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Commitments and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
On February 7, 2007, in an action styled White Plains Plaza Realty, LLC v. TSI LLC et al., the landlord of one of TSI LLC’s former health and fitness clubs filed a lawsuit in the Appellate Division, Second Department of the Supreme Court of the State of New York against it and two of its health club subsidiaries alleging, among other things, breach of lease in connection with the decision to close the club located in a building owned by the plaintiff and leased to a subsidiary of TSI LLC, the tenant, and take additional space in a nearby facility leased by another subsidiary of TSI LLC. Following a determination of an initial award, which TSI LLC and the tenant have paid in full, the landlord appealed the trial court’s award of damages, and on August 29, 2011, an additional award (amounting to approximately $900) (the “Additional Award”), was entered against the tenant, which has recorded a liability. Separately, TSI LLC is party to an agreement with a third-party developer, which by its terms provides indemnification for the full amount of any liability of any nature arising out of the lease described above, including attorneys’ fees incurred to enforce the indemnity. As a result, the developer reimbursed TSI LLC and the tenant the amount of the initial award in installments over time and also agreed to be responsible for the payment of the Additional Award, and the tenant has recorded a receivable related to the indemnification for the Additional Award. The developer and the landlord are currently litigating the payment of the Additional Award and judgment was entered against the developer on June 5, 2013, in the amount of approximately $1,000, plus interest, which judgment was upheld by the appellate court on April 29, 2015. TSI LLC does not believe it is probable that TSI LLC will be required to pay for any amount of the Additional Award.
In April, 2020, the Company charged members their monthly charges pursuant to and in accordance with the terms of their Membership Agreements. The Attorney General’s offices for the states of Massachusetts, New York, Pennsylvania, Washington, DC and Maryland had taken the position that charging members in April 2020 at the time of the Governmental Ordered closure violated State Consumer Protection laws. The Company resolved the matter with the Attorney General’s offices by offering members various options such as upgrades to Elite status, providing members who were already Elite members with a three month guest pass, by permitting members during the periods of club closures to cancel their memberships without a cancellation fee, providing free access to members for the period charged when the clubs were not open, and by freezing all memberships during the periods of club closures free of charge. Any member who wished to cancel or freeze their memberships after the clubs reopened were charged with cancellation or freeze fees, as applicable, pursuant to the terms of their membership agreements. These resolutions are not expected in the aggregate to have a material impact on the Company’s financial statements.
By reason of the Company’s failure to pay rent to many of our commercial landlords while the closure orders were in effect (and in some cases after locations were opened) we have received a number of Landlord default notices, lease terminations and in some cases lawsuits to collect outstanding rent and evictions.
We have asserted defenses to the defaults, terminations and suits consisting of force majeure, impossibility of performance, compliance with governmental mandates and frustration of purpose. It is uncertain whether we will prevail on these defenses. However should the Company or certain of its subsidiaries file for bankruptcy protection, many of the leases subject to such bankruptcy proceedings are likely to be rejected and or renegotiated in bankruptcy.
The Company assigned its interest, and is contingently liable, under a real estate lease. This lease expired in June 2020. As of the expiration of the lease, the undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee is approximately $1,336. The Company has not recorded a liability with respect to this guarantee obligation as of March 31, 2020 as it was concluded that payment under this lease guarantee was not probable.
In addition, the Company is involved in various other lawsuits, claims, investigations and proceedings incidental to the ordinary course of business, including personal injury, landlord tenant disputes, construction matters, employee and member relations (including charging members April dues during the Government Ordered closure), and Telephone Consumer Protection Act claims (a number of which purport to represent a class and one of which was brought by the Washington, D.C. Attorney General’s Office and the New York Department of Consumer Affairs). The results of litigation are inherently unpredictable. Any claims against the Company, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and result in diversion of significant resources. The results of these other lawsuits, claims and proceedings cannot be predicted with certainty. The Company establishes accruals for loss contingencies when it has determined that a loss is probable and that the amount of loss, or range of loss, can be reasonably estimated. Any such accruals are adjusted thereafter as appropriate to reflect changes in circumstances. The Company concluded that an accrual for any such matters is not required as of March 31, 2020.