Andrea Resnick v. Netflix, Inc.
779 F.3d 914
9th Cir.2015Background
- Netflix and Walmart entered a Promotion Agreement (announced May 19, 2005) whereby Walmart transferred its online DVD-rental subscribers to Netflix, Netflix paid revenue shares and bounties, and Netflix agreed to promote Walmart’s DVD sales; the agreement did not include a non-compete and allowed Walmart to continue renting DVDs.
- At the time, Netflix controlled a dominant share of the online DVD-rental market (≈78% in 2005, >90% by 2010); Walmart’s online rental effort never exceeded ~60,000 subscribers (≈1–2% market share) and was losing subscribers before the deal.
- A class of Netflix subscribers sued under §§ 1 and 2 of the Sherman Act, alleging the Promotion Agreement unlawfully allocated and enabled monopolization of the online DVD-rental market and that subscribers paid supracompetitive prices (claiming Netflix would have cut its 3-disc "3U" price to $15.99 but for the agreement).
- The district court granted summary judgment for Netflix, finding no per se violation and that plaintiffs failed to raise a triable issue of antitrust injury-in-fact; the court certified a class, approved Walmart’s settlement, and later taxed costs to Netflix; both sides appealed portions of the cost award.
- The Ninth Circuit affirmed summary judgment (no antitrust injury) and affirmed in part / vacated in part the costs award, applying a narrow construction of 28 U.S.C. § 1920(4) for e-discovery and related charges and remanding certain cost determinations to the district court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Promotion Agreement violated Sherman Act §§ 1 and 2 (market allocation/monopolization) | Agreement allocated market and enabled Netflix to maintain supracompetitive prices; class paid higher subscription prices. | Agreement did not include exclusivity or noncompete; Walmart was free to compete and its business was failing independently. | Court did not reach merits after finding plaintiffs lacked antitrust injury; summary judgment affirmed. |
| Whether plaintiffs established antitrust injury-in-fact (Article III standing) | Plaintiffs claimed they paid supracompetitive 3U prices because Netflix would have cut price to $15.99 had Walmart remained a competitor. | Market facts and documentary record show Walmart was negligible competitor and Netflix historically did not lower prices in response to Walmart; speculative expert opinions insufficient. | Plaintiffs failed to raise a triable issue of antitrust injury-in-fact; summary judgment for Netflix affirmed. |
| Whether district court properly excluded evidence of other third-party agreements (new theories) | Plaintiffs argued such evidence relevant to competitive effects. | Netflix contended evidence raised unpled liability theories and was properly excluded. | District court did not abuse discretion excluding evidence that supported unpled theories. |
| Whether various e-discovery and vendor charges are taxable costs under 28 U.S.C. § 1920(4) | Plaintiffs argued many e-discovery tasks (data upload, keywording, professional services) are not "making copies" and thus not taxable. | Netflix argued these charges were necessary steps to make produceable copies (TIFF, OCR, metadata) and therefore taxable. | Court vacated in part and remanded: only costs clearly attributable to OCR, TIFF conversion, and endorsing (bates/confidentiality branding) — which plaintiffs required — were taxable on the record; many other data-management and ancillary charges are not taxable under a narrow § 1920(4) reading. |
Key Cases Cited
- Taniguchi v. Kan Pac. Saipan, Ltd., 132 S. Ct. 1997 (2012) (narrow scope of taxable costs under § 1920)
- Gerlinger v. Amazon.com Inc., 526 F.3d 1253 (9th Cir.) (lack of price impact defeats antitrust standing)
- Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) (antitrust injury requirement)
- Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir.) (limitations on e-discovery costs under § 1920)
- Country Vintner of N.C., LLC v. E. & J. Gallo Winery, Inc., 718 F.3d 249 (4th Cir.) (analysis of taxable e-discovery expenses)
- CBT Flint Partners, LLC v. Return Path, Inc., 737 F.3d 1320 (Fed. Cir.) (recoverable costs when production format is required)
- Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437 (1987) (§ 1920 defines costs under Rule 54(d))
- In re Ricoh Co., Ltd. Patent Litig., 661 F.3d 1361 (Fed. Cir.) (electronic production can constitute making copies)
- Zuill v. Shanahan, 80 F.3d 1366 (9th Cir.) (taxable copying limited to physical preparation and duplication)
- Save Our Valley v. Sound Transit, 335 F.3d 932 (9th Cir.) (district court need not fully detail reasons when taxing costs)