Peloton Hit With Shareholder Derivative Suit on Treadmill Safety

May 21, 2021, 3:09 PM

Peloton Interactive Inc.'s leadership misled investors about its Tread+ product’s “serious safety defects,” which led to the death of a child, according to a shareholder derivative suit filed in federal court in New York.

The exercise equipment and workout streaming company’s officers and directors “were aware of the threat posed by the Tread+, but failed to remedy the threat or recall” the treadmill, contradicting Peloton statements about prioritizing safety, the complaint filed Thursday in the U.S. District Court for the Eastern District of New York says.

Peloton leadership also allegedly failed to tell investors that the U.S. Consumer Product Safety Commission would likely “declare the Tread+ a serious threat to public health and safety,” something the agency did April 17. Peloton, which in March announced a child’s death following a treadmill accident, joined the commission in issuing a voluntary recall of its Tread and Tread+ products May 5.

A Peloton investor filed a would-be class securities suit over Tread+ safety in April. The company also faces a consumer suit alleging it misrepresented the treadmills as safe for households with children.

Causes of Action: Exchange Act §14(a)—Soliciting a proxy in violation of SEC rules (15 U.S.C. §78n(a)); breach of fiduciary duties; unjust enrichment; abuse of control; gross mismanagement; waste of corporate assets.

Relief: Damages with interest and restitution paid to Peloton by the individual defendants; corporate governance reform; attorneys’ fees; court costs.

Response: Peloton declined to comment on the litigation Friday.

Attorneys: Brown Law Firm PC represents the shareholder.

The case is Chu v. Foley, E.D.N.Y., No. 1:21-cv-02862, complaint filed 5/20/21.

To contact the reporter on this story: Jennifer Bennett in Washington at jbennett@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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