City of Fishers v. Netflix, Inc.

• Court: Indiana Appellate Court
• Writing for the Court: Felix, Judge.
• Citation: 264 N.E.3d 69
• Docket Number: Court of Appeals Case No. 24A-PL-1657
• Decision Date: 30 May 2025
• Parties: CITY OF FISHERS, Indiana; City of Indianapolis, Indiana; City of Evansville, Indiana; and City of Valparaiso, Indiana, on behalf of themselves and all others similarly situated, Appellants-Plaintiffs v. NETFLIX, INC.; Disney DTC LLC; Hulu, LLC; DIRECTV, LLC; Dish Network Corp; and Dish Network L.L.C., Appellees-Defendants and State of Indiana, Appellee-Intervenor

264 N.E.3d 69

CITY OF FISHERS, Indiana; City of Indianapolis, Indiana; City of Evansville, Indiana; and City of Valparaiso, Indiana, on behalf of themselves and all others similarly situated, Appellants-Plaintiffs

v. NETFLIX, INC.; Disney DTC LLC; Hulu, LLC; DIRECTV, LLC; Dish Network Corp; and Dish Network L.L.C., Appellees-DefendantsandState of Indiana, Appellee-Intervenor

Court of Appeals Case No. 24A-PL-1657

Court of Appeals of Indiana.

Filed May 30, 2025

Appeal from the Marion Superior Court, The Honorable Christina Klineman, Judge, Trial Court Cause No. 49D01-2008-PL026436

Attorneys for Appellants: Andrew W. Hull, Michael R. Limrick, Hoover Hull Turner LLP, Indianapolis, Indiana

Attorney for Appellee - DIRECTV, LLC: F. Anthony Paganelli, Anne L. Cowgur, Paganelli Law Group, Indianapolis, Indiana

Attorneys for Appellee - Netflix, Inc.: George M. Plews, Joanne R. Sommers, Plews Shadley Racher & Braun LLP, Indianapolis, Indiana, Mary Rose Alexander, Robert C. Collins III, Latham & Watkins LLP, Chicago, Illinois, Jean A. Pawlow, Peter E. Davis, Latham & Watkins LLP, Washington, D.C., Ward A. Penfold, Latham & Watkins LLP, San Francisco, California

Attorney for Appellees Disney DTC LLC & Hulu, LLC: Jason R. Delk, Delk McNally LLP, Muncie, Indiana

Attorneys for Appellee DISH NETWORK, L.L.C. & Dish Network Corp.: Offer Korin, Brooke Smith, Stoll Keenon Ogden PLLC, Indianapolis, Indiana, Pantelis Michalopoulos, Matthew R. Friedman, Steptoe LLP, Washington, D.C., Jared R. Butcher, Berliner Corcoran & Rowe LLP, Washington, D.C.

Attorneys for Intervenor - State of Indiana: Theodore E. Rokita, Indiana Attorney General, Sierra Murray, Deputy Attorney General, Jodi Kathryn Stein, Deputy Attorney General, Indianapolis, Indiana

Felix, Judge.

Statement of the Case

[1] Four Indiana cities¹ (the “Cities”) sued numerous national streaming companies² (the “Streaming Companies”) for

their failure to pay franchise fees, which the Cities alleged the Streaming Companies owed pursuant to Indiana’s Video Service Franchises Act (the “VSF Act”). While the case was pending, the Indiana General Assembly amended the VSF Act (the “Amendment”) to exempt the Streaming Companies and similar persons from the VSF Act’s requirements, and the Amendment was retroactive. Based on the Amendment, the Streaming Companies filed a motion to dismiss the Cities’ lawsuit for failure to state a claim upon which relief could be granted; the trial court granted that motion. The Cities now appeal the dismissal and challenge the constitutionality of the Amendment and the public law of which it was a part:

1. Whether inclusion of the Amendment in Public Law 236-2023 violates Article 4, Section 19 of the Indiana Constitution;

2. Whether the Amendment violates Article 4, Section 22 of the Indiana Constitution; and

3. Whether the Amendment violates Article 4, Section 23 of the Indiana Constitution.

[2] We affirm.³

Facts and Procedural History

The VSF Act

[3] The VSF Act requires persons that provide video service in Indiana to obtain a franchise from the Indiana Utilities Regulatory Commission and pay franchise fees to each county, municipality, or township in the entity’s service area. Ind. Code §§ 81-34-1 to -30. In particular, Indiana Code section 8-1-34-16 requires “a person who seeks to provide video service in Indiana after June 30, 2006,” to file with the commission an application for a franchise.” I.C. § 8-l-34-16(b).

[4] The VSF Act contains several interrelated defined terms, the definitions of which we provide below and in which we underline the interrelated term. A “franchise” is “an initial authorization, or a renewal of an authorization, that … authorizes the construction or operation of a video service system in a designated service area in Indiana.” I.C. § 8-1-34-4 (emphasis added). A “video service system” is

a system, consisting of a set of transmission paths and associated signal generation, reception, and control equipment, that is designed to provide video service directly to subscribers within a community. The term includes the:

(1) optical spectrum wavelengths;

(2) bandwidth; or

(3) other current or future technological capacity;

used to provide the video service.

Id. § 8-l-34-15(a) (emphasis added). “The term does not include a system that transmits video service to subscribers without using any public right-of way.” Id. § 8-134-15(b).

[5] Prior to 2023, “video service” meant (1) the transmission to subscribers of video programming and other programming service:

(A) through facilities located at least in part in a public right-of-way; and

(B) without regard to the technology used to deliver the video programming or other programming service; and

(2) any subscriber interaction required for the selection or use of the video

programming or other programming service.

2006 Ind. Acts 1129 (emphasis added), 2006 Ind. Legis. Serv. P.L. 27-2006 § 58 (West) (codified as amended in 2023 at I.C. § 8-1-34-14) (emphasis added). “Video service” did not include “commercial mobile service.”⁴ Id.

[6] Additionally, “video programming” means “programming provided by, or generally considered comparable to programming provided by, a television broadcast station.” 47 U.S.C. § 522(20) (emphasis added); see I.C. § 8-1-34-13 (stating “video programming” has the meaning set forth in 47 U.S.C. § 522(20)). “Provider” means “a person such as, but not limited to, a cable operator, a multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive-only satellite program distributor, who makes available for purchase, by subscribers or customers, multiple channels of video programming.” 47 U.S.C. § 522(13); see I.C. § 8-1-34-11 (stating “provider” refers to a multichannel video programming distributor as defined in 47 U.S.C. § 522(13)).

The Cities’ Lawsuit

[7] In August 2020, the Cities sued the Streaming Companies in a class action lawsuit, claiming the Streaming Companies provide video service in Indiana and were therefore subject to the VSF Act but had not obtained franchises and had not paid franchise fees.⁵ In particular, the Cities alleged in relevant part as follows:

24. [The Streaming Companies] offer programming that is comparable to that provided by television broadcast stations and other providers of video programming. [The Streaming Companies] transmit that programming directly to subscribers located within the geographic boundaries of Indiana Units.

25. Subscribers view [the Streaming Companies]’ video programming using devices … that have software enabling them to receive [the Streaming Companies]’ video programming. When a subscriber wants to watch [the Streaming Companies]’ video programming, the companies transmit the video programming to the subscriber via internet protocol and other technologies.

* * *

29. Netflix, Hulu, and Disney DTC each transmit their video programming to subscribers in Indiana Units through facilities located at least in part in a public right-of-way.

30. Defendants DIRECTV and DISH have transformed their businesses and delivery methods over the last decade to meet the demands of the marketplace, and subscribers now access their services through facilities located at least in part in a public right-of-way.

31. Like traditional cable companies and others offering video sendee in Indiana who have obtained franchises and paid fees, each of the [Streaming Companies] charges subscribers a fee to access theirvideo programming. [The Streaming Companies] thus earn gross revenues from transmitting video programming to subscribers through facilities located at least in part in a public right-of-way. 32. [The Streaming Companies] have failed to comply with the VSF Act by failing to apply for and obtain a franchise, as required by I.C. § 8-1-34-16, by failing to determine quarterly gross revenues from their transmission of video service under the VSF Act, as required by I.C. § 8-1-34-23, and by failing to pay franchise fees to [the Cities] and other class member Units, as required by I.C. § 8-1-34-24.

Appellants’ App. Vol. II at 71-72.

[8] In December 2020, the Streaming Companies filed motions to dismiss the Cities’ complaint, arguing the trial court lacked subject matter jurisdiction and that the complaint failed to state a claim upon which relief could be granted. In June 2022, the trial court denied those motions. On interlocutory appeal, on June 13, 2023, this court affirmed the trial court’s denials, holding the trial court had subject matter jurisdiction over the Cities’ claims; this court declined to address whether the VSF Act applies to the Streaming Companies, especially in light of the Amendment, which had been enacted while the appeal was pending, and instead remanded the case for further proceedings. Netflix, Inc. v. City of Fishers, 212 N.E.3d 188, 192-94 (Ind. Ct. App.), trans. denied, 221 N.E.3d 1208 (Ind. 2023).

Public Law 236-2023 and the Amendment

[9] On May 4, 2023, Indiana Public Law 236-2023 was signed into law. Included in Public Law 236-2023 was the Amendment, which modified the VSF Act’s definition of “video service.” 2023 Ind. Acts 3806, 2023 Ind. Legis. Serv. P.L. 236-2023 § 123 (West) (codified at I.C. § 8-1-34-14). The Amendment changed Indiana Code section 8-1-34-14 in three critical ways: (1) “video service” now expressly means, in relevant part, the transmission of video programming by a video service provider, I.C. § 8l-34-14(a); (2) “video service” does not include “direct to home satellite service,”⁶ id. § 8-l-34-14(b)(2), and (3) “video service” does not include “video programming accessed via a service that enables users to access content, information, electronic mail, or other services offered over the Internet, including digital audiovisual works,”⁷ id. § 8-l-34-14(b)(3). These modifications to the definition of “video service” were made retroactive. 2023 Ind. Acts 3806.

[10] Here is a side-by-side comparison of Indiana Code section 8-1-34-14 before and after the Amendment,...