(CN) - Netflix can pay $9 million to settle claims that it stockpiled the credit card information and rental histories of its users, a federal judge has ruled.
In a January 2011 federal class action against the Los Gatos, Calif.-based entertainment giant, Jeff Milans and Peter Comstock said Netflix had retained and disclosed users' viewing histories and other personally identifiable information without consent.
Ultimately their case was consolidated in San Jose with five others alleging violation of the Video Privacy Protection Act, representing a class of "tens of millions of Netflix subscribers and former subscribers nationwide."
The parties reached a settlement agreement in July 2012, following mediation in by retired U.S. District Judge Layn Phillips.
One component of the deal requires Netflix to pay $9 million into a settlement fund for nonprofit organizations. The company must also decouple content histories from users' identification and payment methods within one year.
Class counsel will receive $2.2 million, or about 25 percent of the settlement fund.
Milans, Comstock and two other named plaintiffs will split a $30,000 incentive award for acting as class representatives.
In granting the agreement final approval Monday, U.S. District Judge Edward Davila noted that the balance of the settlement fund will be distributed cy pres to "not-for-profit organizations, institutions, and programs for the purpose of educating 'users, regulators, and enterprises regarding issues relating to protection of privacy, identity, and personal information through user control, and to protect users from online threats.'"
Twenty organizations, which will "spend the funds solely on privacy protection and education efforts," are to receive the money, according to the 23-page order.
In exchange, Netflix and its affiliates are released from any claims arising out of or related to the consolidated action.
Calling the settlement "fair, adequate, and reasonable," Davila dismissed objections over the amount of the settlement fund and attorneys' fees. He also refused a demand for "in-kind" relief - including free service.
"The court has found that the amount of the cash settlement to be fair and adequate considering the strength of plaintiffs' case, potential defenses, experience and opinion of counsel, the settlement amount of similar class action litigations, and other factors," Davila wrote. "Again, the court has been instructed not to substitute its own judgment for that of the parties who were the ones actually engaging in the negotiations."
Class counsel are Jay Edelson, Rafey Balabanian, Ari Scharg and Chandler Givens of Edelson McGuire LLC.
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