S.S. by and through Stern v. Peloton Interactive, Inc.

• Decision Date: 06 October 2021
• Docket Number: Case No.: 3:21-cv-01367-BEN-DEB
• Parties: S.S., a minor, BY AND THROUGH his Guardian ad Litem Eunjin STERN; Eunjin Stern, an individual; William Stern, an individual, Plaintiff, v. PELOTON INTERACTIVE, INC., a Delaware corporation; Does 1 through 50, inclusive, Defendants.
• Court: U.S. District Court — Southern District of California

566 F.Supp.3d 1019

S.S., a minor, BY AND THROUGH his Guardian ad Litem Eunjin STERN; Eunjin Stern, an individual; William Stern, an individual, Plaintiff,

v.PELOTON INTERACTIVE, INC., a Delaware corporation; Does 1 through 50, inclusive, Defendants.

Case No.: 3:21-cv-01367-BEN-DEB

United States District Court, S.D. California.

Signed October 6, 2021

Filed October 7, 2021

Rick J. Nehora, Nehora Law Firm, APC, Newport Beach, CA, for Plaintiff.

Benjamin Scott Kagel, Julie Y. Park, Alexandra Preece Barlow, Erin McCalmon Bosman, Morrison Foerster LLP, San Diego, CA, for Defendant Peloton Interactive, Inc.

ORDER:

(1) GRANTING-IN-PART AND DENYING-IN-PART DEFENDANT'S MOTION TO COMPEL ARBITRATION;

(2) OVERRULING PLAINTIFFS’ EVIDENTIARY OBJECTIONS;

(3) DENYING DEFENDANT'S MOTION TO DISMISS; and(4) GRANTING DEFENDANT'S MOTION TO STAY AS TO WILLIAM STERN ONLY.

[ECF Nos. 11, 12, 13, and 14]

ROGER T. BENITEZ, United States District Judge

I. INTRODUCTION

Plaintiff S.S., a minor, by and through his Guardian ad Litem Eunjin Stern ("S.S."); Eunjin Stern, an individual ("Mrs. Stern"); and William Stern, an individual ("Mr. Stern") (collectively, "Plaintiffs") bring this action against Defendant Peloton Interactive, Inc., a Delaware corporation ("Defendant" or "Peloton") for injuries allegedly sustained in connection with Peloton's Tread+ treadmill (the "Tread+").

Before the Court is Defendant's Motion to Compel Arbitration and to Dismiss or Stay the Case (the "Motion"). ECF No. 11. The Motion was submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1) and Rule 78(b) of the Federal Rules of Civil Procedure. ECF No. 14. After considering the papers submitted, supporting documentation, and applicable law, the Court DENIES Peloton's Motion to Compel Arbitration as to Mrs. Stern and S.S. but GRANTS the Motion as to William Stern only.

II. BACKGROUND

A. Statement of Facts

Peloton is an innovative fitness equipment and media company that combines technology, hardware, and production to bring the immersive experience of fitness class into the home. Motion, ECF No. 11-1 ("Mot.") at 6:26-28 (citing Declaration of Daniel Feinberg, ECF No. 11-2 ("Feinberg Decl.") at ¶ 3). It sells stationary bicycles and treadmills that allow subscribers to remotely participate in classes via streaming media. Id. at 7:1-2. For streaming media, Peloton's Terms of Service state that it "provides an online fitness community and related products, services, content and features through ... the interfaces on tablets connected to Peloton fitness equipment (such as the Peloton Bike and Tread), Peloton's fitness studios, and through mobile, desktop, or device applications (including iOS and Android applications (‘Apps’))." Exhibit 4 to Mot., Peloton Terms of Service (Last Updated: September 14, 2018), ECF No. 11-6 ("Peloton Terms") at 2.

Any customer who purchases a Peloton product must subscribe to Peloton's All-Access Membership in order to gain access to the "full user experience" intended for the bicycle or treadmill, including access to Peloton's workout library, live classes, and real-time performance tracking on the device. Mot. at 7:4-7 (citing Feinberg Decl. at ¶ 5); see also Exhibit 1 to Mot., ECF No. 11-3 at 2 (showing a screenshot of the "Create Your Peloton Account" screen). In fact, Peloton automatically creates a Peloton account for purchasers of a new Tread+ who do not have a pre-existing Peloton account during checkout, but the new membership charge will not begin until the customer activates the device. Feinberg Decl. at ¶ 5. When new purchasers of Peloton equipment create their account for Peloton's All-Access Membership, they must complete a sign-up process that requires them to accept the "Peloton Terms of Service." Mot. at 7:13-15 (citing Feinberg Decl., ¶ 7). New members can complete this process on either the Peloton website, their phones, or on a Peloton device, like the Tread+. Mot. at 7:15-17 (citing Feinberg Decl., ¶ 7). When registering on the Peloton website or mobile application, as Mr. Stern did, users see a series of screens that, inter alia , (1) present the user with instructions to read and agree to Peloton's Terms of Service, Privacy Policy and Membership Terms; (2) advise that these terms are also available at onepeloton.com with the phrases "Terms of Service," "Privacy Policy," and "Membership Terms" called out in underline and hyperlinked to pages displaying complete versions of each document; and (3) require the user to click a button confirming that the user agrees to the Terms. Mot. at 7:17-8:2 (citing Feinberg Decl., ¶7); see also Exhibit 3 to Mot., ECF No. 11-5 at 2 (showing a screen that requires new users to enter an e-mail and password and click the button "CREATE ACCOUNT," which has a phrase underneath it stating, "By creating an account, you agree to our Terms of Service, Privacy Policy and Membership Terms."). Users cannot complete the registration process without confirming that they have read and agreed to the Peloton Terms of Service, Privacy Policy, and Membership Terms. Mot. at 8:3-5 (citing Feinberg Decl., ¶ 7).

As part of their acceptance of Peloton's Terms of Service, Peloton members agree to arbitrate any disputes with Peloton. Mot. at 8:7-8. In fact, the first paragraph of the Terms of Service that applied when Mr. Stern created his Peloton account, stated: "[b]y registering as a member or by visiting, browsing, or using the Peloton Service in any way, you (as a ‘user’) accept and agree to be bound by these Terms of Service (‘Terms’), which forms a binding agreement between you and Peloton." Mot. at 8:9-13 (citing Feinberg Decl. ¶ 8, Ex. 4 at p. 1); see also Exhibit 4 to Mot., ECF No. 11-6, Peloton Terms of Service at 2. The Terms also state that "[i]f you do not wish to be bound by these Terms, you may not access or use the Peloton Service." Mot. at 8:13-15; see also Peloton Terms at 2.

In between these provisions, in a paragraph called out in all caps lettering with an introduction that states, "PLEASE READ," the Terms make clear that they contain a binding arbitration provision and class action waiver for any dispute with Peloton:

PLEASE READ: THESE TERMS CONTAIN A BINDING ARBITRATION PROVISION AND CLASS ACTION WAIVER (SECTION 20). READ CAREFULLY, INCLUDING YOUR RIGHT, IF APPLICABLE, TO OPT OUT OF ARBITRATION. EXCEPT FOR CERTAIN TYPES OF DISPUTES DESCRIBED IN SECTION 20 BELOW, OR WHERE PROHIBITED BY LAW, BY ENTERING INTO THESE TERMS YOU EXPRESSLY AGREE THAT DISPUTES BETWEEN YOU AND PELOTON WILL BE RESOLVED BY BINDING, INDIVIDUAL ARBITRATION, AND YOU HEREBY WAIVE YOUR RIGHT TO PARTICIPATE IN A CLASS ACTION LAWSUIT OR CLASS-WIDE ARBITRATION.

Mot. at 8:16-27. The Peloton Terms of Service also state that "[y]ou must be at least 18 years old, or the age of legal majority in your jurisdiction of residence, to register with and use the Peloton Service." Id. "Minors that can safely fit the dimensions of the Peloton Bike may participate in live in-studio classes, provided that (a) they and their parent/guardian have signed a Peloton waiver and release; and (b) their parent/guardian is on site at all times." Id. The Terms also advise that "the Peloton Service is offered only for your personal, non-commercial use, and not for the use or benefit of any third party." Id. Finally, the Terms of Service contain the following arbitration provision:

20. ARBITRATION CLAUSE & CLASS ACTION WAIVER – IMPORTANT – PLEASE REVIEW AS THIS MAY AFFECT YOUR LEGAL RIGHTS. APPLICABLE TO THE FULL EXTENT PERMITTED BY LAW.

a. Mandatory Arbitration of Disputes. We each agree that any dispute , claim or controversy arising out of or relating to these Terms or the breach , termination, enforcement, interpretation or validity thereof or the use of the Services or Content (collectively, "Disputes") will be resolved solely by binding, individual arbitration and not in a class, representative or consolidated action or proceeding. You and Peloton agree that the U.S. Federal Arbitration Act (or equivalent laws in the jurisdiction in which the Peloton entity that you have contracted with is incorporated) governs the interpretation and enforcement of these Terms and that you and Peloton are each waiving the right to a trial by jury or to participate in a class action. This arbitration provision shall survive termination of these Terms.

b. Exceptions and Opt-out. ... [Y]ou will retain the right to opt out of arbitration entirely and litigate any Dispute if you provide us with written notice of your desire to do so by regular mail sent to the attention of Peloton's Legal Department at the Peloton address set out below within thirty (30) days following the date you first agree to these Terms.

c. Conducting Arbitration and Arbitration Rules. The arbitration will be conducted by the American Arbitration Association ("AAA") under its Consumer Arbitration Rules (the "AAA Rules") then in effect, except as modified by these Terms. The AAA Rules are available at www.adr.org or by calling 1-800-778-7879. A party who wishes to start arbitration must submit a written Demand for Arbitration to AAA and give notice to the other party as specified in the AAA Rules. The AAA provides a form Demand for Arbitration at www.adr.org.

... If your claim exceeds U.S. $10,000, the right to a hearing will be determined by the AAA Rules. Any arbitration hearings will take place in the county (or parish) where you live, unless we both agree to a different location. The parties agree that the arbitrator shall have exclusive authority to decide all issues relating to the interpretation, applicability, enforceability and scope of this arbitration agreement.

Exhibit 4 to Mot., ECF No. 11-6 at 11 (the "Arbitration Provision") (emphasis added).

The Terms of Service also state that "[i]f your contract for the Peloton Service is with Peloton Interactive, Inc.," as is the case here, the "Terms shall be governed by the laws of the State of New York, United States of America,...