Thursday, November 12, 2020

Peloton's music troubles give it consumer protection troubles over "ever-growing library" claim

Fishon v. Peloton Interactive, Inc., 2020 WL 6564755, No. 19-cv-11711 (LJL) (S.D.N.Y. Nov. 9, 2020)

Peloton streams live and on-demand fitness classes requiring a monthly subscription fee. Certain Peloton ads described the library of fitness classes as “ever-growing.” But in March of 2019, however, in response to a lawsuit from music publishers, Peloton removed approximately 5,739 classes, or nearly 57% of the total available classes, from its library. Plaintiffs alleged that the “ever-growing” claim was deceptive and misleading.

The court dismissed the NYGBL claim of the Michigan plaintiff, but not of the NY plaintiff.  

First, the terms of service, which authorized Peloton to remove content from its library at any time, did not protect Peloton. Statements buried in contracts can’t, in general, avoid false advertising claims. “A reasonable consumer, having viewed Peloton’s advertisements on its website and having decided to purchase a Peloton product based on the understanding that the library would grow ‘should not be expected to discover the truth’ and that such understanding was false from the Terms of Service.” Moreover, being able to remove content at any given time was not inconsistent with a promise of an “ever-growing” library, and so the TOS didn’t dispel the alleged falsity. “The Terms of Service do not disclose that Peloton might remove over half of its library without simultaneously replacing that half with even more classes.”

Puffery: “Ever-growing” was objective and testable. “The library either increased in size or it shrunk.”

Deceptive/misleading: This was a factual question not appropriately resolved on a motion to dismiss, despite Peloton’s argument that it was constantly adding new content, nearly 24 hours of live content per day. “Ever-growing” is not the same thing as “ever-changing.” “A consumer attracted to a grocery store by its advertisement of a growing selection of foodstuffs would be surprised to learn on each visit that the number of products on sale was decreasing, although the store was replacing the items it removed with a smaller number of new products…. A reasonable consumer thus would not understand as a matter of law when he or she purchased the Peloton product based on the representation that the library was ever-growing that the library was shrinking in size at the same time Peloton was adding new classes.”

Plaintiffs also properly pled causation even without alleging that they saw the misleading ads, since reliance isn’t required and Section 349/350 claims are not fraud claims that must be pled with particularity. “[A]n allegation that the defendant was injured because she relied on the misleading statement to her detriment is not a ‘[t]hreadbare recital[ ] of the elements of a cause of action,’ but rather “an allegation of fact as to how she came to be injured that—if proven—supports the establishment of that element…. The manner in which the plaintiff came to rely upon the deceptive act—and whether it can be proved—is a further issue of proof and not something that needs to be pleaded in detail for a complaint to proceed.”

So too with injury: The complaint alleged that “Plaintiffs attributed value to Peloton’s promises regarding the nature and characteristics of its on-demand digital library and would not have purchased the hardware and corresponding Peloton Membership, or would not have purchased it on the same terms, if they knew the truth.” That was enough for now.


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