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Settlement in Netflix/Walmart suit slammed

May 1, 2012 at 6:26 PM   |   Comments

SAN FRANCISCO, May 1 (UPI) -- Settlement terms in a class-action suit brought by U.S. Netflix subscribers should be overturned because they give too much to lawyers, critics say.

Some subscribers have asked a federal appeals court to overturn the $27.2 million class-action settlement, saying the terms unfairly give plaintiffs' attorneys more than $8 million in fees.

The suit had been filed over the marketing agreement Netflix entered into with Walmart Stores Inc.

Filed in January 2009, the suit alleged Walmart and Netflix entered into an illegal marketing agreement in which Walmart pulled out of the online video rental market while Netflix discontinued sales of new DVDs.

Plaintiffs argued the cross-promotion agreement was anticompetitive and caused Netflix subscribers to face increased prices for online DVD rentals.

In the proposed settlement, members of the class would get a pro-rata share -- but only after the attorney fees were paid.

An appeal has been filed in the U.S. Court of Appeal for the 9th Circuit in San Francisco.

The terms of the settlement are not in the best interest of the class as required by federal law, said Theodore Frank, a nationally noted litigation expert and founder of the Center for Class Action Fairness in Washington.

Frank is also an appellant in the case.

"The settlement is so patently one that benefits the attorneys without really giving anything to the class members," Frank told FierceOnlineVideo.com.

The settlement calls for the payment of attorneys fees in excess of the 9th Circuit's 25 percent benchmark, he said.

"There are so many class members that if every class member had filed for a claim, they would have gotten less than a dollar each," Frank said, and the settlement "benefits class counsel at the expense of its clients."

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