TEXARKANA, Texas (Legal Newsline) – A Texas city official who sued Hulu and Netflix says she isn’t concerned that her actions could possibly raise subscriber fees elsewhere.
Similar to a recent court battle in Ohio, the two streaming services recently filed their opposition to a class action lawsuit that seeks to force them to pay franchise fees that now only apply to traditional cable TV operators.
The City of New Boston, Texas, is asking a Texarkana federal judge to certify a class of every Texas city that would be led by New Boston.
“Did you talk to any mayors or any city administrators in any other city or municipality in Texas before you decided to sue Netflix and Hulu?” New Boston chief administrator Elizabeth Lea was asked in a deposition.
A: “No, I did not.”
Q: “Why not?”
A: “I didn’t think it was necessary for me to talk to any of them.”
Q: “Did you talk to any managers or mayors or city representatives about this lawsuit after the complaint was filed?”
A: “No.”
Q: “So you have no idea how any other cities feel about this lawsuit?”
A: “No.”
Q: “So I explained to you that if you’re successful, that the franchise fees could be passed on to subscribers, and if the class action is successful, it could be passed on to residents of other cities like Nash. Did you know that?”
A: “Yes.”
Q: “And are you okay with that?”
A: “Yes.”
Like other cities pursuing similar claims around the country, New Boston hired private lawyers on a contingency fee to bring its case. Those firms are Nix Patterson of Austin, Langdon & Davis of New Boston, Bruster PLLC of Southlake, Dicello Levitt Gutzler of Chicago and Schneider Wallace of Houston.
The cases say online entertainment providers failed to register with states to pay franchise fees as required of conventional cable television operators, which use public rights-of-way for their wires and equipment.
By suing streaming video providers, the lawyers seek to extend cable-television franchise fees to companies like Netflix and Hulu that have no physical presence in the city but collect subscription fees from consumers there. Cities and counties have long been concerned about the erosion in franchise fees as more consumers “cut the cord” on traditional cable and stream content over broadband internet connections or mobile devices.
Hulu’s opposition to class certification says New Boston’s administrator Lea failed to keep city officials informed on her decision to hire private lawyers to bring litigation.
Lea is an “unelected local official” who is “attempting to speak for all Texas municipalities and their residents.”
“Municipalities also have less costly ways to seek franchise fees than class litigation,” Hulu’s lawyers wrote.
“(M)unicipalities can rely on the state to seek and fund enforcement. Municipalities can utilize city lawyers that are often available without private counsel. And, cities can likely secure payment without suit by waiting for legal precedent set by New Boston and demanding compliance.
“The City Administrator admitted she never considered any alternatives to suing Hulu.”