Former Netflix Users Reject $9M Settlement

(CN) - Heaps of Netflix users who sued the rental giant for allegedly stockpiling their credit card information and rental histories have objected to a $9 million settlement offer.

The January 2011 complaint purported to represent "tens of millions" of Netflix's former members. They claimed Netflix retained their information in violation of the 1988 Video Privacy Protection Act.

In its proposed settlement, Netflix would set aside a large portion of the $9 million fund as cy pres, donating it to privacy nonprofits and related programs.

U.S. District Judge Edward Davila, in San Jose, Calif., called the deal "fair, reasonable, and adequate," and granted it preliminary approval last month.

"The instant settlement appears fair, non-collusive and within the range of possible final approval," Davila wrote. "The settlement was a product of arm's length negotiation before a mediator and does not appear to benefit those who participated in the mediation at the expense of any other parties."

Davila ordered provisional certification for a proposed class, which includes "tens of millions of Netflix subscribers and former subscribers nationwide."

"In light of the minimal monetary recovery that would be realistically recoverable by individual settlement class members and the immediate benefits offered to the class by the injunctive relief and cy pres donations, the settlement agreement is deserving of preliminary approval," Davila wrote.

Clyde Rothman, of Texas, filed a "strenuous objection" on Aug. 5, and claimed that subscribers would receive "perhaps one-tenth of a cent" if the deal is approved in December.

Allotting $9 million for cy pres funds and $2 million to attorneys would leave an estimated 30 million subscribers with only $30,000, Rothman claims.

"The fact that little is paid to the alleged injured parties establishes clearly and unequivocally that the lawsuit is not designed to repair at all," Rothman said. "If, in fact, there was injury, the litigation makes it crystal clear it was so minor it only comes to an intangible amount, not millions of dollars, for parties injured. This suggests the litigation is intended only to generate income for disinterested parties."

Rothman and about 50 others filed objections, court records show.

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