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Case 5:18-cv-02107-BLF Document 77 Filed 03/05/20 Page 1 of 25

1 THOMAS L. LAUGHLIN, IV (pro hac vice)


JONATHAN M. ZIMMERMAN (pro hac vice)
2 SCOTT+SCOTT ATTORNEYS AT LAW LLP
The Helmsley Building
3 230 Park Avenue, 17th Floor
New York, NY 10169
4 Telephone: 212-223-6444
Facsimile: 212-223-6334
5 Email: tlaughlin@scott-scott.com
jzimmerman@scott-scott.com
6
JOHN T. JASNOCH (CA 281605)
7 SCOTT+SCOTT ATTORNEYS AT LAW LLP
600 W. Broadway, Suite 3300
8 San Diego, CA 92101
Telephone: 619-233-4565
9 Facsimile: 619-233-0508
Email: jjasnoch@scott-scott.com
10
Attorneys for Plaintiff City of Birmingham
11 Relief and Retirement System

12 UNITED STATES DISTRICT COURT


NORTHERN DISTRICT OF CALIFORNIA
13 SAN JOSE DIVISION

14 CITY OF BIRMINGHAM RELIEF AND Case No. 5:18-cv-02107-BLF


RETIREMENT SYSTEM, Derivatively and on
15 Behalf of Nominal Defendant NETFLIX, INC.,
DERIVATIVE ACTION
16 Plaintiff,
PLAINTIFF’S UNOPPOSED NOTICE
17 v. OF MOTION AND MOTION FOR
PRELIMINARY APPROVAL OF
18 REED HASTINGS, DAVID WELLS, SETTLEMENT; MEMORANDUM OF
RICHARD BARTON, A. GEORGE (SKIP) POINTS AND AUTHORITIES IN
19 BATTLE, TIMOTHY HALEY, JAY HOAG, SUPPORT THEREOF
LESLIE KILGORE, ANN MATHER, BRAD
20 SMITH, ANNE SWEENEY, NEIL HUNT, TED
SARANDOS, GREG PETERS, and DAVID Date: April 23, 2020
21 HYMAN, Time: 9:00 a.m.
JUDGE: Hon. Beth Labson Freeman
22 Defendants, DEPT: Courtroom 3 – 5th Floor

23 - and -
24 NETFLIX, INC.,
25 Nominal Defendant.
26

27

28

PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
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1 TABLE OF CONTENTS

2
NOTICE OF MOTION AND MOTION ....................................................................................... iv
3
STATEMENT OF ISSUE TO BE DECIDED............................................................................... iv
4
MEMORANDUM OF POINTS & AUTHORITIES...................................................................... 1
5 I. INTRODUCTION .............................................................................................................. 1
6 II. BACKGROUND ................................................................................................................ 2
7 A. Factual and Procedural History ................................................................................... 2
B. The Terms of the Proposed Derivative Settlement ..................................................... 5
8
III. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL........... 8
9
A. The Standard for Preliminary Approval ...................................................................... 9
10 B. The Settlement Is Within the Range of Possible Final Approval.............................. 10
11 1. Great Weight Should Be Attributed to the Settling Parties’ Belief that the
Settlement Is Fair and Reasonable ...................................................................... 10
12
2. The Proposed Settlement Was Reached Through Arm’s-Length Negotiations
13 and Falls Well Within an Appropriate Range for Possible Final Approval ........ 12

14 3. The Settlement Confers a Substantial Benefit on Netflix and Easily


Outweighs the Mere Possibility of Future Relief After Protracted and
15 Expensive Litigation............................................................................................ 13

16 4. The Settlement Appropriately Weighs the Benefits Conferred Upon


Netflix with the Significant Risks of Continued Litigation ................................ 14
17 IV. THE PROPOSED NOTICE TO NETFLIX SHAREHOLDERS IS ADEQUATE .......... 15
18 V. PROPOSED SCHEDULE FOR FINAL APPROVAL..................................................... 17
19 VI. CONCLUSION ................................................................................................................. 17

20

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26

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1 TABLE OF AUTHORITIES

2 Page(s)
3 Cases
4 Alberto v. GMRI, Inc.,
5 252 F.R.D. 652 (E.D. Cal. 2008) .........................................................................................9, 10

6 Arace v. Thompson,
No. 08 Civ. 7905, 2011 WL 3627716 (S.D.N.Y. Aug. 17, 2011) ...........................................16
7
Cohn v. Nelson,
8 375 F. Supp. 2d 844 (E.D. Mo. 2005)........................................................................................8
9 Gautreaux v. Pierce,
690 F.2d 616 (7th Cir. 1982) ...................................................................................................10
10

11 Greenspun v. Bogan,
492 F.2d 375 (1st Cir. 1974) ......................................................................................................9
12
Hanlon v. Chrysler Corp.,
13 150 F.3d 1011 (9th Cir. 1998) ...................................................................................................9
14 In re Activision, Inc. S’holder Deriv. Litig.,
Case No. 2:06-cv-04771, slip op. (C.D. Cal. May 13, 2008) ..................................................16
15
In re AOL Time Warner S’holder Deriv. Litig.,
16
No. 02 Civ. 6302, 2006 WL 2572114 (S.D.N.Y. Sept. 6, 2006) ...............................................8
17
In re Atmel Corp. Deriv. Litig.,
18 No. C 06-4592 JF (HRL), 2010 WL 9525643 (N.D. Cal. Mar. 31, 2010) ..............................13

19 In re Austrian and German Bank Holocaust Litig.,


80 F. Supp. 2d 164 (S.D.N.Y. 2000)........................................................................................12
20
In re Blue Coat Sys., Inc. Deriv. Litig.,
21
Case No. 06-cv-04809-JF-RS, slip op. (N.D. Cal. Nov. 12, 2010) .........................................16
22
In re Ditech Networks, Inc. Deriv. Litig.,
23 Case No. 5:06-cv-05157-JF, slip op. (N.D. Cal. Oct. 23, 2009)..............................................16

24 In re First Capital Holdings Corp. Fin. Prods. Sec. Litig.,


MDL No. 901, 1992 WL 226321 (C.D. Cal. June 10, 1992) ..................................................11
25
In re Hewlett-Packard Co. S’holder Deriv. Litig.,
26 No. 3:12-cv-06003-CRB, 2015 WL 1153864 (N.D. Cal. Mar. 13, 2015) ...............................13
27
In re KLA-Tencor Corp., S’holder Deriv. Litig.,
28 Case No. 5:06-cv-03445-JW, slip op. (N.D. Cal. Mar. 25, 2010) ...........................................16
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1 In re MRV Commc’ns, Inc. Deriv. Litig.,


No. CV 08-03800, 2013 WL 2897874 (C.D. Cal. June 6, 2013) ..................................9, 13, 16
2
In re NVIDIA Corp.,
3 No. C-06-06110-SBA (JCS), 2008 WL 5382544 (N.D. Cal. Dec. 22, 2008) .........9, 12, 13, 14
4
In re Pac. Enters. Sec. Litig.,
5 47 F.3d 373 (9th Cir. 1995) .....................................................................................................10

6 In re PMC–Sierra, Inc. Deriv. Litig.,


No. 06-cv-05330-RS, slip op. (N.D. Cal. Jan. 26, 2010) .........................................................16
7
In re Rambus, Inc., Deriv. Litig.,
8 No. C 06-3513 JF (HRL), 2009 WL 166689 (N.D. Cal. Jan. 20, 2009)..................................13
9 Maher v. Zapata Corp.,
10 714 F.2d 436 (5th Cir. 1983) ...............................................................................................8, 15

11 Mills v. Elec. Auto-Lite Co.,


396 U.S. 375 (1970) .................................................................................................................13
12
Mohammed v. Ells,
13 No. 12-cv-1831, 2014 WL 4212687 (D. Colo. Aug. 26, 2014) ...............................................14
14 Mullane v. Cent. Hanover Bank & Trust Co.,
339 U.S. 306 (1950) .................................................................................................................16
15

16 Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc.,


221 F.R.D. 523 (C.D. Cal. 2004) .......................................................................................10, 12
17
Officers for Justice v. Civil Serv. Comm’n of San Francisco,
18 688 F.2d 615 (9th Cir. 1982) .................................................................................................8, 9
19 Sved v. Chadwick,
783 F. Supp. 2d 851 (N.D. Tex. 2009) ....................................................................................13
20

21 True v. Am. Honda Motor Co., Inc.,


No. EDCV 07-287, 2009 WL 838284 (C.D. Cal. Mar. 25, 2009) .......................................9, 10
22
U.S. v. McInnes,
23 556 F.2d 436 (9th Cir. 1977) .....................................................................................................8

24 Villanueva v. Morpho Detection, Inc.,


No. 13-cv-05390-HSG, 2015 WL 4760464 (N.D. Cal. Aug. 12, 2015) ..................................15
25
Williams v. First Nat’l Bank,
26
216 U.S. 582 (1910) ...................................................................................................................8
27

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1 Statutes, Rules, and Regulations

2 8 Del. C.
§220................................................................................................................................2, 11, 12
3
26 U.S.C.
4
§162(m) ......................................................................................................................................3
5
Federal Rules of Civil Procedure
6 Rule 12(b)(6) ..............................................................................................................................3
Rule 23.1 .................................................................................................................. iv, 3, 16, 17
7 Rule 23.1(c)..........................................................................................................................9, 15
8 Other Authorities
9 MANUAL FOR COMPLEX LITIGATION,
10 §21.632 (4th ed. 2004) .........................................................................................................9, 10

11

12

13

14

15

16

17

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19

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21

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1 NOTICE OF MOTION AND MOTION

2 PLEASE TAKE NOTICE that on April 23, 2020, or at such other date and time as ordered

3 by the Court, in Courtroom 3, 5th Floor, of the United States District Court for the Northern District

4 of California, located at 280 South 1st Street, San Jose, California, Plaintiff in the above-captioned

5 shareholder derivative action (the “Action”) will appear before the Honorable Beth Labson

6 Freeman to move (the “Motion”), pursuant to Rule 23.1 of the Federal Rules of Civil Procedure,

7 for entry of an order granting preliminary approval of the Stipulation of Settlement (the

8 “Stipulation”)1 entered between and among the parties to the Action.

9 This Motion seeks an order (the “Preliminary Approval Order”):2 (a) granting preliminary

10 approval of the settlement embodied within the Stipulation (the “Settlement”); (b) directing that

11 notice of the Settlement (including the Fee Award Provision), be provided to current shareholders

12 of Netflix, Inc. (“Netflix”) in substantially the form and method agreed to by the parties and as

13 ordered by the Court; (c) setting the deadline and procedure for current Netflix shareholders to file

14 and serve objections, if any, to the proposed Settlement in a form and manner directed by the

15 Court; and (d) setting a date for a hearing on a motion for final approval of the Settlement (the

16 “Settlement Hearing”).

17 This motion is based on the accompanying Declaration of Thomas L. Laughlin, and

18 exhibits thereto, the Court’s file, and such other matters as may be considered at the hearing.

19 STATEMENT OF ISSUE TO BE DECIDED

20 Is the Settlement, wherein the Board of Directors (the “Board”) of Netflix, Inc. (“Netflix”

21 or the “Company”) has agreed to adopt, maintain, and implement important corporate governance

22 reforms upon Final approval, within the range of possible approval such that notice of the

23 Settlement should be directed to current Netflix shareholders and a date for a Settlement Hearing

24 should be set by the Court?

25
1
The Stipulation is filed as Exhibit A to the Declaration of Thomas L. Laughlin, IV in
26 Support of Motion for Preliminary Approval of Settlement (the “Laughlin Decl.”), filed
contemporaneously herewith. All capitalized terms herein, unless otherwise defined, have the
27 same meaning as set forth in the Stipulation.
28 2
The [proposed] Preliminary Approval Order is filed with the Motion.
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1 MEMORANDUM OF POINTS & AUTHORITIES

2 I. INTRODUCTION

3 Plaintiff and Defendants3 have reached a settlement in the above-captioned action

4 resolving claims brought derivatively on behalf of Netflix. As a result, Plaintiff now seeks an

5 order from the Court: (i) granting preliminary approval of the proposed Settlement; (ii) directing

6 that notice of the proposed Settlement be given to Netflix’s shareholders in the proposed form

7 and manner submitted herewith; and (iii) scheduling a hearing before the Court to determine

8 whether the proposed Settlement should be granted Final approval. As set forth in detail herein

9 and in the Stipulation of Settlement attached hereto, the proposed Settlement, including the

10 corporate governance reforms that will be implemented promptly, which directly address and

11 seek to prevent the alleged wrongdoing from occurring again, finally resolves all the claims

12 asserted in the Action.

13 The Settlement is the product of extensive arm’s-length negotiations among the parties to

14 the Action. Pursuant to the terms of the Settlement, Netflix’s Board has agreed to adopt and/or

15 maintain for a minimum of no less than four years from the effective date of the Settlement,

16 corporate governance reforms that: (i) enhance Netflix’s management Disclosure Committee;

17 (ii) enhance bonus-related disclosures about regular and annual bonus compensation; (iii) require

18 Netflix to retain compensation and tax consultants to assist the Compensation Committee in

19 identifying risks associated with bonuses; (iv) require the Board to receive legal advice from

20 Netflix’s General Counsel’s office about regulatory compliance related to compensation; and that

21 (v) augment and strengthen training for directors on compensation-related issues and compliance

22 (collectively, the “Corporate Reforms”). In sum, the Settlement provides significant and material

23 benefit to Netflix, was reached after intensive arm’s-length negotiations between experienced and

24 informed counsel on both sides, and is well within the range of what might be approved as fair,

25 reasonable, and adequate at a final approval hearing. Accordingly, Plaintiff respectfully submits,

26
3
“Defendants” refers to Reed Hastings, David Wells, Richard Barton, A. George (Skip)
27 Battle, Timothy Haley, Jay Hoag, Leslie Kilgore, Ann Mather, Brad Smith, Anne Sweeney, Neil
Hunt, Ted Sarandos, Greg Peters, and David Hyman (collectively, the “Individual Defendants”),
28 and Netflix, Inc.
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1 and Defendants do not oppose, that the Court should enter the Preliminary Approval Order,

2 granting preliminary approval of the Settlement and providing for notice to Netflix’s

3 shareholders.

4 II. BACKGROUND

5 A. Factual and Procedural History

6 On July 18, 2017, the Financial Times ran an article, entitled “Netflix Executives Keep

7 Hitting Bonus Bullseyes,” and stating that investors and tax experts had begun questioning

8 whether Netflix’s targets were a “fait accompli[,]” as opposed to legitimate performance goals.

9 ¶8.4 The Financial Times further explained that for Netflix to “compl[y] with the US tax code,”

10 bonuses for highly paid executives were only permitted to be deducted from corporate taxes if

11 “the outcome is substantially uncertain.” At the time of the article, Netflix’s top officers had hit

12 their target squarely in seven out of eight quarters, missing by just one percentage point in the

13 other quarter. ¶7. This resulted in Netflix paying these select officers approximately

14 $18.73 million out of a target pool of $18.75 million. Id.

15 On August 17, 2017, having reviewed this article, Plaintiff sent a books and records

16 demand seeking Board-level materials relating to the potential wrongdoing pursuant to 8 Del. C.

17 §220 (“Section 220”). On October 13, 2017, Netflix produced over 1,200 pages of both redacted

18 and unredacted Board-level documents, including certain materials received by the Board from

19 January 2014 to September 2017 (the “Production”). On November 7, 2017, Netflix produced a

20 redaction and privilege log (the “Privilege Log”), listing 31 documents previously produced to

21 Plaintiff in redacted form as part of the Production.

22 Plaintiff filed the Complaint on April 6, 2018, which alleged that Netflix’s Board breached

23 its fiduciary duty in connection with the administration of Netflix’s Performance Bonus Plan (the

24 “Plan”) and by causing Netflix to issue false and misleading proxy statements concealing its

25 misconduct in violation of federal securities laws. ¶1. The Complaint alleged that the Individual

26

27 4
All “¶” and “¶¶” references herein are to the Verified Shareholder Derivative Complaint
filed under seal on April 6, 2018, with a redacted version filed on April 18, 2018 (ECF No. 25)
28 (the “Complaint”).
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1 Defendants misled shareholders into approving the compensation paid to Netflix’s top officers by

2 representing that the bonuses were paid for the attainment of substantially uncertain performance

3 goals, when, in fact, they knew or had reason to know that the targets set for the goals were nearly

4 guaranteed to be achieved. ¶6. Consequently, the bonuses issued were not “performance-based”

5 under 26 U.S.C. §162(m) (“Section 162(m)”), and Netflix’s proxy statements characterizing the

6 payouts as being, or as capable of being, Section 162(m)-compliant were materially false and

7 misleading. ¶¶64-66, 69-72, 75-78.

8 On June 8, 2018, Defendants filed motions to dismiss arguing that Plaintiff did not

9 demonstrate demand futility pursuant to Federal Rule of Civil Procedure 23.1 or state a claim

10 pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants argued Plaintiff did not

11 sufficiently plead that at least a majority of the Board knew about the requirements of Section

12 162(m), or knew of any alleged violations of Section 162(m). ECF No. 30 at 14-15. Further,

13 Defendants argued that the Complaint lacked particularized facts showing that the Board actually

14 reviewed and approved the release of the allegedly false proxy statements. Id. at 16-17.

15 On December 13, 2018, having reviewed briefing on Defendants’ motions to dismiss,

16 Judge Freeman heard oral argument.

17 On February 13, 2019, the Court granted Defendants’ motion to dismiss pursuant to Rule

18 23.1 without prejudice. The Court found that Plaintiff had adequately alleged, at the pleadings

19 stage, that Netflix had issued misleading proxy statements and the culpable involvement of three

20 members of Netflix’s nine-member Board. ECF No. 50 at 18, 20. However, the Court found that

21 the Complaint did not contain facts sufficient to implicate a majority of Netflix’s Board. See,

22 e.g., id. at 15. The Court granted Plaintiff leave to file an amended complaint.

23 In connection with the drafting of Plaintiff’s amended complaint, Plaintiff sought the

24 production of unredacted versions of certain documents that were previously produced to Plaintiff

25 in redacted form. Counsel for Plaintiff and Defendants subsequently undertook negotiations on

26 the production of those documents, leading to an in-person meeting on March 21, 2019, during

27 which the contents of the documents were shown to Plaintiff’s counsel without certain redactions

28
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1 subject to a non-waiver agreement. Following this meeting, the parties were able to narrow the

2 number of documents in dispute from 31 to 17 (the “Contested Documents”).

3 On April 16, 2019, the parties filed a stipulation and proposed order advising the Court of

4 the dispute and asking the Court to extend the deadline for the filing of Plaintiff’s amended

5 complaint until 30 days from an order resolving Plaintiff’s motion to compel the production of

6 the Contested Documents. ECF No. 53.

7 On April 17, 2019, the Court granted the parties’ request and directed Plaintiff to make its

8 motion to compel before Magistrate Judge Nathanael Cousins on or before April 30, 2019. ECF

9 No. 54. Plaintiff’s April 30, 2019 motion to compel was fully briefed by May 17, 2019. On May

10 21, 2019, Judge Cousins vacated the then-forthcoming May 22, 2019 hearing, finding that the

11 motion was appropriate to decide on the parties’ papers.

12 Following briefing on Defendants’ motion to dismiss and while the parties negotiated for

13 the production of the Contested Documents, counsel for Plaintiff and Defendants also undertook

14 negotiations regarding a possible resolution of the Action. As a result of those arm’s-length

15 negotiations, Plaintiff and Defendants reached a tentative agreement-in-principle for the

16 resolution of the Action.

17 On October 15, 2019, Plaintiff and Defendants executed a Memorandum of

18 Understanding (the “MOU”), memorializing the terms of their agreement-in-principle to resolve

19 the Action, subject to the approval of the Board.

20 On October 28, 2019, the Board unanimously approved the MOU pursuant to a

21 Unanimous Written Consent.

22 On December 2, 2019, Plaintiff confirmed to Defendant that, based upon the

23 documentation and information received and discussions with Defendants’ counsel, in addition

24 to Plaintiff’s investigation, the Settlement is fair, reasonable, and adequate.

25 Following agreement among the Settling Parties to the terms of the Stipulation, other than

26 with respect to the amount of any attorneys’ fees and expenses to be paid to Plaintiff’s Counsel,

27 Plaintiff’s Counsel and Defendants’ counsel separately reached agreement regarding the amount

28
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1 of attorneys’ fees and expenses to be paid to Plaintiff’s Counsel. The Settling Parties did not

2 discuss the appropriateness of any amount of attorneys’ fees and expenses before all other terms

3 of the Settlement were agreed upon, and the Settling Parties understood at all times that the

4 Settlement was not contingent upon agreement or payment of any attorneys’ fees and expenses

5 to Plaintiff’s Counsel.

6 As a result of these negotiations, the Settling Parties reached an agreement to settle the

7 Action upon the terms and conditions set forth in the Stipulation.

8 Plaintiff has owned shares of Netflix common stock since the outset of the Action and

9 continues to do so. Plaintiff, having thoroughly considered the facts and law underlying the

10 Action, and based upon the investigation and prosecution of the Action, and after weighing the

11 risks of continued litigation, and the value of the proposed Settlement, has determined that it is in

12 the best interest of Netflix and Netflix shareholders that the Action be fully and finally settled in

13 the manner and upon the terms and conditions set forth in the Stipulation, and that those terms

14 and conditions are fair, reasonable, and adequate to Netflix and Netflix shareholders.

15 The Individual Defendants have denied and continue to deny the allegations of

16 wrongdoing and the allegations of liability arising out of the conduct, statements, acts, or

17 omissions alleged, or that could have been alleged in the Action. Nonetheless, the Individual

18 Defendants have concluded that further proceedings would be protracted, expensive, and

19 uncertain, and have determined that it is desirable that the claims against them be settled to avoid

20 further distraction, disruption, and to reduce the risk and expense of further litigation, on the terms

21 reflected in the Stipulation.

22 B. The Terms of the Proposed Derivative Settlement

23 In consideration of the Settlement, Netflix and the Board have agreed to implement the

24 corporate governance changes below for a period of no less than four years.

25 Enhancements of the Disclosure Committee. Netflix currently has a management

26 Disclosure Committee (the “Committee”). Netflix agrees that it will maintain the existence of

27 this Committee, and that this Committee will take the following affirmative steps with respect to

28
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1 Netflix’s disclosures relating to compensation matters. The Disclosure Committee will: (i) review

2 draft disclosures related to compensation matters in Netflix’s proxy (the Compensation

3 Discussion and Analysis section) to ensure, to the extent possible, that the proxy does not

4 inaccurately characterize Netflix’s compliance with federal and/or state law and discloses all

5 material information related to compensation to Named Executives Officers and/or directors; (ii)

6 receive input from experienced outside counsel on the draft proxy disclosures and on the

7 Disclosure Committee’s annual report to the full Board of Directors; and (iii) issue an annual

8 report to the full Board of Directors on the accuracy and completeness of Netflix’s compensation

9 proxy disclosures.

10 Enhanced Bonus-Related Disclosures. Netflix’s compensation disclosures shall include,

11 to the extent applicable, the following general information with respect to any regular bonuses

12 associated with annual compensation paid or proposed to be paid to Named Executives Officers

13 and/or directors: (i) Netflix’s bonus philosophy; (ii) the process by which bonus decisions are

14 made; (iii) significant changes in bonus policies or philosophy; (iv) any material impact of bonus

15 decisions, programs, or payouts on Netflix’s financial, legal, and compliance risk; and (v) the

16 justification and reasoning for any bonus awards.

17 Retention of Compensation and Tax Consultant(s). With respect to the use of any regular

18 bonuses associated with annual compensation paid or proposed to be paid to Named Executive

19 Officers and/or directors, the Compensation Committee shall retain an independent compensation

20 and tax consultant(s) (the “Compensation Consultant”) to assist the Compensation Committee in

21 carrying out its duties, including identifying possible risks associated with any regular bonuses

22 associated with annual compensation and related disclosures by Netflix. More specifically, the

23 Compensation Consultant will be retained to support the work of the Compensation Committee

24 with respect to evaluation and design of any regular bonuses associated with annual compensation

25 paid or proposed to be paid to Named Executive Officers and/or directors, including providing

26 input on performance measures and targets and compensation methods, conditions and criteria,

27 and quantitative target ranges.

28
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1 Enhancement of General Counsel’s Office Related to Legal Advice on Regulatory

2 Compliance. Netflix shall designate a member of the General Counsel’s Office (either the general

3 counsel or a deputy) to serve as the designated internal legal counsel with respect to regulatory

4 issues concerning compensation paid to Named Executive Officers and/or Directors. The

5 individual so designated will consult with the Compensation Committee on at least an annual

6 basis concerning relevant regulatory issues pertaining to Netflix’s compensation paid to Named

7 Executive Officers and/or Directors and shall advise the Compensation Committee concerning

8 Netflix’s regulatory compliance or advise that additional resources (such as external counsel with

9 relevant expertise) are warranted to ensure Netflix’s compliance with applicable regulations.

10 Training for Directors. Netflix will, within 12 months of settlement approval, provide a

11 training session for the Compensation Committee overseen by Netflix’s General Counsel Office

12 that will include, but not be limited to, industry trends in the design of compensation plans,

13 avoidance of legal and regulatory pitfalls in designing and implementing performance plans,

14 methods of stockholder engagement on compensation policies, including the utilization of a “Say-

15 on-Pay” stockholder proxy vote, stockholder evaluation of compensation plans, and other

16 methods of engaging stockholders on Netflix compensation philosophy and policies, as well as

17 peer practices for compensation plans. Netflix also will, within 12 months of settlement approval,

18 provide a training session to the Board overseen by Netflix’s General Counsel Office regarding

19 the responsibilities of publicly traded companies and their directors and officers under Generally

20 Accepted Accounting Principles (“GAAP”), the Sarbanes-Oxley Act of 2002, the Securities

21 Exchange Act of 1934, the Securities Act of 1933, public company reporting and compliance

22 requirements, and other topics that are appropriate for, or of interest to, the compliance of public

23 companies with applicable laws.

24 Additional Compensation-Related Actions. With respect to the use of any regular bonuses

25 associated with annual compensation paid or proposed to be paid to Named Executive Officers

26 and/or directors, the Compensation Committee shall review the compensation philosophy,

27

28
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1 compensation metrics and amounts, and the results of shareholder “Say-on-Pay” votes in prior

2 year(s) before using any such bonus compensation.

3 Also, as part of the Settlement, and separately from the substantive terms, the Settling

4 Parties agreed that Plaintiff’s Counsel would be entitled to apply for a Fee and Expense Award

5 in an amount up to $800,000 and an Incentive Award for Plaintiff of $10,000, and that Defendants

6 would not oppose any such application.

7 III. THE PROPOSED SETTLEMENT WARRANTS PRELIMINARY APPROVAL

8 The Settlement creates significant material benefits for Netflix and is the result of intense

9 arm’s-length negotiations by experienced counsel. As a result of the filing, prosecution, and

10 settlement of the Action, Defendants have agreed to implement meaningful corporate governance

11 reforms designed to prevent the misconduct alleged in the Complaint. Accordingly, Plaintiff

12 respectfully submits that the Settlement is fair, reasonable, and adequate, and should be

13 preliminarily approved by the Court. Defendants agree that the Settlement is fair, reasonable, and

14 adequate, and should be preliminarily approved by the Court.

15 It is well settled that “[c]ompromises of disputed claims are favored by the courts.”

16 Williams v. First Nat’l Bank, 216 U.S. 582, 595 (1910); Officers for Justice v. Civil Serv. Comm’n

17 of San Francisco, 688 F.2d 615, 635 (9th Cir. 1982) (recognizing that the “settlement process [is]

18 favored in the law”); U.S. v. McInnes, 556 F.2d 436, 441 (9th Cir. 1977) (explaining that “there

19 is an overriding public interest in settling and quieting litigation”). This is particularly true with

20 respect to shareholder derivative litigation, “because such litigation is ‘notoriously difficult and

21 unpredictable.’” Maher v. Zapata Corp., 714 F.2d 436, 455 (5th Cir. 1983).5 See also In re AOL

22 Time Warner S’holder Deriv. Litig., No. 02 Civ. 6302, 2006 WL 2572114, at *3 (S.D.N.Y. Sept.

23 6, 2006) (recognizing that public policy favors settlement of shareholder derivative litigation);

24 Cohn v. Nelson, 375 F. Supp. 2d 844, 852 (E.D. Mo. 2005) (settlement of shareholder derivative

25 suits is ‘“particularly favored’”).

26

27

28 5
Unless otherwise noted, citations are omitted and emphasis is added.
8
PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
CASE NO. 5:18-CV-02107-BLF
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1 A. The Standard for Preliminary Approval

2 Federal Rule of Civil Procedure 23.1(c) provides that “[a] derivative action may be settled,

3 voluntarily dismissed, or compromised only with the court’s approval.” In addition, Rule 23.1(c)

4 mandates that “[n]otice of a proposed settlement . . . must be given to shareholders or members in the

5 manner that the court orders.” This generally involves a two-step process. “[U]nder Ninth Circuit

6 precedent, [the] Court must grant preliminary approval of a settlement, including approval of the

7 notice to shareholders and the proposed method of notice, before having the final settlement hearing.”

8 In re NVIDIA Corp., No. C-06-06110-SBA (JCS), 2008 WL 5382544, at *2 (N.D. Cal. Dec. 22,

9 2008); In re MRV Commc’ns, Inc. Deriv. Litig., No. CV 08-03800, 2013 WL 2897874, at *2 (C.D.

10 Cal. June 6, 2013) (“[A]pproval of a derivative action appears to be a two-step process, similar to that

11 employed for approving class action settlements, in which the Court first determines whether a

12 proposed settlement deserves preliminary approval and then, after notice of the settlement is provided

13 to class members, determines whether final approval is warranted.”); True v. Am. Honda Motor Co.,

14 Inc., No. EDCV 07-287, 2009 WL 838284, at *3 (C.D. Cal. Mar. 25, 2009) (citing MANUAL FOR

15 COMPLEX LITIGATION, §21.632 (4th ed. 2004) (“Manual”)); Greenspun v. Bogan, 492 F.2d 375, 382

16 (1st Cir. 1974) (preliminary approval and notice in a derivative action is designed to ‘“fairly apprise’”

17 the company’s shareholders ‘“of the terms of the proposed settlement and of the options that are open

18 to them’”).

19 At this time, the Court need only preliminarily approve the Settlement by “conduct[ing] a

20 cursory review of the terms of the parties’ settlement for the purpose of resolving any glaring

21 deficiencies” before authorizing the dissemination of notice of the settlement. Alberto v. GMRI,

22 Inc., 252 F.R.D. 652, 665 (E.D. Cal. 2008) (granting preliminary approval of a proposed class

23 action settlement). At the preliminary approval stage the Court’s review of the proposed

24 Settlement is “limited to the extent necessary to reach a reasoned judgment that the agreement is

25 not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that

26 the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” Officers for

27 Justice, 688 F.2d at 625; accord Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998).

28
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1 This is a low threshold, requiring the Court to determine only “whether a proposed

2 settlement is ‘within the range of possible approval’ and that notice should be sent to class

3 members.” True, 2009 WL 838284, at *3; see also Manual at §13.14 (“First, the [court] reviews

4 the proposal preliminarily to determine whether it is sufficient to warrant public notice and a

5 hearing. If so, the final decision on approval is made after the hearing.”).6 A finding that a

6 proposed settlement deserves preliminary approval is merely “the ground work for a future

7 fairness hearing.” Alberto, 252 F.R.D. at 659 (citing Nat’l Rural Telecomms. Coop. v. DIRECTV,

8 Inc., 221 F.R.D. 523, 525 (C.D. Cal. 2004)).

9 As demonstrated below, application of the relevant factors dictates that preliminary

10 approval of the proposed Settlement should be granted.

11 B. The Settlement Is Within the Range of Possible Final Approval

12 The Settlement should be preliminarily approved because it provides substantial benefits

13 to Netflix and its shareholders, is designed to prevent the “corporate trauma” alleged in the

14 Complaint, was negotiated at arm’s length, informed by substantial investigation, and

15 appropriately balances the risks of litigation against the benefits of Settlement. Accordingly, the

16 Settlement falls within the range of possible approval.

17 1. Great Weight Should Be Attributed to the Settling Parties’ Belief that


the Settlement Is Fair and Reasonable
18
The Settlement meets the standards for preliminary approval. As a threshold matter, the
19
Settling Parties and their respective counsel believe that the proposed Settlement before the Court
20
represents a fair, reasonable, beneficial, and practical resolution of highly uncertain litigation, and
21
that its terms fairly account for the risks and potential rewards of the claims being settled.
22
Stipulation at 4-5. As the Ninth Circuit has recognized, significant weight should be attributed to
23
the parties’ belief that the litigation should be settled on the proposed terms, since “[p]arties
24
represented by competent counsel are better positioned than courts to produce a settlement that
25
fairly reflects each party’s expected outcome in litigation.” In re Pac. Enters. Sec. Litig., 47 F.3d
26

27 6
See also Gautreaux v. Pierce, 690 F.2d 616, 621 n.3 (7th Cir. 1982) (purpose of preliminary
approval is “to ascertain whether there is any reason to notify the class members of the proposed
28 settlement and to proceed with a fairness hearing”).
10
PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
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1 373, 378 (9th Cir. 1995); see also In re First Capital Holdings Corp. Fin. Prods. Sec. Litig., MDL

2 No. 901, 1992 WL 226321, at *2 (C.D. Cal. June 10, 1992) (finding belief of counsel that the

3 proposed settlement represented the most beneficial result for the class to be a compelling factor

4 in approving settlement).

5 Here, Plaintiff and Plaintiff’s Counsel have engaged in extensive investigation, document

6 discovery, and other litigation efforts throughout the prosecution of the Action, including, among

7 other things: (i) reviewing Netflix’s press releases, public statements, U.S. Securities and

8 Exchange Commission (“SEC”) filings, and securities analysts’ reports and advisories about

9 Netflix; (ii) reviewing media reports about Netflix; (iii) researching the applicable law with

10 respect to the claims alleged in the Action and the potential defenses thereto; (iv) conducting

11 preliminary damages analyses; (v) preparing and filing the Complaint; (vi) opposing Defendants’

12 motion to dismiss and participating in oral argument before the Court; (vii) preparing an amended

13 complaint; (viii) participating in informal conferences with Defendants’ Counsel regarding the

14 specific facts of the case, the perceived strengths and weaknesses of the case, and other issues in

15 an effort to facilitate negotiations and fact gathering; (ix) reviewing and analyzing over 1,200

16 pages of documents produced by Netflix in response to Plaintiff’s inspection demand pursuant

17 to 8 Del. C. §220; and (x) negotiating this Settlement with Defendants. Stipulation at 4. The

18 accumulation of the information discovered through the above efforts enabled Plaintiff and

19 Plaintiff’s Counsel to be well informed about the strengths and weaknesses of the case and to

20 engage in effective settlement discussions with Defendants. Id.

21 While Plaintiff believes that the claims alleged in the Action are meritorious, continued

22 litigation of the Action would be extremely complex, costly, and of substantial duration.

23 Stipulation at 3. Plaintiff’s Counsel has also taken into account the uncertain outcome and the

24 risk of any continued litigation, especially in complex cases such as the Action, as well as the

25 difficulties and delays inherent in such litigation. Stipulation at 4. Plaintiff’s Counsel is also

26 mindful of the inherent problems of the possible defenses to the claims and the requirement of

27 establishing demand futility. Id. The Settlement eliminates these and other risks of continued

28
11
PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
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1 litigation, including the very real risk of no recovery for Netflix after years of additional litigation,

2 while ensuring that Netflix and its shareholders obtain immediate benefits. Id.

3 2. The Proposed Settlement Was Reached Through Arm’s-Length


Negotiations and Falls Well Within an Appropriate Range for
4 Possible Final Approval

5 Where “the Court finds that the Settlement is the product of arm’s length negotiations

6 conducted by experienced counsel knowledgeable in complex . . . litigation, the Settlement will

7 enjoy a presumption of fairness.” In re Austrian and German Bank Holocaust Litig., 80 F. Supp.

8 2d 164, 173-74 (S.D.N.Y. 2000). The Settlement negotiations in this case have been fair, honest,

9 and at arm’s length. The Settlement was only reached after extensive arm’s-length negotiations

10 between counsel for the parties. The negotiations included Plaintiff sending Defendants a detailed

11 settlement demand and multiple telephonic meet and confers during which the parties responded

12 and exchanged counter-proposals. This factor thus weighs in favor of preliminary approval of

13 the proposed Settlement. See, e.g., NVIDIA, 2008 WL 5382544, at *3 (derivative settlement

14 preliminarily approved where the settlement “appears to be the result of good faith arm’s-length

15 bargaining”).

16 As noted supra, the Settling Parties engaged in settlement discussions after they

17 thoroughly evaluated the risks of continued litigation and had sufficient information to support

18 the decision regarding the fairness, adequacy, and reasonableness of the Settlement. Counsel for

19 all parties were thus fully apprised of the strengths and weaknesses of the case when the

20 Settlement was reached. The arm’s-length negotiations were also conducted by experienced

21 counsel from firms that have extensive experience in complex shareholder litigation. This fact

22 militates in favor of preliminarily approving the Settlement. See, e.g., Nat’l Rural Telecomms.

23 Coop., 221 F.R.D. at 528 (“‘Great weight’ is accorded to the recommendation of counsel, who

24 are most closely acquainted with the facts of the underlying litigation.”).

25 As set forth in the Stipulation, the parties did not begin negotiating the amount of fees and

26 expenses payable to Plaintiff’s Counsel until after all the substantive terms of the Settlement were

27 agreed upon. This factor further demonstrates the fairness of the arm’s-length Settlement.

28
12
PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
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Case 5:18-cv-02107-BLF Document 77 Filed 03/05/20 Page 19 of 25

1 3. The Settlement Confers a Substantial Benefit on Netflix and Easily


Outweighs the Mere Possibility of Future Relief After Protracted and
2 Expensive Litigation

3 ‘“The principal factor to be considered in determining the fairness of a settlement

4 concluding a shareholders’ derivative action is the extent of the benefit to be derived from the

5 proposed settlement by the corporation, the real party in interest.” In re Atmel Corp. Deriv. Litig.,

6 No. C 06-4592 JF (HRL), 2010 WL 9525643, at *12 (N.D. Cal. Mar. 31, 2010). Corporate

7 governance measures such as those achieved here provide valuable benefits to public companies.

8 See Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 395-96 (1970) (“[A] corporation may receive a

9 ‘substantial benefit’ from a [stockholders’ action], justifying an award of counsel fees, regardless

10 of whether the benefit is pecuniary in nature,” because ‘“corporate therapeutics’ . . . furnish a

11 benefit to all shareholders by providing an important means of enforcement of [a corporation’s

12 director and officer obligations].”); see also NVIDIA, 2008 WL 5382544, at *3 (N.D. Cal. Jan. 20,

13 2009); In re Rambus, Inc., Deriv. Litig., No. C 06-3513 JF (HRL), 2009 WL 166689, at *3 (N.D.

14 Cal. Jan. 20, 2009); In re Hewlett-Packard Co. S’holder Deriv. Litig., No. 3:12-cv-06003-CRB,

15 2015 WL 1153864, at *5 (N.D. Cal. Mar. 13, 2015); MRV Commc’ns, 2013 WL 2897874, at *4.

16 As a direct result of the litigation of the Action, resulting in the Settlement, Netflix has agreed to

17 adopt and implement the governance reforms. Netflix’s Board has approved the Settlement, in

18 which Netflix acknowledges both that “Plaintiff’s actions were a primary cause for implementing

19 the corporate governance enhancements” and that the Settlement is “in the best interests of Netflix

20 and its stockholders.” Stipulation at 5. As a result of these substantial and material benefits, the

21 Settlement is an outstanding resolution for Netflix of a case of substantial complexity and cost,

22 and it positions Netflix and its shareholders to reap the long-term benefits of strong corporate

23 governance.

24 In addition, the fact that the governance reforms provided by the Settlement directly

25 address and seek to prevent the alleged wrongdoing and failures alleged in Plaintiff’s Complaint

26 strongly militates in favor of preliminary approval. See Sved v. Chadwick, 783 F. Supp. 2d 851,

27 864 (N.D. Tex. 2009) (approving derivative litigation settlement because it “offers tangible, long-

28
13
PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
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Case 5:18-cv-02107-BLF Document 77 Filed 03/05/20 Page 20 of 25

1 term remedial measures that are specifically designed to avoid the alleged missteps in [the

2 company’s] past and protect shareholders as the company moves forward”); Mohammed v. Ells,

3 No. 12-cv-1831, 2014 WL 4212687, at *3 (D. Colo. Aug. 26, 2014) (finding settlement fair and

4 adequate and stating, “The fact that the settlement involves only corporate governance reforms

5 (in addition to payment of attorneys’ fees) does not weigh against approval of the settlement. To

6 the contrary, the corporate governance reforms provided for as part of the settlement are

7 specifically and appropriately designed to prevent the recurrence of the alleged misconduct that

8 formed the basis for this action.”).

9 4. The Settlement Appropriately Weighs the Benefits Conferred Upon


Netflix with the Significant Risks of Continued Litigation
10
Although it is not the role of the Court at this stage of the litigation to evaluate the merits
11
of the Settlement, it is clear that there exist serious questions of law and fact that could negatively
12
impact this case if it were litigated through to judgment and appeal. The uncertainties and
13
vagaries of further litigation of the Action demonstrate that the proposed Settlement is within the
14
range of approval, and that Plaintiff’s motion should be granted. Although Plaintiff believes that
15
its claims were (and are) meritorious, it recognizes the significant risks in continuing to prosecute
16
the Action. For example, had Plaintiff filed the amended complaint and even if Defendants’
17
anticipated motion to dismiss was denied, liability was by no means a foregone conclusion.
18
Continued litigation would be extremely complex, costly, and lengthy. Document discovery
19
would need to be completed, depositions would need to be taken, experts would need to be
20
designated, and expert discovery conducted. Defendants’ expected motions for summary
21
judgment would have to be briefed and argued and a trial would have to be held. Even if liability
22
were established at trial, the amount of recoverable damages would still have posed significant
23
issues and would have been subject to further litigation. See, e.g., NVIDIA, 2008 WL 5382544,
24
at *3-4 (preliminarily approving the derivative settlement after balancing the risks faced by
25
plaintiffs and defendants).
26
Considering the difficulty and unpredictability of a lengthy and complex trial – where
27
witnesses could suddenly become unavailable or the fact finder could react to the evidence in
28
14
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1 unforeseen ways – the benefits of the Settlement become all the more apparent. It is also clear

2 that even a victory at trial is no guarantee that the judgment would ultimately be sustained on

3 appeal or by the trial court in post-trial motions. The proposed Settlement eliminates these and

4 other risks of continued litigation, including the very real risk of no recovery after several more

5 years of litigation, while providing Netflix with substantial benefits immediately. See, e.g.,

6 Maher, 714 F.2d at 466 (derivative settlement approved where ‘“the parties’ conclusion that any

7 possible benefit to Zapata from pursuing the remaining causes of action could be more than offset

8 by the additional cost of litigation, [wa]s based on an intelligent and prudent evaluation of their

9 case’”).

10 IV. THE PROPOSED NOTICE TO NETFLIX SHAREHOLDERS IS ADEQUATE

11 Federal Rule of Civil Procedure 23.1(c) provides that ‘“[n]otice of a proposed settlement,

12 voluntary dismissal, or compromise must be given to shareholders or members in the manner that the

13 court orders.”’ The purpose of providing shareholders notice of a proposed settlement is to “apprise

14 interested parties of the pendency of the action and afford them an opportunity to present their

15 objections.” Villanueva v. Morpho Detection, Inc., No. 13-cv-05390-HSG, 2015 WL 4760464, at *7

16 (N.D. Cal. Aug. 12, 2015).

17 In accordance with these requirements, Plaintiff respectfully requests that the Court approve

18 the form and content of the Notice of Proposed Settlement and of Settlement Hearing (the “Notice”)

19 and the Summary Notice of Proposed Settlement and of Settlement Hearing (the “Summary Notice”),

20 as well as the method of notice dissemination to shareholders. With respect to form and content, the

21 proposed Notice includes information about the nature and history of the Action, Plaintiff’s claims,

22 the parties’ reasons for the proposed Settlement, and the essential terms of the proposed Settlement.

23 It also includes information regarding the $800,000 Fee and Expense Award and the $10,000

24 Incentive Award for Plaintiff that Plaintiff’s Counsel will seek in connection with the Settlement. It

25 sets forth the procedure for objecting to the proposed Settlement, and provides the date, time, and

26 place of the Settlement Hearing. The Notice also provides contact information for the parties’

27 counsel, and informs shareholders as to how they may obtain additional information. Netflix

28
15
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Case 5:18-cv-02107-BLF Document 77 Filed 03/05/20 Page 22 of 25

1 shareholders are advised that if they fail to comply with the procedures and deadlines for filing

2 objections, they will lose any opportunity to object to any aspect of the proposed Settlement, as well

3 as the right to be heard. The Summary Notice contains much of the same material, as well as

4 instructions on how shareholders may obtain additional information, including internet access to the

5 Stipulation and Notice.

6 Regarding the manner of notice, the Stipulation provides that Netflix shall: (i) disclose the

7 terms of the Settlement through the filing of a Form 8-K with the SEC, attaching the Notice;

8 (ii) publish the Summary Notice in Investors’ Business Daily; and (iii) post a copy of the Notice and

9 the Stipulation on Netflix’s investor relations website. In addition, Plaintiff’s Counsel shall post the

10 Notice on its website. This is a robust notice program consistent with notice programs previously

11 approved. See MRV, 2013 WL 2897874, at *1; see also Mullane v. Cent. Hanover Bank & Trust Co.,

12 339 U.S. 306, 314 (1950) (notice should be “reasonably calculated, under all the circumstances, to

13 apprise interested parties of the pendency of the action and afford them an opportunity to present their

14 objections”). Indeed, courts have approved notice programs consisting of only one or two of the

15 components of the proffered notice program here. For example, both notice solely by publication, as

16 well as notice by publication plus posting of settlement-related documents on a company’s website,

17 has been held to satisfy due process standards in shareholder derivative action settlements. Arace v.

18 Thompson, No. 08 Civ. 7905, 2011 WL 3627716, at *4 (S.D.N.Y. Aug. 17, 2011); In re PMC–Sierra,

19 Inc. Deriv. Litig., No. 06-cv-05330-RS, slip op. (N.D. Cal. Jan. 26, 2010), attached to the Laughlin

20 Decl. as Exhibit B (providing for notice of proposed derivative settlement by publication in Investor’s

21 Business Daily and on company’s website).7

22

23

24 7
See, e.g., In re Activision, Inc. S’holder Deriv. Litig., Case No. 2:06-cv-04771, slip op.
(C.D. Cal. May 13, 2008) (publication of the notice on company website and in public securities
25 filing meets the requirements of Federal Rule of Civil Procedure 23.1 and due process), attached
to Laughlin Decl. as Exhibit C. In re KLA-Tencor Corp., S’holder Deriv. Litig., Case No. 5:06-
26 cv-03445-JW, slip op. (N.D. Cal. Mar. 25, 2010) (same), attached to Laughlin Decl. as Exhibit D;
In re Ditech Networks, Inc. Deriv. Litig., Case No. 5:06-cv-05157-JF, slip op. (N.D. Cal. Oct. 23,
27 2009) (same), attached to Laughlin Decl. as Exhibit E; In re Blue Coat Sys., Inc. Deriv. Litig., Case
No. 06-cv-04809-JF-RS, slip op. (N.D. Cal. Nov. 12, 2010) (same), attached to Laughlin Decl. as
28 Exhibit F.
16
PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
CASE NO. 5:18-CV-02107-BLF
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1 Since the form of the Summary Notice and Notice, as well as the manner of dissemination,

2 fulfill the requirements of due process and Rule 23.1, Plaintiff respectfully requests that the Court

3 approve the proposed plan of notice.

4 V. PROPOSED SCHEDULE FOR FINAL APPROVAL

5 Plaintiff requests that the Court: (i) grant preliminary approval of the Settlement;
6 (ii) approve, as to form and content, the Notice and Summary Notice, annexed as Exhibits B and
7 C to the Stipulation; (iii) find that the Notice complies with due process and shall constitute due
8 and sufficient notice for all purposes to Current Netflix shareholders; and (iv) set a date for the
9 Settlement Hearing. Plaintiff, with consent of all parties, proposes the following schedule:
10 Netflix shall file a Form 8-K with the SEC Within ten (10) business days after the entry
which shall attach to the Notice, and shall of the Preliminary Approval Order
11 cause the Summary Notice to be published in
12 Investor’s Business Daily
Netflix will post the Notice and Stipulation Within ten (10) business days after the entry
13 on Netflix’s investors’ relations website and of the Preliminary Approval Order and until
Plaintiff’s Counsel will post the Notice on its Judgment becomes final
14 website
Deadline for Settling Parties to file an At least seven (7) calendar days before the
15
appropriate affidavit or declaration with Settlement Hearing
16 respect to providing Notice
Deadline for Netflix shareholders to At least twenty-one (21) calendar days
17 comment on the Settlement before the Settlement Hearing
Deadline for Settling Parties to file papers in At least thirty-five (35) calendar days before
18 support of Final Approval of the Settlement the Settlement Hearing
19 Deadline for Settling Parties to file reply At least seven (7) calendar days prior to the
briefs to shareholder comments Settlement Hearing
20 Settlement Hearing To be scheduled by the Court

21 VI. CONCLUSION
22 The Settlement achieved is an excellent result in light of the risks inherent in the litigation
23 and the substantial cost and complexity if the case proceeded to trial. Accordingly, Plaintiff
24 respectfully requests that the Court preliminarily approve the Settlement and enter the Preliminary
25 Approval Order.
26 DATED: March 5, 2020 Respectfully submitted,
SCOTT+SCOTT ATTORNEYS AT LAW LLP
27
s/ Thomas L. Laughlin, IV
28
17
PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
CASE NO. 5:18-CV-02107-BLF
Case 5:18-cv-02107-BLF Document 77 Filed 03/05/20 Page 24 of 25

1 THOMAS L. LAUGHLIN, IV (pro hac vice)


JONATHAN M. ZIMMERMAN (pro hac vice)
2 The Helmsley Building
230 Park Avenue, 17th Floor
3 New York, NY 10169
Telephone: 212-223-6444
4 Facsimile: 212-223-6334
Email: tlaughlin@scott-scott.com
5 jzimmerman@scott-scott.com

6 JOHN T. JASNOCH (CA 281605)


SCOTT+SCOTT ATTORNEYS AT LAW LLP
7 600 W. Broadway, Suite 3300
San Diego, CA 92101
8 Telephone: 619-233-4565
Facsimile: 619-233-0508
9 Email: jjasnoch@scott-scott.com

10 Attorneys for Plaintiff City of Birmingham


Relief and Retirement System
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1 CERTIFICATE OF SERVICE

2 I hereby certify that on March 5, 2020, I caused the foregoing to be electronically filed

3 with the Clerk of the Court using the CM/ECF system, which will send notification of such

4 filing to the email addresses denoted on the Electronic Mail Notice List

5 Executed on March 5, 2020, at New York, New York.

6 s/ Thomas L. Laughlin, IV
THOMAS L. LAUGHLIN, IV (pro hac vice)
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PLAINTIFF’S UNOPPOSED NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT
CASE NO. 5:18-CV-02107-BLF

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