LAS VEGAS (Legal Newsline) - A federal judge dismissed the City of Reno’s lawsuit against Netflix and Hulu seeking to impose a 5% franchise tax on streaming video services, saying state law doesn’t allow the charge and Reno didn’t have standing to bring the suit anyway.
The Sept. 3 decision by U.S. District Judge Miranda M. Du ends one of the most prominent cases by private lawyers who recruited Reno and other cities to sue Internet video providers under state laws written to cover traditional cable television operators that require public rights-of-way to string their physical lines. The suits, if successful, would impose new taxes on video subscribers, a portion of which would flow back to the private lawyers as fees.
Reno is represented by Nix Patterson, a Texas law firm that earned millions of dollars in fees from similar public litigation against the opioid industry by the state of Oklahoma; DiCello Levitt Gutzler, active in video streaming litigation in Ohio and PFAS litigation in Michigan; Schneider Wallace Cottrell Konecky; and Shook & Stone.
In her ruling, Judge Du cited a 2007 Nevada video franchise law limiting the definition of “video service provider” to companies that offer multichannel programming “comparable to video programming delivered by a broadcast television station” and excluding any service allowing people to access content “via the public Internet.” The law also limited enforcement of complaints about “underpayment” of franchise fees to the state Attorney General.
Reno’s lawyers argued the city wasn’t trying to recover an “underpayment” because Netflix and Hulu weren’t paying anything at all. The judge said the argument wasn’t entirely without merit, but said the overall thrust of the statute was to enforce uniform franchise fee policies statewide and allowing Reno to sue on its own would thwart that purpose.
The dismissal, if upheld, eliminates the key arguments lawyers have made for extending franchise fees in Nevada. Plaintiff lawyers have been promoting their theories of litigation nationwide to municipal officials distressed at declining franchise revenue as customers “cut the cord” and increasingly purchase video content via Internet streaming services.
In depositions, however, some of those officials have displayed either a lack of interest or ignorance about the actual effect of a courtroom success on their constituents.