Stella Case No. 103, Originally Published: 25 January 2006
The CD-rental-by-mail firm Netflix allows you to get as many DVDs as you can watch in a month, subject to the delay in turning them around by mail. So if you have the three-disks-at-a-time deal, and you can get them in the mail quickly, you could theoretically watch dozens of movies in a single month for the flat rate of about $18 if you had nothing better to do.
The word Netflix used to describe the deal in its advertising was “unlimited.” Not so, argued one customer. He claimed he could only see about 10 disks a month under the plan, so (not having anything better to do) he not only sued in San Francisco County Superior Court, but he sought — and received — class action status to sue on behalf of every one of the firm’s customers.
Netflix quickly settled without admitting any wrongdoing. The deal: the company will upgrade all customers to a higher plan for free for one month. The catch: unless they downgrade after the first month back to the plan they were on, they’d stay on the more expensive plan and would be charged that plan’s higher price from then on out. And presumably the company will stop saying “unlimited” in their ads.
That’s it! That’s the settlement!
Well, not quite: the company also agreed to pay the lawyers who sued it $2.5 million. The Netflix customers who were supposedly “misled” by the Netflix ads get no money — not even a brief discount on their current or past service. The settlement is so bad that another customer, Chris Ambler, set up a web site, NetflixSettlementSucks.com [which is no longer online], to file a formal objection to it. More than 1,000 Netflix customers have joined in objecting to the settlement, even helping to fund a court challenge.
“This is a very good settlement,” insists plaintiff attorney Seth Safier — the guy who gets to split the millions of dollars with his partner. “It addresses exactly what the plaintiff was complaining about.”
Few agree with the lawyer with dollar signs in his eyes: the U.S. Federal Trade Commission has joined the objection, and so has Trial Lawyers for Public Justice, an association of class action attorneys. I’ve long maintained that most lawyers are honorable and decry the damage done to their profession’s reputation by a minority of their peers; it’s about time that the majority stood up and demanded change.
- “The Netflix Fix Is In”, MSNBC, 15 November 2005.
- “FTC Objects to Netflix Settlement”, Seattle Post-Intelligencer, 10 January 2006.
Thanks to public (and FTC) pressure, the settlement was amended …barely. San Francisco Superior Court Judge Thomas Mellon Jr. approved a revised settlement that provided a $1.3 million payment to the main plaintiff lawyers, Adam Gutride and Seth Safier, plus $60,000 to the lawyers who objected to the earlier settlement.
What did the customers get? Instead of having to opt out of the higher-cost plan after their one month of four-disk service, Netflix was required to not keep them on the higher-cost plan unless they opted in.
Affected customers still got no money.
My 2022 Thoughts on the Case
Affected customers got no money …but then, they really had no damage, did they?
While the company mostly streams content now, actually allowing virtually unlimited movies, they do still have the program for customers to get DVDs in the mail, just like the old days.
Bottom line: as per usual in a class action case, only the lawyers made out, splitting millions while customers are left out completely.
Again as noted previously, several short cases were published “late,” so this really is a 2005 case.
Ray in S.A., Australia: “Whenever we folk on the rest of the planet read about inane decisions by an elected judge, or a jury awarding vast punitive damages to undeserving litigants, our initial reaction tends to be ‘Only in America!’ However there are longer-term implications. There is a danger that companies from around the globe will hesitate to invest or do business in the U.S. for fear of becoming embroiled in such litigation. We are aware that fee-only lawyers are often willing to keep going up and down the supply chain until some company is found culpable — or else makes a settlement to close the case before losing more money. If a policeman’s widow can sue drug companies because the killer took amphetamines illegally made from their legal products, is any company safe? Even when cases are rejected, the sued company often endures huge legal fees and much time wasted by executives. When the vast emerging middle class markets in India and China are added to the fast-growing Eastern European economies (plus of course traditional non-U.S. markets) it may become increasingly attractive for risk-averse companies to avoid the U.S. market altogether.”
Personally, I think we’re already seeing that. On the other hand, I think you (in Australia) may be too!
Amanda in Kentucky: “Your silly stories aren’t funny anymore. I don’t laugh so much anymore because of the reality that these aren’t just silly stories! I am an average person all around: size, weight, income, intelligence — nothing about me stands out from the norm. Even though there’s nothing that sets me apart from the crowd, I can’t seem to bring myself to accept that these people (for lack of a more appropriate term) you write about are part of MY world! In my younger years I would laugh at the situations and silly lawsuits but I’ve come to realize (thanks to age, experience and your wonderful writing) that these situations and silly lawsuits affect my everyday life in ways I’d never thought of before. I’m afraid to wave a pedestrian across the street at a stop sign for fear I’ll be sued should another driver fail to yield and hit the pedestrian en route. I worry about a would-be burglar falling through my roof as he tries to break in, only to sue me for improperly maintaining my home. I worry that a child will come into MY fenced yard, do who-knows-what to MY dog, subsequently get bit, only to have his mommy and daddy sue me for possession of a vicious animal. I’m terrified someone will fall on an icy sidewalk outside my home and sue for either throwing or not throwing salt, whichever case best suits them for a lawsuit.
“When I was 15, these situations were laughable. Now I’m 24, they’ve become very real to me. I work very hard for my money and to think that some money hungry, something-for-nothing person can potentially walk away with every dime I’ve earned absolutely petrifies me. On the other hand, I may never have to personally deal with a situation that likens itself to the ones you write about. HOWEVER, I do have to pay the higher insurance premiums so companies can afford to issue outrageous payouts. And I know that doesn’t even scratch the surface of ways that these lawsuits affect all of us. I’m a huge fan of you and your message. THANK YOU!”
Er… you’re welcome?
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4 Comments on “103: Netfixed”
I have always maintained that class action suits enrich nobody but the lawyers. Your recent Netflix class action suit confirmed that. What did they do to deserve the millions they received? Seriously, that’s disgusting, more so than your previous True Stella Awards.
I’ve never once seen the lawyers agree to getting coupon codes as their fee. They always get cash. The settlement to the “damaged” parties is something they are far more flexible on.
Nice idea to make them take coupons. 8000 years or so of Netflix seems a fair reward for their efforts. They might even be able to sell some, at an appropriate discount, if they wanted cash instead!
(Here in the UK, this would probably be dealt with by the Advertising Standards Authority — a rap on the knuckles for Netflix — and a ban on the advert being shown again. Simples.)
Heck, even the ability to make an order for credit to customers would be appropriate — but not millions in attorneys fees. -rc
Reminds me of the Costco Hot Fuel case, where the attorneys got paid, Costco had to retrofit their gasoline dispensers (gas pumps), and no one else got anything. What’s really interesting in the Costco case is that people could have either overpaid or underpaid a total over time of maybe ten cents. It’s conceivable that fleet buyers could have been out, (over or under), as much as a whole dollar. And just what did Costco do to recover the six million paid to the attorneys? They raised the price of gas. It’s pretty easy to see who really “won” and who paid for it.