9th Circ. Keeps Netflix DVD Antitrust MDL Dead

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Late last week, the Ninth Circuit affirmed a trial court’s decision to dismiss multidistrict litigation accusing Netflix and Wal-Mart of conspiring to illegally divide the DVD rental and sales market in order to push out competitors, but affirmed the $27.3 million class action settlement agreement.

The action stemmed from claims made by Netflix subscribers in 2009 that Netflix and Wal-Mart agreed to split the market; Netflix agreed to refrain from selling new DVDs and Wal-Mart agreed to shut down its online DVD rental program and transfer subscribers to Netflix.

Wal-Mart settled its portion of the class action lawsuit in 2011, agreeing to a $27.3 million class action settlement. Later in 2011, U.S. District Judge Phyllis Hamilton dismissed the class action lawsuit against Netflix, finding that the plaintiffs could not establish that Netflix had conspired with Wal-Mart and that there was no evidence that Netflix would have lowered its prices without the agreement with Wal-Mart.

The plaintiffs appealed the trial court’s decision, taking their appeal to the Ninth Circuit. The Ninth Circuit’s three-judge panel refused to hear the appeal, issuing an order Feb. 27, stating:

“The district court properly determined that no reasonable juror could conclude that Netflix was going to lower its … price to $15.99 in response to Walmart when (1) Netflix had never lowered its prices in response to Walmart at any time and (2) Netflix did not lower its price in the face of the $14.99 price cut by Blockbuster, which was objectively a greater competitive threat.

“Much of the subscribers’ documentary evidence actually supports Netflix’s position and convincingly reveals that Walmart did not view itself and was not viewed by others as a competitive threat in late 2004 and early 2005,” the opinion stated.

The Ninth circuit vacated part of the more than $710,000 the district court had awarded Netflix for discovery costs as well. The court pointed out that even though the district court had applied the circuit’s then-current precedent offering broad access to costs for electronic production as copying, a U.S. Supreme Court ruling overturning that precedent required a new evaluation of some of the costs in the case.

In a separate opinion, the Ninth Circuit also rejected objections to the Wal-Mart class action settlement, including that the attorneys fess were excessive and the settlement improperly included gift cards.

The court concluded that there were no problems with the Wal-Mart gift cards granted to the class representatives, the attorneys’ fee awards or the notice process. Regarding the gift cards, “[a]ffording over 1 million class members $12 in cash or $12 to spend at a low-priced retailer does not leave them with ‘little or no value.’”

The plaintiffs are represented by Robert G. Abrams and Gregory Lynn Baker ofBakerHostetler, William G. Caldes, Eugene A. Spector and Jonathan M. Jagher of Spector Roseman Kodroff & Willis PC, Merrill G. Davidoff, H. Laddie Montague Jr., Sarah Rebecca Schalman-Bergen and David Francis Sorensen of Berger & Montague PC, Guido Saveri and Lisa Saveri of Saveri & Saveri Inc. and Todd A. Seaver and Joseph J. Tabacco Jr. ofBerman DeValerio.

The objectors who appealed the Wal-Mart settlement were represented by Theodore Frank of the Center for Class Action Fairness LLC, Gary Sibley, Joseph Darrell Palmer of Law Offices of Darrell Palmer PC, Christopher A. Bandas of Bandas Law Firm PC, Christopher V. Langone and Grenville Pridham of Law Office of Christopher Langone and Joshua R. Furman of Joshua R. Furman Law Corp.

The Netflix/Walmart DVD Antitrust MDL cases are Andrea Resnick, et al. v. Netflix Inc. et al., Case No. 11-18034, and Theodore H. Frank et al. v. Netflix Inc., et al., Case No. 12-15705, in the U.S. Court of Appeals for the Ninth Circuit.