U.S. judge reviews settlement decree in spa bias lawsuit Holiday chain admits to past discrimination


Holiday Universal Inc. has admitted to discriminating against blacks who sought membership in its chain of health spas in five U.S. metropolitan areas, including Baltimore, and agreed to pay $9.5 million in damages and to give free memberships to blacks who were turned away or overcharged for membership.

At a hearing yesterday in U.S. District Court in Baltimore, Judge Joseph C. Howard said he would decide tomorrow whether to accept the proposed settlement, which would end a case originally filed in December 1988 and scheduled to go to trial last Monday.

"I've heard enough now, I think, to call off the jury," Judge Howard said.

According to Joseph M. Sellers, one of the plaintiffs' attorneys from the Washington Lawyers' Committee for Civil Rights under Law, Holiday says in the proposed decree that it regrets discrimination took place at about 50 clubs in Boston, Atlanta, Philadelphia, Washington and Baltimore.

The proposed consent decree also says that management of Holiday's parent company, Bally Manufacturing Corp., blames previous management for the discrimination, which it condemns.

The company further says it is committing itself to full compliance with the civil rights laws and to hiring a civil rights director, and it promises to discipline employees who discriminate.

Beyond that, Mr. Sellers said, the settlement commits Bally to extend provisions of the settlement to another 250 health clubs that it operates under various names throughout the United States, even though the parent company wasn't a defendant in the lawsuit.

Mr. Sellers said the discriminatory practices were revealed in pretrial interviews with 60 to 70 employees who said they had been told to keep blacks out of the clubs. Two vice presidents and three district managers have been subsequently fired, he said.

The company admits in the settlement that some blacks, although accepted as members, were limited to certain clubs in black neighborhoods, quoted much higher rates, denied financing and forced to pay cash for fewer benefits. For example, Mr. Sellers said, blacks might be told to pay several thousand dollars up front while whites received financing for up to 36 months for $25 down.

Typical of the cases cited was that of Gregory A. Kernan of Gaithersburg, a 37-year-old assistant chief of maintenance and development for the Prince George's County Department of Recreation and Parks, who was the first plaintiff listed in the lawsuit.

He recalled yesterday that he answered a late-night TV advertisement for a Holiday spa in Rockville, but "when I showed up for my appointment, -- it was three years ago yesterday -- I waited a half an hour or more and no one came out. Others with appointments went in, all white."

After further waiting, he said he was told to come back the next day, when the same thing happened. He tried to call for an appointment for two more weeks, he said, then dropped it.

"Obviously, they didn't want me as a member," he said. "I thought at that time that it was mostly discourtesy."

When he found out about the lawsuit, he said, he became the lead defendant because "I have a 7-year-old daughter. I know what my parents went through in the '20s, the '30s, the '40s and what I went through in the '60s and '70s -- and I was determined that things will be different for her."

In other cases cited, black applicants were similarly discouraged from pursuing membership by being required to make appointments to tour a spa, then being kept waiting as whites were ushered in. Often, they were given a brief tour or none, a sales pitch that offered fewer features and facilities, and membership options at prices higher than the general rate.

Employees told of being instructed in these techniques at regional sales meetings, and of making notations on sign-in books and salesmen's work sheets, such as "DNWAM" -- for "do not want as member" -- or "$," "M," "50" and "8," all designations for African-American applicants, according to W. Scott Blackmer, a plaintiffs attorney.

A former manager in Atlanta gave a pretrial statement telling of a visit from a now-departed vice president who complained that the club was too dark.

When the manager assured him that it had been repainted and was well-lighted, the executive "used a racial epithet to say there were too many blacks in the club," said plaintiffs attorney Mark J. Leimkuhler of Washington.

No testers were used in preparing the lawsuit, the lawyers said, but they will be used to make sure any agreement is kept.

About 1,300 people have contacted the lawyers thus far, Mr. Sellers said, and about 2,000 are expected to eventually be eligible for damages. The settlement is to be advertised, with a deadline of May 30 for claims by anyone who may have suffered discrimination from Dec. 12, 1985, through Feb. 27, 1991.

Payments would begin with $3.5 million March 30, and continue at $1.5 million a year through March 1995. The 16 plaintiffs named as representatives in the class action would each receive $10,000 for their extra efforts; the others would get $2,500 to $3,000, depending upon the final number of victims.

About one-third of the settlement would go for lawyers' fees and court costs.

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