Netflix and Hulu scored another victory with a growing initiative by local governments to allow streamers to pay bills for using public infrastructure, this time in California.
In a ruling that would likely end the case, a Los Angeles judge ruled Wednesday that the city of Lancaster has no right to sue Netflix and Hulu for taxing them. Even if they could, the judge ruled that the ship did not use wires, cables or public facilities.
Lancaster is one of many cities and towns across the country that have sued Netflix and Hulu over taxes. These counties argue that streaming services must pay a fee, usually 5% of total revenue from local video programming, once traditionally reserved for cable companies that needed to use public rights-of-way to build their own lines.
Currents have largely prevailed on this legal front in cases across the country.
Los Angeles Supreme Court Judge Yvette M. Palazuelos confirmed a number of rulings in favor of streamers that they are not subject to state laws governing video service providers. She found that counties are limited to just complaints from franchise owners, which Netflix and Hulu are not.
There is no “language” in the letter that “allows a local entity to sue, forcing the franchisee to apply for a state franchise”. [the Digital Infrastructure and Video Competition Act] Or to meet their demands,” Palazuelos wrote in the verdict, which supports the defendants’ Demur without amendments.
The authority to force the franchisee to pay the fee through a lawsuit, the judge concluded, rests with the California Public Utilities Commission. He said the statute “clearly gives only the PUC, and not the local units, the right to take action against unfranchised video service providers that are subject to the requirements of the DIVCA. In other words, by simply reading the relevant statutory provisions, only the PUC can act to force non-franchised owners, such as Netflix and Hulu, to comply with the DIVCA.
Courts in other jurisdictions have reached similar conclusions, although state laws are slightly different. An Arkansas federal judge ruled that “the legislature has not expressed any intention that individual counties should enforce compliance”, rather, “the Arkansas Public Utilities Commission intends to enforce compliance”. A Nevada federal judge also ruled that “in recognizing the reasons for the public policy of uniformity, the Nevada legislature intended to apply actions, remedies, and penalties for violating the provisions through the state’s Attorney General. [statute]Which means that “local authorities… have no private right to act”.
But even if local entities could sue, Palazuelos concluded that the DIVCA does not apply to Netflix and Hulu because they do not own or operate the infrastructure with any public rights.
“If Defendants were required to obtain a DIVCA franchise for the provision of their services, Plaintiff could likely have asked Disney Plus, Peacock, HBO Max and Amazon Prime Video to obtain a DIVCA franchise as well,” the statement said. “According to the plaintiff’s reading of the DIVCA, multiple franchise owners could ‘use’ a public right of way and local units could charge a 5% franchise fee from each franchise owner. “Such an interpretation would lead to a financial income for local entities, which the legislature did not intend to do.”
In an identical case, the Ohio Supreme Court on Wednesday considered whether Netflix and Hulu are video service providers and must pay a franchise fee under state law. In this case, the question is whether the municipality is responsible for enforcing the law in justice and not the state. It should be noted that the Ohio Attorney General presented a friend of the court’s statement in support of the Streamers.
Netflix and Hulu have stated that they do not own or operate any cables or facilities and are not a traditional video service provider as required by state law because there is no scheduled programming and they deliver their content on demand.
Leading to the logical conclusion of the local authorities’ claims, they argued that this position would make anyone distributing content online a video service provider and therefore subject to franchise fee requirements.
There has been at least one adverse decision in the state of Missouri, the first jurisdiction where a franchise rights lawsuit was filed. In that case, the judge rejected arguments that Netflix and Hulu are not really video service providers at the time of the dismissal. He found that streamers may be covered by the Missouri Video Service Providers Act.
Complaints are filed in Texas, Nevada, Tennessee, Indiana, Georgia and Arkansas, among others.
The proposed class action sought to represent the cities and counties in California where Netflix and Hulu operate.
Netflix and Hulu did not respond to a request for comment.
Source: Hollywood Reporter
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
