Illinois Municipality in Franchise-Fee Suit Moves to Remand Netflix Suit After Seventh Circuit Ruling

On Monday, the named-plaintiff municipality in a class-action, franchise-fee lawsuit against streaming platforms filed a motion to remand the federal case to Illinois state court. The Illinois village’s motion and briefing follow the federal court’s July sua sponte order asking the streaming platforms why the suit should not be remanded to state court, given a recent Seventh Circuit decision. As previously reported, the streaming platforms responded to the district court’s order to show cause on August 6. 

The lawsuit surrounds the village’s claim that the defendant streaming platforms should pay local government fees, as set forth by state statute. A similar Illinois suit brought by the City of East St. Louis, Illinois resembles a federal court case in Indiana, as well as a third suit in California state court, which is considering Netflix and Hulu’s motion to dismiss.

In Monday’s briefing, the village argues that the Seventh Circuit’s July City of Fishers decision controls, requiring state court jurisdiction. The village claims that because the suit involves novel questions of state tax law, which the Illinois state courts have not yet resolved, the federal courts should abstain from hearing the case. They quote the Seventh Circuit’s statement that a federal-court decision on the merits “will risk or result in federal court interference with the fiscal affairs of local government.” 

The village responded to the streaming platforms’ argument that the similar lawsuit brought by East St. Louis in Illinois federal court might result in “duplicative litigation,” arguing that the court should focus on the primary consideration: the Seventh Circuit’s noted abstention principle. 

The lawsuit is a putative class action against Netflix and other streaming platforms — including DirecTV, Dish Network, Hulu, and Disney. The village leads the putative class of all local units of government to which the streaming platforms provide video services. 

The putative class seeks collection of franchise fees under the Illinois Cable and Video Competition Law of 2007, 220 ILCS 5/21-801, which authorizes Illinois political subdivisions and municipalities to collect franchise fees from any “video service” provider doing business within their boundaries. The primary questions surround whether each streaming platform is a “video service” that provides “video programming” under the Illinois statute.

The Illinois suit is similar to the City of Fishers case, which was brought under an analogous statute in Indiana, was also originally brought in state court, was removed to federal court, and which the Seventh Circuit ordered to be remanded back to state court.

The putative class, including Village of Shiloh, is represented by Despres, Schwartz & Geoghegan, Ltd., as well as Kistner, Hamilton, Elam & Martin.

DISH Networks is represented by Steptoe & Johnson LLP, Cross Castle PLLC, and Armstrong Teasdale LLP, Netflix by Latham & Watkins, Hulu and Disney by Bryan Cave Leighton Paisner LLP as well as Wilson Sonsini Goodrich & Rosati, and DIRECTV by Sandberg Phoenix & Von Gontard P.C. and Kilpatrick Townsend & Stockton LLP.