Reno's Streaming Franchise Fee Fight Faces Judicial Challenging
A 9th U.S. Circuit Court of Appeals panel repeatedly challenged Reno's right-of-action arguments Monday during oral argument in the city's appeal (docket 21-16560) of a lower court rejecting its franchise fee litigation against streamers Netflix and Hulu (see 2202080088). The 8th Circuit is scheduled to hear oral argument Tuesday in an appeal by Ashdown, Arkansas, regarding a similar dismissed franchise fee suit against the streaming services.
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The Nevada state legislature was clear in its Video Service Law (VSL) that a local government thinking it's owed fees should go through the state Attorney General’s Bureau of Consumer Protection, which is empowered to seek the fees, said Judge Susan Graber. State law doesn’t give the city an independent right of action “and that’s my problem,” she said.
Reno attorney Jason Kim of Schneider Wallace repeatedly pressed the judges about whether the federal Declaratory Judgment Act (DJA) maintains the suit. Judge Lucy Koh said Reno's position seems to violate the Supreme Court's position that the DJA can't be a source of federal jurisdiction or create a private right of action. Reno is "effectively conceding you don't have an independent source to sue," she said. Kim said he disagreed. "Really?" Graber said at one point, showing seeming skepticism of Kim's assertion that the question of who can sue is more procedural than substantive.
Going through the state AG's office is an option but not the only one, Kim argued in response to questioning by Judge Michelle Friedland. He acknowledged Reno hadn't tried that route, but said arguments the streaming services have raised in similar franchise fee suits point to an inevitable outcome: they would deny they're subject to franchise fees and the AG's office would then have to take them to court anyway. Hulu counsel Victor Jih of Wilson Sonsini later acknowledged as much. "They can sue you, but they will lose," Graber said at one point. Replied Jih, "correct."
While the AG's office has authority to bring a complaint and seek declaratory relief, Netflix would argue that's not a valid complaint because the streamer has no physical presence in the state, said Netflix lawyer Gregory Garre of Latham Watkins.
When Koh pointed out parts of the VSL don't require a physical presence, Garre said the context of the act and its definition of a video service as operating over a video service network point to needing wireline facilities. "It does always link back to the land," he said. Reading the statute otherwise would create contradictions with what a franchise is and require rewriting parts of the law about providing public, educational and government content over wireline networks in public rights of way.
All three lawyers and the three-judge panel appeared in person in the San Francisco courtroom. Friedland remained masked through the oral argument.