COLUMBUS, Ohio (Legal Newsline) – The Ohio Supreme Court has taken up the issue raised by the City of Maple Heights and private lawyers it hired who want to charge Netflix and Hulu for doing business there.
The City’s case, filed in Cleveland federal court, seeks to impose a “franchise fee” on the streaming services that has historically been imposed on cable TV providers. It’s one of the latest brainchilds of the plaintiffs bar that required partnerships with government officials.
One of those government officials, Maple Heights Mayor Annette Blackwell, admitted in a deposition, “I don’t have enough information to have my own view about this.”
Another - New Boston, Texas, chief administrator Elizabeth Lea - said it will be fine with her if Netflix and Hulu pass on the added costs to their customers.
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.
On July 22, the Ohio Supreme Court decided to answer questions certified to it by Judge James Gwin, who is presiding over the Maple Heights case.
The two questions the court will answer:
-Whether Netflix and Hulu are video service providers under Ohio law; and
-Whether Maple Heights can sue Netflix and Hulu to enforce Ohio’s video service provider provisions.
In Nevada, a federal judge has already thrown out the City of Reno’s lawsuit.
In her ruling, Judge Miranda 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.