Netflix and Hulu Urge Once-and-for-All Dismissal of California City’s Right-of-Way Fee Case

Online streaming platforms Netflix and Hulu filed reply briefs on Monday, arguing that the City of Lancaster, Calif.’s case seeking backdated Digital Infrastructure and Video Competition Act of 2006 (DIVCA) fees should be dismissed. This is their second bid to end the class action after the court dismissed the case last September.

Notably, the suit is one of several proceeding around the country that aims to hold streaming platforms, including the defendants and others, accountable under state laws requiring certain television and video service providers to pay utility usage fees.

In this case, Lancaster filed suit on part of all California municipalities to force the defendants to pay for their use of broadband wireline facilities located in public rights-of-way. Under DIVCA, qualifying franchises must pay up to 5% percent of their gross revenue generated in that locale to the city or county.

Lancaster filed an amended complaint following the court’s dismissal order, which found the lawsuit deficient in several respects. The state court ruled that DIVCA does not grant a private right of action against franchise-less video service providers. It also said that the complaint neither established that the defendants “use” public rights-of-way nor that they provide “video programming” within the meaning of the law.

Hulu’s brief argued that those flaws remain. “Instead of correcting factual defects, Plaintiff has chosen to double-down on the old facts and to urge the Court to reconsider its prior ruling,” the reply said.

Among other arguments, Hulu pressed that it does not use facilities in the public right-of-way and that the plaintiff improperly focuses on the term “use.” The statute “does not turn on the interpretation of ‘use’ but the requirement that ‘video service’ be ‘provided through facilities located at least in part in public rights-of-way,’” Hulu argued.

Hulu also asserted that it is exempt from DIVCA fees because its streaming service is excluded pursuant to the “Public Internet Exception.” The plaintiff’s unwarranted narrowing of that exception to internet service providers only “advances an interpretation that has been rejected by numerous courts, and creates nonsense outcomes that serve no conceivable policy purpose,” the filing said.

The demurrer hearing is scheduled for April 6.

The plaintiff and putative class are represented by Andrus Anderson LLP and Schneider Wallace Cottrell Konecky LLP. Netflix is represented by Latham & Watkins and Hulu by Wilson Sonsini Goodrich & Rosati.