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Courts

Birmingham pension fund sues Netflix for alleged mismanagement of bonus program

City of Birmingham (Ala.) Relief and Retirement System has filed a lawsuit against media streaming service Netflix for allegedly mismanaging the company's performance bonus plan to receive a federal tax deduction.

The shareholder derivative action, filed in U.S. District Court in San Francisco on April 6, alleges that certain members of Netflix's board and executive officers knowingly breached their fiduciary duties by purposefully mismanaging its performance bonus plan to pay senior executives "unwarranted compensation." The suit also alleges that the plaintiffs issued false and misleading statements concerning the bonus plan to mislead investors about how executive compensation was calculated and to conceal the potential tax liability incurred.

The lawsuit asks that the plaintiffs return all compensation during the time they were in breach. The complaint is also being made on behalf of Netflix, and alleges that Netlix itself suffered monetary damages as a result of this activity.

"Through their conduct, defendants rigged the compensation process, guaranteeing Netflix officers huge cash payments while misleading investors into believing that these payments were justified by attainment of real performance goals," the suit alleges.

The $1 billion pension system, a Netflix shareholder, is seeking a trial by jury.

Thomas L. Laughlin IV and Jonathan M. Zimmerman, the plaintiff's attorneys from the law firm Scott & Scott, and Netflix spokesman Jonathan Friedland could not be immediately reached for comment by press time.