Barclay v. iFit Health & Fitness Inc.

Background

Teeda Barclay, Erin Ovsak, and Nicole Nordick alleged that NordicTrack treadmills they purchased could not achieve or maintain the continuous horsepower that ICON Health & Fitness and NordicTrack represented. They asserted warranty, consumer-protection, negligent-misrepresentation, and related claims on behalf of themselves and proposed nationwide and Minnesota classes.

The defendants filed a motion to dismiss under Federal Rule of Civil Procedure 12 and a motion to compel individual arbitration under the Federal Arbitration Act. The dismissal motion challenged jurisdiction, the plaintiffs’ standing to seek certain relief, and the sufficiency of their claims. It also sought to strike allegations about the proposed nationwide class. Larry Schwartz, a former plaintiff whose California-law claims were challenged for lack of personal jurisdiction, voluntarily dismissed those claims before the court ruled on that part of the motion.

Jurisdiction and dismissal motion

The court held that the plaintiffs lacked standing to seek injunctive relief because they alleged past purchases but did not allege a plausible prospect of future interactions with the defendants. The court therefore granted the dismissal motion to the extent it sought dismissal of the claims for injunctive relief for lack of subject-matter jurisdiction.

The court rejected the defendants’ argument that the plaintiffs lacked standing to challenge treadmill models they did not personally purchase. The court concluded that the plaintiffs plausibly alleged standing because continuous horsepower was the common feature and alleged misrepresentation across the models. The court also rejected the argument that the Magnuson-Moss Warranty Act’s requirement of at least 100 named plaintiffs prevented jurisdiction. Because the plaintiffs alleged jurisdiction under the Class Action Fairness Act, the court held that the additional Magnuson-Moss requirement did not apply at this stage.

The order therefore granted the dismissal motion in part and denied it in part. It denied on the merits the portions seeking dismissal of other aspects of the claims for lack of subject-matter jurisdiction, denied as moot the portion concerning Schwartz’s claims, and denied without prejudice the motion in all other respects. The order stated that the remaining dismissal and motion-to-strike issues could be refiled and addressed later if an arbitrator determined that some claims were outside the arbitration agreement.

Arbitration

The court treated the motion to compel arbitration as a motion for summary judgment because the parties presented evidence outside the pleadings. Under Utah law, which the court applied because the iFit terms contained a Utah choice-of-law provision, an online contract requires notice of the terms and conduct showing assent.

Barclay and Nordick registered for iFit after purchasing their treadmills. The court found that each available registration method required the user to click a button placed next to a clear statement that clicking meant agreement to the hyperlinked iFit Terms of Use. The court held that these procedures gave Barclay and Nordick reasonably conspicuous notice of the terms and established their agreement to arbitrate disputes with ICON and NordicTrack, which the terms defined as included entities. The arbitration clause incorporated the American Arbitration Association’s rules, so the court held that the arbitrator—not the court—would decide whether the arbitration agreement covered these treadmill-related claims.

Ovsak did not register for iFit, although her spouse, Jay Ovsak, did. The court held that Jay assented to the iFit terms in effect when he registered and that the modification provision permitted the later addition of the arbitration clause. But the court found unresolved questions about whether Utah law required notice of the later-added arbitration provision and whether Erin knowingly received direct benefits from Jay’s membership. Those questions required limited expedited discovery and potentially a later trial. The court therefore denied without prejudice the request to compel Ovsak to arbitrate.

Order and effect

The court granted in part and denied in part the motion to dismiss. It granted dismissal of the injunctive-relief claims for lack of subject-matter jurisdiction, denied the other jurisdictional challenges on the merits, denied as moot the challenge to Schwartz’s claims, and denied without prejudice the remaining dismissal requests.

The court also granted in part and denied in part the motion to compel arbitration: Barclay and Nordick were compelled to submit their claims to arbitration, while the request concerning Ovsak was denied without prejudice. The parties were ordered to conduct limited expedited discovery about whether Ovsak is bound to arbitrate, and all merits proceedings were stayed pending completion of that discovery and resolution of that question.