Lawsuit against Curves founder resolved

The plaintiffs, all former friends and associates of Heavin, alleged they quit their jobs, mortgaged homes, maxed out credit cards and slept in their cars to help Heavin launch Curves in the early years on the promise he would share the wealth once the company took off. Instead, they claim, Heavin "changed the rules" and forced them to accept a fraction of the proceeds he promised them at the risk of being fired.

www.wacotrib.com
October 21, 2005

Lawsuit against Curves founder resolved
Tommy Witherspoon

Seven people who sold franchises for Curves International and reportedly helped Gary Heavin turn his company into one of the largest and fastest-growing franchises in the world have settled their $20 million lawsuit against the fitness company.

Judge Jim Meyer of Waco's 170th State District Court signed an order dismissing the lawsuit this week after the parties filed court documents indicating the dispute had been settled.

Those filings do not reflect the terms of the settlement and attorneys for the plaintiffs, Heavin and Curves general counsel Roger Schmidt, also named as a defendant in the lawsuit, would not elaborate on how the lawsuit was resolved.

"Discovery showed the tort claims to be without merit and were withdrawn from the lawsuit and the remaining claims asserted against the Curves parties were resolved by agreement," said plaintiffs' attorney Rick Yeomans, of Austin, who declined additional comment.

The plaintiffs, all former friends and associates of Heavin, alleged they quit their jobs, mortgaged homes, maxed out credit cards and slept in their cars to help Heavin launch Curves in the early years on the promise he would share the wealth once the company took off.

Instead, they claim, Heavin "changed the rules" and forced them to accept a fraction of the proceeds he promised them at the risk of being fired.

The lawsuit, filed in March, alleged fraud, breach of fiduciary duty and breach of contract.

"We are pleased that the recent lawsuit that was filed against Curves and others has been withdrawn," said Waco attorney Rick Bostwick, who represents Curves, Heavin and Schmidt. "As we anticipated, the discovery showed that the claims were without merit."

Bostwick, too, declined to elaborate on the case's resolution.

The plaintiffs included Don Buster and Robert Findley, both of McLennan County; San Hance of Tarrant County; Charles Cunningham of Tennessee; Cathy Reardon of Iowa; David Mesmer of New York; and Darrel Payne of Canada.

Heavin began selling franchises to Curves, a gym for women that uses hydraulic exercise machines, in the mid-1990s. In a few short years, the company became the largest fitness center franchise in the world with more than 8,400 locations worldwide.

According to the suit, Heavin turned to the plaintiffs and others when he was beginning to sell his Curves franchises and promised them that if they were willing to take a risk and invest their own time and money to make the Curves dream a reality, he would reward them for their efforts.

"Heavin told plaintiffs that he was a committed Christian, that he conducted his business based on biblical principles of honesty and integrity and that he would never try to cheat them," the suit claimed.
Heavin told the plaintiffs that they would receive a return on their investment of 20 percent of the initial franchise fees and 20 percent of the monthly fees paid by each franchise they sold, the suit alleged.

"And Curves did become successful – very successful," the suit says. "By the beginning of 2002, over 2,000 franchises had been sold, and Curves had become one of the fastest-growing franchises in the world. Thanks to the plaintiffs' hard work, sacrifice and financial investment, the Curves name had become well-known and people were lining up to buy franchises. Plaintiffs were beginning to enjoy the returns which had been promised to them after years of financial hardship. Then Gary Heavin changed the rules."

In February 2002, not long after Schmidt was hired as general counsel, Heavin told the plaintiffs that "their original agreement was a mistake, that plaintiffs stood to earn too much money under the terms Heavin had promised and that plaintiffs would have to sign a new agreement under which plaintiffs would receive residuals of only 5 percent of the monthly fees paid by each franchise they sold, not 20 percent as originally promised," the suit claimed.

The new agreement also allowed Curves to buy out plaintiffs' rights to future residuals at a "tiny" fraction of their present value, the plaintiffs alleged.

"Plaintiffs were given the new agreement, which they had no role in negotiating, and told that if they did not sign it, their relationship with Curves would be terminated," the suit claimed. "Having devoted years to Curves, and faced with the prospect of losing any future right to share in the returns on the time, effort and money they had invested in Curves, and believing Heavin's promises that he would never deprive them of their residuals, plaintiffs signed the new agreement."

In November 2002, Heavin notified the plaintiffs that Curves intended to exercise the buyout provision of the 2002 agreement, the suit says.

The plaintiffs alleged more than $20 million in damages.

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