Netflix and Hulu Press 9th Cir. to Affirm Dismissal of Reno’s Local Franchise Fee Case

A pair of answering briefs filed with the Ninth Circuit Court of Appeals on Monday argued that the district court correctly interpreted the Nevada Video Service Law (VSL) and found defendant-appellees Netflix and Hulu exempt from regulation. For its part, Netflix argued that the ruling, which joins “a growing consensus” of decisions around the country dismissing similar lawsuits, should stand.

The City of Reno, Nevada is the plaintiff in the class action, one of several proceeding around the country. It seeks fees from online video content streaming services for their alleged use of public rights-of-way under the VSL, which, like other state laws, requires that video service providers apply to the state for a franchise and pay franchise fees to local governments. Reno, on behalf of a putative class of all Nevada cities and towns, seeks damages, including 5% of Netflix’s gross revenues derived from operations in each municipality.

Reno appealed the case after the district court granted dismissal, arguing that the court erred in its interpretation of the VSL.

Netflix’s opposition brief first explains that “[f]or well over a decade, no one—not any Nevada city, not the state of Nevada, and not any video service provider—believed that Internet streaming services like Netflix were required to pay franchise fees.” On that basis, and owing to the suit’s contradiction of the “text, structure, and history” of VSL, Netflix argues for an order affirming the district court’s dismissal.

First, it says the VSL does afford Reno a private right of action for damages. Second, the brief argues that the VSL does not apply to Netflix. Netflix contends that an express exception applies to the kind of service it offers: video content that is provided via the public Internet. The district court agreed, the brief says, noting that nothing Reno now asserts should change that determination.

Netflix also says the VSL’s structure and intent “confirm that it does not reach Internet streaming services like Netflix.” Finally, the company argues that the law does not apply because Netflix does not provide “multichannel video programming” generally considered analogous traditional television service, a prerequisite of the VSL.

Reno is represented by Schneider Wallace Cottrell Konecky LLP, Shook & Stone Chtd., Nix Patterson & Roach LLP and DiCello Levitt Gutzler LLC.

Netflix is represented by Parsons Behle & Latimer and  Latham & Watkins LLP and Hulu by Wilson Sonsini Goodrich & Rosati PC.