Peloton Interactive Inc. investors are attempting to “spin” the company’s transparency about treadmill safety issues into a securities suit, but their claims have “no merit” and should be dismissed, the company told a federal judge in New York.
Investors accuse the exercise equipment and workout streaming company of misleading them about the safety of its Tread+ product. The would-be class complaint’s “allegations fall far short of the rigorous requirements” for pleading securities fraud, Peloton said in a memo filed in support of its dismissal motion in the U.S. District Court for the Eastern District of New York.
“When a public company announces a product recall, securities class action lawsuits usually follow,” even when the claims are meritless, according to Peloton. “This is just such a case.”
Investors sued in April 2021 after news broke that a child had died following an accident involving the company’s newest treadmill, prompting a voluntary recall.
The investors didn’t allege that the company made any materially false or misleading statements, the memo said. They challenged some of Peloton’s risk disclosures, but federal securities laws don’t require the company to “predict the future or accuse itself of wrongdoing,” the company argued.
And even if they did, the investors’ “own allegations show that the Company warned of the exact risks that transpired,” Peloton told Judge Carol Bagley Amon.
The complaint also fell short of alleging the company intended to deceive or defraud investors, according to the memo. The suit “fails to identify a single particularized fact suggesting that any Defendant acted with the required state of mind.”
The investors based their case in part on the allegations of two confidential witnesses, but “both witnesses’ allegations show the challenged statements were true,” Peloton said Tuesday.
Latham & Watkins LLP represents Peloton. Faruqi & Faruqi LLP represents the investors as lead counsel.
The case is In re Peloton Interactive Inc. Sec. Litig., E.D.N.Y., No. 1:21-cv-02369, motion to dismiss filed 4/26/22.