When Barbara Ellen Enterprises shut down its 10 physical fitness centers last week and filed for bankruptcy, the company left an estimated 12,000 Washington-area women with no place to exercise and no quick way to recover membership fees ranging from $59 up to $350.
"There was no warning at all," said Marilyn DiLorenzo, 29, a Bethesda Naval Hospital nurse who had been going almost daily to the Rockville branch since June. She was there on Jan. 22 and found everything normal, including the signs urging women to purchase lifetime memberships.
"Then when I went back on Monday Jan. 24 , there was a sign on the door saying 'Under New Management--Closed Until Further Notice,' " said DiLorenzo, who paid $139 for her membership. "I invested my money and trust in the company. I feel I was definitely cheated."
Consumer officials say they were as surprised by the closing as the club's own members.
"We have had problems with health clubs before, but that was where they took your money and never opened or never installed the equipment they promised," said Barbara B. Gregg, director of the Montgomery County Office of Consumer Affairs. "And they generally were small operations, with only one or two locations.
"But Barbara Ellen was different--it was a large, established company with relatively few complaints."
However, Gregg and other consumer experts cautioned that consumers always run the risk of losing money when they pay now for goods and services to be obtained in the future.
"The less you pay down, the better, because the company could close before you get what you paid for," she said.
Women with unexpired memberships will have a chance to file claims under the federal bankruptcy law, which permits creditors to recover losses but does not guarantee the amount of the recovery.
Maryland officials said that a new state law, which took effect in mid-1982, requires health clubs to post a bond that would cover unexpired memberships in cases like this. But Barbara Ellen did not post a bond. An attorney for the company said Barbara Ellen had revised its membership contracts and was not affected by the bonding requirement.
Neither Virginia nor the District of Columbia requires any such bonds.
Other than a state bond requirement, there generally is no special protection for consumers who buy memberships in health clubs that later go out of business, according to industry officials.
"It's like any other business--if the club shuts down, members are in trouble," said Bill Montgomery, assistant manager of the Nautilus Fitness Center at 19th Street and Pennsylvania Avenue in downtown Washington.
"To my knowledge, there are no safeguards" for consumers, Montgomery said.
Hundreds of women who had Barbara Ellen memberships called local consumer agencies seeking information and help when they learned about the club closings. The Montgomery office had recorded 520 calls by late Friday; Prince George's County more than 450; and Fairfax County more than 100.
The Prince George's Consumer Protection Commission declared a "consumer alert" and urged residents to call 952-4700 to register their claims. Executive director Nila Stovall said the commission will submit its list to the bankruptcy court to "prevent anyone from being overlooked."
But most other agencies are trying to discourage calls.
"It doesn't do any good to call us now--it is premature," said Gloria Kornasiewicz, chief of investigations for the Fairfax Office. She said Barbara Ellen members should receive a notice from the bankruptcy court within the next four to six weeks explaining the steps necessary for filing their claims. If they don't hear anything within that time period, they then should contact the court, Kornasiewicz said.
Attorneys for the company are setting up a 24-hour toll-free number to provide information to Barbara Ellen members. Stanley J. Samorajczyk, the attorney who filed the petition for reorganization under Chapter XI of the bankrupty law, urged club members to follow media reports and call the toll-free number, which he said will be published Monday.
Barbara Ellen Enterprises was formed in 1969 by two Washington area men, David Carpenter and David Gibson. Samorajczyk called it a victim of today's national economic woes.
He described it as "an outfit that appealed to working people, middle-income people, people with the least amount of disposable income." Barbara Ellen also relied on new memberships to sustain its income and profits, and "new members just weren't coming in," he said.
Samorajczyk said efforts are being made to reorganize the company under the bankruptcy law. "We are pursuing several options--having other clubs make good on the memberships, selling one or two branches along with membership rights or selling all of them," he said.
He said about 31,000 women have signed membership deals at Barbara Ellen since 1980 but only about 12,000 of them have unexpired memberships now and are eligible to file claims in the bankruptcy case. The others never renewed their memberships.