Key Points

  • The Appellate Division, Second Department, affirmed a Kings County order compelling arbitration and staying a putative class action alleging Equinox violated the Health Club Services Act.
  • The plaintiff alleged Equinox charged membership fees in excess of $3,600 per year and argued the violation rendered the whole membership agreement, including its arbitration clause, void.
  • Applying the separability doctrine, the court held that a party resisting arbitration must show the arbitration clause itself, not the overall agreement, is unenforceable.
  • Because the clause covered disputes over the agreement's 'validity, enforceability or scope' and the alleged statutory violations related to other provisions, the arbitration clause remained enforceable.
  • The unsigned decision and order was unanimous and affirmed with costs.

A New York appeals court ruled Wednesday that a gym member who says Equinox Holdings Inc. charged more in membership fees than state consumer law allows must take his claims to arbitration, holding that an allegation that the whole membership contract is illegal does not knock out the arbitration clause inside it.

The Appellate Division, Second Department, unanimously affirmed a Kings County Supreme Court order that compelled arbitration and stayed the putative class action brought by Ricardo Martinez under the Health Club Services Act. The unsigned decision and order, issued Oct. 7 by a four-justice panel of Justices Colleen D. Duffy, presiding, Barry E. Warhit, Lourdes M. Ventura and Lisa S. Ottley, affirmed with costs.

Under the decision, a consumer's argument that a statutory violation renders an entire contract void is a question for the arbitrator when the arbitration clause covers disputes over the contract's enforceability and the alleged violation concerns other terms. The panel relied on the separability doctrine, the principle that a broad arbitration clause is treated as distinct from the rest of a contract and can survive defects in the contract's substantive terms, citing Matter of Monarch Consulting, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA and Wu v. Uber Tech., Inc.

Martinez filed suit in February 2024, seeking damages for violations of the Health Club Services Act, codified at General Business Law sections 620 through 631. According to the decision, he alleged that Equinox had charged him and similarly situated members membership fees in excess of $3,600 per year in violation of the statute.

Before filing an answer, Equinox moved under CPLR 7503 to send the dispute to an arbitrator and halt the court case. Martinez opposed the motion, arguing that the company's violation of the act rendered the membership agreement, including its arbitration provision, void and unenforceable.

Justice Peter P. Sweeney of Kings County Supreme Court granted Equinox's motion in an order dated Oct. 24, 2024. Martinez appealed.

The appellate panel began with the threshold inquiry a court must make on such a motion. "[O]n a motion to compel or stay arbitration, a court must determine, in the first instance . . . whether parties have agreed to submit their disputes to arbitration and, if so, whether the disputes generally come within the scope of their arbitration agreement," the court wrote, quoting Revis v. Schwartz.

The panel added, quoting Wilson v. PBM, LLC, that "Arbitration is a matter of contract, and arbitration clauses, which are subject to ordinary principles of contract interpretation, must be enforced according to their terms."

On separability, the court quoted Markowits v. Friedman for the rule that "[A] broad arbitration provision is separable from the substantive provisions of a contract such that the agreement to arbitrate is valid even if the substantive provisions of the contract" render it unenforceable. That rule puts the burden on the party resisting arbitration. "A party trying to avoid an arbitration clause must therefore show that the arbitration clause itself, not the overall agreement, was . . . unenforceable," the panel wrote, quoting Mouli v. Stern and citing Wu.

Turning to the Equinox contract, the court noted that Martinez's membership agreement provided that any and all disputes arising after it was signed would be resolved exclusively through arbitration. The clause defined a dispute as "any dispute, claim, or controversy . . . regarding any aspect" of the parties' relationship, "includ[ing] without limitation the validity, enforceability or scope" of the membership agreement.

That language was decisive. The membership agreement "demonstrated that the parties clearly and unambiguously agreed to resolve any disputes arising out of the agreement, including those involving the enforceability of the agreement, through arbitration," the panel wrote.

The court then rejected Martinez's voidness theory. "Since the alleged violations of the Health Club Act related to other substantive provisions of the membership agreement rather than the arbitration provision itself, the arbitration provision remained enforceable, notwithstanding the alleged illegality of the agreement," the decision said. In support, the panel cited sections 623(1) and 627(1) of the General Business Law, the Monarch Consulting decision and Mouli.

"Accordingly, the Supreme Court properly granted the defendant's motion pursuant to CPLR 7503 to compel arbitration and stay all proceedings in the action pending arbitration," the court concluded.

The decision did not reach the merits of Martinez's claim that Equinox's fees exceeded what the Health Club Services Act permits, and it did not address how the class allegations would be handled once the dispute is before an arbitrator. The panel's analysis turned entirely on the scope of the arbitration clause and on the fact that Martinez's challenge was aimed at the contract as a whole rather than the clause itself.

No justice wrote separately. The decision lists Duffy, Warhit, Ventura and Ottley as concurring.

Lawyers for Martinez included Philip L. Fraietta of Bursor & Fisher, P.A. Equinox was represented by Patrick McPartland of LaRocca, Hornik, Greenberg, Kittredge, Carlin & McPartland LLP.

With the order affirmed, all proceedings in the Kings County action, Index No. 503903/24, remain stayed pending arbitration. The decision, reported as 2026 NY Slip Op 05779 under appellate docket No. 2024-13229, is marked uncorrected and subject to revision before publication in the Official Reports.