Video Service Providers:

Creve Coeur Class Action Lawsuits Against Netflix, Hulu, DirecTV, And DISH Seek Recovery Of Video Service Fees For Transmitting Their Video Programming Through The Public Right Of Way

Two class action lawsuits are pending in the Circuit Court of St. Louis County to collect video service provider fees owed to cities under the Missouri Video Service Provider Act, § 67.2675, RSMo, et seq. from the video streaming industry. One suit is against Netflix and Hulu, and the other against DirecTV and DISH. The city of Creve Coeur brought the cases using the same legal team that has been successfully recovering unpaid telecommunications and electric utility taxes on behalf of Missouri cities for almost two decades. A class consisting of cities with a population of more than 400 and counties has now been certified in the Netflix/Hulu case, and Creve Coeur and its attorneys are officially representing the class. All cities and counties would benefit from favorable rulings.

The streaming industry, including satellite companies like DirecTV and DISH, sends video programming through facilities in the public right of way to customers throughout the state. Because these companies use the public right of way to provide programming, the lawsuits seek video service fees owed to cities under the Act.

Successful litigation will bring revenues promised by the Legislature to help fund the high cost of improvement and maintenance of public rights of way and eliminate the unfair competitive advantage streamers have been taking over traditional cable providers. Initial estimates of back fees owed to the class exceed $60 million.

What is the status of the cases?

The class action legal team has been litigating these cases since 2018 and has already defeated motions to dismiss. As of today, the order certifying the class of cities in the Netflix/Hulu case is on appeal. The matter has been briefed, argued and submitted to the Missouri Court of Appeals. Pending that appeal, both cases have been stayed at the circuit court. The class action legal team hopes for favorable ruling in the appeal and the resumption of the litigation in circuit court.

After appeal, the team intends to continue to litigate its pending motion for summary judgment in Netflix/Hulu and the motion for class certification in DirecTV/DISH. These motions rely heavily on expert witness testimony concerning the use of the public rights of way throughout Missouri and defendants’ revenues. Absent settlement, it will still likely take several years before the cases and all related appeals are over.

What is the Video Service Provider Act?

In 2007, the Missouri Legislature enacted a set of statutes known as the Video Service Provider (VSP) Act. Prior to the Act, cable television providers had to obtain separate franchises from every city in which they wanted to provide service. By federal law, the franchise fee was limited to 5% of revenues. Since adoption of the VSP Act, video service providers have been able to obtain authority to provide service in cities from the Missouri Public Service Commission by means of an expedited process. This has saved the providers (and the cities) from a great deal of cost and effort. However, under the Act, the providers are still required to pay video service fees to the cities (and counties) in which they provide service. The fees were initially set to match the existing cable franchise fee, but fees can be changed once a year up to the maximum of 5%.

The General Assembly included an express statement of purpose in the Act:

The general assembly finds and declares it to be the policy of the state of Missouri that consumers deserve the benefit of competition among all providers of video programming. Creating a process for securing a state-issued video service authorization best promotes the substantial interest of the state of Missouri in facilitating a competitive marketplace that will, in turn, encourage investment and the deployment of new and innovative services in political subdivisions and provide benefits to the citizens of this state. The general assembly further finds and declares that franchise entities will benefit from immediate availability of the state-issued video service authorization to all video service providers, including new entrants and incumbent cable operators. In addition to the benefits to franchise entities found in [the Act], this immediate availability of stateissued video service authorization will promote fair competition among all video service providers in a local market and thereby provide new revenues to political subdivisions derived from additional video service customers, and the purchase of additional video services by such customers, and the sale of additional advertising by video service providers. This policy will provide a more predictable source of funding for franchise entities that will continue beyond the natural terms of all existing franchise agreements. The franchise entities will also experience cost savings associated with the administrative convenience of the enactment of the state-issued video service authorization. These benefits are full and adequate consideration to franchise entities, as the term “consideration” is used in … the Missouri Constitution.