NetFlix 2004 Annual Report Download - page 25

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On September 23, 2004, Frank Chavez, individually and on behalf of others similarly situated, filed a class
action lawsuit against us in California Superior Court, City and County of San Francisco. The complaint asserts
claims of, among other things, false advertising, unfair and deceptive trade practices, breach of contract as well
as claims relating to our statements regarding DVD delivery times. The complaint seeks restitution,
disgorgement, damages, and injunction and specific performance and other relief.
On August 13, 2004, Miles L. Mitzner, a shareholder claiming to be acting on our behalf, filed a shareholder
derivative suit in the United States District Court for the Northern District of California against certain officers
and certain current and former members of the board of directors, specifically Reed Hastings, W. Barry
McCarthy, Jr., Jay C. Hoag, A. Robert Pisano, Michael Ramsay and Timothy M. Haley. Mr. Mitzner claimed that
the named defendants breached their fiduciary duties by allowing allegedly false and misleading statements to be
made regarding, among other things, churn. Mr. Mitzner also claimed that the named defendants illegally traded
our stock while in possession of material nonpublic information. The lawsuit sought, on our behalf, unspecified
compensatory and enhanced damages, disgorgement of profits earned through alleged insider trading, recovery of
attorneys’ fees and costs, and other relief. However, on February 25, 2005, the Court dismissed the action with
prejudice, and final judgment was entered in our favor.
On October 19, 2004, Doris Staehr and Steve Staehr, shareholders claiming to be acting on our behalf, filed
a shareholder derivative suit in the Superior Court of the State of California for the County of Santa Clara against
certain officers and certain current and former members of the board of directors, specifically Reed Hastings,
Barry McCarthy, Thomas R. Dillon, Leslie J. Kilgore, Richard Barton, Timothy Haley, Jay Hoag, A. Robert
Pisano, Michael Schuh and Michael Ramsay. The plaintiffs claim that the named defendants breached their
fiduciary duties by allowing allegedly false and misleading statements to be made regarding, among other things,
churn. They also claim that the named defendants illegally traded our stock while in possession of material
nonpublic information. In addition, the plaintiffs assert claims for abuse of control, gross mismanagement, waste
and unjust enrichment. The lawsuit seeks, on our behalf, unspecified compensatory and enhanced damages,
disgorgement of profits earned through alleged insider trading, recovery of attorneys’ fees and costs, and other
relief. In December 2004, the Court stayed this proceeding pending resolution of the federal action brought by
Mr. Mitzner. Although the federal action brought by Mr. Mitzner was dismissed, as of the date of the filing of
this report the stay had not been lifted.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
9