Update: Netflix Pays $9 Million To Settle Video Privacy Lawsuit

Netflix

Netflix (NSDQ: NFLX) disclosed this afternoon that it will pay to settle nationwide claims that it illegally retained customers’ rental histories. (Updated with Netflix statement)

The settlement, disclosed in a securities filing, grows out of a 2011 lawsuit that accused the company of violating the Video Privacy Protection Act and California consumer laws. The VPPA forbids video rental agencies from disclosing customer information and also requires them to destroy certain data within one year.

In the lawsuit, former customers said they discovered Netflix still had their personal information when they went to resubscribe to the service later on. This information includes viewing histories or “queues” that Netflix uses to predict what subscribers might want to watch next.

In a related legal filing, Netlix said it is working with plaintiffs’ lawyers to finalize the details of the $9 million settlement before seeking court approval. In these type of deals, lawyers typically take 25 percent of the award.

The VPPA has been an ongoing nuisance for Netflix. Congress passed the 1988 law in the VHS era after a newspaper published the video rental history of Supreme Court nominee Robert Bork; today, the language of the law also applies to newer technologies like streaming. The law, which forbids disclosing rental histories, is blocking Netflix from jumping onto Facebook’s frictionless sharing platform. The company is pushing Congress to amend the law.

UPDATE: Steve Swasey, VP of Corporate Communications for Netflix, provided the following statement:

Netflix has settled a lawsuit related to the company’s compliance with the Video Privacy Protection Act with no admission of wrongdoing. This matter is unrelated to the company’s concerns about the ambiguities contained in the VPPA, which keep Netflix from offering its U.S. members the ability to share their instant watching information with their Facebook friends, an experience Netflix members currently enjoy in 46 other countries.

Last year, streaming radio service Pandora (NYSE: P) tripped over a similar state law in Michigan where it is being sued for disclosing subscribers’ playlists.

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