Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—NDCal: Attorney’s Fee Award Under “Catalyst” Theory Denied, (May 2, 2013)

By William Zale, J.D.

A deaf Netflix subscriber—who failed to state claims based on the company’s alleged misrepresentation of its intentions to offer movies with captions and/or subtitles—could not recover attorney’s fees under statutes including the California Consumer Legal Remedies Act (CLRA) on the theory that he was the "catalyst" for Netflix’s consent judgment in a separate action filed by the National Association for the Deaf (NAD), the federal district court in San Jose has ruled (Cullen v. Netflix, Inc., May 1, 2013, Davila, E.). The court also denied Netflix’s request for fees under California’s Unruh Civil Rights Act and Disabled Persons Act (DPA).

In March 2011 the subscriber brought suit under the Americans with Disabilities Act, the above statutes, and California’s Unfair Competition Law and False Advertising Law. Following dismissal, the subscriber filed a notice of appeal, and the parties filed their motions for attorney’s fees and costs.

Catalyst theory. The subscriber argued that he was entitled to fees because his action motivated Netflix’s changed behavior in entering into a 2012 consent judgment in Nat’l Ass’n of the Deaf v. Netflix, Inc., No. 11-cv-30168 (D Mass.). The court disagreed, noting that the California Supreme Court in Tipton-Whittingham v. City of Los Angeles, 34 Cal. 4th 604, 608 (2004), had held that, in order to obtain attorney fees under the catalyst theory, a plaintiff must establish that (1) the lawsuit was a catalyst motivating the defendants to provide the primary relief sought; and (2) that the lawsuit had merit and achieved its catalytic effect by threat of victory, not by dint of nuisance and threat of expense.

The subscriber failed to satisfy the Tipton-Whittingham test. NAD’s motivation to file suit was not the result of the subscriber’s suit; he did not participate in the settlement negotiations in the NAD case; and he failed to establish that his suit had merit, the court determined.

Prevailing party. In denying Netflix’s request for fees, the court observed that Sec. 1032(a)(4) of the California Civil Procedure Code has defined a "prevailing party" for the purposes of fees and costs statutes like Sec. 55 of the DPA as "a defendant in whose favor a dismissal is entered" and "a defendant as against those plaintiffs who do not recover any relief against that defendant." However, section 1032 did not purport to define "prevailing party" for all purposes, and the court observed that the California Supreme Court had held that the determination that a defendant is a prevailing party is generally discretionary. In declining to award fees, the court found no indication that the subscriber filed his DPA claim in bad faith and alluded to the policy objectives underlying private attorney general enforcement of civil rights statutes.

The case is No. 5:11-CV-01199-EJD.

Attorneys: Courtland Wayne Creekmore (The Weston Firm) for Donald Cullen. David Frank McDowell (Morrison & Foerster LLP) for Netflix, Inc.

Companies: Netflix, Inc.

Cases: StateUnfairTradePractices CaliforniaNews