Netflix Settlement Falls Under Attack
The national public interest law firm Trial Lawyers for Public Justice has long been taking aim at what it considers unfair class-action settlements, filing objections to the settlements it believes offer lots of money to the plaintiff attorneys but very liittle--usually coupons with relatively small monetary value--to consumers. The group's latest target is a proposed class-action settlement involving Netflix customers.
The national class-action lawsuit, filed in September 2004, alleged that Netflix misled consumers by failing to deliver DVDs as promised, within one business day. In reality, the suit said, it would often take as long as four to six business days for customers to receive their requested DVDs. And that meant customers could watch fewer videos than they had signed up for under Netflix's monthly membership plan.
The proposed settlement, which TLPJ officials said is worth $4 million max, includes $2.5 million in attorney fees. But that's just one of the problems with the proposed settlement, according to TLPJ, which filed a legal challenge . More troublesome, TLPJ says, is what consumers get: Current Netflix customers would get one-month upgrade to receive more DVDs, a value that ranges from $2 to $6, depending on what plan a customer is signed up for. But if consumers fail to cancel that upgraded service at the end of 30 days, they would then be billed for the more expensive service every month after that. Meanwhile, former Netflix customers, would get a month's free service.
TLPJ says the proposed settlement is just a marketing tool designed to increase Netflix's revenues. In the long run, customers could be worse off, especially if they fail to opt out of the more expensive service. It is asking both sides to come up with a more fair settlement, as it has done on other class action settlements.
Netflix spokesman Steve Swasey said the company agreed to the settlement because it is in the best interest of its shareholders and customers. Netflix did not admit any wrongdoing in the settlement.
A court hearing on the proposed settlement and TLPJ's ojbections will be held Jan. 18 in California Superior Court in San Francisco.
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