SDNY Permits False Advertising Case Against Peloton to Proceed

An opinion issued by a federal judge in New York City on Thursday said that two Peloton Inc. subscribers’ state law misrepresentation claims can continue. The class action concerns Peloton advertisements touting its on-demand digital library of fitness classes as “growing,” despite the fact that the company eliminated more than half of its library due to music copyright infringement. 

Thursday’s 40-page opinion explained that the operative complaint is the fourth in the class action brought by New Yorkers who purchased subscriptions to Peloton’s fitness platform including its suite of online classes. 

The plaintiffs said that Peloton obtained licenses from certain song copyright holders, but most of the music played in the classes was used without permission; thus Peloton was “‘building its on-demand library with copyrighted material for which it did not have the proper licenses,’” the opinion explained. In March 2019, and in response to copyright holders’ cease and desist letters, Peloton removed every class that infringed copyrights, amounting to more than half of its class library.

In turn, the plaintiffs assert that the representations led to increased subscription and online-connected exercise equipment costs, over and above what they were worth.

Previously, the court dismissed the Michigan consumer protection law claims and ruled that only people who transacted with Peloton in New York were entitled to inclusion in the class. In this week’s order, the court first found that the two plaintiffs have Article III standing. In so finding, the court accepted one of two theories of harm implicating the plaintiffs’ personal reliance on Peloton’s misrepresentations.

“Plaintiffs’ allegations that they paid increased costs—a ‘price premium’—for these products as a result of the misrepresentation is sufficient to plead a cognizable injury for the purposes of constitutional standing,” the opinion reasoned.

The court also upheld the plaintiffs’ New York’s General Business Law claims. Peloton was aware that it was committing copyright infringement and was therefore on notice about the potential for litigation, the opinion said. Assuming all other class certification requirements are met, the plaintiffs’ case will proceed for a class of New York purchasers, the court concluded.

The plaintiffs are represented by DiCello Levitt Gutzler LLC, Keller Lenkner LLC, and Zigler Law Group. Peloton is represented by Latham & Watkins LLP.