Dictum is defined as a judge’s incidental expression of opinion, not essential to the decision, and not establishing precedent. In Eric Fishon et al. v. Peloton Interactive, there is quite a lot of dictum surrounding a motion to dismiss.
The case started as an intellectual property matter between Peloton and the National Music Publishers Association (NMPA), which represents publishers of hundreds of thousands of musical compositions. Peloton is known for its library of different classes to run on the built-in video screens of its stationary bikes and treadmills.
As it turns out, Peloton never obtained licensing for a staggering amount of the content in its library — 57%. As part of its settlement with the NMPA, Peloton took down the infringing files, thus reducing its library by more than half.
After that settlement, at least one consumer (hoping to serve as a putative class action plaintiff), alleged that Peloton’s music problems were not finished. In Peloton’s advertising campaigns, the content library was touted as “ever-growing.” As word of the reduction in music — and therefore, in Peloton’s training classes built around such music — travelled, the plaintiff claimed he never would have bought this expensive training device and signed up for the subscription of exciting workouts if not for the “ever-growing library” claims — and so on the heels of the copyright settlement, a deceptive advertising action was born.
The case was brought in the Southern District of New York because Peloton’s Terms of Service (ToS) chose New York law and courts to settle disputes — that is, disputes relating to the ToS. Peloton brought a motion to dismiss with six defenses.
Plaintiffs, mindful of Peloton’s choice of venue for contract disputes, must have been eager to have New York’s sweeping General Business Law Sections 349 and 350 on their side. That’s because courts in New York State had essentially paved the way for them, ruling that the contents of a ToS cannot be an affirmative defense against a deceptive advertising claim under NY’s consumer fraud statute.
Unfortunately for the plaintiff, he was from Michigan rather than New York. The court held that Peloton’s choice of venue was for contract disputes only — but the laws of the jurisdiction in which an injury took place automatically apply for literally everything else, including false advertising and consumer fraud. Therefore, all of the Michigan plaintiff’s claims under the New York statute prohibiting consumer fraud were thrown out.
The court also weighed the merits of Peloton’s other legal arguments. Here are some highlights:
•Peloton argued that the statement that its library is “ever-growing” was non-actionable puffery. Puffery is an exaggerated statement that makes no specific claims. The court disagreed. calling the number of classes “measurable.” In other words, Peloton had asserted that it had a known number of classes at the time of advertising, and purportedly was in the process to add more later. But because Peloton actually decreased its portfolio of music/classes by 57%, it was making a false statement of fact rather than mere puffery.
•Peloton’s Terms of Service disclosed that Peloton reserved the right to remove class content “at any time, in its sole discretion.” Reading the ToS, or what the court called the “fine print” (always a bad sign!), the court said that Peloton’s purported option to delete classes contradicted the advertisement that the library was going to increase. Plus, the court noted, the disclaimer is not as prominently displayed as the marketing department’s hyping of the supposedly ever-growing library. The court went on to say that Peloton’s attempt to hide behind its ToS might work to minimize plaintiff’s damages (because the theoretically savvy consumer, unlike most of us, would have actually read the ToS) but was not sufficient to dismiss the claim.
It’s interesting to see the NMPA copyright settlement fueling an action targeting the optimistic promises and “business as usual” misrepresentations sometimes made by marketing departments. It was even more interesting to watch the judge seeming to lay out a legal strategy for the next litigant, provided that they are a New York resident.
