Netflix upgrades subscribers to settle suit

Move in response to class-action claim filed in 2004

By Danny King -- Video Business, 7/22/2008

JULY 22 | Netflix this week began temporarily upgrading the membership status of some subscribers as part of the settlement of a four-year-old class-action lawsuit.

The largest U.S. movie-rental service via mail e-mailed some subscribers saying they would be upgraded one plan level for a month, confirmed company spokesman Steve Swasey, who said the company wouldn’t disclose how many subscribers would receive the upgrade. The e-mail was posted yesterday on the blog HackingNetflix.com.

Netflix admitted no wrongdoing when in April 2006 a San Francisco Superior Court judge approved the company’s decision to give a one-month upgrade to members who had subscriptions between Jan. 15, 2005, and Oct. 19, 2005, with Netflix paying more than $1.3 million to attorneys involved with the case.

The lawsuit, filed in September 2004, alleged that Netflix “engaged in fraud, deceit and misrepresentation” by advertising that it would provide subscribers unlimited DVD rentals through one-day delivery.

The California Court of Appeals affirmed the decision in April after the initial judgment was appealed. The case was Frank Chavez v. Netflix Inc., et al.

Netflix said in April that its first-quarter subscriber base grew 21% from a year earlier, to 8.24 million. The company reports second-quarter results later this week.