Illinois Municipality Secures Remand in Right-of-Way Fee Case Against Netflix, Hulu and Others

The Village of Shiloh, Illinois scored a victory last week after a Southern District of Illinois judge agreed to remand its suit against DISH Network, Netflix, Hulu, Disney, and DIRECTV over their alleged failure to pay local usage fees required of cable or video service providers to state court.

The case, filed under the Illinois Cable and Video Competition Law of 2007, alleges that the online streaming platforms offer “video service” within the meaning of the law and use public right-of-way in delivering those services. As such, and like all traditional cable television providers, they must pay right-of-way usage fees, but have purportedly failed to do so. 

The suit seeks declaratory and injunctive relief and damages relating to the defendants’ failure to pay the fees on behalf of a putative class of all local units of government within the state and to which the defendants provide video service.

Notably, Shiloh filed a suit nearly identical to one brought by the City of East St. Louis, Illinois several days after its municipal counterpart. The latter is proceeding in federal court.

The Village of Shiloh’s motion for remand, filed after the federal court sua sponte ordered the defendants to show cause as to why the case should remain there, argued that the matter is more appropriately decided by Illinois state courts under comity principles and specifically, to avoid the federal court’s interference with “state and municipal fiscal operations.” The defendants opposed.

Magistrate Judge Mark A. Beatty agreed with Shiloh in his 15-page opinion issued last week. In so doing, he claimed to have sided with other federal courts presented with the same question including the Seventh Circuit in City of Fishers and district courts in Missouri and Georgia.

The court analyzed various factors influencing the discretionary determination, and ultimately found that the defendants inappropriately “sought to inject a federal court into matters affecting local revenue over which the State of Indiana and its municipalities enjoy wide regulatory latitude.”

Judge Beatty also shook off arguments that remanding the case would create duplicative litigation owing to East St. Louis’ federal court case asking the same questions. The court reasoned that the defendants “are not doomed to proceed simultaneously in both forums,” as there are options, such as stays, the court said. 

The Village of Shiloh is represented by Despres, Schwartz & Geoghegan, Ltd.

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 and Wilson Sonsini Goodrich & Rosati, and DIRECTV by Sandberg Phoenix & Von Gontard P.C. and Kilpatrick Townsend & Stockton LLP.