Online DVD Rental Antitrust Litigation

Docket number: 16-cv-4196 (Eastern District of New York)

In March 2012, the Center for Class Action Fairness objected to the proposed settlement in a class action lawsuit against Wal-Mart and Netflix over the price of online DVD rentals.

Later that month, the district court approved the settlement, agreeing with the settling parties that a coupon isn’t a coupon if they call it a “gift card” instead, and that the restrictions on coupon settlements in the Class Action Fairness Act (CAFA) didn’t apply.

CCAF disagreed with the district court and believed the ruling was contrary to Seventh Circuit precedent. CCAF appealed this decision to the Ninth Circuit. The Ninth Circuit affirmed.

On March 13, 2015, Ted Frank petitioned for a rehearing en banc of the decision but that was denied on June 18, 2015. The Ninth Circuit issued its final mandate on June 29, 2015.

In June 2016, CCAF objected to the cy pres distribution of the settlement funds remaining due to uncashed and voided checks, undeliverable e-gift cards, and unused reserve funds. On August 31, 2016, the U.S. District Court for the Northern District of California issued its order. As a result of CCAF’s objection, more than $2.3 million was distributed to class members instead of unrelated organizations such as the Geena Davis Institute on Gender in Media. The parties had originally requested that these dollars be awarded to organizations unrelated to the litigation, a practice known as cy pres.

“One of the leading ways class action attorneys benefit themselves at the expense of the class is through cy pres settlements,” said CCAF director Ted Frank. “It exacerbates existing conflicts of interest in class action settlements and gives attorneys an incentive to breach their fiduciary duties to the class.”

There is rampant abuse of cy pres awards in class actions where the interests of attorneys and defendants are prioritized over the class members who were allegedly harmed. CCAF has won numerous landmark decisions in this area. Read more about the cy pres problem from Ted Frank in his House Judiciary Committee testimony here.

On March 6, 2018, Frank moved for leave to intervene for the limited purpose of requesting that Walmart disclose the redemption rate of the coupons, or “e-gift cards,” distributed to class members pursuant to the settlement. Frank argued that the redemption rate is of public interest because the national press, the judiciary, the government, the bar, and academia have an interest in knowing the ultimate results of class action settlements, while class members such as Frank have an interest in transparency regarding the actual benefit that class members realized from the release of  their claims. The district court denied the motion; the actual redemption rate remains a mystery.

This case was originally brought by the Center for Class Action Fairness. From October 2015 until its conclusion, it was a project of the Competitive Enterprise Institute.

Case Documents