3 Peloton members have filed suit against Peloton in the US Southern District of New York (Fishon v. Peloton Interactive, Inc. (1:19-cv-11711)). They are alleging that some of Peloton’s purges of classes from the on-demand library are a breach of Peloton’s terms & conditions and amounts to deceptive marketing. The suit, filed in December of 2019, seems to center around Peloton’s statements of a “‘ever-growing’ on-demand library of fitness classes.” A recent document filed in the case reveals some of the backstory and claims in the case.
As long time Peloton members may have noticed, every now and then on-demand classes will randomly be removed from the on-demand library. There is usually no notice, rhyme, or reason given. Most members refer to these as “purges”. The specific purge in question relates to a large purge Peloton did in response to their now-settled lawsuit with the NMPA and 14 music publishers. After the initial music publisher’s lawsuit was filed, Peloton removed any workouts from their library that contained music from the publishers in question – in the current lawsuit it states this was 57% of Peloton’s library.
The Complaint alleges that Eric Fishon, Alicia Pearlman, and Patrick Yang (“Named Plaintiffs”) purchased Peloton products in reliance on “Peloton’s uniform representations about its ‘ever-growing’ on-demand library of fitness classes.” (Dkt. No. 1 ¶¶ 24–26.) Named Plaintiffs assert that the representations were false because “approximately 57% of [Peloton’s] on-demand digital library” would subsequently “be removed.” (Id. ¶ 28.) Named Plaintiffs complain that they paid more “for the Peloton hardware and corresponding Peloton Membership” than Peloton represented such products were worth. (Id.)
The lawsuit is seeking to attain class action status. Specifically, the affected class would be:
[O]n behalf of themselves individually as well as on behalf of a putative class defined as “[a]ll purchasers of the Peloton hardware and/or corresponding Peloton Membership subscription from April 9, 2018 through March 25, 2019.” (Id. ¶ 84.)
Over the summer of 2019, the plantiff’s lawyers used social media and email surveys to try and find other members who wanted to file claims against Peloton related to the purge. Over several months, they ended up getting a few thousand interested members. More than 2,7000 members then filed arbitration claims with the American Arbitration Association (AAA), as required by Peloton’s terms of service. However, the recent document filed in the case reveals that Peloton had not paid any required arbitration fees to the AAA. When the claims came in:
The AAA issued a letter in which it “decline[d] to proceed with administration of the parties’ disputes” and stated that “either party may choose to submit its dispute to the appropriate court for resolution.” (Dkt. No. 1-2.) The letter advised that, “because [Peloton] has not paid AAA administrative fees . . . the AAA will decline to accept future consumer matters submitted against or by [Peloton].”
Following this response from the American Arbitration Association, the new Fishon v. Peloton Interactive lawsuit was filed in New York. As part of discovery in the case to defend themselves, Peloton has requested to the judge they be allowed to depose 21 unnamed members, out of the 2,700 who had filed for arbitration (this group is referred to as the “absent class members”). Peloton’s goal with these depositions is to provide evidence that this case does not deserve to attain class action status.
Peloton has articulated a reasonable basis to believe that the absent class members have information which could help inform the Court’s decision whether to certify a class and which could rebut Named Plaintiffs’ showing at class certification
Specifically, Peloton is requesting the ability to depose extra people as they think the 3 members filing suit aren’t a good representation of the entire potential class action group.
Those Named Plaintiffs, however, represent only a subset of the class members proposed in this case. Named Plaintiffs all bought the most expensive Peloton hardware products, seemingly from Peloton directly, in one month—November 2018. (Dkt. No. 1 ¶¶ 24–26.) The proposed class, however, is defined as “[a]ll purchasers of the Peloton hardware and/or corresponding Peloton Membership subscription from April 9, 2018 through March 25, 2019.” (Dkt. No. 1 ¶ 84.) As Peloton highlights, that class would include:
• purchasers who only brought a subscription to Peloton Digital (up to $19.49 per month compared to a one-time payment of more than $2,000 for Peloton hardware plus a $39 monthly membership);
• purchasers who acquired Peloton hardware second-hand, including at a cheaper price than Named Plaintiffs; and
• purchasers who bought Peloton products on dates other than November 2018 and throughout the full date range identified above (during which time the number of fitness classes in the Peloton library differed significantly)
The 21 people Peloton requested to depose were apparently hand-picked by Peloton out of the 2,700 people who had filed for arbitration “in an effort to identify individuals with such experiences, and it is those individuals (for this very reason) Peloton seeks to depose.”
It appears likely that Peloton will be making the case that customers outside of that November 2018 purchase timeframe might not have even seen the advertisements, or “misleading statements”, in question. As the court document states:
Peloton relies on a series of decisions holding that, in the case of an alleged consumer fraud, the plaintiff must show that she saw the advertisement (in order to demonstrate that she was injured by it), and that the plaintiff must show that she was motivated to make the purchases at issue because of the allegedly misleading advertisements.
The judge sees the Peloton member’s case they are presenting as follows:
For their part, Named Plaintiffs rely on a “price premium” theory that they argue is applicable to all putative class members. They contend that “Peloton’s gutting of its digital library materially lowered the value of Plaintiffs’ and the other Class members’ subscriptions.” (Dkt. No. 1 ¶ 80.)
The end result of the most recent hearing is that the judge granted Peloton’s request for depositions, in part only. Rather than allowing the full 21 depositions requested, the judge instead is allowing 10 depositions, which is a standard number established by case law.
Peloton has offered no persuasive justification for divergence from the presumption in the Federal Rules of Civil Procedure that parties are entitled to ten depositions.
However, the judge has left open the possibility for Peloton to depose extra members after the initial depositions have taken place:
If, upon the conclusion of the ten depositions permitted by this order, Peloton has a reasonable basis for believing that certain “factors . . . important at class certification” have not been covered by the taken depositions, then Peloton may move the Court for leave to take additional depositions. (Id.)
We will continue to track this case and provide new updates if and when they become available, whether it results in dismissal or the case obtaining class action status and moving forward.
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