A court in the Southern District of New York recently compelled arbitration in the putative class action Skillern et al v. Peloton Interactive, Inc. (No. 1:21-cv-06808), concluding that the defendant did not waive its ability to seek arbitration by defaulting in a prior unrelated arbitration proceeding. The judge differentiated between this case and a series of other decisions where a movant had failed to pay arbitration fees in an earlier arbitration proceeding involving the same parties. This case is another helpful precedent strongly favoring arbitration as an alternative dispute resolution process in lieu of class actions.
Peloton, a fitness and media company, included an arbitration and class action waiver clause in its terms of service for its subscription-based live and on-demand exercise classes. Peloton originally specified arbitration would be held through the American Arbitration Association (“AAA”). In 2019, Peloton was involved in separate, unrelated arbitration proceedings brought by over 2,700 individual consumers regarding deletion of videos. Peloton failed to pay the required filing fees to the AAA, and a group of consumers subsequently filed a putative class action against Peloton. The AAA told Peloton it would not accept any future arbitration matters involving Peloton.
Peloton then removed AAA from its terms of service, instead specifying that arbitration would be conducted through JAMS. Three of the four named plaintiffs in this case agreed to these modified terms, while the fourth named plaintiff’s spouse agreed.
The plaintiffs were later charged sales tax while living in states where Peloton subscription services allegedly are tax exempt, and Peloton allegedly did not fully reimburse plaintiffs for the sales tax charged. Plaintiffs brought a putative class action alleging various breaches of contract and consumer protection laws.
The court granted Peloton’s motion to compel arbitration, distinguishing this case from other cases involving the failure to pay arbitration fees in earlier proceedings. The judge noted “the key difference” was that in other cases, the parties were “left forever in limbo” since arbitration had begun, then failed due to non-payment of fees. But arbitration had not yet occurred in this specific case. Thus, Peloton’s default in unrelated prior arbitration proceedings could not provide a basis for concluding that Peloton waived its ability to arbitrate “completely distinct actions against completely different parties” in this case.