By Jonathan Stempel
NEW YORK (Reuters) -A U.S. judge on Thursday said Peloton Interactive (NASDAQ:PTON) Inc must face a proposed class action lawsuit accusing the bike and treadmill maker of misleading customers about the "ever-growing" size of its library of on-demand fitness classes.
The lawsuit stemmed from Peloton's March 2019 decision to purge more than half of its estimated 12,000 on-demand classes, after music publishers sued the New York-based company for streaming songs in its workout videos without proper licensing.
Customers said Peloton knew this could happen, yet kept charging full price for bicycles and monthly subscriptions that carried copyrighted songs from artists including Adele, Beyoncé, Luke Bryan, Drake, Ariana Grande, Madonna, Justin Timberlake and Jay Z.
In a 40-page decision, U.S. District Judge Lewis Liman in Manhattan said customers in New York from April 2018 to March 2019 could try to prove they overpaid because Peloton was silent about the "imminent" removal of much of its digital library.
Liman called it reasonable to infer from Peloton's claim of an "ever-growing" library that "there would be value associated with the products that resulted in an increased price when that value was not actually there."
Peloton did not immediately respond to requests for comment.
In a joint statement, the plaintiffs' lawyers said they were "pleased with Judge Liman's categoric denial of Peloton's latest dismissal motion and we look forward to prosecuting our clients' and the other class members' claims through trial."
Peloton settled the licensing lawsuit by the National Music Publishers' Association and 14 of its members in February 2020.
More recently, the 10-year-old company has struggled with waning demand, losing $757.1 million in the quarter ending March 31 as more people resumed pre-pandemic activities.
Peloton expects to report fiscal fourth-quarter and full-year results on Aug. 25.
The case is Passman et al v Peloton Interactive Inc , U.S. District Court, Southern District of New York, No. 19-11711.