 17th, 2009 8:51 am

    Scott still hasn’t disputed the fact that Tom Gergley continually stated, and I have an email with the same in writing, that the class action lawsuit was simply 10 early disgruntled franchise owners. He never acknowledged, as Scott has now put in writing, that they represented “virtually all Butterfly Life franchisees”. Obviously, their own wirtten statements contradict one another. Scott is it all about just getting paid regardless of who you represent?

  15. Franchisee on March 19th, 2009 3:51 pm

    Just to confirm, I am a current BFL franchisee and I DID file a response and claim with the AAA. We received a response from the AAA stating that the action was suspended because BFL’s check was returned and the filing fee was not paid. This is a fact! It has nothing to do with the franshisees not putting up the money because we did.

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