Holiday Universal Inc. has agreed to pay $9.5 million to blacks who faced discrimination when they tried to join the company's Holiday Fitness Spas and related health clubs in five major cities.
In an unusual move in a discrimination suit, the Towson-based company did not dispute the plaintiffs' claims and promised to treat all customers equally in the future.
Lawyers representing the company and about 1,300 class-action plaintiffs submitted the proposed settlement to Judge Joseph C. Howard yesterday in U.S. District Court in Baltimore.
The judge did not indicate whether he would accept the proposal, which he received just as the case was scheduled to go to trial.
Company lawyers said the spa operators "regret that the practices alleged by the plaintiffs were committed." They said the companies are operating under new management that "condemns the discriminatory practices committed by their predecessors."
The new management "has established, and is committed to enforcing," a company policy of subjecting employees to "severe disciplinary action" if they violate civil rights laws, the company said.
The proposal calls for Holiday Universal and its subsidiary, U.S. Health Inc., to pay $10,000 each to 16 blacks named as co-plaintiffs in the case, and an estimated $2,000 to $2,500 each to other class members who file court claims before May 30.
In addition, the defendants will offer free, one-year memberships to blacks against whom they discriminated.
A payment schedule submitted with the proposed consent decree calls for the defendants to pay $3.5 million of the settlement by March 30, and $1.5 million annually for the next four years, as the court sorts out valid claims.
Much of the $3.5 million chunk could be paid out in legal fees, the documents indicated.
The suit grew out of claims by the Washington Lawyers' Committee for Civil Rights Under the Law and other attorneys in Washington, Philadelphia and Atlanta that Holiday Spas engaged in a pattern of discrimination against prospective black members between Dec. 12, 1985 and Feb. 27, 1991.
The plaintiffs claimed that Holiday Spas and U.S. Health Inc., both subsidiaries of Bally Manufacturing Corp., required blacks to make appointments for pre-membership tours of the health facilities, denied blacks tours or sales presentations, denied them full membership benefits and denied them the same financing options given to whites.
Holiday Universal and U.S. Health operate the clubs under the names Holiday Spas, Holiday Fitness Spas, Holiday Espre Centers, Holiday Health and Racquet Centers and Holiday Supreme Spas in Baltimore, Washington, Philadelphia, Boston and Atlanta.
Washington attorney Mark J. Leimkuhler, one of the plaintiffs' lawyers, said the group "is very happy" with the proposed consent decree.
"It provides a substantial monetary payment to the class members," he said, "but just as important, it provides a lot of non-monetary relief to assure that this type of thing doesn't happen again. It promises to make Bally a leader in the industry.
"Our clients felt very strongly that the defendants should admit the discrimination and apologize for it. The consent decree does that. They admitted liability based on our facts."
The proposal also said that Bally, the parent company, will have a civil rights director who is responsible for receiving and evaluating complaints, and will institute a civil rights training program company-wide.
That extends the company's commitment beyond the 50 Holiday and U.S. Health clubs to more than 300 health clubs that Bally operates nationwide, Leimkuhler said.
The company has fired at least six high-ranking people who were involved in discrimination, including two vice presidents, three regional managers and its former civil rights director, the court papers said.