Mike Warkentin (00:00):
Legal issues and gyms. We’re gonna dig into some news stories today to help you keep your business safe. This is a “Run a Profitable Gym.” I’m your host, Mike Warkentin. Please hit subscribe wherever you are watching or listening so you don’t miss any of the wisdom our guests bring every single week. Now, we’ve got three stories that we’re gonna break down for you today. My guest is Matthew Becker. He’s the owner of gymlawyers.com. He also owns Industrial Athletics in Pittsburgh. Matthew, you’re our gym-owning legal eagle. Are you ready to soar through the headlines today?
Matthew Becker (00:31):
Hey, Mike. Legal eagle. I might steal that.
Mike Warkentin (00:35):
Yeah, you should put it on your masthead
Matthew Becker (00:39):
But yeah, let’s go through some headlines. Let’s go through some real practical stuff here.
Mike Warkentin (00:44):
Yeah. So before the show, Matthew and I, we did a Google here and we just took a look at some stuff that pops up in the news with regard to gyms and legal issues. And I’m gonna read you a headline, give you a short snippet of an article, then Matthew’s gonna tell you what’s going on and how you can limit your risk as a gym owner. So first one, this one comes from insauga.com, and the headline is “one of the largest gyms in Mississauga closes suddenly due to legal dispute, says it will reopen.” So this is a gym near Toronto. Short summary: Fuzion Fitness closed suddenly last week, catching some members off guard. A notice of termination was posted on the window, according to a post on Reddit and several comments on Google reviews. The notice stated that the gym’s lease was terminated due to non-payment of rent, and this happened back in April. So Matthew, the big question, can this really happen if you don’t pay your rent? And do you have any recourse? Like, what’s going on here?
Matthew Becker (01:31):
Yeah, well, 100% it can happen if you don’t pay your rent. And that is the biggest issue that gyms run into with leases being terminated. There’s all kinds of issues that can pop up, and we’ll kind of talk about a couple of them with leases in general that may not result in termination so much as it may just result in problems with the landlord. But this one in particular, non-payment is like the number one cause of locations being closed if it’s lease related.
Mike Warkentin (02:07):
So have you seen this happen?
Matthew Becker (02:09):
I have talked to a number of gym owners that have come very close to this happening.
Mike Warkentin (02:15):
Okay.
Matthew Becker (02:16):
Okay. And so usually there’s a couple of different ways that we can get around it. Try to negotiate with the landlord in order to put ’em on a payment period. Oftentimes the gym owner goes through a period of hardship and sort of the lease gets pushed to the end, and they just don’t have the money to pay for it. And that can usually last for two, three, maybe four months. And eventually the landlord’s gonna reach out and start to make a bunch of claims. And hopefully by that point the gym is sort of out of their rut and back making some profit and can now afford to pay again. But they still have this arrearage in the background that needs to be paid. So we try to step in and help before we get to the point of the locks are being changed, the notice of lawsuit has been applied et cetera.
Matthew Becker (03:13):
There’s a couple different things we can do to try to negotiate with the landlord as far as, you know, spreading the back payments over a period of time, a short period of time versus making a lump sum payment versus taking kind of like amortization over the period of the remainder of the lease–although that one’s gonna be tricky. So there’s a couple different ways that we can try to get around this, but it does happen. Now I’m not sure of the information on this, and some of the research that I did on this particular case, it’s a little scarce. What is unclear here is whether or not the gym owners got any notice from the landlord that this was gonna happen.
Mike Warkentin (04:02):
And should they?
Matthew Becker (04:03):
We’re kind of crossing country lines here. I’m not sure what is required up in Canada, in Ontario, or what was in the lease specifically as far as notices are required. Down here in the States, it is very typical that notices are required. And then there’s typically two steps, almost three step process. So first there’s the default. So there’s a difference between a default and a breach. So first we go into the default, and the default just simply means you violated your lease in some way, shape, or form. Here we’re talking about nonpayment. And typically then there’s a notice requirement from a landlord that you have—you know, like if you’re late on your payments by 10 days, the landlord now has to send you written notice of your default of the lease, and then the lease is gonna provide you additional time—this is all negotiable—but additional time that you can correct that default. If you don’t, now you’re in breach. And so what can then happen once you’re in breach of the lease? And that’s typically when we start to see the lawsuits. What’s interesting about this case is it seems like they went so many months without paying. And so the landlord just literally came in and like locked the door, changed the locks. They couldn’t get back in.
Mike Warkentin (05:26):
In the U.S. there would be a process for that where the landlord to do that would have to go through like a couple of steps. So it wouldn’t just be like, you miss one payment three days later, you show up and the locks are changed. That’s not really common?
Matthew Becker (05:38):
Yeah, that’s exactly right. And that’s where, I’m not exactly sure what happened in this case, but usually down here in the States, they have to at least engage into some sort of a lawsuit or some sort of a long, lengthy notice process before you can ever just go in and shut somebody out of their location.
Mike Warkentin (05:59):
I gotta ask this one. If someone did go through that process and did change the locks, what happens to the equipment left inside?
Matthew Becker (06:06):
So that’s very dependent on individual states. So the certain state laws will then allow the landlord to go in and take possession of the equipment and turn around and sell the equipment in order to make up for the lease. Fewer and fewer states I think are allowing that anymore. And usually, once again, they can then hold the equipment, but they can’t do anything with it until they go.
Mike Warkentin (06:35):
“I’ve Got to store like 150,000 pounds of stuff that takes up all this space?” That’s kind of a bad deal for the landlord. Right?
Matthew Becker (06:43):
Yeah. Usually, again, the process is the landlord then has to file a lawsuit and ask for eviction and ask for possession of the location. And then they go through the lawsuit and then they try to collect, and they’re not able to collect. And then we have something called a “sheriff’s sale process,” where now the landlord has to go through an inventory, everything that’s in the location. I mean, you’ve gotta give the tenant like notice after notice after notice after notice. And if the tenant just continues to ignore the landlord, then yes, the landlord can now go in there and snatch possession and hold a sale and make their money back and literally sell the equipment. But down here that’s very long process.
Mike Warkentin (07:26):
So let’s take it back from like that, you know, nuclear option, as we’ll call it. Let’s take it back to help your average gym owner right now, and let’s say this gym owner out there has either has missed a payment or is going to miss a payment and is going to struggle maybe in the next month or two. What would you advise this client or this gym owner to do to avoid the nuclear option down the road? How can we make this better for them?
Matthew Becker (07:51):
I believe that communication with the landlord is always top notch. And I get that, that there may be a gym owner that’s listening that says, “Well, yeah, but my landlord never communicates with me.” Okay, I get that. And we certainly deal with those issues as well of just the landlords are just silent. But there’s nothing stopping the gym owner from at least–and I’m talking like some sort of written communication, not phone call. Text is okay if you have that sort of relationship with your landlord. But, you know, email or like literal snail-mail notice—ask for some relief or let them know that you’re gonna have a problem. It’s very expensive for a landlord to go through this process and to try to turn over a location. So oftentimes landlords are gonna be motivated to try to work with the tenants to try to keep the tenants in there and to start paying again. Because it’s not worth the landlord’s time and effort to really play hardball a lot. And that’s not true in every instance. There are plenty of hardball landlords out there. But if the gym owner knows that this is gonna become a potential issue, the best thing to do is reach out to the landlord and try to give them a heads up, try to get them to work with them.
Mike Warkentin (09:11):
Okay. So the best path is pay your rent on time. But if circumstances come up and you are struggling, the first thing, I would call Two-Brain Business and potentially talk about how to get your business in great shape so that you never have to be in this situation—because we do have a plan for that. But the other thing is talk to your landlord, explain the situation and try, person to person, to work through this so that you can get things back on track. Matthew, when would you need to get involved? Is there a point where a gym owner should call you?
Matthew Becker (09:38):
For a lot of our help, this is really gonna start when you go to sign the lease to begin with. I mean, that’s where the majority of our help comes into play—to review that lease and really look for some of these notice requirements, look for the default versus the breach versus the eviction, and try to renegotiate some of those terms in an effort to give the tenant something. Like instead of having the gym owner have to right a default within 10 days, trying to give them 20 or 30, maybe even 60 days to turn around a default, because that can be the difference between “well, I went through a couple of hard months, but now all of a sudden, you know, I hired Two-Brain and now I can start to make my payments again. Meanwhile, we’re still only in the default phase. We haven’t hit that breach phase yet.” So getting it in the beginning is really important. Once we’re at this point, really the best that we can do is just advise the gym owner on their specific situation on a couple of steps they can take to try to avoid completely being evicted. And even to the point that once they get sued, I’ll often explain to a gym owner that it is scary as hell getting sued. Okay? I will not downplay that at all. I’m an attorney and I don’t like the process of the legal paperwork being served and everything else. However, there is almost an advantage to being sued because now if there’s an attorney on the other side who is suing you, you now have an immediate contact point, and you have an immediate contact point with somebody who is very motivated to settle this thing because these aren’t big money makers oftentimes for attorneys, and they’re a little bit annoying and they’re long and they’re drawn out. And, chances are, your little lease is not going to be the top thing on this attorney’s list on the daily basis. So the attorney’s gonna be very motivated to try to settle this and is gonna be now sort of in some sense your voice of reason for the landlord to try to work something out. And so there can actually be some advantages to that.
Mike Warkentin (12:00):
So, listeners, you might not wanna call Matt when you’re in the depths of this deep, dark hole and you have to fight it out and litigate because that could be a long, nasty situation that you don’t wanna be in the first place. Your best bet is probably to call him to look over your lease in the first place. Matt, that’s something you do, correct?
Matthew Becker (12:14):
Oh, yeah. Oh yeah. Yeah. We review the leases. And a couple of other notes that I picked out from this in the article that you sent me from, what is it? Insauga or?
Mike Warkentin (12:31):
Insauga—It’s kind of a rough website name, but I think it’s a variation of their city name with Mississauga, which is near Toronto. It’s kind of an ugly website name though.
Matthew Becker (12:41):
So they had the copy of the notice of termination on there. And the first thing that popped out to me was that the tenant was listed as the actual corporation, which is one of the first and prime items we always look for whenever we’re reviewing commercial leases—to make sure that the tenant is actually listed as the LLC, the corporation, the business entity itself, not the individuals. And all those individuals are then named down below, as you know. They call ’em the indemnifiers. We call ’em the guarantors. It doesn’t matter. But that’s fine. But the fact that the tenants are actually their corporation, that’s good stuff. Then two other things that kind of jumped out at me is, I think at the very end of the article that you sent me, it talked about the fact that the city was going—there were projects and there were rumors of projects coming in that were gonna tear this building down and potentially build a bunch of high-rise apartments there.
Matthew Becker (13:37):
That can spark a whole bunch of other primary issues. One being what happens to your lease if the landlord sells your building, and what happens if the city, the county, the state wants to come in and take over the property? And those are two other things that we really have to be watching for and be aware of in commercial leases, because nine times outta 10, a commercial lease is not gonna protect the tenant if the landlord wants to sell the building. And if we know in advance that that’s a potential, we can start to negotiate adding language in the lease that requires the new owner of the building to honor this lease. The second thing, if the government comes in and wipes it out, that’s just called condemnation. And that’s, you know, eminent domain. You’re gonna have a real hard time getting around that.
Matthew Becker (14:34):
We will get gym owners that’ll call us that will say, “Yeah, this new building just popped up in an area that is being gentrified. And I can get it a real cheap rate because it’s an old building, but they’re building all these other apartments, and everything around me.” That can be a red flag. Because, you know, that’s a sign that that building might be sold very soon, and that’s a sign that the city could be starting to issue a bunch of permits that allow that building to just be torn down. And that can be a big, big issue for gym owners who move into these spots and are signing five-year leases.
Mike Warkentin (15:14):
Alright, well, to summarize that one up, gym owners, pay your rent on time. If you don’t, talk to your landlord and really try and work that out if you can. Call Two-Brain if you’re having trouble paying your lease, and call Matt when you are looking to set up a lease. I spent money on a lawyer when my lease was delivered to me. She found some stuff that really helped me out down the line, and it was well worth the money. So get someone to look over your lease–unless you know how to do it yourself, which almost no one does—because the clauses are important. Let’s move on to number two. I’m gonna give you this headline here, Matthew. This is an interesting one: “Man sues LA Fitness after Faulty Gym equipment causes injuries. So this was on the Abraham Watkins blog, and if anyone’s an “Arrested Development” fan, this is Bob Loblaw’s Law Blog, if you remember that. But this is a law blog, and here is the short summary: According to the lawsuit, man injured when the elliptical’s right pedal snapped off. Man alleges that LA Fitness provided faulty equipment and failed to properly train staff to inspect and discover dangerous conditions. Claims LA Fitness failed to provide any safety instructions for the machine. The man further alleges that LA Fitness was negligent in that it failed to warn people of the dangerous condition presented by the elliptical. And that LA Fitness knew, or should have known, that the elliptical was in an unreasonably dangerous condition. So, Matthew, the big question: equipment fails. I worked in a gym with a step mill 20 years ago. There were many falls. Some were related to tripping, some were related to just equipment failure. Who’s liable? How do you reduce risk? What’s going on?
Matthew Becker (16:39):
Yeah. Okay. So this one becomes a big issue. Mainly this one becomes a big issue because the equipment failed. And that’s sort of the key why this one ended up in a lawsuit versus somebody just getting injured in gym. So first things to note, the corporation, the LLC itself got sued. Again, not individual owners, because you would imagine that LA Fitness has gone through the steps of going through proper corporate setup to make sure that the individual owners are all protected. So they had to go after the LLC.
Mike Warkentin (17:15):
We have a show on this in the archives, guys, piercing the corporate veil. We have a show and Matthew talks about this if you wanna look into setting up a corporation properly. I’ll put it in the show notes for you. Sorry, Matt, continue. Thank you.
Matthew Becker (17:26):
Yep. You’re all good. So from there we have to look at, well, what really arose to this issue and this is something called premises liability. And once we start talking about premises liability, we’re talking about the building and the surrounding area. So those of you who own 24-hour gyms, all-access gyms, sometimes even something more like a CrossFit or functional fitness gym that is primarily group based but offering open gym as its own individual source of revenue, we have to be concerned about this premises liability. So then again, just a little bit more, this is different than if at my gym we run everything group based or instructor led. Okay? So I need a waiver that talks about the fact that somebody’s gonna be telling somebody what to do. That’s its own sort of liability as opposed to me just walking in a gym, walking in a business, and it’s just sort of free form. It’s open. There’s gonna be hazards that exist. Yes. It’s premises liability. So we now need a waiver that is directed specifically toward this premises liability. And we need a waiver that puts everybody on notice of the potential dangers that could exist in this premises. Okay. Now, I didn’t have the advantage of seeing the waiver in this case. This one had a little bit more information available than the last one we talked about. The complaint is online. So I was able to read down through the complaint, and I’m gonna read some of it here. But question number one is whether or not the waiver and what’s called the “acknowledgement of danger” in that section of the waiver, whether it put people on notice that they could get injured from equipment and or faulty equipment.
Matthew Becker (19:24):
It was not raised in the complaint itself—because what it appears is, though—yeah, they say they didn’t put ’em on proper notice, but they’re specifically zeroing in on the fact that this piece of equipment was broken. So now the question becomes, “Well, if it was broken, what is the duty upon the gym, the staff in our case, like the gym owners, what is their duty to be inspecting the equipment, say on a daily basis, a quarterly basis, an every-six-months basis in order to determine things that are broken?” Because that’s now gonna take—okay, so lemme kind of back up. We have premise liability. We then have a waiver that puts everybody on notice that there’s potential dangers within the premises.
Matthew Becker (20:19):
So how do they end up getting sued? It’s from this thing called gross negligence, right? And that’s where LA Fitness got hit here—no waiver is gonna protect you against gross negligence. So we can say, “Yes, we told that” or “we told them that they were gonna get injured, but we never really did an inspection of anything,” which is what sounds like here. The elliptical got broken, and they guy comes in and uses elliptical. And now an attorney is gonna say, “Well, you had a duty to protect. You had a duty to inspect. You didn’t do either. So that’s now gross negligence.”
Mike Warkentin (20:57):
So the bare minimum here, LA Fitness, according to this complaint, they’re saying “you didn’t do the bare minimum” even though you’ve got a waiver that maybe even says “there are risks.”
Matthew Becker (21:06):
That’s right. So how do you prove that, though? So lemme go through—let’s go through just a little bit of the complaint here. So first it alleges that there was failure on behalf. So failure just means failure on behalf of LA Fitness to provide adequate safety instruction. And so again, the 24-hour access gyms, are you taking your new members through a process of explaining how to use the equipment? Those of us who do group led and we have like a foundations or fundamentals or on-ramp or something like that, presumably we’re showing people the safe way to do stuff. But in 24-hour access gyms, we don’t usually see that process because it’s just like, “Come in, sign up, you can show up at 3 o’clock in the morning, whatever.” So that’s something that you may wanna start to consider because that got named here as part of this lawsuit. Next, there was failure to provide adequate supervision from LA Fitness, from the staff. Okay? So once again, we have these access gyms that aren’t staffing it at 2 o’clock in the morning, right? That shows up on the Gym Owners United page. Every so often somebody asks, “Do I have to staff this at 2 o’clock in the morning?” Well, you’re running a risk if you don’t. For a trainer-led gym, a group-based service that just allows a portion of the gym to be used as open gym, if we’re not supervising that, are we now opening up the gym to too much risk? Failure to maintain the premises in a reasonably safe condition. And that’s that premises liability stuff that I’ve been talking about—it’s the premises itself. Safe failure to provide necessary and proper procedures in order to train its employees and to have customers safely operate fitness equipment. That’s that same walkthrough, you know, that we might wanna start doing. Failure to provide necessary and proper procedures to train its employees to identify unreasonably dangerous conditions on its premises.
Mike Warkentin (23:20):
So that’s one that right of way jumps out to me where it sounds like maybe a staff playbook that has a maintenance log with exactly “this was checked at this date, this time, this date, this time,’ and like a 10-year history of “I checked the machines weekly,” that might be a bit of a defense and maybe something that helps you catch this stuff before it happens. Am I right?
Matthew Becker (23:39):
That’s exactly right. Okay.
Mike Warkentin (23:41):
So that’s something you can do easily.
Matthew Becker (23:43):
Yeah. Throwing something in your staff playbook, making it a regular standard operating procedure that you conduct inspections. And there’s no rule to how often these inspections need to be done, but they do need to be done so that we identify things like is the nylon strap on the rings okay? Are the boxes stable? Okay. Alright, moving on. Okay. So the next point is failure to perceive unreasonable conditions that existed on the premises. Same thing, they’re getting a little bit redundant on some of this. But same idea that if we’re doing regular inspections, we should be picking up on some of these conditions.
Mike Warkentin (24:28):
Staff would have to know what those conditions are. So you, you know, Chris Cooper spelled this out many times, meaning like, if you say “make sure the ring straps are okay,” tell people what is not okay. Like if they’re frayed or they look—you know, tell people exactly what’s unacceptable so that your new staff member doesn’t miss something that to you is obvious but might not be obvious to them. So, gym owners, just before Matt goes on, put stuff in your staff playbook. Tell people what’s acceptable, and what’s not. This goes for your entire business, but especially for equipment maintenance. Put in the playbook, put it on a schedule, sign it off. Keep going, Matt.
Matthew Becker (25:01):
Yep, that’s exactly right. Failure to warn of existing dangerous conditions. Okay. So I mean, it’s in some sense we walk through the gym, we now see the dangerous condition exists, and it’s “okay, we can take time to fix that,” but we now have to warn people about it, right? You know, if we have an Assault bike that’s down for some reason, and we’re gonna move that off to the side, we’re gonna put tape on it, we’re gonna put a sign on it, we’re gonna warn people not to use it while we take the time to fix that Assault bike. And that all comes with that regular inspection—
Mike Warkentin (25:38):
Standard operating procedure.
Matthew Becker (25:39):
The last one that really stuck out to me was failure to render assistance to the individual after his injury. And this for us comes up: we’ve got the waiver, but we also need an incident report. So all of this is recorded, but we also need what’s called an “emergency action plan.” And that emergency action plan is essentially a standard operating procedure, but it’s very specific as to what we need to do, what happens when certain emergency conditions exist. It’s a way that we can now charge our staff so that they know if somebody goes down with a heart attack, if somebody to appears to be having a stroke, if somebody breaks a bone, if somebody starts bleeding excessively, if there’s an earthquake, if there’s a hurricane, if there’s a tornado, what are all these different emergency conditions that we could encounter? I’m not there as the owner, but my staff as we just see here is charged with knowing how to handle this stuff. Do we have the necessary documentation? Do we have the necessary instructions in place so that we don’t get hit with a lawsuit that has a condition of failure to render assistance to the injured person?
Mike Warkentin (26:56):
And again, that can go in your staff playbook. And talk to your insurer. Your insurer might have something there that you have to put in there to fulfill their requirements. Ours did, and they sent me a form that would need to be filled out if there was an incident. But you can also put in everything else, like procedures, location of AED, which should have a big sign anyways. You could put in closest hospital, emergency contacts, you know, the exact location of your building to be stated when you call the paramedics or whatever it is. Your emergency plan should have all this stuff in there. And then each staff member should know exactly how to execute. You could even have a drill. We did that at my gym. We would actually just say, “Okay, this happened, what happens?” And you go through it, and everyone knows that you go to this page of the playbook and you follow the instructions. And, people, lives have been saved in fitness facilities with AEDs and proper training. That’s happened regularly. I’ve seen that over the years.
Matthew Becker (27:45):
Oh, yeah. And that’s something else that we can help gym owners with as well. It’s sort of a waiver package that we put together where, you know, not only will we draft the waiver so that we make sure that we get all this stuff covered, but then we’ll provide an incident report and an emergency action plan that’s customized to that gym. So build all that stuff out. But, you know, the big moral of this one, I think this particular case really applies to those all-access gyms. And what are you doing to inspect, what are you doing to protect yourself against that premises liability? Does your waiver even address premises liability? Because I can tell you if you just go online and you pull a waiver online, the majority of the time it’s gonna be an instructor-led waiver. It’s not gonna be a premises liability waiver. And, and that can leave you really exposed.
Mike Warkentin (28:37):
Okay. To summarize this one, gym owners, talk to Matthew if you need some of the things that he’s talked about, action plans and waivers. The other thing is if you’re not inspecting equipment regularly and logging that in your manual, do that. That is a major step to preventing injuries–just looking around, checking bolts regularly, checking important welds, checking things, shaking things, jiggling. Just check your equipment, oil it, lubricate it, tighten it, do the regular maintenance that the manufacturer requires. That would be a first step. And then have a maintenance log. Make sure your staff knows. Matthew, let’s move on to next one. This is our final one here. This is from the San Diego Union Tribune. So the headline here is “man awarded more than $46 million for jiu-jitsu injury that left him paralyzed.” So this is a tragedy, obviously, and this is a kind of a horrible one to go through here.
Mike Warkentin (29:21):
The short summary: A man who sustained a spinal cord injury during a Brazilian jiu-jitsu lesson in Del Mar, he was rendered a quadriplegic and was awarded more than $46 million by a San Diego civil jury this week. Jack Greener, 23 at the time, said in his lawsuit that his instructor, a second-degree black belt, put his entire body weight on, Greener in a position that crushed the student’s cervical vertebrae, paralyzing him. So this is really a tragedy. The big question, this might happen less, you know, in certain kind of gyms that are like non-contact or something, but spotting in gymnastics might be in the neighborhood. How do you limit risk as an instructor in a situation like this?
Matthew Becker (29:56):
Yeah, this one has shaken the mixed-martial-arts community. It has a lot of gym owners from the mixed martial arts really, really shaking in their boots because, you know, again, there’s a ton of information about this case online. And I even dug into this one quite extensively. I was recently at a conference for a mixed-martial-arts business consulting company, like Two-Brain Business, and it kept coming up. So I looked into it, I dove into it. I actually called one of the plaintiff’s law firms in order to get a bunch of information about this case because the headlines like “$46 million,” and I just go, “I’ve got so many questions.”
Mike Warkentin (30:41):
Me, too.
Matthew Becker (30:42):
And there, I think on Reddit, you can actually find the Instagram camera video. I think somebody put on Instagram. I think it got it pulled off. I think Reddit saved it. And it seems very controversial, the move itself. I need to talk with some people in mixed martial arts because there’s a lot of opinion about the danger of the movement. But, you know, we essentially have a very experienced trainer performing a very advanced move on a very inexperienced client. Again, I’m walking through some vague information on purpose because there’s also a lot of debate about how experienced the injured individual was and whether he was brand new or just there as a trial class.
Matthew Becker (31:38):
And I’m not gonna get into all of that. But the bottom line is the mixed-martial-arts community, they have black belts and they have all these color belts down to like white belt. The client was a white belt. The instructor was a much more advanced belt. And I see this as sort of applicable in our traditional realm: how much are our advanced and experienced trainers, coaches, encouraging their clients, even their newer clients, to do something like try to max out on a heavy lift? I would see this in a snatch, okay. For gyms that continue to coach power snatches or squat snatches, I coached at my gym for over 10 years, and there are plenty of times that I puckered watching a newer athlete try to get a barbell overhead and practically dropping it on their head. Right? And it just, it happens. And we have to walk a fine line between really encouraging our members to try to do more than they think they’re capable of doing while also not putting them into the dangerous position that that barbell’s gonna come down on the back of their neck, which I believe happened. I can’t remember the individual’s name, a number of years ago, he dropped a barbell from an overhead position on the back of their neck and was paralyzed.
Mike Warkentin (32:59):
Are you referring to Kevin Ogar by chance?
Matthew Becker (33:01):
Yeah. Is that it?
Mike Warkentin (33:03):
Yeah. And there’s a whole film about that. And I can remember exactly what happened—if there was some equipment behind him where there was a ricochet or something like that. So you’ll have to forgive me for not knowing the exact details of that story. But the long and the short of it is that Kevin Ogar. CrossFit actually made a film about him and he’s on their Seminar Staff now. There was an injury during a competition with a snatch, and I forget the exact mechanics of it, but he did end up in a wheelchair and went on to do very great things as a trainer. So yes, it has happened. And I’m sure owners out there have seen–and if it’s not a snatch, it could be anything. Like I’ve seen someone drop a heavy barbell on a slightly bent knee and get a big black bruise. I’ve seen that. There’s all sorts of stuff. So this stuff can happen. And in contact sports, you know, punches to the face and head. There’s all sorts of concussion things going on. So walk us through this because $46 million is pretty crazy.
Matthew Becker (33:56):
Yeah. Yeah. So in some sense we own, I try to say this and I don’t sugarcoat it, we own inherently dangerous businesses.
Mike Warkentin (34:06):
There is a risk for sure.
Matthew Becker (34:08):
And that’s what we’re talking about. And those who own contact gyms, you own an even more inherently dangerous business. I mean, it’s the nature of what we do. It’s the nature of—we’re not running around in a padded room. We’re not drawing pictures, right? Like it’s an inherently dangerous business. And so we have to take a number of different steps, and we can see that these number of different steps that were actually taken in this instance in the end actually worked to protect the actual business owner. Okay? So when this lawsuit came out, the plaintiff’s attorneys came in and they sued the individual owner, claiming he was doing business as the Del Mar Jiu-Jitsu Club. So we call that a sole individual just acting as a DBA. I’ll come back to that. They sued the corporation that was actually owned by the owner.
Matthew Becker (35:05):
They sued the trainer who performed the movements, and then they blanket-sued like every John Doe that could be involved here. And this is really important because what we talked to gym owners about when it comes to corporate setup and what we talked about in the first article and what we talked about in the second article is we’re really trying to isolate the individual owners from liability. Okay? And this is a prime example because this stuff can happen. And even if it’s not $46 million, even if it’s like $1 million or $500,000, like that’s life ending for a lot of—I couldn’t afford a $500,000 lawsuit.
Mike Warkentin (35:46):
Yeah. It kills a gym. It would kill any small business.
Matthew Becker (35:49):
And not only that, it’s gonna kill the individual owner if the individual owner hasn’t properly isolated themselves from these potential lawsuits. So the first thing that I noted, and this was one of the reasons I called the plaintiff’s law firm, was because it was unclear from all of these stories whether the original, the individual owner ended up with the judgment against him as well. And it turns out he did not. And the reason for this was in the beginning he filed a corporation and he maintained that corporation all the way through. And then he went to his local county, California does this at the county level, and he filed the gym’s fictitious name, the DBA, to the corporation itself. And so that told the world that this corporation actually does business as Del Mar Jiu-Jitsu Club.
Matthew Becker (36:49):
And so when the original owner, when they attach that individual owner to the original lawsuit doing business as the fictitious name, that gave the defense an easy chance to then go in and say, “No, no, no, hold on a second. He actually took the proper steps of filing that fictitious name to the corporation. So we need to remove the individual owner from this lawsuit.” And it took a long time, but thankfully the owner was eventually removed from the lawsuit. And so the judgment itself, that $46 million went against his corporation and the individual trainer. And again, I don’t want a $46 million judgment against my company, but it’s a lot better to have it against my company than it is against me, okay? Because insurance can kick in and bankruptcy can kick in. And all of my personal assets, my house, my car, my bank accounts, all that stuff is protected. And so he did a really good job of protecting himself and isolating himself in this instance so that that $46 million didn’t end up against him. The other problem that we saw in this instance was the insufficiency of the waiver. And I haven’t been able to get a copy of the waiver. And man, I wish I could, I’ve almost thought about calling Del Mar and asking them “gimme a copy of the waiver,” but I was like, “No, I can’t do that.”
Mike Warkentin (38:17):
For educational purposes. It would be interesting to help other gym owners, of course, and clients, to be fair, too.
Matthew Becker (38:22):
Yes, yes. But a lot of what the plaintiff’s attorneys were claiming was that the waiver did not put the client on adequate amount of notice that this could happen. And this goes back to, you know, our last discussion. I mentioned the acknowledgement of danger in a waiver, and that’s where we lay out everything that could happen to you that from coming into my gym. And a lot of these are going to be very neutral in general and say, you know’ “by participating in my activity, you recognize that you could break a bone, suffer other muscular skeletal injuries and potentially death.” Okay? And that’s why I really wanna see his waiver—I’m betting that’s what his waiver said because that’s the general language that people oftentimes send me when they send me their waivers to review.
Matthew Becker (39:19):
And what we’re seeing, and we’re seeing this elsewhere, not just in this case, but specifically within this case, what we’re seeing is that’s not enough. We’ve gotta be real specific here. We have to talk about the fact that you can cause bruises and strains and broken bones and hurt backs and concussions and paralysis and death, you know, and we have to be so—.
Mike Warkentin (39:40):
And rhabdo?
Matthew Becker (39:42):
And rhabdomyolysis. That’s exactly right. And I don’t know if that would’ve protected them anymore, but I can tell you from looking at the complaint that was a big thing—they kept saying in the complaint the defendants did not put the plaintiff on notice that this was a potential danger.
Mike Warkentin (39:59):
So it’s a chink in the armor, essentially, if you don’t have that in there. They can still attack it, but if it’s not their specifically, you’ve got a hole that they can pick at in a suit.
Matthew Becker (40:08):
Oh, yeah, yeah, yeah. A big hole. And now some people might be saying, “Well, how did this get up to $46 million?” Just another really quick note because the size of these lawsuits are gonna be controlled by every individual state. And I have received this question, so I’ll just address it here. California specifically has a provision that basically says that if a plaintiff’s firm believes that their lawsuit is worth above the policy limits in an insurance policy, in this case it was, and the plaintiff’s reasonably believe that their lawsuit is worth more than that, and they make a demand to the insurance company to pay a million dollars, and the insurance company denies it, it’s now considered an open lawsuit. And so the attorneys can just go for as much money as they possibly want. And they did that in this case because the insurance denied coverage at a million dollars. Or they didn’t—I’m sorry. They didn’t deny coverage, they denied settling at policy limits at that million. So that gave the plaintiff’s attorney the freedom in California, and that doesn’t exist in all states, but in California that allows for the jury to come in and award anything at all. And that’s how this got blown way up to $46 million.
Mike Warkentin (41:26):
So I guess if we’re at a gym-owner level, we’re starting to get into like all sorts of like legal stuff that’s well beyond us. What I would suggest is that you A, have a waiver and B, have that waiver professionally done. Now it’s gonna cost you a bit of money. However, a guy like Matthew can give you a waiver that is as airtight as possible, and it doesn’t save you from everything under the sun. However, it gives you a really good foundation. And if you just download one from the internet, Matthew and I have talked about this before, it’ll not be a good thing. It might have some clauses in there that maybe apply but maybe don’t. It’s not gonna offer you all the protection of a professionally done waiver tailored to your particular business. Matthew, have I got that right?
Matthew Becker (42:06):
That is correct. And I’m just gonna plug on that fictitious name for a second, too, because I think this is a common misconception—what that fictitious name actually does or is? Okay, so lemme kind of use a couple of different examples. My gym is Bionic Fitness LLC. We operate or do business as Industrial Athletics. So the state of Pennsylvania, the Commonwealth of Pennsylvania says I have to attach, I have to file a document that says Industrial Athletics is the same as Bionic Fitness LLC. And if I don’t do that, then I’m just operating my gym by myself and I don’t get to enjoy any of the protections of the LLC. And where this becomes a little bit more confusing is drop Industrial Athletics out of there for a second.
Matthew Becker (43:00):
Let’s just say I own Bionic Fitness LLC but I operate my gym as Bionic Fitness. And so all I’ve done is just dropped that LLC, and a lot of individuals get confused and think, “That’s okay, we’re doing it under the same name.” And I agree that sounds like the same name, but legally it’s not the same thing. And as soon as you drop that LLC designation, it’s a fictitious name, and you have to follow a process to connect it to the LLC or the corporation or else you’re not gonna enjoy the protection. One last note: another gym that I was looking in recently, they changed their corporate name. They filed it back in 2016 as, you know, let’s say Bionic Fitness, and then they changed it later to just being, let’s say, Bionic Gym, but they never updated the, the government filing on the DBA to connect it to the new corporation.
Matthew Becker (44:00):
And I get that I’m getting a little bit in the weeds here, Mike, but I run into this issue all the time on the nuances of this stuff because it just gets overlooked. And when I see $46 million and a gym owner that actually protected themselves by paying attention to this stuff, I just can’t overlook it anymore. You know, it’s so important to make sure that all of these ducks are in a row and you don’t make any assumptions that you’ve done it right or that you did it one way in the past and it’s still right.
Mike Warkentin (44:31):
And I’m sure as you’re looking, you’re speaking, you can see my eyes going—they’re getting like “I don’t know, I don’t understand.” I’m a gym owner. Other gym owners are in the same boat. The best thing you can do is get someone to look over your stuff and make sure it’s done properly if you are not a legal professional. Matthew can obviously do it for his own gym, but you can’t do it for your gym because few gym owners have his dual skill set. So, Matthew, where can people contact you about this stuff and how does the process go?
Matthew Becker (44:57):
Yeah, easiest way is, is just to go to the website, gymlawyers.com. There’s all kinds of calls to action on there. My cell phone’s on there. My email is on there. And once you reach out in any way possible, we’re just gonna set up a Zoom call or a phone call for about 45 minutes, and I’m gonna hear all about your gym. If you have specific questions, of course we’re gonna address those specific questions. Some people just call and say, “Tell me what I don’t know.” And we’re gonna have that kind of a discussion. There’s a lot of blog information on there. The resources are out there for free, the initial phone call’s free. There’s no commitment or anything. If you just have questions that need to be answered, it’s better to just get these things answered than it is to worry about it on the back end of a lawsuit,
Mike Warkentin (45:52):
An ounce of prevention as the old saying goes. So, guys, if you’re confused about anything, you have questions, get on the horn, talk to Matthew and you can limit your risk at your business. Matthew, thanks for going through these things and bringing up some important issues.
Matthew Becker (46:05):
Always a pleasure, Michael. Always a pleasure.
Mike Warkentin (46:07):
We’ll have you back again and hopefully we can help some more gym owners. That was gym-owning lawyer Matthew Becker. He’s at gymlawyers.com. Check him out if you need some assistance. Thanks for listening to “Run a Profitable Gym.” Please hit subscribe on your way out wherever you’re watching and listening, with my thanks. And now here’s a final message from Two-Brain founder Chris Cooper.
Chris Cooper (46:26):
Hey, it’s Two-Brain founder Chris Cooper with a quick note. We created the Gym Owners United Facebook group to help you run a profitable gym. Thousands of gym owners just like you have already joined. In the group, we share sound advice about the business of fitness every day. I answer questions, I run free webinars, and I give away all kinds of great resources to help you grow your gym. I’d love to have you in that group. It’s Gym Owners United on Facebook, or go to gymownersunited.com to join. Do it today.
