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    Netflix smacked with class-action lawsuit by digruntled investors

    By Mike Flacy | Digital Trends – Tue, Jan 17, 2012

    Initially filed by the Robbins Geller Rudman & Dowd law firm on behalf of investors at the City of Royal Oak Retirement System in Michigan, Netflix is now dealing with a class-action suit alleging that company officials “issued materially false and misleading statements regarding business practices and its contracts with content providers.”  Defendants specifically identified within the lawsuit include CEO Reed Hastings, chief content officer Ted Sarandos, chief product officer Neil Hunt, finance director David Wells and marketing director Leslie Kilgore. The lawsuit also contends that ”company insiders” quietly sold approximately 400,000 shares of Netflix stock for just over $90 million when the stock was nearing $300 a share during mid-July. Specifically, Reed Hastings sold 190,000 shares to collect approximately $43 million.

    The lawsuit claims that Netflix knew that content agreements, such as the Starz agreement, were going to expired if they were not renegotiated, but failed to notify investors of this fact. The lawsuit also claims that Netflix management did not notify investors prior to the announcement of spitting up streaming and the DVD rental service or the price hike that came along with that new business plan. While these series of decisions sent the stock below $100 per share, Netflix lost approximately 800,000 subscribers during the third quarter. 

    It’s possible that the attorneys representing the people affected by Netflix’s falling stock price will attempt to make a case that Netflix management purposefully made a series of poor business decisions to drive the price of the stock down, specifically to repurchase the stock once it fell considerably. However, the lawsuit doesn’t identify the specific reasons behind the sale of the company stock, nor does it mention if the stock sale was a pre-scheduled event. The lawsuit also doesn’t state how much of the company stock that the five members of upper management still have on hand. This particular law firm handling the case specializes in corporate class actions and has won previous monetary verdicts from AT&T and Enron.

    This article was originally posted on Digital Trends

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    32 comments

    • Joel
      Joel  •  New Haven, Michigan  •  4 mths ago
      just like that movie the Godfather " ...a man in a suit with a brief case can steal more than 10 men with guns and masks.."
    • WillieM
      WillieM  •  Atlantic City, New Jersey  •  4 mths ago
      ...and the Empire begins its spiral.
    • kyle
      kyle  •  Brick, New Jersey  •  4 mths ago
      did anyone else have a complete heart attack after reading, "Reed Hastings sold 190,000 shares to collect approximately $43 million." I hope they sue the crap out of Netflix for still having Hastings as its CEO after making so much money to only screw over it's investors/customers(intentionally or not)
    • Sam
      Sam  •  4 mths ago
      HAHAHAHAHAHAHAHAHA
    • chicken little
      chicken little  •  Charlotte, North Carolina  •  4 mths ago
      who proof reads this crap. "spitting up streaming"? What idiots.
      • A Nonymous
        A Nonymous 4 mths ago
        I liked the "going to expired" line myself.
      • Chris
        Chris 4 mths ago
        well its Yahoo so don't expect a lot from them.
    • Kristen
      Kristen  •  4 mths ago
      Good luck on that one!!! Investing is considered a savvy persons game--for greater reward they assume the risk. Hence why they have less regulation in investing. There is a lot they would have to prove...it would be easier to skate uphill than win this case.
    • John
      John  •  4 mths ago
      Sadly, stupid is not against the law. So netflix goes on, and the legislature remains free.
    • red
      red  •  4 mths ago
      Get em!
    • KMW
      KMW  •  4 mths ago
      Oh how the mighty have fallen.....it's a shame, I used to love Netflix. If only we as a society could stand up & send the same message to all the politicians that have tanked the country. Baby steps I guess ;)
      • Kristen
        Kristen 4 mths ago
        How does Netflix business decision have anything to do with government?
      • KMW
        KMW 4 mths ago
        It doesn't.

        What I mean is that if we as a society could muster the same passion and 'we're not gonna take it' attitude that has been displayed with regard to Netflix's actions, maybe we could effect some much needed change to the way government works (or doesn't work) these days.

        We're so willing to act when it comes to dvds, but were not willing to do much when it comes to more important things, like jobs, healthcare, poverty, etc. We need to show the same resolve for the bigger issues...need to show the politicians that we are the boss, not them......but ya gotta start somewhere, so home entertainment it is.
    • Kirk
      Kirk  •  4 mths ago
      If you kill somebody, you'll do seven years. If you steal money from the investor class, you'll do fifteen.
    • AUGUSTUS MCCRAE
      AUGUSTUS MCCRAE  •  4 mths ago
      interesting. what it means is that anyone who possibly could have insider knowledge should be prohibited from investing in a certain stock. that means even the doofus in the mailroom.
    • It Is What It Is
      It Is What It Is  •  4 mths ago
      Netflix management did have a new business plan - sell high and go short! Suckers!!!!
    • TOMORROWS HERE
      TOMORROWS HERE  •  Phoenix, Arizona  •  4 mths ago
      Investers should research the investment, The NetFlix contracts were public Knowlege. Whiners.
      • chris
        chris 4 mths ago
        I'll be thumbed down, perhaps, but I must say: It's "investors." I don't normally care to make a big deal about this stuff unless the poster is being a #$%$ but, c'mon, it's in the headline!
    • greene_teeth
      greene_teeth  •  Chattanooga, Tennessee  •  4 mths ago
      I have decided though not notified Netflix I will not be ordering the DVDs requiring streaming to all of my devices.
    • JAR
      JAR  •  Minneapolis, Minnesota  •  4 mths ago
      I still have Netflix, but quit the dvds as I could never get the new ones in a timely manner. I know someone who got them from the local library before I did. I am fed up enough to get rid of them all together. I just don't like crooks so why pay the basdards anything?
    • Daniel
      Daniel  •  Aurora, Colorado  •  4 mths ago
      Investing carries risk, don't want risk, don't invest.
    • Mark SF
      Mark SF  •  4 mths ago
      It is way to early to determine the long term effects of the changes Netflix made.
    • Brian
      Brian  •  Fayetteville, New York  •  4 mths ago
      Well the way things are now i think i will go invest in Chap Stick cause i have a feeling it will be a sucess.I mean with all the ass kissing going on around the world,I mean it has to be a sure thing.
    • chris
      chris  •  4 mths ago
      "spitting up streaming and the DVD rental service"
      I'm splitting mad! :/
      yeah cheesy.. but whatever, cheese is delicious.
    • epd537
      epd537  •  4 mths ago
      And they kept the CEO.Amazing!
     Post a comment
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