City of Kenner v. Netflix, Inc.

• Decision Date: 03 May 2023
• Docket Number: 22-CA-466
• Parties: CITY OF KENNER v. NETFLIX, INC., AND HULU, LLC
• Court: Court of Appeal of Louisiana — District of US

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CITY OF KENNER
v.
NETFLIX, INC., AND HULU, LLC

No. 22-CA-466

Court of Appeals of Louisiana, Fifth Circuit

May 3, 2023

ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NO. 814-168, DIVISION "M" HONORABLE SHAYNA BEEVERS MORVANT, JUDGE PRESIDING

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COUNSEL FOR PLAINTIFF/APPELLANT, CITY OF KENNER

Joseph M. Bruno, Sr.

Malvern C. Burnett

Joshua C. Joseph

Elvin L. Kistner

COUNSEL FOR DEFENDANT/APPELLEE, NETFLIX, INC.

Glenn L. M. Swetman

Brandie M. Thibodeaux

Mary A. Reed

Mary Rose Alexander

Robert C. Collins, III

Jean A. Pawlow

Peter E. Davis

Henry Adrian van Seventer

COUNSEL FOR DEFENDANT/APPELLEE, HULU, LLC

Martin E. Landrieu

Phillip J. Antis, Jr.

Victor Jih

Praatika Prasad

Panel composed of Judges Susan M. Chehardy, Marc E. Johnson, and Robert A. Chaisson

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SUSAN M. CHEHARDY, CHIEF JUDGE

Plaintiff, the City of Kenner, appeals the trial court's judgment that sustained exceptions of no right of action and no cause of action filed by defendants Netflix, Inc., and Hulu, LLC. For the reasons that follow, we affirm the trial court's judgment sustaining the exceptions and dismissing Kenner's putative class action lawsuit.

FACTS AND PROCEDURAL HISTORY

This case concerns the application of Louisiana's Consumer Choice for Television Act ("CCTA"), La. R.S. 45:1361 et seq., which authorizes subdivisions of the State to collect franchise fees from certain cable service or video service providers as defined in the Act.^[1] Enacted in 2008, the CCTA authorizes the Secretary of State to issue a certificate of franchise to those providers who "construct or operate wireline networks in public rights of way." La. R.S. 45:1364A; La. R.S. 45:1363(4). By centralizing the franchise authority, the CCTA alleviates the previous scheme in which service providers had been required to negotiate and obtain separate franchises from each local government subdivision for use of its public rights of way-a much more laborious process.^[2]

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After a service provider obtains the necessary franchise certificate, "[a] local governmental subdivision shall allow the holder of a certificate to install, construct, and maintain a network within public rights of way and shall provide the holder of a certificate with open, comparable, nondiscriminatory, and competitively neutral access to the public rights of way." La. R.S. 45:1374 B. Governmental subdivisions may enact ordinances in conjunction with the CCTA which allows them to collect franchise fees from the certificate holders, which fees are not to exceed 5% of the "holder's gross revenues." La. R.S. 45:1366 A.^[3]

On January 22, 2021, Kenner enacted Ordinance Number 11,813, which provides for the collection of franchise fees pursuant to the CCTA. In pertinent part, Kenner's Ordinance states:

That all persons or entities providing cable or video services to the citizens of the City of Kenner pursuant to a state-issued certificate of franchise authority as provided in LSA-R.S. 45:1361 et seq., shall, pursuant to the provisions of LSA-R.S. 45:1366, pay the City of Kenner a franchise fee equal to five percent of the cable or video service provider's gross revenue, as that term is defined by the "Consumer Choice for Television Act of 2008," derived from operations within the City's municipal limits

At the time that Kenner enacted the Ordinance, La. R.S. 45:1363(14) (2008) defined "video service" as follows:

"Video service" means video programming services provided through wireline facilities located at least in part in the public rights of way without regard to delivery technology, including Internet protocol technology. "Video service" shall not include any video programming

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provided by a commercial mobile service provider as defined in this Section or video programming provided as part of a service that enables users to access content, information, e-mail, or other services offered over the public Internet.

Effective May 22, 2022, the Legislature amended La. R.S. 45:1363(14), which references streaming content offered over the internet, specifically excluding it from the definition of "video service," as follows:

"Video service" means video programming services provided by a video service provider through wireline facilities located at least in part in the public rights of way without regard to delivery technology, including internet protocol technology. Video service shall not include any of the following:

(a) Video programming provided by a commercial mobile service provider as defined in this section. (b) Direct-to-home satellite services as defined in 47 U.S.C. 303(v).

(c) Video programming accessed via a service that enables users to access content, information, email, or other services offered over the internet, including streaming content.

(Emphasis added).

On the same day that Kenner's City Council enacted the franchise-fee ordinance in 2021, Kenner filed this putative class action lawsuit on behalf of itself and all of Louisiana's political subdivisions similarly situated to collect franchise fees from defendants Netflix and Hulu. Netflix and Hulu asserted exceptions of no right of action, arguing that they were not franchise "holders" under the CCTA; and exceptions of no cause of action, contending that various provisions of the CCTA do not require streaming service providers to obtain franchise certificates or pay franchise fees.

The trial court sustained the defendants' exceptions of no cause of action and no right of action, dismissing with prejudice Kenner's lawsuit against them. The trial court's Judgment states:

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First, the Louisiana Consumer Choice for Television Act ("the CCTA") does not confer upon Plaintiff a right of action or cause of action against Netflix and Hulu.

Second, under the CCTA, a "franchise" "authorizes the construction and operation of a cable system, or other wireline facilities used to distribute video programming services, in the public right of way." La. R.S. § 45:1363(6). Plaintiff does not allege that either Netflix or Hulu construct, operate, install, or otherwise maintain any cable system, wireline facilities, or other infrastructure in the public right of way. Defendants are therefore not required to obtain a franchise before they make their content available to their customers, and Defendants are not subject to the CCTA.

Third, even if Defendants were otherwise subject to the CCTA ..., Defendants' video content was and is "provided solely as part of, and via, a service that enables users to access content, information, electronic mail, or other services offered over the public Internet." La. R.S. § 45:1363(14) (pre-amendment). Defendants' content is accessed by their customers over the networks of third-party Internet service providers, whose service allows Defendants' customers to access content over the public Internet, i.e., the Internet. ^[4]

Kenner now appeals.

LAW AND DISCUSSION

Kenner assigns three errors on appeal: (1) the trial court erred in finding that the CCTA did not confer on it a right of action or cause of action against Netflix and Hulu; (2) the trial court erred by finding that Netflix and Hulu are not required

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to obtain a franchise before they make their content available to their customers and that Netflix and Hulu are not subject to the CCTA; and (3) the trial court erred by finding that Netflix and Hulu's video content is excluded from the definition of "video service."

Assignment of Error No. 1 - Exception of No Right of Action

The peremptory exception of no right of action tests whether the plaintiff has a real and actual interest in the action. La. C.C.P. art. 927(6). The court assumes the petition states a valid cause of action for some person and questions whether the plaintiff is a member of the class that has a legal interest in the subject matter of the litigation. Succession of Brandt, 21-131 (La.App. 5 Cir. 12/29/21), 334 So.3d 1041, 1045. Determining whether a plaintiff has a right to bring an action raises a question of law, which requires de novo review on appeal. I E C I, LLC v. South Central Planning &Dev. Comm'n, Inc., 21-382 (La.App. 5 Cir. 2/23/22), 336 So.3d 601, 609.

Netflix and Hulu argued in their exceptions of no right of action that La. R.S. 45:1367 B gives political subdivisions a limited right of action to sue for fees from a franchise "certificate holder," but it does not authorize a political subdivision like Kenner to sue to enforce franchise obligations against parties who do not hold a franchise certificate. They contend that under La. R.S. 45:1363(4), the franchising authority belongs to the Secretary of State, and only the Secretary of State can transform a video service provider into a franchise certificate holder. Permitting a political subdivision to pursue a claim against an entity that does not hold a franchise certificate circumvents that authority and the very purpose of the CCTA.

On the other hand, Kenner claims that pursuant to La. R.S. 45:1367 B, it has a responsibility to its citizens to enforce its own ordinance requiring cable or video services to apply for a franchise certificate and pay franchise fees. Because Netflix

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and Hulu have not applied for such a certificate, Kenner has the right to enforce the statute and its ordinance.

We disagree. La. R.S. 45:1367 B provides: "Any suit with respect to a dispute arising out of or relating to the amount of the franchise fee due to a local governmental subdivision under La. R.S. 45:1366 shall be filed either by the local governmental subdivision . or by the certificate holder ... in a state or federal court of competent jurisdiction[.]" (Emphasis added). La. R.S. 45:1367 C further provides that before either party may file suit, "the local governmental...