robert c. schubert s.b.n. 62684 willem f...

Case 3: 12cvM0225SC Document23 Fflecl03/13/12 Pagel of 18

ROBERT C. SCHUBERT S.B.N. 62684 WILLEM F. JONCKHEER S.B.N. 178748 SCHUBERT JONCKHEER & KOLBE LLP Three Embarcadero Center, Suite 1650 San Francisco, California 94111 Telephone: (415) 788-4220 Facsimile: (415) 788-0161 rsc1iubert(äschubcrt1awfirrncorn wjoflcIcheer(schubcrt1awfifln corn

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ROBERT I. HARWOOD MATTHEW M. HOUSTON HARWOOD FEFFER LLP 488 Madison Avenue, 8th Floor New York, NY 10022 Telephone: (212) 935-7400 Facsimile: (212) 753-3630 rharwood 1 ifcsq corn rnhousto fesgeom

CITY OF ROYAL OAK RETIREMENT SYSTEM, Individually and on Behalf of All Others Similarly Situated,

Plaintiff, V.

NETFLIX, INC., REED HASTINGS, DAVID B. WELLS, THEODORE A. SARANDOS, LESILE J. KILGORE And NEIL D. HUNT,

Defendants.

) No. 12-cv-0225-SC

)

) NOTICE OF MOTION AND ) MOTION OF FRANK FISH, ANITA ) AND ROGER WILSON, AND NANCY ) COMSTOCK FOR CONSOLIDATION, ) APPOINTMENT AS LEAD PLAINTIFFS, ) AND APPROVAL OF LEAD COUNSEL; ) MEMORANDUM OF POINTS AND ) AUTHORITIES IN SUPPORT THEREOF )

)

) DATE: APRIL 20, 2012 ) TIME: 10:00 A.M. ) JUDGE: HON. SAMUEL CONTI )CTRM: 1

Counsel for Proposed Lead Plaintiffs Frank Fish, Anita G. Wilson, Roger T. Wilson, and Nancy Comstock and Proposed Lead Counsel [Additional counsel listed on signature page

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

NOTICE OF MOTION AND MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK FOR

CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL; MEMORANDUM OF

POINTS AND AUTHORITIES IN SUPPORT THEREOF - Case No. 12-00225-SC

Case 3: 12cvM0225SC Document23 Fflecl03/13/12 Page2 of 18

DAVIN POKOIK, Individually and on Behalf of All Others Similarly Situated,

Plaintiff,

NETFLIX, INC., REED HASTINGS, DAVID B. WELLS, THEODORE A. SARANDOS, LESLIE J. KILGORE, And NEIL D. HUNT,

Defendants.

FRANK J. FISH, individually and on behalf of all others similarly situated,

Plaintiff,

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) No. 12-cv-0439-LHK

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No. 12-cv-1030-LHK

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13 V.

14 NETFLIX, INC., REED HASTINGS, DAVID B. WELLS, THEODORE A.

15 SARANDOS, LESLIE J. KILGORE And NEIL D. HUNT

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17 Defendants.

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27 NOTICE OF MOTION AND MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK FOR


28 POINTS AND AUTHORITIES IN SUPPORT THEREOF - Case No. 12-00225-SC


1 TABLE OF CONTENTS

NOTICE OF MOTION AND MOTION................................................................................1

MEMORANDUM OF POINTS AND AUTHORITIES ........................................................ 2

I. STATEMENT OF ISSUES TO BE DECIDED ............................................. 2

II. STATEMENT OF FACTS ............................................................................. 3

III. ARGUMENT ................................................................................................. 5

A. THE RELATED ACTIONS SHOULD BE CONSOLIDATED........ 5

B. FISH, WILSON, AND COMSTOCK SHOULD BE APPOINTED LEAD PLAINTIFFS FOR THE CLASS ........................................... 6

1. Fish, Wilson, and Comstock Are Willing to Serve as Class Representatives ....................................................................... 7

2. Fish, Wilson, and Comstock Have the Largest Financial Interest in the Action .............................................................. 7

3. Fish, Wilson, and Comstock Satisfy the Requirements of Rule 23 of the Federal Rules of Civil Procedure.................... 9

4. Fish, Wilson, and Comstock Will Fairly and Adequately Represent the Interests of the Class and Are Not Subject to Unique Defenses ...................................................................10

C. HARWOOD FEFFER LLP SHOULD BE APPOINTED LEAD COUNSEL FOR PLAINTIFFS AND THE CLASS ........................11

CONCLUSION.. 12

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28 CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF - Case No. 12-00225-SC

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TABLE OF AUTHORITIES

2 Cases

3 Aronson v. McKesson HBOC, Inc., 79 F. Supp. 2d 1146 (ND. Cal. 1999)....................... 6,9

Dalkon Shield IUD Prod. Liab. Litig., 693 F.2d 847 (9th Cir. 1982) ................................ 10 4

Danis v. USNCommuns., Inc., 189 F.R.D. 391 (ND. Ill. 1999) ...................................... .9

S Erikson v. Cornerstone Propane Partners LP, 2003 U. S. Dist. LEXIS 18009 (ND. Cal.

6 Sept. 9, 2003) .................................................................................................................. .7

7 Hanon v. Dataproducts Corp., 976 F.2d 497 (9th Cir. 1992) ................................................ 9

In re Barney Transfer Agent Litig., 2006 U.S. Dist. LEXIS 19728, at *16 (S.D.N.Y. Apr.

8

17, 2006) ...........................................................................................................................11

9 In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001) .....................................................11

10 In re Elan Corp. Sec. Litig., 2002 U.S. Dist. LEXIS 23162 (S.D.N.Y. May 18,2004) ....... 12

In re Gemstar-TV Guide Int'l Sec. Litig., 209 F.R.D. 447 (CD. Cal. 2002) .........................8

11 In re McKesson HBOC, Inc. Sec. Litig., 97 F. Supp. 993 (ND. Cal. 1999) .......................... 8

12 In re Olsten Corp Sec. Litig., 3 F. Supp. 2d 286 (E.D.N.Y. 1998) ........................................ 8

13 Kokkinis v. A gean Marine Petroleum Network Inc., 2011 U.S. Dist. LEXIS 54939 (S.D.N.Y. May 19, 2011) ............................................................................................11, 12

14 Lax v. First Merchants Acceptance Corp., 1997 U.S. Dist. LEXIS 11866, 1997 WL 461036

15

(ND. Ill. 1997).................................................................................................................... 8

16 Lerwill v. In/light Motion Pictures, Inc., 582 F. 2d 507 (9th Cir. 1978) ...............................10

17 Osher v. Guess?, Inc., 201 U.S. Dist. LEXIS 6057 (CD. Cal. Apr. 26, 2001)...................... 7

Riordan v. Smith Barney, 113 F.R.D. 60 (ND. Ill. 1986).................................................... 10

18 Takeda v. Turbodyne Techs., Inc., 67 F. Supp. 2d 1129 (CD. Cal. 1999).......................6, 10

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Tanne v. Autobytel, Inc., 226 F.R.D. 659 (CD. Cal. 2005) ................................................... 9

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Wenderhold v. Cylink Corp., 188 F.R.D. 577 (ND. Cal. 1999) ............................................9

21 Statutes, Rules, and Regulations

Fed. R. Civ. P. 23 .....................................................................................................1, 8 ' 9 ' 10 22

Fed. R. Civ. P. 42(a) .......................................................................................................2, 5,6

23 S .E.C. Rule lob-S ...................................................................................................................2

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15 U.S.C. § 78u-4(a)(3)(B)...............................................................................................................1

25 15 U.S.C. § 78u-4a(3)(B)(i) ................................................................................................... 6

26 15 U.S.C. § 78u-4(a)(3)(B)(ii) ...................................................................................................... 2, 6




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1 15 U.S.C. § 78u-4(a)(3)(B)(iii) ...................................................................................... 2,6,8,9, 11

2 Securities and Exchange Act of 1934, Section 21D ...................................................1, 6, 7, 11

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Security and Exchange Act of 1934, Section lOB .........................................................2, 3, 5

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Security and Exchange Act of 1934, Section 20A .........................................................2, 3, 5

5 Other Authorities

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Manual For ConiplexLitig. (3d), 20.123 (1995)....................................................................6

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1

NOTICE OF MOTION AND MOTION

2 TO THE CLERK OF THE COURT AND ALL PARTIES AND THEIR COUNSEL

3 OF RECORD

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PLEASE TAKE NOTICE that Frank Fish ("Fish"), Anita and Roger Wilson

5 (collectively "Wilson"), and Nancy Comstock ("Comstock"), by and through their counsel,

6 will and hereby do move this Court, pursuant to Section 211)(a)(3)(13) of the Securities and

7 Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78u-4(a)(3)(B), as amended by the

8 Private Securities Litigation Reform Act of 1995 (the "PSLRA"), on April 20, 2012 at

9 10:00 a.m., or as soon thereafter as the matter can be heard in the courtroom of the Honorable

10 Samuel Conti, in Courtroom 1 at the United States District Court for the Northern District of

11 California, 450 Golden Gate Avenue, San Francisco, California, 94102, for an Order (attached

12 hereto as exhibit A): (i) consolidating the Related Actions filed in this Court; (ii) appointing

13 Fish, Wilson, and Comstock as Lead Plaintiffs on behalf of all persons that purchased or

14 otherwise acquired Netflix, Inc.'s ("Netflix" or the "Company") securities; (iii) appointment of

15 Plaintiffs' counsel as Lead Counsel; and (iv) granting such other and further relief as the Court

16 may deem just and proper. In support of this Motion, Fish, Wilson, and Comstock submit a

17 Memorandum of Points and Authorities and the Declaration of Matthew M. Houston and

18 exhibits attached thereto, the pleadings, and other filings herein and such other written or oral

19 arguments as may be presented to the Court.

20

This motion is made on the grounds that Fish, Wilson, and Comstock are the most

21 adequate plaintiffs, as defined by the PSLRA, based on their collective loss of

22 $2,067,796.29, which was suffered as a result of defendants' wrongful conduct as alleged

23 in the above-referenced actions. Further, Fish, Wilson, and Comstock satisfy the

24 requirements of Rule 23(a) of the Federal Rules of Civil Procedure, as their claims are

25 typical of other Class members' claims and they will fairly and adequately represent the

26 interests of the class.


28 CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL; MEMORANDUM OF


1.


1 MEMORANDUM OF POINTS AND AUTHORITIES

I I. STATEMENT OF ISSUES TO BE DECIDED

Presently pending before the Court are three securities class action lawsuits (the

"Related Actions") brought on behalf of all persons who purchased or otherwise acquired

Netflix securities. Each complaint raises substantially similar allegations: that defendants

violated Sections 10(b) and 20(a) of the Exchange Act and United States Securities and

Exchange Commission Rule lob-S promulgated thereunder, 17 C.F.R. § 240.10b-5.

Pursuant to the PSLRA, the Court must decide whether to consolidate the Related Actions

prior to appointing a plaintiff to lead this litigation on behalf of the putative class. See

15 U.S.C. § 78u-4(a)(3)(B)(ii). As discussed below, Fish, Wilson, and Comstock

respectfully submit that the Related Actions should be consolidated pursuant to Rule 42(a)

because they each involve similar issues of law and fact.

After determining consolidation, the Court is to appoint as lead plaintiff the movant

who possesses the largest financial interest in the outcome of the Action and who best satisfies

the requirements of Rule 23 of the Federal Rules of Civil Procedure. 15 U.S.C. § 78u-

4(a)(3)(13)(iii)(1). Here, Fish, Wilson, and Comstock, with a total loss of $2,067,796.29 in

connection with their purchases of Nefflix stock during the Class Period, are adequate and

typical to serve as lead plaintiffs. Indeed, Fish, Wilson, and Comstock believe that they are the

"most adequate plaintiffs" as defined by the PSLRA and should be appointed Lead Plaintiffs

for these actions. Fish, Wilson, and Comstock have the greatest financial interest in the relief

sought by these actions through virtue of their substantial holdings in Netflix during the Class

Period and the loss they suffered as a result of Defendants' misconduct. Further, Fish, Wilson,

and Comstock stand in the same position and with claims typical of other Class members and

1 The actions are entitled City of Royal Oak Retirement v. Neçflix, Inc., 12-cv-0225-SC; Pokoik v. Neçflix, Inc., 12-cv-0439-LHK; and Fish v. Netfiix, Inc., 12-cv-1030-LHK. All three complaints are brought on behalf of individuals who purchased Netflix securities between December 20, 2010 and October 24, 2011. NOTICE OF MOTION AND MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK FOR



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1 are therefore adequate class representatives. Accordingly, Fish, Wilson, and Comstock

2 respectfully submit that they should be appointed Lead Plaintiffs.

3

Additionally, Fish, Wilson, and Comstock's selection of Harwood Feffer LLP as Lead

4 Counsel for plaintiffs and the proposed class should be approved by this Court.

5 I II. STATEMENT OF FACTS

6

This is a securities class action on behalf of all persons or entities who purchased or

7 otherwise acquired the securities of Netflix during the period from December 20, 2010 to

8 October 24, 2011, inclusive (the "Class Period"), seeking to pursue remedies under Sections

9 10(b) and 20(a) of the Exchange Act.

10

Netflix is a subscription video-content service that delivers its product both

11 streaming via the internet and as DVDs and Blu-Ray discs via mail. Netflix's business

12 model is dependent upon the ability to obtain content to offer either through its streaming

13 business or its discs by mail business. The rights to these various sources of content

14 permitted Netflix to vastly expand its streaming subscriber base because the video options

15 available for streaming increased substantially with each acquisition of rights.

16

Plaintiffs allege that during the Class Period, Defendants made a series of

17 misleading and materially false statements about the Company's business practices and

18 specifically its cost of obtaining content. Although Defendants knew that the Company

19 was being threatened with devastating cost increases, they did not disclose the threat, but

20 instead spoke publicly about the Company's ability to grow. At the beginning of the Class

21 Period, the Company was facing increased competition for streaming business as other

22 providers explored new ways to integrate their business with internet viewing. One such

23 competitor was Warner Brothers, which announced in March 2011 that it would bypass

24 Netflix entirely by offering certain movies directly through Facebook. Apple's iTunes

25 store, Amazon's instant viewing product, and the cable companies all sought to cash in on

26 the increased speed of broadband networks and computers that now permitted more and




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1 more viewers to instantly watch video content at the time and place of their choice. The

2 new competition in streaming video content caused investors to be concerned that Netflix

3 would be unable to maintain its profit margins. As a result, the Defendants' statements

4 about the Company's ability to secure content and maintain profit margins were crucial to

5 I investors' evaluation of Netflix.

6

Defendants misrepresented and/or failed to disclose the following adverse facts,

7 known to Defendants or recklessly disregarded by them:

8

(a) The Company had short-term contracts with content providers that

9 forced it to either renegotiate the contracts at substantially higher rates or allow them to

10 expire. This was known to Defendants;

11

(b) Content providers were already demanding much higher license fees,

12 which would threaten Netflix's business model;

13

(c) Defendants understood that the Company would need to substantially

14 increase its pricing for subscribers to offset the soon-to-be increased content costs;

15

(d)

The Company was not on track to achieve its 2011 guidance;

16

(e)

As a result, the Company's public statements and SEC filings were

17 materially false and misleading

18

The truth, finally disclosed after September 1, 2011, was that the Company's quickly

19 increasing content costs were responsible for the increase in Netflix's pricing and decision to

20 spin-off the mail order business, the resulting decrease in subscribers, and the ultimate

21 reduction of the Company's corporate credit rating. It was soon revealed that the Individual

22 Defendants misrepresented the reason for the proposed spin-off of the mail order business

23 into a separate division and a service price increase as a strategic decision. The truth was

24 that the spin-off and price increase were not so much the product of a strategic deliberation

25 as a forced response to the reality of increasing content costs.

26

On October 27, 2011 in a Form 10-Q, the Company disclosed that its obligations had

27 NOTICE OF MOTION AND MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL; MEMORANDUM OF

28 POINTS AND AUTHORITIES IN SUPPORT THEREOF - Case No. 12-00225-SC 4.

Case 3:12cvOO225SC Document23 FVed03/13/12 PagelO of 18

1 skyrocketed, from approximately $1.1 billion at the beginning of the Class Period, to $3.5

2 billion with nearly $2.9 billion due within the next three years. Even while its streaming

3 content costs were increasing by $2.4 billion, or 250%, in less than a year, Defendants were

4 continually misrepresenting that the content costs would remain under control and did not

5 present an existential threat to the Company.

6

In reality, the Company's content costs had shot up so quickly that on November

7 28, 2011, Standard & Poor's cut Netflix's corporate credit rating to "BB-" because it was

8 "concerned with the company's escalating content costs and aggressive international

9 expansion plans." S&P cited the Company's $2.5 billion increase in content costs between

10 the beginning of 2011 and September 30 of that year.

11 III. ARGUMENT

12 A. THE RELATED ACTIONS SHOULD BE CONSOLIDATED

13

On January 13, 2012, the first of the three Related Actions against Netflix was filed

14 in this Court. These Related Actions allege substantially similar factual events and name

15 the same defendants. Each of the complaints also alleges similar legal bases for their

16 claims: Sections 10(b) and 20(a) of the Exchange Act. In sum, the Related Actions are

17 related because they involve common questions of fact and law. Accordingly, pursuant to

18 Rule 42(a) of the Federal Rules of Civil Procedure, the Related Actions may be

19 consolidated for all purposes.

20

Consolidation of related cases is proper where, as here, the actions involve common

21 questions of law and fact and where consolidation would avoid unnecessary cost or delay in

22 adjudication:

23 When actions involving a common question of law or fact are pending before

24 the court, it may order a joint hearing or trial of any or all of the matters in

issue in the actions; it may order all the actions consolidated; and it may make 25

such orders concerning proceedings therein as may tend to avoid unnecessary costs or delays.

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Case 3:12cvOO225SC Document23 FVed03/13/12 Pagell of 18

1 Fed. R. Civ. P. 42(a); see also Manual For ConiplexLitig. (3d), 20.123, at 13-14 (1995).

2

The PSLRA contemplates consolidation where "more than one action on behalf of a

3 class asserting substantially the same claim or claims arising under this chapter has been

4 filed," see 15 U.S.C. 78u-4(a)(3)(A)(ii), and did not displace the traditional legal standards

5 for consolidation under Fed. R. Civ. P. 42(a). Aronson v. McKesson HBOC, Inc., 79 F.

6

Supp. 2d 1146, 1150-51 (ND. Cal. 1999). Under the traditional principles of

7 consolidation, actions may be consolidated even if the individual claims or causes of action

8 are not identical. See Takeda v. Turbodyne Techs., Inc., 67 F. Supp. 2d 1129, 1133 (C.D.

9 Cal. 1999) ("[N]either Rule 42 nor the PSLRA demands that the actions be identical.").

10 Here, while there are some facts alleged in Fish complaint that may not be found in any

11 other, it nonetheless remains well-suited for consolidation.

12

The consolidation of the Related Actions will expedite pretrial proceedings, reduce

13 duplication, avoid multiple contacts of the same parties and witnesses for inquiries in multiple

14 proceedings and minimize the expenditure of time and money by all parties concerned. Also,

15 consolidation will reduce the possibility of confusion and delay that may result from

16 prosecuting these Related Actions separately. For these reasons, Fish, Wilson, and Comstock

17 respectfully submit that their motion to consolidate should be granted.

18 B. FISH, WILSON, AND COMSTOCK SHOULD BE APPOINTED LEAD

19 PLAINTIFFS FOR THE CLASS

20 Section 211)(a)(3)(D) of the PSLRA sets forth the process for selection of the lead

21 plaintiff(s) in class actions brought under the Exchange Act. The PSLRA directs courts to

22 consider any motion to serve as lead plaintiff filed by a class member in response to a

23 published notice of a class action by the later of (i) 90 days after the date of publication, or

24 (ii) as soon as practicable after the court decides any pending motion to consolidate.

25 15 U.S.C. § 78u-4a(3)(B)(i) and (ii).

26 Further, under 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I), the Court is directed to consider




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Case 3:12cvOO225SC Document23 FVed03/13/12 Page12 of 18

1 all motions by plaintiffs or class members to appoint a lead plaintiff filed in response to any

2 such notice. Under this section, the Court "shall" appoint "the presumptively most

3 adequate plaintiff' to serve as lead plaintiff and shall presume that plaintiff is the person or

4 group of persons that:

5

(aa) has either filed the complaint or made a motion in response to a notice. .

6 (bb) in determination of the Court, has the largest financial interest in the relief

7 sought by the class; and

8

(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.

9

10 See Erikson v. Cornerstone Propane Partners LP, 2003 U.S. Dist. LEXIS 18009, at *89

11 (ND. Cal. Sept. 9, 2003); Osher v. Guess?, Inc., 201 U.S. Dist. LEXIS 6057, at *11

12 (C. D. Cal. Apr. 26, 2001).

13 1. Fish, Wilson, and Comstock Are Willing to Serve as Class

14 Representatives

15

On January 13, 2012, counsel in the first filed action caused a notice to be published

16 pursuant to Section 21D(a)(3)(A)(i) of the PSLRA announcing that a securities class action

17 had been filed against Netflix and the other defendants. The notice informed investors that

18 they had sixty days until March 13, 2012, to file a motion to be appointed Lead Plaintiff.

19 A copy of the notice is annexed to the Houston Dccl. as Exhibit A. Fish, Wilson, and

20 Comstock have filed the present motion and have submitted their certifications attesting to

21 their willingness to serve as class representatives for the Class and to provide testimony at

22 depositions and trial if necessary. See Houston Dccl., Exhibit B, C, and D. Accordingly,

23 Fish, Wilson, and Comstock satisfy the first requirement to serve as Lead Plaintiffs.

24 2. Fish, Wilson, and Comstock Have the Largest Financial Interest

25 in the Action

26

As noted above, the PSLRA creates a rebuttable presumption that the most adequate




7.


1 plaintiff is the "person" or "group of persons" who "has the largest financial interest in the

2 relief sought by the class," and who also satisfies the requirements of Rule 23 of the

3 I Federal Rules of Civil Procedure. This presumption is only rebuttable by proof that the

4 presumptively most adequate plaintiff "will not fairly and adequately protect the interests

5 of the class" or is "subject to unique defenses that render such plaintiff incapable of

6 adequately representing the class." 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II). In re Genistar-TV

7 Guide Int'l Sec. Litig., 209 F.R.D. 447, 450 (C.D. Cal. 2002).

8

As of the time of the filing of this motion, Fish, Wilson, and Comstock believe that

9 they have the largest financial interest of any movants in the relief sought by the Class.

10 During the Class Period, (1) Fish purchased 10,500 shares of Netflix stock; (2) expended

11 $2,515,979.00 on his purchases of Netflix stock; (3) retained zero shares of his Netflix

12 stock at the end of the Class Period; and (4) as a result of the revelations of the fraud, Fish

13 suffered a loss of $865,977.00. Houston Dccl., ¶ 4. During the Class Period, (1) Anita and

14 Roger Wilson purchased 7,000 shares of Netflix stock; (2) expended $1,161,159.40 on

15 their purchases of Netflix stock; (3) sold 7,000 shares of their Netflix stock during and after

16 the end of the Class Period; and (4) as a result of the revelations of the fraud, Anita and

17 Roger Wilson suffered a loss of $617,963,44. Houston Dccl., ¶ 6. During the Class Period,

18 (1) Comstock purchased 6,000 shares of Netflix stock; (2) expended $1,643,238.35 on his

19 purchases of Netflix stock; (3) retained 1,000 shares of his Netflix stock at the end of the

20 Class Period; and (4) as a result of the revelations of the fraud, Comstock suffered a loss of

21 $583,855.85. Houston Dccl., ¶ 8. Collectively, Fish, Wilson, and Comstock suffered a loss

22 of $2,067,796.29. Houston Dccl., ¶ 9. See also In re McKesson HBOC, Inc. Sec. Litig., 97

23 F. Supp. 993 (ND. Cal. 1999); In re Olsten Corp Sec. Litig., 3 F. Supp. 2d 286, 296

24 (E.D.N.Y. 1998); Lax v. First Merchants Acceptance Corp., 1997 U.S. Dist. LEXIS 11866,

25 1997 WL 461036, at *5 (ND. Ill. 1997). Because Fish, Wilson, and Comstock possess the

26 largest financial interest in the outcome of this litigation, they are the "most adequate"




8.


1

plaintiffs. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(bb).

2 3. Fish, Wilson, and Comstock Satisfy the Requirements of Rule 23

3 of the Federal Rules of Civil Procedure

4

The P5LRA requires that the lead plaintiff must satisfy the requirements of Rule 23

5 of the Federal Rules of civil Procedure. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(cc). With

6 respect to the claims of a class representative, Rule 23(a) requires that: (1) the class be so

7 numerous that joinder of all members is impracticable; (2) there are questions of law or fact

8 common to the class; (3) plaintiff's claims are typical of those of the class; and (4) the

9 representative will fairly and adequately protect the interests of the class. For purposes of

10 a motion to appoint lead plaintiff pursuant to the PSLRA, however, all that is required is a

11 "preliminary showing" that the lead plaintiff's claims are typical and adequate. Aronson,

12 79 F. 5upp. 2d at 1158 (citing Wenderhold v. Cylink Corp., 188 F.R.D. 577, 587 (ND. Cal.

13 1999)). See also Tanne v. Autobytel, Inc., 226 F.R.D. 659, 666 (CD. Cal. 2005).

14

The typicality requirement of Fed. R. Civ. P. 23 (a)(3) is satisfied where the named

15 representative's claims have the "same essential characteristics as the claims of the class at

16 large." Danis v. USN Coniniuns., Inc., 189 F.R.D. 391, 395 (ND. Ill. 1999). "A class is

17 typical if it arises from the same event or course of conduct that gives rise to claims of

18 other class members and all claims are based on the same legal theory." Id. Indeed, the

19 "similarity of legal theory may control even where factual distinctions exist between the

20 claims of the named representatives and other class members." is.; see Hanon v.

21 Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (The typicality requirement serves

22 to "assure that the interest of the named representative aligns with the interests of the

23

class").

24

Fish, Wilson, and Comstock's claims are typical of those of the Class. Fish,

25 Wilson, and Comstock allege, as do all class members, that defendants violated the

26 Exchange Act by making what they know or should have known were false and misleading




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statements of material fact concerning Netflix, or omitted to state material facts necessary

to make the statements not misleading. Fish, Wilson, and Comstock, as did all members of

the Class, purchased Netflix securities during the Class Period at prices artificially inflated

by defendants' misrepresentations and/or omissions. These shared claims, which are based

on the same legal theory and arise from the same events and course of conduct, satisfy the

typicality requirements of Fed. R. Civ. P. 23(a)(3).

The adequacy of representation requirement of Rule 23(a)(4) is satisfied where it is

established that a representative party "will fairly and adequately protect the interests of the

class."

The Ninth Circuit has held that representation is "adequate" when counsel for the class is qualified and competent, the representative's interests are not antagonistic to the interests of absent class members, and it is unlikely that the action is collusive.

Takeda, 67 F. Supp. 2d at 1137 (citing In re Northern Dist. Of Cal., Dalkon Shield IUD

Prod. Liab. Litig., 693 F.2d 847, 855 (9th Cir. 1982)); accord Lerwill v. In/light Motion

Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978). The class representative must also have

"sufficient interest on the outcome of the case to ensure vigorous advocacy." Takeda, 67 F.

Supp. 2d at 1137 (citing Riordan v. Smith Barney, 113 F.R.D. 60, 64(N.D. Ill. 1986)).

Fish, Wilson, and Comstock are adequate representatives for the Class. There is no

antagonism between their interests and those of the Class, and their losses demonstrate that

they have sufficient interest in the outcome of this litigation. Additionally, Fish, Wilson,

and Comstock have retained qualified and competent counsel who will vigorously

prosecute this action.

4. Fish, Wilson, and Comstock Will Fairly and Adequately Represent the Interests of the Class and Are Not Subject to Unique Defenses

The presumption in favor of appointing Fish, Wilson, and Comstock as Lead




10.


1 Plaintiffs may be rebutted only upon proof "by a purported member of the plaintiffs' class"

2 that the presumptively most adequate plaintiff:

3 (aa) will not fairly protect the interest of the class; or

4 (bb) is subject to unique defenses that render such plaintiff

5

incapable of adequately representing the class.

6

15 U.S.C. § 78u-4(a)(3)(B)(iii)(I).

7

Fish, Wilson, and Comstock's ability and desire to fairly and adequately represent

8 the class have been discussed above. Fish, Wilson, and Comstock are not aware of any

9 unique defenses Defendants could raise that would render them inadequate to represent the

10 Class. Thus, Fish, Wilson, and Comstock should be appointed Lead Plaintiffs for the

11

Class.

12 C. HARWOOD FEFFER LLP SHOULD BE APPOINTED LEAD

13 COUNSEL FOR PLAINTIFFS AND THE CLASS

14 The PSLRA vests authority in the lead plaintiff to select and retain counsel, subject

15 to the approval of the Court. See Section 21D(a)(3)(B)(v). Thus, the Court should not

16 disturb the lead plaintiffs' choice of counsel unless it is necessary to protect the interests of

17 the plaintiff class. In re Barney Transfer Agent Litig., 2006 U.S. Dist. LEXIS 19728, at

18 * 16 (S.D.N.Y. Apr. 17, 2006) ("The court should generally employ a deferential standard

19 in reviewing the lead plaintiff's choices.") (quoting In re Cendant Corp. Litig., 264 F.3d

20 201, 274 (3d Cir. 2001)); Kokkinis v. Agean Marine Petroleum Network Inc., 2011 U.S.

21 Dist. LEXIS 54939, at *4 (S.D.N.Y. May 19, 2011) (holding that lead plaintiff's choice of

22 lead counsel is entitled to deference) (collecting cases).

23 Here, Plaintiffs Fish, Wilson, and Comstock have retained Harwood Feffer LLP as

24 counsel to pursue this litigation and will retain this firm as Lead Counsel in the event that

25 they are appointed Lead Plaintiffs. As detailed in its firm resume annexed as Exhibit E to

26 the Houston Dccl., Harwood Feffer LLP possesses extensive experience in securities




11.

Case 3:12cvOO225SC Document23 FVed03/13/12 Pagel-7 of 18

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litigation and has successfully prosecuted numerous securities fraud class action on behalf

of injured investors. See In re Elan Corp. Sec. Litig., 2002 U.S. Dist. LEXIS 23162, at * 14

(S.D.N.Y. May 18, 2004) (approving lead plaintiff's selection of counsel where proposed

counsel were "accomplished in the field of securities litigation and eminently qualified for

this assignment."); Kokkinis, 2011 U.S. Dist. LEXIS 54939, at *5 (approving lead

plaintiff's choice of counsel where counsel has substantial experience in securities class

actions).

Therefore the Court may be assured that by approving Fish, Wilson, and

Comstock's selection of Lead Counsel, Plaintiffs and the Class will receive the highest

caliber of legal representation.

CONCLUSION

WHEREFORE, Fish, Wilson, and Comstock respectfully request that the Court

issue an Order: (1) consolidating the Related Actions; (2) appointing Fish, Wilson, and

Comstock as Lead Plaintiffs for the Class; (3) approving Harwood Feffer LLP as Lead

Counsel; and (4) granting such other and further relief as the Court may deem just and

proper.

Dated: March 13, 2012

SCHUBERT JONCKHEER & KOLBE LLP ROBERT C. SCHUBERT S.B.N. 62684 WILLEM F. JONCKHEER S.B.N. 178748

Is! Willem F. Jonckheer Willem F. Jonckheer

Three Embarcadero Center, Suite 1650 San Francisco, California 94111 Telephone: (415) 788-4220 Facsimile: (415) 788-0161

Counsel for Proposed Lead Plaintiffs Frank Fish, Anita G. Wilson, Roger T. Wilson, and Nancy Comstock




12.

Case 3:12cvOO225SC Document23 FVed03/13/12 PagelB of 18

HARWOOD FEFFER LLP

1 ROBERT I. HARWOOD

2 MATTHEW M. HOUSTON

488 Madison Avenue, 8th Floor

3

New York, NY 10022 Telephone: (212) 935-7400

4

Facsimile: (212) 753-3630

5 Counsel for Proposed Lead Plaintiffs

6 Frank Fish, Anita G. Wilson, Roger T.

Wilson, and Nancy Comstock and Proposed

7

Lead Counsel

8 -- and --

9 NEWMAN FERRARA LLP

10 JEFFREY M. NORTON

1250 Broadway, 27th Floor

11

New York, NY 10001 Telephone: (212) 619-5400

12 Facsimile: (212) 619-3090

13 Counsel for Proposed Lead Plaintiffs

14

Frank Fish, Anita G. Wilson, Roger T. Wilson, and Nancy Comstock

15

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26




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Case3:12-cv-00225-SC Document234 FVed03/13/12 Pagel of 38

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ROBERT C. SCHUBERT S.B.N. 62684 WILLEM F. JONCKHEER S.B.N. 178748 SCHUBERT JONCKHEER & KOLBE LLP Three Embarcadero Center, Suite 1650 San Francisco, California 94111 Telephone: (415) 788-4220 Facsimile: (415) 788-0161 rsclmbeil 'hubert1awfirnt corn wjonckhee1 ;chubcrtlawfirrncorn

ROBERT I. HARWOOD MATTHEW M. HOUSTON HARWOOD FEFFER LLP 488 Madison Avenue, 8th Floor New York, NY 10022 Telephone: (212) 935-7400 Facsimile: (212) 753-3630 rhan ood<Th 1 ifcsqcom rnhous—to fesgeom


Plaintiff,

V.

NETFLIX, INC., REED HASTINGS, DAVID B. WELLS, THEODORE A. SARANDOS, LESLIE J. KILGORE and NEIL D. HUNT

Defendants.

No. 12-cv-0225-SC

DECLARATION OF MATTHEW M. HOUSTON IN SUPPORT OF MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL

Counsel for Proposed Lead Plaintiffs Frank Fish, Anita G. Wilson, Roger T. Wilson, and Nancy Comstock and Proposed Lead Counsel



DATE:

APRIL20, 2012 TIME:

10:00 A.M. JUDGE HON. SAMUEL CONTI CTRM:

1

DECL. OF MATTHEW M. HOUSTON ISO MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY

COMSTOCK FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL

Case No. 12-00225-SC

Case3:12-cv-00225-SC Document234 FVed03/13/12 Page2 of 38

)

1 DAVIN POKOIK, Individually and on 2 Behalf of All Others Similarly Situated,

3

Plaintiff,

4 V.

5 NETFLIX, INC., REED HASTINGS, 6 DAVID B. WELLS, THEODORE A.

SARANDOS, LESLIE J. KILGORE, 7 and NEIL D. HUNT,

8 Defendants.

9

10 FRANK J. FISH, individually and on behalf of all others similarly situated,

11 Plaintiff,

12

13

14 NETFLIX, INC., REED HASTINGS, DAVID B. WELLS, THEODORE A.

15 SARANDOS, LESLIE J. KILGORE and NEIL D. HUNT

16

17 Defendants.

18

19

I, Matthew M. Houston, hereby declare as follows:

20

1. I am a partner of Harwood Feffer LLP, counsel for the proposed lead

21 plaintiffs Frank Fish, Anita G. Wilson, Roger T. Wilson, and Nancy Comstock

22 ("Movants"). Movants seek, inter al/a, to consolidate the related actions pursuant to Fed.

23 R. Civ. P. 42(a) and to be appointed lead plaintiff pursuant to Section 21D of the Securities

24 Exchange Act of 1934 in the consolidated action. I am fully familiar with the facts set forth

25 herein.

26

2. Attached hereto as Exhibit A is a true and correct copy of Royal Oak

27 DECL. OF MATTHEW M. HOUSTON ISO MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY

28 COMSTOCK FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL


2

) No. 12-cv-0439- LHK

)

)

)

)

)

)

)

)

)

)

)

No. 12-cv-1039-LHK


1 Retirement System's press release from the first filed action against Defendants.

2

3. Attached hereto as Exhibit B is a true and correct copy of the Certification

3 of Frank Fish with confirmations of purchases and sales.

4

4. Mr. Fish purchased 10,500 shares of Netflix stock during the Class Period.

5 Mr. Fish expended $2,515,979.00 on his purchases of Netflix stock and he retained zero

6 I shares of his Netflix stock at the end of the Class Period. As a result of the revelations of

7 the fraud, Mr. Fish suffered a loss of $865,977.00

8

5. Attached hereto as Exhibit C is a true and accurate copy of the Certification

9 of Anita G. Wilson and Roger T. Wilson with confirmations of purchases and sales.

10

6. Anita and Roger Wilson purchased 7,000 shares of Netflix stock during the

11 Class Period. Anita and Roger Wilson expended $1,161,159.40 on purchases of Netflix

12 stock and sold 7,000 shares of Netflix stock during and after the Class Period for a return of

13 543,195.96. Anita and Roger Wilson suffered a loss of $617,963.44

14

7. Attached hereto as Exhibit D is a true and correct copy of the Certification

15 of Nancy Comstock with confirmations of purchases and sales.

16

8. Ms. Comstock purchased 6,000 shares of Netflix stock during the Class

17 Period. Ms. Comstock expended $1,643,238.35 on her purchases of Netflix stock and

18 retained 1,000 shares of her Netflix stock at the end of the Class Period. As a result of the

19 revelations of the fraud, Ms. Comstock suffered a loss of $583,855.85.

20

9. Collectively, Fish, Anita and Roger Wilson, and Comstock suffered a loss of

21

$2,067,796.29.

22

10. Annexed hereto as Exhibit E is a true and accurate copy of Harwood Feffer

23 LLP's firm biography.

24

25

26

27 DECL. OF MATTHEW M. HOUSTON ISO MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY

28 COMSTOCK FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL Case No. 12-00225-SC

3


I declare under penalty of perjury under the laws of the United States of America that the

2 foregoing facts are true and correct.

3 Executed this 13th day of March, 2012 at New York, NY.

4

5

6

MaJhL' \L Houston

7

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4


HMOSWIM

1.Thaatflh[s:4wIim1iSiir.rDIuIJ1I*1 Class Action Suit Against Netflix, Inc.

Prcss Release: Robbins Geller Rudman & Dowd LU' Fri. Jan 13, 2012 6:38 PM EST

SAN DIEGO--(BUSINESS WIRE)-- Robbins Geller Rudman & Dowd LLP ("Robbins

Geller") (http://www.rgrdlaw.com/cases/netflix/) today announced that a class action has

been commenced on behalf of an institutional investor in the United States District Court

for the Northern District of California on behalf of purchasers of Netflix, Inc. ("Netflix")

(NASDAQ:NFLX - News) common stock during the period between December 20, 2010

and October 24, 2011 (the "Class Period").

If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from

today. If you wish to discuss this action or have any questions concerning this notice or

your rights or interests, please contact plaintiffs counsel, Darren Robbins of Robbins

Geller at 800-449-4900 or 619-231-1058, or via e-mail at [email protected] . If you are a

member of this class, you can view a copy of the complaint as filed or join this class action

online at http://www.rgrdlaw.com/cases/netflix/ . Any member of the putative class may

move the Court to serve as lead plaintiff through counsel of their choice, or may choose to

do nothing and remain an absent class member.

The complaint charges Netflix and certain of its officers and directors with violations of the

Securities Exchange Act of 1934. Netflix is a subscription service that streams television

shows and movies over the Internet, and in the United States subscribers can have DVDs

delivered to their homes.

TIi@ complaint ali'guL dmt (luring the Class Period, defendants issued materially false and 11I:H1J '}1H'Ht LflriI!Hthe Cornpany'sbusiness practices and its contracts ith

) i d t , l - s t I(:<Hlt of defendants' false statements, Netflix's stock traded at

artificiakkinflated prices during the Class Period, reaching a high of almost $300 per share on July 13, 2011. While Netflix stock was inflated (partially by Netflix buying back its own

stock), Company insiders were selling 388,661 shares of their own Netflix stock for proceeds of 890.2 million.

L tirH qwuL':r I .i]r:i :11*1 revealed .that it

http://finance.yahoo.com/news/Robbins-Gefler-Rudman-.. . 2/28/2012

.JJ 1111111 11111111 ilill Jill iii i'llilli~ 1111111111 1111111 111

effective. On this news, Netflix stock fell nearly $40 per share to close at just under $170

per share. On September 19, 2011, the Company announced that, in an effort to offset

skyrocketing costs and rapidly defecting customers, the Company would begin charging

separately for its two services and had raised prices as much as 6o%. Netflix stock dropped

to 5130 per share on this news. Then, on October 24, 2011, Netflix issued its third quarter

2011 shareholder letter, which reported a net loss of 81o,000 U.S. subscribers, translating

into a cumulative loss of 5.5 million subscribers. The subsequently filed Form ioQ

revealed that Netflix's obligations for content over the coming years had skyrocketed to

$3.5 billion, with $2.8 billion due within three years. These disclosures caused Netfiix stock

to collapse from $118.84 per share on October 24, 2011 to $80.86 per share on October 27,

2011, a 32% decline in three days and a 73% decline from the stock's Class Period high.

According to the complaint, the true facts, which were known by the defendants but

concealed from the investing public during the Class Period, were as follows: (a) Netflix

had short-term contracts with content providers and defendants were aware that the

Company faced the choice of renegotiating the contracts in 2011 at much higher rates or

not renewing them at all; (b) content providers were already demanding much higher

license fees, which would dramatically alter Netflix's business; (c) defendants recognized

that Netflix's pricing would have to dramatically increase to maintain profit margins given

the streaming content costs they knew the Company would soon be incurring; and (d)

Netflix was not on track to achieve the earnings forecasts made by and for the Company for

2011.

Plaintiff seeks to recover damages on behalf of all purchasers of Netflix common stock

during the Class Period (the "Class"). The plaintiff is represented by Robbins Geller, which

has expertise in prosecuting investor class actions and extensive experience in actions

involving financial fraud.

Robbins Cc1lcr, a i o-lawyer firm with offices in San Diego, San Francisco, NewYork, Boca

DC., Philadelphia and Atlanta, is active in major litigations pending in

tletughoutthe United States and has taken a leading role in many jfl) p et aitioii behalf of defrauded investors, consumers, and companies, as well as

victims of human rights violations. The Robbins Geller Web site (http://www.rgr (ilaw.com) has more information about the firm.

http://finance.yahoo.com/news/Robbins-Gefler-Rudman-.. . 2/28/2012

1 : 11 , illim. ITUOTT'I r,,,WT.Fj= i ll I lli pl ill 111 11 11 11 1 1111' 111 1 111111111 IrL!1w SIR ']Jp72EE MGM rsrsI

Ct I I Business Wire. All dgl: i. \l the news releases provided by Business 1 are copyrighted.

Any .\ ier than an mdi H. I - I eference without express wit pm is

Pt' :jb F ...... !il)fltion of U H - H. - . archiving in a public web sitc or I

re J Hi- H 1 computer neiwork is sin.......I i ,

Cr - - :.J - t - . -, Yahoo! Inc. All rights reserved. /

http://finance.yahoo.com/news/Robbins-Geller-Rudman-.. . 2/28/2012

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u*imivz


12M toe4w, 2? FL Ne_va NY tOI 0212A195400 EO2126I9309O

INVEST oR CERTIFICATION FOR NVJvUXjNC.NASDAQ; N5LX

Full Name! 44n WLS&VS PaE 7 Street Address: 473/ 7.o.4i74 SAY 84 s41fl iza jodi'iT S?I("*'

State: Zip: - - Phone(s):fl73fa -3 Email:

CERTIFY THAYt Cl A. I have reviewed to complaint and authorize its filing;

B. I did not acquire the security that is the subject of this action at the direction of counsel or in order to participate in this private action or any other litigation under the lderal securities laws;

C. I am wilting to serve as * representative party on behalf oft class, including providing testimony at deposition and trial, If necessary;

D. I represent and wurrarit that I am fully authorized to enter into and execute this ccrticat on;

F. I Will not accept any payment to serve as a ropresonuaivc pasty on bCII*If of the class beyond my pro rata share of any recovery, except such reaste costs asd expenses (Including loss wqta) directly relating to the representation of the clan as ordered or approved by the court

F. During the three )tts prior to the date of this certification, I have not sought to save or served as a repnsscntstivc pasty for a class in an action filed under the federal securities law except if,detaileii below:

(1 Except those set forth In the following tnnsactlot,I • I have made no transaction(s) during the Class Period in the debtor equity securities that are the subject of this action (a Is additional pages if needed):

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I declare under penalty of perjury that the foregoing are true and correct statements.

Dated: ZZ 1z CJ2fl) c4az77d&4x't--) (Signature)

j5i2l24w3on1 OR EMAIL finorlotna wilitt.coml THIS DOCUMENT BACKS

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• 4 .tw York, NY I0001 -- 400 (1)2126)93090

Full Name:

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I CERTIFY THAT ,

A. I have reviewed the complaint and authorize its tiling;

B. I did not acquire the security that is the subject of this action at the direction of counsel or in order to participate in this private action or any other litigation under the federal securities laws;

C, 1 am willing to serve as a representative party on behalf of a class, including providing testimony at depositioa and trial, if necessary;

11 1 represent and warrant that tarn fully authorind to enter into and execute this certification;

E. I will not accept any payment to serve as a representative pany on behalf of the class beyond my pro nU share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as ordered or approved by the court;

F- During the three years prior to the date of this certiti cation, I have not sought to serve or served as a representative party for a class in an action filed under the federal securities Law except if detailed below:

C. Except those set forth in the following transaction list, I have made no transjwtion(s) during the Class Period in the debt or equity securities that are the subject of this action (attach additional pages if needed):

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Case 3: 12-cv-00225-SC

rirt7 .:1. FDed03/13/12 Page26 of 38

I; i :t' ill StU :11 a i i.ii

The law firm of Harwood Feffer LLP ("Harwood Feffer" or the "Firm")

specializes in complex, multi-party litigation with an emphasis on securities

class actions, shareholder class and derivative actions, ERISA litigation,

and consumer protection. The Firm also handles more general complex

commercial litigation involving allegations of breach of contract, breach of

fiduciary duty, fraud, and negligence, as well as litigation involving labor

and employment, civil rights, anti-competitive conduct, and other

commercial claims.

Harwood Feffer is dedicated to prosecuting socially useful actions in

the most efficient manner and with the highest level of professional

competence. The structure of the Firm allows us a far greater degree of

independence, flexibility, and satisfaction than a large firm environment,

without sacrificing the quality of representation necessary to successfully

litigate complex actions throughout the country. The Firm maintains an

excellent reputation among both the plaintiffs' and defense bars. Our

adversaries and co-counsel know that we take a case to trial, if necessary,

to achieve a satisfactory result for our clients.

Harwood Feffer has been acknowledged by courts and by its peers to

be one of the leaders in the plaintiffs' shareholder advocacy bar. In this

regard, we have developed new law in the areas of tender offers, fiduciary

duty of corporate insiders to public shareholders in mergers and takeovers,

and general principles of required disclosure to shareholders and

Case 3: 12-cv-00225-SC Document23-1 FDed03/13/12 Page27 of 38

Page 2

institutional investors in public companies.

As a result, the Firm has been designated as lead, co-lead or special

counsel in numerous complex cases and other actions involving

shareholder rights and corporate governance. In the vast majority of such

actions, the Firm's skill and expertise has led to the recovery of substantial

monetary and equitable benefits for investors, stockholders, corporations,

and partnerships. By way of example, the following litigated actions, in

which the Firm served in a leadership capacity, were all brought to highly

successful conclusions: 1) In re First Capital Holdings Corporation

Financial Products Securities Litigation, MDL 901 (C.D.CaI.) (restoration of

over $1 billion in insurance policies and benefits); 2) In re Royal

Dutch/Shell Transport ERISA Litigation, (D.N.J.) (creation of settlement

fund of $90 million plus implementation of structural relief); 3) In re

Prudential Bache Energy Income Partnerships Securities Litigation, MDL

880 (E.D.La.) (creation of settlement fund in excess of $90 million); 4) In re

JWP Inc. Securities Litigation, (S.D.N.Y.) (creation of settlement fund in

excess of $37 million); 5) Morse v. McWhorter, (M.D. Tenn.)(creation of a

settlement fund of $49.5 million on behalf of investors in Columbia/HCA

Healthcare Corp.); 6) In re BankOne Securities Litigation, (ND. Ill.)

(creation of a $45 million settlement fund); and 7) Sidney Morse, et al. v.

Abbott Laboratories, et al., (N.D. III.) (creation of a $14.1 million settlement

fund following a jury verdict for plaintiffs).

The Firm has also been appointed Co-Lead Counsel in a Multidistrict

Litigation against FedEx Ground Package System, Inc. currently pending in


Harwood Feffer LLP Page 3

the Northern District of Indiana, Docket No. MD- 1700, involving actions

prosecuting claims on behalf of over 40 separate state and federal classes

from over 35 states. This litigation concerns FedEx Ground's practice of

misclassifying its driver employees as independent contractors.

Courts have often recognized the Firm's skill in class, derivative, and

ERISA actions. For example, in In re Electro-Catheter Securities Litigation,

Judge Nicholas Politan of the District of New Jersey stated:

[C]ounsel in this case are highly competent, very skilled in this very specialized area and were at all times during the course of the litigation that I participated in, which was perhaps the major part of the Court litigation here, always well prepared, well spoken, and knew their stuff and they are a credit to their profession. They are the top of the line.

In J. Michael v. SFBC International, Inc., Judge Stanley R. Chesler of

the District of New Jersey stated:

The Court . * . is delighted, quite frankly, to see the practicality of counsel on both sides in this matter and that, indeed, settlement in this case and at this early stage ends up with very substantial and practical benefits to all the parties in this case and ultimately to the corporation.

THE ATTORNEYS OF THE FIRM

Robert I. Harwood, senior partner of the Firm, graduated from

William and Mary Law School in 1971, and has specialized in securities law

and securities litigation since beginning his career in 1972 at the



Enforcement Division of the New York Stock Exchange. He has

prosecuted numerous securities, class, derivative, and ERISA actions. He

has served as Acting Village Justice in Dobbs Ferry, New York since 1999.

He is a member of the Trial Lawyers' Section of the New York State Bar

Association and has served as a guest lecturer at trial advocacy programs

sponsored by the Practicing Law Institute. In a statewide survey of his

legal peers published by Super Lawyers Magazine, a special publication of

THE NEW YORK TIMES MAGAZINE, Mr. Harwood has been consistently

selected as a "New York Metro Super Lawyer" in 2006, 2007, 2008, 2009

and 2010. Super Lawyers are the top five percent of attorneys in New

York, as chosen by their peers and through the independent research. He

is also a Member of the Board of Directors of the MFY Legal Services Inc.,

which provides free legal representation in civil matters to the poor and the

mentally ill in New York City.

Commenting on Mr. Harwood's abilities, in In re Royal Dutch/Shell

Transport ERISA Litigation, (D.N.J.), Judge Bissell stated:

the Court knows the attorneys in the firms involved in this matter and they are highly experienced and highly skilled in matters of this kind. Moreover, in this case it showed. Those efforts were vigorous, imaginative and prompt in reaching the settlement of this matter with a minimal amount of discovery. *

So both skill and efficiency were brought to the table here by counsel, no doubt about that.

Likewise, Judge Hurley stated in connection with In re Olsten

Corporation Securities Litigation, 97 CV-5056 (E.D.N.Y. Aug. 31, 2001),


1 Harwood Feffer LLP

Di Pages

wherein a settlement fund of $24.1 million was created: "The quality of

representation here I think has been excellent." Mr. Harwood was lead

attorney in Meritt v. Eckerd, 86 Civ. 1222 (E.D.N.Y. May 30, 1986), where

then Chief Judge Weinstein observed that counsel conducted the litigation

with "speed and skill" resulting in a settlement having a value "in the order

of $20 Million Dollars." Mr. Harwood prosecuted the Hoeniger v. Aylsworth

class action litigation in the United States District Court for the Western

District of Texas (SA-86-CA-939), which resulted in a settlement fund of

$18 million and received favorable comment in the August 14, 1989 edition

of The Wall Street Journal ("Prospector Fund Finds Golden Touch in Class

Action Suit" p. 18, col. 1), Mr. Harwood served as co-lead counsel in In Re

Interco Incorporated Shareholders Litigation, Consolidated C.A. No. 10111

(Delaware Chancery Court) (May 25, 1990), resulting in a settlement of

$18.5 million, where V.C. Berger found, "This is a case that has an

extensive record that establishes it was very hard fought. There were

intense efforts made by plaintiffs' attorneys and those efforts bore very

significant fruit in the face of serious questions as to ultimate success on

the merits."

Mr. Harwood served as lead counsel in Morse v. McWhorter,

(Columbia/HCA Healthcare Securities Litigation) (M.D. Tenn.), in which a

settlement fund of $49.5 million was created for the benefit of the Class, as

well as In re Bank One Securities Litigation, (N.D. Ill.), which resulted in the

creation of a $45 million settlement fund. Mr. Harwood also served as co-

lead counsel in In re Safety-Kleen Corp. Stockholders Litigation, (D.S.C.),

Case 3: 12cvM0225SC Document234 FDed03/13/12 Page3l of 38


which resulted in a settlement fund of $44.5 million; In re Laidlaw

Stockholders Litigation, (D.S.C.), which resulted in a settlement fund of $24

million; In re AIG ERISA Litigation, (S.D,N.Y,), which resulted in a

settlement fund of $24.2 million; In re JWP Inc. Securities Litigation,

(S.D.N.Y.), which resulted in a $37 million settlement fund; In re Oxford

Health Plans, Inc. Derivative Litigation, (S.D.N.Y,), which resulted in a

settlement benefit of $13.7 million and corporate therapeutics; and In re

UNUMProvident Corp. Securities Litigation, (D. Me.), which resulted in the

creation of settlement fund of $45 million.

Joel C. Feffer, one of the senior members of the firm, was the

partner supervising the litigation of In re Home Shopping Network, Inc..

Derivative Litigation, (S.D. Fla.), which created a settlement benefit in

excess of $20 million, and Edge Partners, L.P. v. Dockser, et al., (D. Md.),

which created a settlement benefit in excess of $11 million. In addition, Mr.

Feffer was in charge of Dornberger v. Metropolitan Life Insurance

Company in the Southern District of New York, which created a settlement

benefit of more than $20 million; the successful prosecution of the

Regeneron Pharmaceuticals, Inc. Securities Litigation in the Southern

District of New York, which created a settlement fund in excess of $4

million; and Croyden Assoc. v. Tesoro Petroleum Corp., et al., (Del. Ch.),

which created a settlement benefit of $19.2 million on behalf of holders of

preferred stock of Tesoro Petroleum Corp.; and In re Alliance

Case 3: 12-cv-00225-SC Document234 FDed03/13/12 Page32 of 38

B] Harwood Feffer LLP

Page 7

Pharmaceutical Corp. Securities Litigation, (S.D.N.Y.), which on the eve of

trial created a settlement of $4.75 million.

Mr. Feffer graduated from Georgetown University Law Center in 1967

and specialized in corporate law and securities litigation. Mr. Feffer is a

member of both the New York State and American Bar Associations.

Daniella Quitt, a member of the Firm, graduated from Fordham

University School of Law in 1988, is a member of the Bar of the State of

New York, and is also admitted to the United States District Courts for the

Southern and Eastern Districts of New York and the United States Court of

Appeals for the Second, Fifth and Ninth Circuits.

Ms. Quitt has played a significant role in numerous actions in which

Harwood Feffer served as lead or co-lead counsel, wherein substantial

benefits were conferred upon plaintiff shareholders, such as In re Safety-

Kleen Corp. Stockholders Litigation, (D.S,C,) (settlement fund of $44.5

million): In re Laidlaw Stockholders Litigation, (D.S.C.) (settlement fund of

$24 million): In re UNUMProvident Corp. Securities Litigation, (D. Me.)

(settlement fund of $45 million): In re Harnischfeger Industries (E.D. Wisc.)

(settlement fund of $10.1 million): In re Oxford Health Plans, Inc. Derivative

Litigation, (S.D.N.Y.) (settlement benefit of $13.7 million and corporate

therapeutics): In re JWP Inc. Securities Litigation, (S.D.N.Y.) (settlement

fund of $37 million): In re Home Shopping Network, Inc., Derivative

Litigation, (S.D. Fla.) (settlement benefit in excess of $20 million): In re

Rexel Shareholder Litigation, (Sup. Ct. N.Y. County) (settlement benefit in


Page 8

excess of $38 million); and Croyden Assoc. v. Tesoro Petroleum Corp., et

al., (Del. Ch.) (settlement benefit of $19.2 million).

In connection with the settlement of Alessi v. Beracha, (Del. Ch.), a

class action brought on behalf of the former minority shareholders of

Earthgrains, Chancellor Chandler commented: "I give credit where credit is

due, Ms. Quitt. You did a good job and got a good result, and you should

be proud of it,"

Prior to joining Harwood Feffer in May 1991, Ms. Quitt represented

both plaintiffs and defendants in complex commercial litigation. Since her

affiliation with Harwood Feffer, Ms. Quitt has focused her practice on

shareholder rights and ERISA class actions but continues to handle

general commercial and consumer litigation.

Matthew M. Houston, a member of the Firm, graduated from Boston

University School of Law in 1988. Mr. Houston is a member of the Bar of

the State of New York and the Commonwealth of Massachusetts. Mr.

Houston is also admitted to the United States District Courts for the

Southern and Eastern Districts of New York and the District of

Massachusetts. Mr. Houston has substantial courtroom experience

involving complex actions in federal and state courts throughout the

country. Mr. Houston was co-lead trial counsel in one the few ERISA class

action cases taken to trial asserting breach of fiduciary duty claims against

plan fiduciaries; Brieger et al. v. Tellabs, Inc., No. 06-CV-01882 (N.D. Ill.)

and has successfully prosecuted many ERISA actions; In re Royal Ahold



N. V. Securities and ERISA Litigation, Civil Action No. 1:03-md-01 539. Mr.

Houston has been one of the principal attorneys litigating claims in multi-

district litigation concerning employment classification of pick up and

delivery drivers and primarily responsible for prosecuting ERISA class

claims; In re FedEx Ground Package Inc. Employment Practices Litigation,

3:05-MD-527 (MDL 1700). Mr. Houston also served as lead counsel in

multi-district class litigation seeking to modify insurance claims handling

practices; In re UnumProvident Corp. ER/SA Benefits Denial Actions, 1:03-

cv-1000 (MDL 1552).

In addition to numerous employment cases, Mr. Houston has litigated

actions asserting breach of fiduciary duty in the context of mergers and

acquisitions. Mr. Houston has been responsible for securing millions of

dollars in additional compensation and structural benefits for shareholders

of target companies; In re Instinet Group, Inc. Shareholders Litigation, C.A.

No. 1289 (Delaware Court of Chancery) Jasinover v. The Rouse Company,

Case No. 13-C-04-59594 (Maryland Circuit Court); McLaughlin v.

Household International, Inc., Case No. 02 CH 20683 (Illinois Circuit

Court); Sebesta v. The Quizno'.s Corporation, Case No. 2001 CV 6281

(Colorado District Court); and Crandon Capital Partners v. Sanford M.

Kimmel, C.A. No. 14998 (Delaware Court of Chancery).

Mr. Houston has played a principal role in numerous class actions

wherein substantial benefits were conferred upon plaintiffs: Pace American

Shareholder Litigation, 94-92 TUC-RMB (securities fraud class action

settlement resulting in a recovery of $3.75 million); In re Bay Financial

Case 3: 12cv00225SC Document234 FDedO3/13/12 Page35 of 38


Securities Litigation, Master File No. 89-2377-DPW, (J. Woodlock) (ft

Mass.) (settlement of action based upon federal securities law claims

resulting in class recovery in excess of $3.9 million); Crandon Capital

Partners v. Sanford M. Kimmel, C.A. No. 14998 (J, Chandler) (Del. Ch,

1996) (settlement of an action on behalf of shareholders of Transnational

Reinsurance Co. whereby acquiring company provided an additional $10.4

million in merger): Goldsmith v. Technology Solutions Company, 92 C 4374

(J. Manning) (N.D. Ill. 1992) (recovery of $4.6 million as a result of action

alleging false and misleading statements regarding revenue recognition).

Samuel K. Rosen, a member of the Firm, graduated Princeton

University in 1965 and cum laude from Harvard Law School in 1968. Mr.

Rosen has had extensive experience in securities class action litigation, as

well as complex corporate and commercial litigation. Mr. Rosen has also

represented public and private companies in matters of general corporate

concern.

In 1979, Mr. Rosen argued in the United States Supreme Court, and

won, the landmark case, Park Lane Hosiery Co., Inc. v. Shore, 439 U.S.

322 (1979). Mr. Rosen played a key role in the successful prosecution of

Morse v. McWhorter, (M.D. Tenn.) (creation of a settlement fund of $49.5

million on behalf of investors in Columbia/HCA Healthcare Corp.) and In re

Olsten Corporation Securities Litigation, (E.D.N.Y.) (creation of a

settlement fund of $24.1 million).



James G. Flynn, a member of the Firm, graduated cum laude from

Fordham College in 1980 and cum laude from St. John's School of Law in

1988. Mr. Flynn is a member of the Bar of the State of New York and is

also admitted to the United States District Courts for the Southern and

Eastern Districts of New York and to the United States Court of Appeals for

the Second and the Fifth Circuits.

Mr. Flynn has played a principal role in numerous class, derivative,

and consumer actions wherein substantial benefits were conferred upon

investors and consumers, such as In re Executive Telecard, Ltd. Securities

Litigation, 94 Civ. 7846 (CLB) (S.D.NX.) (settlement benefit in cash and

options of over $4 million in Federal securities action); In re Verizon Three

Way Calling Litigation, No. 603484-01 (Sup. Ct. N.Y. County) (class action

settlement providing full refund of improper three way calling charges of up

to $2 million collected); In re Graham-Field Health Products, Inc. Securities

Litigation, No. 98-CV-1923 (DRH) (E.D.N.Y.) ($5,650,000 settlement of

Federal securities class action); and Geer v. Cox, et al., Case No.

01-2583-JAR (D. Kan.) (derivative settlement of $2.5 million in class and

derivative action).

Prior to joining Harwood Feffer, Mr. Flynn represented both plaintiffs

and defendants in commercial and securities litigations and in class

actions. Since his affiliation with Harwood Feffer in 1994, Mr. Flynn has

focused his practice in the field of shareholder and consumer rights but

continues to handle general and complex commercial litigation as well.

Case 3: 12cv400225SC Document234 FDed03/13/12 Page37 of 38

Harwood Feffer LLP Page 1 2

Peter W. Overs, Jr., Counsel to the Firm, was admitted to the New

York Bar in 1994 and the U.S. District Court, Southern and Eastern

Districts of New York in 1995. He is a graduate of St. Johns University

(J.D., 1993) and New York University (B.A., magna cum laude,

Departmental Honors in Philosophy, 1990). Mr. Overs authored "U.S. v,

Fagg: Stretching the Bounds of Privacy," 66 St. Johns L. Rev. 1193 (1993).

He is a member of the Association of the Bar, City of New York. Upon

graduation from law school, Mr. Overs served as law clerk to the Honorable

Paul J. Kelly, Jr., Circuit Judge, United States Court of Appeals for the

Tenth Judicial Circuit. Prior to becoming an associate of the Firm, Mr.

avers represented both plaintiffs and defendants in antitrust and securities

class actions, complex commercial litigation and federal appeals.

Mr. Overs has played a significant role in the Firm's prosecution of

employment misclassification and related Fair Labor Standards Act claims

in In re FedEx Ground Package System, Inc., Employment Practices

Litigation, MDL No. 1700 and Reid, et al. vs. SuperShuttle Int'l, Inc.. et al.

Civ. No, 1:08-cv-04854-JG-WP (E.D.N,Y.). Mr Overs' practice also

includes the prosecution of shareholder rights, consumer rights, securities

fraud, antitrust and ERISA class actions.

Tanya Korkhov, an associate of the Firm, was admitted to the bar in

2006, Ms. Korkhov graduated from New York University with a Bachelor of

Arts in English and American Literature. She received her J.D. from the

Benjamin N. Cardozo School of Law in 2005, where as a member of the

Case 3:12cvMO225SC Document234 FiHedO3I13/12 Page38 of 38


Securities Arbitration Clinic, she represented clients in securities-related

matters. Ms. Korkhov represented Cardozo on a four-member team in the

2005 and 2004 annual Willem C. Vis International Commercial Arbitration

Moot Competition held in Vienna, Austria. Ms. Korkhov is admitted to the

United States District Courts for the Southern and Eastern Districts of New

York.

Roy Shimon, an associate of the Firm, was admitted to the Bar of

the State of New York in 2007. Prior to becoming an associate of the Firm,

Mr. Shimon served as judicial intern to New York Supreme Court Justice

Ronald D. Hollie, and to New York State Supreme Court Justice/Associate

Justice Appellate Term Jaime A. Rios.

Mr. Shimon graduated with honors from Franklin & Marshall College

in 2003, where he was also inducted into the Pi Sigma Alpha and Alpha

Kappa Delta National Honor Societies. He received his J.D. from St. John's

University in 2006, where he served on the Board of the Moot Court Honor

Society, and as Vice President of the Entertainment & Sports Law Society.

Mr. Shimon is admitted to the United States District Courts for the Southern

and Eastern Districts of New York.

Case3:12cv00225SC Document232 Fflecl03/13/12 Pagel of 4

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ROBERT C. SCHUBERT S.B.N. 62684 WILLEM F. JONCKHEER S.B.N. 178748 SCHUBERT JONCKHEER & KOLBE LLP Three Embarcadero Center, Suite 1650 San Francisco, California 94111 Telephone: (415) 788-4220 Facsimile: (415) 788-0161 rsc1iubert(äschubcrt1awfirrncorn wjoflcIcheer(schubcrt1awfifln corn

ROBERT I. HARWOOD MATTHEW M. HOUSTON HARWOOD FEFFER LLP 488 Madison Avenue, 8th Floor New York, NY 10022 Telephone: (212) 935-7400 Facsimile: (212) 753-3630 rharwood 1 ifcsq corn rnhousto fesgeom


Plaintiff,

NETFLIX, INC., REED HASTINGS, DAVID B. WELLS, THEODORE A. SARANDOS, LESLIE J. KILGORE and NEIL D. HUNT

Defendants.

No. 12-cv-0225-SC

[PROPOSED] ORDER GRANTING MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL

DATE:

APRIL 20, 2012 TIME:

10:00 A.M. JUDGE HON. SAMUEL CONTI CTRM:

1

Counsel for Proposed Lead Plaintiffs Frank Fish, Anita G. Wilson, Roger T. Wilson, and Nancy Comstock and Proposed Lead Counsel



[PROPOSED] ORDER GRANTING MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK

FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL


Case3:12cv00225SC Document232 Fflecl03/13/12 Page2 of 4

DAVIN POKOIK, Individually and on Behalf of All Others Similarly Situated,

Plaintiff,

NETFLIX, INC., REED HASTINGS, DAVID B. WELLS, THEODORE A. SARANDOS, LESLIE J. KILGORE, and NEIL D. HUNT,

Defendants.

)

) No. 12-cv-0439- LHK

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9 FRANK J. FISH, individually and on

No. 12-cv- 1030-LHK 10 behalf of all others similarly situated,

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Plaintiff,

12 V.

13 NETFLIX, INC., REED HASTINGS, DAVID B. 14 WELLS, THEODORE A. SARANDOS, LESLIE

J. KILGORE and NEIL D. HUNT

Defendants.

[PROPOSED] ORDER GRANTING MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK

FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL


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IPROPOSEDI ORDER

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Having considered the motion of Frank Fish, Anita and Roger Wilson, and Nancy

3 Comstock for consolidation of related actions, appointment as lead plaintiffs, and approval of

4 Lead Counsel, the memorandum of law in support thereof, the Declaration of Matthew M.

5 Houston in support of the motion, and good cause appearing,

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IT IS HEREBY ORDERED:

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1) The motion is granted;

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2) The above-captioned cases are consolidated pursuant to Fed. R. Civ. P. 42(a);

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3) Frank Fish, Anita and Roger Wilson, and Nancy Comstock are appointed to

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serve as lead plaintiffs in the consolidated action, pursuant to 15 U.S.C. 78u-

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4(a)(3)(B);

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4) Frank Fish, Anita and Roger Wilson, and Nancy Comstock's selection of

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Harwood Feffer LLP as Lead Counsel is hereby approved;

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5) This Order shall apply to the above-captioned action and to each case that

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relates to the same subject matter that is subsequently filed in this Court or is

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transferred to the Court and consolidated with this action;

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6) An original of this Order shall be filed by the Clerk in the Master File;

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7) The Clerk shall mail a copy of this Order to counsel of record in this action; and

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8) Lead Counsel shall provide general supervision of the activities of plaintiffs'

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counsel and shall have the following responsibilities and duties to perform or

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delegate as appropriate:

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a) to brief and argue motions;

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b) to initiate and conduct discovery, including without

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limitation, coordination of discovery with defendants'

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counsel, preparation of written interrogatories, requests for

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admission and requests for production of documents;

27 [PROPOSED] ORDER GRANTING MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK

28 FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL


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C) to direct and coordinate the examination of witnesses in

depositions;

d) to act as spokesperson at pretrial conferences;

e) to call and chair meetings of plaintiffs' counsel as

appropriate or necessary from time to time;

f) to initiate and conduct settlement negotiations with counsel

for defendants;

g) to provide general coordination of the activities of

plaintiffs' counsel and to delegate work responsibilities to

selected counsel as may be required in such a manner as to

lead to the orderly and efficient prosecution of this

litigation and to avoid duplication or unproductive effort;

to consult and employ experts;

to receive and review periodic time reports of all attorneys

on behalf of plaintiffs, to determine if the time is being

spent appropriately and for the benefit of plaintiffs, and to

determine and distribute plaintiffs' attorneys' fees; and

to perform such other duties as may be expressly

authorized by further order of this Court.

2012 THE HONORABLE SAMUEL CONTI UNITED STATES DISTRICT JUDGE

h)

i)

.j)

27 [PROPOSED] ORDER GRANTING MOTION OF FRANK FISH, ANITA AND ROGER WILSON, AND NANCY COMSTOCK

28 FOR CONSOLIDATION, APPOINTMENT AS LEAD PLAINTIFFS, AND APPROVAL OF LEAD COUNSEL


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