Former MoviePass Executives To Pay $400K: Contra Costa DA

CONTRA COSTA COUNTY, CA — Two executives affiliated with the now-defunct movie subscription service, MoviePass, will have to pay $400,000 in civil penalties and restitution for unlawful business practices, the Contra Costa County District Attorney's Office announced Wednesday.

Former MoviePass executives Theodore Farnsworth and Mitchell Lowe agreed to the fines in a settlement agreement reached May 20 with the Contra Costa County DA's Office and the district attorneys' offices of San Joaquin, Sonoma and Ventura counties.

In addition to $400,000 in monetary payments, the judgment stipulates that Farnsworth and Lowe must not engage in any of the "alleged unlawful, unfair or fraudulent business acts or practices committed during their tenure as MoviePass managers," Contra Costa County DA's Office Spokesperson Scott Alonso said in the news release.

MoviePass was an American subscription-based movie ticket service headquartered in New York City. It was founded in 2011 and initially allowed subscribers to purchase up to three movie tickets per month for a discounted monthly fee. Through a cell phone app, subscribers could check into a movie theater and choose a movie theater and showtime. The cost of the ticket was loaded by MoviePass onto a prepaid MoviePass debit card, which subscribers then used to purchase the ticket from the movie theater.

Under a new business model in 2017 — around the time MoviePass was purchased by Helios and Matheson Analytics — MoviePass shifted from offering a three-movie per month subscription to an offering an "unlimited" subscription plan that cost $9.95 a month and an "unlimited" fixed-rate annual subscription, Alonso said.

In 2018 — the year MoviePass peaked at 3 million subscribers — a Contra Costa County resident filed a complaint with the California Attorney General's Office claiming that MoviePass violated its Terms of Service by not showing available tickets in the mobile app and limiting the number of movies to the consumer even though they paid in advance for a year of "unlimited" service.

The complaint was forwarded to the Contra Costa County DA's Office to be investigated on the local level.

The investigation, Alonso said, revealed that MoviePass changed its business model and terms of services changed multiple times between 2017 and 2019 to the detriment of customers.

After the acquisition of MoviePass by Helios and Matheson Analytics, Farnsworth and Lowe in their roles as executives engaged in numerous unlawful, unfair and fraudulent acts and practices, which according to the DA's Office included:

—Falsely advertising that MoviePass subscriptions offer "unlimited" movie watching, specifically "any movie," "any day," at "any theater," when in reality MoviePass continually added limitations to customers' subscriptions;

— Unconscionably changing terms of service during a subscription period;

— Converting all prepaid "unlimited" plans to three movies per month;

— Shutting down the availability of movies when a certain dollar amount is reached, referred to as "Trip wire";

— Failing to notify autorenewal customers of material changes to their subscriptions; and

— Continuously charging customers' debit or credit cards after receiving notice of cancellation from customers.

And in 2019, MoviePass suffered a data breach when a MoviePass engineer created an unsecured and unencrypted server as a debugging tool. The server had more than 161 million pieces of personal identifying information, including names, MoviePass card numbers, credit card numbers, billing information, email addresses and login information, belonging to at least 58,000 consumers.

"Despite being notified by private individuals, MoviePass allowed this server to operate for three months before it was taken down," Alonso said. "MoviePass failed to advise the California Attorney General’s Office of the data breach, as required by law."

In September 2019, MoviePass shut down its operations and in January 2020, both MoviePass and its parent company, Helios and Matheson Analytics, filed for Chapter 7 bankruptcy.