Bally Total Fitness Holding Corp.'s recent hiring of its chief executive has touched off a lawsuit from a competitor over the possible misappropriation of trade secrets.
Michael Sheehan joined the Chicago-based gym operator as CEO on July 1, after nearly eight years at 24 Hour Fitness USA Inc., where he was most recently chief operating officer. 24 Hour Fitness, based in San Ramon, Calif., operates more than 400 clubs that offer low-cost memberships similar to Bally's.
24 Hour Fitness claims that Sheehan's new position would inevitably lead him to rely on his previous employer's trade secrets, according to its complaint filed July 7 in federal court in Chicago. In his previous position Sheehan, 46, had knowledge of the company's confidential growth plans, marketing strategies and financial data, the suit said.
"As CEO of Defendant Bally, a direct, head-to-head competitor of 24 Hour Fitness, Defendant Sheehan cannot 'unring the bell,' as he will be charged with executive responsibilities for the same areas that he worked in as COO of 24 Hour Fitness, " it said.
The California company seeks to stop Sheehan from disclosing its proprietary information and asks undisclosed financial damages.
Sheehan also had an employment contract that included a clause barring him from joining a competitor during the length of his pact and for two years afterward, according to court papers.
A phone call to Bally's corporate headquarters was not returned Friday.
Less than a year after emerging from bankruptcy protection, Bally is looking to expand its chain of 350 health clubs. In October, Harbinger Capital Partners, a New York-based private-equity firm, invested $233.6 million to bring Bally out of bankruptcy.
