CLEVELAND (Legal Newsline) - The private lawyers who have recruited cities around the country to try to collect local taxes on video streaming services have asked a federal court to make their Ohio lawsuit a class action on behalf of every municipality in the state.
In a recent filing, lawyers at DiCello Levitt Gutzler, Nix Patterson and Schneider Wallace Cottrell Konecky told U.S. District Judge James Gwin their lawsuit on behalf of the city of Maple Heights is “tailor-made for class certification” because it presents the basic questions at issue in every similar case. The lawyers claim Netflix, Hulu and other streaming content providers should collect a 5% tax from viewers under Ohio’s cable-television franchise law.
Netflix and Hulu argue the lawsuit is an unwarranted money grab that is blocked by a federal law prohibiting local taxes on video services and violates the First Amendment because it seeks to discriminate against specific providers of video content.
Despite these arguments, Judge Hull has allowed the case to proceed. In January, he rejected the streaming services’ argument Maple Heights had admitted these flaws by failing to meet a December deadline to present counterarguments. The judge said its failure was a mistake the city could correct later.
In the motion for class certification, the lawyers for Maple Heights say it is undisputed that Netflix and Hulu transmit their signals over wires to subscribers living inside the borders of Ohio municipalities. The central question a class action could answer is whether their content represents the “video services” described in Ohio’s cable-television franchise law, they say.
“Defendants cannot reasonably dispute that the infrastructure of Internet service providers in municipalities in the State of Ohio, including Maple Heights, are located in public rights-of-way and, without the use of such infrastructure, they would be unable to deliver their video programming to their subscribers,” the lawyers say.
In an acknowledgement of the true economic basis for the claims, they add that Netflix, Hulu and others present video programming that is identical to the fare on cable and traditional broadcast TV. Lawyers promote this litigation to cities as a way to make up for declining franchise revenue from cable TV franchise fees as viewers shift to streaming services.
The streaming services say the lawsuit, if successful, would require consumers to pay a 5% tax on a narrow slice of video providers and ignore the various ways they receive content, including over cellphones. The lawyers say that doesn’t matter, since cities would calculate the taxes based on the bills sent to consumers inside their borders, regardless of how they watch the content.
DiCello Levitt, which also represents government clients suing over the chemical PFAS, negotiated a 33% fee for itself and co-counsel in the video lawsuit. Nix Patterson, also part of the team representing Maple Heights, collected part of a $60 million fee award in Oklahoma’s lawsuit against Purdue Pharma.
In their request for class certification, the lawyers describe themselves as “highly-qualified counsel with extensive experience conducting class and complex litigation, particularly in the context of franchise requirements for video service providers.” They said they have “committed significant resources to developing the claims in this case” and are pursuing similar litigation in Arkansas, California, Nevada, Tennessee and Texas.