Netflix Settles Data Retention Suit For $9M

Netflix-EnvelopeVideo rental company Netflix has reached a tentative agreement to settle a class-action lawsuit accusing it of violating video privacy laws by retaining information about users' movie rentals.

The company said in an SEC filing that it will pay $9 million to resolve the matter. Other details have not yet been disclosed. Attorneys for Netflix and the consumers who sued also filed court papers late last week stating that they had reached an agreement.

The settlement came about after a mediation session on Feb. 1, according to the court papers. The terms will be filed with U.S. District Court Judge Edward J. Davila in San Jose, Calif. once the details are finalized. Jay Edelson, a lawyer who represents the consumers, estimates that should occur within three to four weeks.



The case stemmed from allegations that Netflix violated the Video Privacy Protection Act storing information about their rental histories for at least two years -- even when people canceled their accounts.

The consumers argued that the alleged data retention violates the 23-year-old federal law video privacy law, which Congress enacted after a Washington newspaper obtained and printed the movie rental records of U.S. Supreme Court nominee Robert Bork. The law bans movie rental services from disclosing customers' records without their written consent. It also says that rental services must destroy users' personal information “as soon as practicable, but no later than one year from the date the information is no longer necessary for the purpose for which it was collected.”

Netflix has not said yet whether it intends to revise its data retention practices as a result of the lawsuit.

The company currently is lobbying to amend the Video Privacy Protection Act by providing that consumers can consent once to the ongoing disclosure of their records. Current law appears to require consumers to consent each time data is shared. Netflix says the change would enable it to integrate with Facebook by allowing users to stream movies from their accounts while also telling their friends what they're watching.

But even if that revision goes through, the VPPA's data retention provisions would remain unchanged.

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