Court upholds Netflix "throttling" settlement

Reed Hastings, CEO of Netflix Inc., the online DVD-rental service, is interviewed at the Netflix offices in Beverly Hills, California, December 8, 2005. REUTERS/Fred Prouser

LOS ANGELES (Reuters) - A California appeals court has upheld a 2006 settlement of a consumer lawsuit against online movie rental company Netflix Inc over the objections of four Netflix subscribers who challenged the terms.

In a ruling issued on Monday, the appellate court rejected the four subscribers’ claims that attorneys fees awarded by the trial court were “excessive,” the way that subscribers were notified of the terms was “deficient,” and that the settlement should have consisted of a cash award rather than a free month of Netflix rentals.

The original lawsuit, filed in San Francisco state court by Netflix subscriber Frank Chavez, accused the Los Gatos, California-based company of delaying delivery of DVDs by mail to heavier users who are less profitable, a practice that came to be known as “throttling.”

Under the settlement, Netflix provided a free month of rental or a service upgrade to 5.5 million current and former subscribers and paid the plaintiffs’ attorneys fees and costs.

Plaintiffs attorney Seth Safier said class members were “very pleased with the court’s opinion upholding Judge Mellon’s order.”

Reporting by Gina Keating; Editing by Brian Moss and Braden Reddall