Lawsuits against Netflix and Hulu dismissed by federal judges in Texarkana

Texarkana Federal Courthouse

Lawsuits alleging Netflix and Hulu should pay franchise fees in municipalities where it offers services in Texas and Arkansas have been dismissed by federal judges in Texarkana.

U.S. District Judge Susan O. Hickey dismissed a suit Thursday filed on behalf of the City of Ashdown, Arkansas, in the Texarkana Division of the Western District of Arkansas and U.S. District Judge Robert Schroeder III dismissed a suit the same day filed on behalf of the City of New Boston, Texas, in the Texarkana Division of the Eastern District of Texas.

Both cases were filed as class actions seeking to proceed on behalf of all municipalities in the state.

The suits alleged that Netflix and Hulu should be paying franchise fees.

Hickey’s order granting a motion to dismiss the case refers to the Arkansas Video Service Act. Hickey ruled that the state law doesn’t provide for the action sought in the lawsuit.

“Defendants do not offer video services as defined by the VSA and are not required to pay a video service provider fee,” Hickey’s ruling states.

The order concludes that the VSA of Arkansas gives the power to enforce the law to the Arkansas Public Service Commission, not individual municipalities.

Schroeder’s order notes that the law in Texas may allow municipalities to sue companies which hold a certificate of franchise authority issued by the state but doesn’t give authority to sue companies, like Netflix and Hulu, which do not. The order states that Texas law puts enforcement power concerning franchise fees with the Public Utility Commission, not municipalities.

“To allow a municipal plaintiff to bypass the PUC would undermine the regulatory scheme set forth in the statute and its overall purpose to centralize the issuance of franchises in one statewide body,” Schroeder’s ruling states.

Both of the lawsuits were filed in 2020.

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