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Selfspot, Inc. v. Butler County Family YMCA

January 5, 2010

SELFSPOT, INC., D/B/A THE FITNESS FACTORY, APPELLANTS
v.
THE BUTLER COUNTY FAMILY YMCA



The opinion of the court was delivered by: Judge McGINLEY

Argued: October 14, 2009

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE BERNARD L. McGINLEY, Judge, HONORABLE DAN PELLEGRINI, Judge, HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JOHNNY J. BUTLER, Judge.

OPINION

Selfspot, Inc., d/b/a The Fitness Factory, appeals from the order of the Court of Common Pleas of Butler County (trial court) after a non-jury trial that ruled in favor of The Butler County Family YMCA (Butler County Y) and dismissed Selfspot's complaint in equity filed pursuant to Section 8 of the Institutions of Purely Public Charity Act (Act).*fn1

Selfspot is a small, tax-paying health club located in Seven Fields, Pennsylvania which operates "The Fitness Factory." Butler County YMCA is a purely public charity*fn2 that owns and operates a new YMCA branch in Cranberry Township, Pennsylvania called the Rose E. Schneider YMCA ("Schneider Y"). The Fitness Factory and the Schneider Y both operate fully equipped "fitness centers" and group exercise programs to members. They serve the same communities and compete with each other, to an extent, for dues-paying members.

The Fitness Factory consists of a fitness center, an aerobics room, a play area for baby-sitting, a juice bar, tanning beds, locker rooms and a general multi-purpose desk. The Fitness Factory has a primarily adult clientele. Children under 13 are not permitted to use the facilities. Children between the ages of 13-16 may exercise with adult supervision. The Fitness Factory offers weight and strength training, cardiovascular equipment, and group aerobics and spinning classes.

The Butler Y's Charter states that "the purpose for which the corporation is formed is the promotion of the religious, intellectual, social and physical welfare of young men." Charter of the Young Men's Christian Association of Butler, Penna., November 8, 1886, at 1; Reproduced Record (R.R.) at 358a. Its By-Laws state "[t]he Corporation is a group of persons whose objectives shall be the improvement of the spiritual, mental, social and physical condition of its membership and the community at large." Bylaws of the Butler County Family Young Men's Christian Association, February 24, 1981, at 1; R.R. at 366a. The Butler Y's Articles of Incorporation define its purposes:

1. To establish and maintain a fellowship rooted in traditional and historical Judeo/Christian principles for the development of healthy spirit, mind and body.

2. As a community service organization, to put into practice the aforesaid principles through programs as a community service organization, and facilities that promote good health (both physical and mental), strengthening of family ties and values, citizenship, adult and youth leadership, individual awareness and worth, good character, volunteerism, and national and international understanding.

3. To offer the aforesaid programs to all people of all ages, races, sex, ethnicity, social economic standing, religion or creed and regardless of one's ability to pay.

4. To act as an Association of members working together to improve the quality of life for adults and children of all income levels of the community.

5. To operate facilities and provide the necessary equipment throughout the Butler County Family YMCA's service area, including, but not limited to: youth centers, indoor and outdoor swimming pools, gymnasiums, weight training rooms, fitness centers, childcare facilities, sports courts, day camp sites, after-school childcare sites, playgrounds, athletic fields, educational and community all-purpose rooms.

6. To conduct such charitable and educational activities in furtherance of its duties as contemplated by Section 501(c)(3) of the Internal Revenue Code.

Articles of Incorporation of the Butler County Family Young Men's Christian Association, February 22, 2000, at 1; R.R. at 378a.

On November 4, 2006, the Butler Y opened the Schneider Y. The Schneider Y is an 80,000 square foot facility which, in addition to the fitness center, has a three-court gymnasium, a running track, a chapel, extensive swimming facilities, community meeting rooms, offices, a rock climbing wall, and locker rooms. The Schneider Y offers numerous programs offered to families and people of all ages in the community including childcare, day camp, gymnastics, Healthy Kid Day, health and fitness programs, lifeguarding, personal fitness, sports programs, swim and scuba lessons, CPR and first-aid classes, teen programs, volunteer programs, senior strengthening and fitness programs, and youth programs such as, a Fit Kids Program for children ages 7-13, a youth weight training program for children ages 11-15, cardiovascular training for youths. The Schneider Y also makes its facilities available to various clubs, school districts and other local organizations and community groups.

On January 24, 2000, Selfspot filed a complaint in equity seeking to enjoin the operation of the fitness center (the weight room, aerobics room, and the spinning room) and alleged it was not related to a recognized and approved charitable purpose of the Butler Y in violation of Sections 8(a) and (b) of the Act:*fn3

(a) Intent. - It is the policy of this act that institutions of purely public charity shall not use their tax exempt status to compete unfairly with small business.

(b) General rule. - An institution of purely public charity may not fund, capitalize, guarantee the indebtedness of, lease obligations of or subsidize a commercial business that is unrelated to the institution's charitable purpose as stated in the institution's charter or governing legal documents.

10 P.S. §378(a), (b). (Emphasis added).

Selfspot averred that the Schneider Y's fitness center catered primarily to paying customers. Therefore, this portion of its facility was unrelated to its charitable purpose. Selfspot did not seek to enjoin the entire operation of the Schneider Y; just the areas which offered the same fitness equipment and programs as those offered by the Fitness Factory, namely, the weight and exercise room, the aerobics and spinning classes.

The Butler Y filed Preliminary Objections in the nature of a demurrer. It argued that Selfspot's complaint was an improper request for the trial court to examine whether the Schneider Y's activity of running a fitness center was a proper charitable purpose under Section 5 of the Act, 10 P.S. §375. According to the Butler Y, the trial court lacked subject matter jurisdiction because only political subdivisions may challenge an institution's tax exempt status under Section 6 of the Act, 10 P.S. §376(b). The trial court agreed that it lacked jurisdiction and dismissed the complaint.

On February 25, 2003, this Court, sitting en banc, reversed the trial court. Selfspot, Inc. v. The Butler County Family YMCA, 818 A.2d 587 (Pa. Cmwlth. 2003) (en banc), appeal denied, 574 Pa. 756, 830 A.2d 977 (2003) ("Selfspot I"). The en banc decision addressed a number of issues relating to the validity of a cause of action brought by a small tax-paying health club against a YMCA under the unfair competition provision of the Act. Reviewing Dynamic Sports Fitness Corp. of America, Inc. v. Community YMCA of Eastern Delaware County, 768 A.2d 375 (Pa. Cmwlth. 2001), appeal denied, 568 Pa. 707, 796 A.2d 986 (2002), this Court confirmed that in prosecuting a claim of unfair competition under the Act, a small business may aver, and the court may consider, a claim ...


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