Nevada: Lawsuit Against Streaming Service Providers Dismissed

A federal court in Nevada recently dismissed the City of Reno’s lawsuit against Netflix and Hulu alleging that they had failed to pay local franchise fees. The City of Reno filed a class action lawsuit in federal court against Netflix and Hulu alleging that the businesses were “video service providers” under Nevada’s Video Service Law and were therefore required to pay local franchise fees to various cities and counties. A “video service provider” is defined by the law as “any person that provides or offers to provide video service over a video service network to subscribers in this State.” The term “video service” provides an exclusion, however, for “any video content provided solely as part of, and through, a service which enables users to access content, information, electronic mail or other services that are offered via the public Internet.” Netflix and Hulu filed motions to dismiss the lawsuit arguing that they were excluded from the definition of “video services” and that the City of Reno was not granted a private right of action to enforce the Video Service Law.

The federal district court agreed with Netflix and Hulu that they were not video service providers, as both provided video content through a service offered via the public Internet. The court rejected the City’s argument that the payment of a fee to access Netflix and Hulu meant that their services were not provided through the public Internet. In dealing with the city’s right of action, the court found that the legislative intent behind the Video Service Law was to create a uniform system at the state level for management and enforcement of franchise fees. A private right of action by the City would be inconsistent with the law which vested authority to bring claims in the state Attorney General. Therefore, the court granted Netflix and Hulu’s motions to dismiss the lawsuit. Please stay tuned to TWIST for additional streaming developments.