Frank v. Netflix, Inc., No. 12-15705 (9th Cir. 2015)
Annotate this CaseA class of Netflix DVD subscribers filed a consolidated amended class action against Netflix and Walmart, claiming that a promotion agreement whereby Walmart transferred its online DVD-rental subscribers to Netflix and Netflix agreed to promote Walmart’s DVD sales business was anti-competitive. The district court approved of a settlement between Walmart and the class of Netflix subscribers whereby Walmart agreed to pay a total amount of $27,250,000. The Ninth Circuit affirmed, holding that the district court did not err in (1) approving the settlement as fair, reasonable, and adequate; (2) certifying the settlement class; and (3) awarding attorneys’ fees of twenty-five percent of the overall settlement fund.
Court Description: Settlement. The panel affirmed the district court’s approval of a settlement between Walmart and a class of Netflix DVD subscribers in a class action challenging as anti-competitive an agreement under which Netflix and Walmart divided up DVD-related business. In the settlement agreement, Walmart agreed to pay a total amount of $27,250,000, comprising both a “Cash Component” and a “Gift Card Component.” The panel held that the district court did not abuse its discretion in certifying the settlement class under Fed. R. Civ. P. 23(a) and (b). The panel concluded that the class representatives were adequate even though they received incentive awards. 8 IN RE ONLINE DVD RENTAL ANTITRUST LITIG. The panel concluded that, even though few class members actually filed claims, the district court did not err in using the claimant fund sharing approach, whereby each class member who submits a claim receives an equal share of the settlement fund, regardless of the harm he or she suffered. The panel concluded that the district court’s notice of settlement did not violate either Rule 23 or due process. The panel held that the district court did not err in approving the settlement as fair, reasonable, and adequate under Rule 23(e). The panel rejected arguments that the incentive awards were unreasonably large, that a reverter provision and a confidential opt-out provision were unfair, and that the district court failed adequately to explain its decision. The panel held that the district court did not err in awarding attorneys’ fees of 25% of the overall settlement fund under Rule 23(h). The panel held that the fee award was not subject to provisions of the Class Action Fairness Act governing “coupon settlements” because the portion of the settlement to be paid in Walmart gift cards was not a “coupon settlement” within the meaning of CAFA. In addition, the district court provided adequate notice to the class of the attorneys’ fee petition and provided an adequate explanation of its rationale. IN RE ONLINE DVD RENTAL ANTITRUST LITIG. 9
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