Legal News

Court Orders Netflix to Deliver $2 Million in Attorneys Fees

By Dan Slater

Since the Law Blog began using Netflix in 2003, our membership plan has been a constant source of befuddlement. What’s better, the 3-DVD plan or the 5-DVD plan? Does the 5-DVD plan translate into more movies watched, or simply a greater selection laying around the house? In either case, can that much screen time be healthy?

Frank Chavez, also once a Netflix user, had different issues with the DVD delivery service, so he sued. In 2004, Chavez, on behalf of a class, sued Netflix for, among other things, fraud and false advertising. According to a court opinion, Chavez alleged that, contrary to its advertising, Netflix was employing algorithms to prioritize the allocation of DVDs to its lowest-consuming members, with the effect that its highest-consuming members would receive fewer DVDs per month. In other words, the more quickly you watch and return movies, the more slowly Netflix sends you new ones. In 2005, Netflix settled with the 697,000 class members (out of a total of 6 million) who made claims, offering them a somewhat disappointing award: a one-month upgrade in service level for current subscribers, or one month free for past subscribers. (The settlement also required Netflix to change its advertising practices.)

We know what you’re thinking. What about the attorneys who brought the case? Do they go home with a one-month service upgrade too? On Monday a California appeals court awarded $2 million in fees to Gutride Safier, a San Francisco class-action law firm comprised of two lawyers — Adam Gutride and Seth Safier, former Orrick litigators. Here’s a report from the NLJ, and here’s the opinion.

According to the report, in granting the fee award, the appeals court determined that the lower court properly calculated the attorney fees, which were about 22% of the settlement, valued at $7.3 million (i.e. 697,000 x the value of the one-month upgrade, or free month of service).

Representing Netflix were Wilson Sonsini’s Keith Eggleton, Rodney Strickland and Dale Bish.

Full post as published by Law Blog - WSJ.com on April 23, 2008 (boomark / email).