LOS ANGELES (Legal Newsline) - The wildly unsuccessful litigation strategy that would have streaming providers like Netflix and Hulu pay franchise fees designed for cable TV providers has failed again.
California's Second Appellate District rejected the theory on Feb. 22 in Lancaster's lawsuit, brought by private lawyers hoping to get a chunk of any recovery. Similar suits have failed all over the country, with the U.S. Court of Appeals for the Seventh Circuit recently refusing to get on board.
The California case involved the state's Digital Infrastructure and Video Competition Act, which requires video service providers to obtain a franchise from the Public Utilities Commission and then pay fees to local governments for the use of public rights-of-way.
The fees are designed to compensate governments for the use of their land on which cable wires are laid. Netflix, Hulu and others argue they aren't subject to the act. A Los Angeles trial court agreed, as does the Second District.
It found the streaming providers did not need franchises, and as such, the governments could not seek franchise fees - only the State can.
"In particular, the provisions that the (Public Utilities Commission) should 'ensure full compliance with the requirements of this division' and may 'collect any fees authorized by this division' are strong indications that the Legislature intended for the Commission, and not local governments, to prosecute a video service provider that does not hold a state franchise," the ruling by Justice Luis Lavin says.