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Hollywood to Settle Late-Fee Suit

18 Oct, 2004 By: Erik Gruenwedel

Hollywood is proposing to settle a late-fee legal flap.

To resolve a class action lawsuit alleging improper rental policies and late fees, among other charges, Hollywood Entertainment Corp. is offering more than $9 million in coupons for free movie and video game rentals.

Hollywood customers charged late fees or product charges for lost, damaged or unreturned rentals prior to Aug. 10, 2004, are eligible to receive up to seven certificates over an 18-month period for a free movie or video game rental with the rental of any Hollywood product, according to a notice from the Circuit Court of St. Clair County, Twentieth Judicial Circuit, of Illinois.

The settlement, which must still be approved by the court, would deny any official wrongdoing by Hollywood in addition to shielding the chain from further litigation. The state and nationwide class action suits were filed June 14, 2002, in the Superior Court of King County, Wash., and May 20, 2003, in Illinois.

“It's an insignificant number,” said Michael Pachter, analyst with Los Angeles-based Wedbush Morgan Securities of the deal. “It's so small it doesn't make any difference. It's coupons. It's a nuisance settlement.”

With some analysts last week downgrading Hollywood stock to sell status, Pachter criticized a Wall Street mindset that undervalues brick-and-mortar rentailers in favor of video-on-demand and Netflix.

“Your mom is not going to stop renting at a brick-and-mortar rental any time soon,” Pachter said. “These people think that the studios are going to give us digital downloads direct to our TVs; and we are wired to do that?”

Pachter isn't sure Hollywood founder Mark Wattles is really having a difficult time transforming Hollywood into a private company, as some industry analysts have speculated. “He's a buyer,” he said. “He's not getting the price he wants. I'd rather see the whole deal fall apart and the company become an independent company. They are worth more than the current $9.30 a share.”

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