Memorandum & Order — Wilson v. Peloton (filed 2022-01-26)

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A Memorandum & Order in In re Peloton Interactive, Inc. Securities Litigation, 21-CV-2369 (CBA) (PK), United States District Court, Eastern District of New York, by United States District Judge Amon, filed 1/26/2022. Defendants Peloton Interactive, Inc., John Foley, and Jill Woodworth (Moving Defendants) moved to transfer the case to the Southern District of New York under 28 U.S.C. § 1404(a), and the order denies the motion. It finds the geography-related factors neutral and the cases not sufficiently related, since the claims here concern alleged misrepresentations about safety threats posed by Peloton's Tread+ and the Southern District claims concern inventory levels. It states that the first-filed rule weighs in favor of keeping the case and that the motion fails.

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Clerk’s Office
Filed Date: 1/26/2022

UNITED STATES DISTRICT COURT U.S. DISTRICT COURT
EASTERN DISTRICT OF NEW YORK EASTERN DISTRICT OF NEW

xX YORK
IN RE PELOTON INTERACTIVE, INC. NOT FOR PUBLICATION PROOKLYN OFFICE
SECURITIES LITIGATION MEMORANDUM & ORDER

21-CV-2369 (CBA) (PK)
xX
AMON, United States District Judge:
INTRODUCTION

Defendants Peloton Interactive, Inc. (“Peloton”), John Foley, and Jill Woodworth
(collectively “Moving Defendants”) move to transfer this case to the Southern District of New
York pursuant to 28 U.S.C. § 1404(a). For the following reasons, Moving Defendants’ motion is
DENIED.

BACKGROUND

On April 29, 2021, Plaintiff Ashley Wilson (“Wilson”), a U.K. citizen, sued Moving
Defendants in the Eastern District of New York under Sections 10(b) and 20(a) of the Securities
Exhange Act of 1934 (“Exchange Act”) and Rule 10b-5. (ECF Docket Entry (“D.E.”) # 1.) Wilson
filed an amended complaint on May 6, 2021. (D.E. #8.) Wilson alleged that Moving Defendants
made materially false and misleading statements regarding Peloton’s business, operational, and
financial results by failing to disclose several adverse facts regarding serious safety threats posed
by Peloton’s Tread+. (Id. § 26.) Wilson sought to bring the action as a class action “on behalf of
all persons and entities who purchased or otherwise acquired the publicly traded securities of
Peloton between September 11, 2020 and May 5, 2021, inclusive.” (Id. { 1.) On May 24, 2021,
Plaintiff Leigh Drori sued Moving Defendants in the Eastern District of New York under the same
causes of action, alleging the same conduct, and seeking to represent the same class. See
Complaint, Drori v. Peloton Interactive, Inc., No. 21-cv-2925 (CBA) (PK) (E.D.N.Y. May 24,

2021), ECF No. 1.
Wilson’s initial complaint triggered a process under the Private Securities Litigation
Reform Act (“PSLRA”) by which any member of the purported class “may move the court to serve
as lead plaintiff of the purported class,” 15 U.S.C. § 78u-4(a)(3)(A)(i)(ID, and to select lead
counsel, id. § 78u-4(a)(3)(B)(v). Several purported class members moved to consolidate the cases,
serve as lead plaintiff, and appoint lead counsel. On November 18, 2021, I adopted Magistrate
Judge Peggy Kuo’s Report and Recommendation, (D.E. # 19), thereby consolidating the two suits,
appointing Richard Neswick (“Neswick’’) as lead plaintiff, and appointing Faruqi & Farugi LLP
as lead counsel. Neswick filed an amended complaint on January 21, 2022. (D.E. # 45.)
Neswick’s amended complaint added Defendants Hisao Kushi and Brad Olson. (Id.)

Over six months after Wilson filed her complaint, on the day I appointed Neswick as lead
plaintiff, a new securities class action was filed against Peloton, this time in the Southern District
of New York (the “Southern District”). See Complaint, City of Hialeah Emps. Ret. Sys. v. Peloton
Interactive, Inc., No. 21-cv-9582 (ALC) (S.D.N.Y. Nov. 18, 2021), ECF No. 1. That class action
also brought claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5. However,
it alleged a different class period — December 9, 2020 through November 4, 2021 — and focused
on a different set of allegedly false and misleading statements — those relating to Peloton’s
inventory levels and its ability to maintain COVID-19-era results. Id. On December 2, 2021, a
second lawsuit was filed in the Southern District, with allegations mirroring those in the first
Southern District lawsuit. Complaint, Deulina v. Peloton Interactive, Inc., No. 21-cv-10266 (ALC)
(S.D.N.Y. Dec. 2, 2021), ECF No. 1.

The PSLRA process has yet to run its course in the Southern District cases. The sixty-day
period for purported class members to move to serve as lead plaintiff ran on January 18, 2022, and

seven members so moved. The court has yet to rule on the motions.
Moving Defendants now move to transfer this case to the Southern District under 28 U.S.C.
§ 1404(a).
STANDARD OF REVIEW
“Under 28 U.S.C. § 1404(a), a district court has discretion to transfer an action to another

999

district court ‘[f]or the convenience of parties and witnesses, in the interest of justice.’” Corley v.
United States, 11 F.4th 79, 89 (2d Cir. 2021) (quoting 28 U.S.C. § 1404(a)). The district court
should consider, among other things, seven factors: “(1) the plaintiff's choice of forum, (2) the
convenience of witnesses, (3) the location of relevant documents and relative ease of access to
sources of proof, (4) the convenience of parties, (5) the locus of operative facts, (6) the availability

of process to compel the attendance of unwilling witnesses, and (7) the relative means of the

parties.” Id. (quoting D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 106-07 (2d Cir. 2006)

(alteration omitted)). District courts “have identified additional factors, including ([8]) ‘the

forum’s familiarity with governing law,’ and ([9]) ‘trial efficiency and the interest of justice, based

on the totality of the circumstances.’” Sarracco v. Ocwen Loan Servicing, LLC, 220 F. Supp. 3d

346, 356 (E.D.N.Y. 2016) (Bianco, J.) (quoting Albert Fadem Tr. v. Duke Energy Corp., 214 F.

Supp. 2d 341, 343 (S.D.N.Y. 2002)); see also Nuss v. Guardian Life Ins. Co. of Am., No. 20-cv-

9189 (MKV), 2021 WL 1791593, at *2 (S.D.N.Y. May 5, 2021). The moving party has the burden

of establishing by clear and convincing evidence that transfer is justified. See N.Y. Marine & Gen.

Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 114 (2d Cir. 2010).
DISCUSSION
In seeking to meet their burden that clear and convincing evidence calls for transfer,
Moving Defendants must establish that at least one of the factors weighs in favor of transfer, and

that any factors weighing in favor of transfer outweigh any factors weighing against it. If all of
the factors are neutral, the transfer motion should be denied. As discussed below, all of the factors
are either neutral or weigh against transfer.
I, Factors Related to Geography

Of the factors identified by the Second Circuit in Corley and D.H. Blair & Co., see supra,

factors two through seven address the relative ease of litigating in one district court over another.
They address such considerations as access to documents and evidence, and the difficulty of
getting unwilling witnesses to the courthouse. Accordingly, these factors are heavily tied to
geography — the closer two districts are, the less inconvenient it is to travel between them.
Geography also informs the forum’s familiarity with governing law. Two district courts located
within the same jurisdiction should have the same familiarity with that jurisdiction’s laws.
Because this district is a “relatively short walk across the Brooklyn Bridge” from the
Southern District, courts generally find that these geography-related factors “are neutral with

regard to transfer requests.” Wald v. Bank of Am. Corp., 856 F. Supp. 2d 545, 549 (E.D.N.Y.

2012); see, e.g., Ahmed v. T.J. Maxx Corp., 777 F. Supp. 2d 445, 449 (E.D.N.Y. 2011). Although

Moving Defendants contend that the case “should” have been brought in the Southern District
because Peloton is headquartered there,! (D.E. # 41 (“Mot.”) at 1), they do not explain how
transporting witnesses and evidence an extra few subway stops or ten minutes in an Uber will
inconvenience them. Because Moving Defendants do not provide “persuasive arguments as to
why it would be physically more or less convenient to litigate this case in Brooklyn as opposed to

Manhattan,” I find that these factors are neutral. Wald, 856 F. Supp. 2d at 549. Accordingly,

'! Moving Defendants do not argue that this case was improperly brought in this district. Nor could they,
given Peloton’s presence in the district: it has showrooms, retail locations, a warehouse, and, more relevant to a
securities class action, its stock transfer agent, in this district.

4
Moving Defendants must meet their burden of proving that transfer is justified by providing clear
and convincing evidence that the two remaining factors weigh in their favor on balance.
Il. Trial Efficiency and the Interest of Justice

Moving Defendants argue that trial efficiency and the interest of justice weigh in their
motion’s favor because transfer will allow related cases to be litigated in a single forum. They are
correct that “[t]here is a strong policy favoring the litigation of related claims in the same tribunal.”

Wyndham Assocs. v. Bintliff, 398 F.2d 614, 619 (2d Cir. 1968). However, this case is not

sufficiently related to the litigation in the Southern District to justify transfer.

Moving Defendants point out certain similarities between the cases in the two districts:
they involve overlapping defendants’; they assert causes of action under the same laws; their class
periods overlap; and evidence of alleged misstatements might be found in some of the same public
filings. (Mot. 9.) But Moving Defendants admit, as they must, that the claims in each district are
distinct. The claims in this district involve Peloton’s alleged misrepresentations regarding serious
safety threats posed by Peloton’s Tread+, while the claims in the Southern District involve its
alleged misrepresentations relating to its inventory levels and ability to maintain COVID-19-era
results. Moreover, although the class periods overlap, they are not coextensive.

Although the policy favoring transfer of related cases “require[s] that the cases be related,
not identical,”” Columbia Pictures Indus., Inc. v. Fung, 447 F. Supp. 2d 306, 309 (S.D.N.Y. 2006)

(quoting Mfrs. Hanover Tr. Co. v. Palmer Corp., 798 F. Supp. 161, 167 (S.D.N.Y. 1992)), Moving

Defendants fail to identify a court that has found two cases premised on entirely distinct theories

of liability sufficiently related to justify transfer. Instead, the opinions that Moving Defendants

2 Although Moving Defendants argue that the cases have identical defendants, Neswick’s amended complaint
adds Defendants Hisao Kushi and Brad Olson, who are not defendants in the Southern District cases. Additionally,
the Southern District plaintiffs have sued William Lynch, who is not a defendant in this action.

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cite involve the transfer of cases with “theories of liability” that are “substantially similar” to cases

in the transferee district. Id. at 310; see also Brooklyn Downtown Hotel, LLC v. N.Y. Hotel &

Motel Trades Council, No. 14-cv-6067 (ILG) (SMG), 2015 WL 779441, at *2 (E.D.N.Y. Feb. 25,

2015) (discussing cases with the same “essential issues”); Navarro Carrilo v. Carranza No. 20-cv-

1707 (EK) (CLP), 2020 WL 3129160, at *3 (E.D.N.Y June 12, 2020) (“Although the claims . . .

are ‘conceptually distinct,’ Doe v. Lyme Bd. of Educ., 790 F.3d 440, 447 (2d Cir. 2015), both
actions contest the adequacy of a single administrative process for the same child, for the same

year.”); MASTR Asset Backed Sec. Tr. 2007-WMC1 ex rel. U.S. Bank Nat’l Ass’n v. WMC

Mortg. LLC, 880 F. Supp. 2d 418, 424 (S.D.N.Y. 2012) (“[T]he two cases are clearly related
because they involve the same parties, the same or very similar contracts, the same primary claim
| (repurchase), and nearly identical fact patterns.”).

Apparently predicting the Court’s skepticism, Moving Defendants argue that it is possible
that the cases will eventually involve the same theories of liability because both lead plaintiffs can
file operative complaints pursuant to PSLRA. Each lead plaintiff might add new allegations
covering the alleged misrepresentations in the other district. But such amendments are uncertain,
if not unlikely. Neswick’s amended complaint does not expand to cover the claims being litigated
in the Southern District. (See D.E. #45.) And there is less reason to believe that the Southern
District plaintiffs will amend their complaint to cover the claims being litigated in this district.
After all, they filed their complaint over six months after Wilson filed hers, and there is no reason
they could not have copied her allegations then. A speculative chance that the cases might
someday overlap fails to justify transfer of venue. Accordingly, because the cases are not

sufficiently related, this factor is neutral at best.
Moreover, this factor would weigh against transfer if the cases were sufficiently related.
“The first-filed rule states that, in determining the proper venue, ‘[w]here there are two competing

lawsuits, the first suit should have priority.” N.Y. Marine & Gen. Ins., 599 F.3d at 112 (alteration

in original) (quoting D.H. Blair & Co., 462 F.3d at 106). Although the first-filed rule does not
supersede the § 1404(a) inquiry, id. at 112-13, “a court considers the first-filed rule ‘as one among
several factors in the overall calculus of efficiency and the interests of justice.” HomeoPet LLC
v. Speed Lab’y, Inc., No. 14-cv-663 (JFB) (AKT), 2014 WL 2600136, at *14 (E.D.N.Y. June 11,

2014) (Bianco, J.) (quoting Am. Steamship Owners Mut. Prot. & Indem. Ass’n v. Lafarge N. Am.,

Inc. 474 F, Supp. 2d 474, 481 (S.D.N.Y. 2007), aff'd sub nom., N.Y. Marine & Gen. Ins., 599
F.3d 102). Here, this case was filed six months prior to the Southern District cases, and so the
first-filed rule weighs in favor of keeping the case in this district. Although Moving Defendants
argue that the first-filed rule should not apply because “the actions are in the early stages and no
discovery has taken place,” (Mot. 10), the cases are at different stages. The instant case has gone
through the PSLRA process while the Southern District cases have just entered that stage of
litigation. Judicial efficiency will be best advanced by allowing the parties in this case to proceed
to dispositive motion practice and discovery now rather than by delaying for the sole purpose of
transferring across the East River.
Ill. Plaintiff's Choice of Forum

The parties dispute whether the plaintiff's choice of forum “tips only slightly in plaintiff's
favor,” (see D.E. # 42 at 7 n.5 (quoting In re Collins & Aikman Corp. Sec. Litig., 438 F. Supp. 2d
392, 398 (S.D.N.Y. 2006))), or whether it is “not entitled to deference,” (Mot. 7 (capitalization and
typeface altered)). Even Moving Defendants do not suggest, however, that this factor supports

venue transfer. Because no other factor weighs in favor of transfer, I need not determine the weight
to attribute to plaintiff's choice of forum. Simply put, Moving Defendants have failed to carry

their burden.

CONCLUSION
For the foregoing reasons, Moving Defendants’ motion is DENIED.
SO ORDERED.

Dated: January 26, 2021 7 “ a
Brooklyn, New York _ s/Carol Bagley Amon

Carol Sanioeh / Leena lianas
D

United Stat ict Judge

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