In its motion to remand a lawsuit against streaming services, the Village of Shiloh argues that the federal court has no jurisdiction to decide matters of state law.
On Aug. 16, attorney Thomas Geoghegan of Despres Schwartz & Geoghegan in Chicago filed a motion to remand the case on behalf of the plaintiff.
In the memorandum in support of the motion to remand, Geoghegan wrote that the case involves state tax law - “whether video streaming services are liable for the same fee that video cable companies now pay under state law.”
“It is a claim that Illinois state courts have not resolved and a federal court is not competent to decide,” he wrote.
Geoghegan argues that by removing the case, the defendants “seek to inject a federal court into matters affecting local revenue over which the State of Illinois and its municipalities enjoy wide regulatory latitude.”
Geoghegan also argues that the similar case filed in federal court by East St. Louis should not bar remand.
“Defendants claim that the East St. Louis case ‘triggers the duty to avoid duplicative litigation’ under the first-to-file rule. But all the cases cited by defendants refer to multiple original filings in federal court.
“Whether East St. Louis filed ‘first’ in a federal case just a few days before plaintiff Shiloh filed a state case has nothing to do with the applicable abstention principle here, which is based on the necessary avoidance of interference in state fiscal affairs,” Geoghegan wrote.
Geoghegan suggests that the East St. Louis case filed in federal court could end up in the Illinois Supreme Court.
“It is hard to imagine a greater waste of federal judicial resources than to litigate a state law claim that in the end is sent to the state supreme court to decide. Of course that would have to occur here - for the plaintiff East St. Louis is seeking a class action judgment that would bind every local unit of government in the state - and would be impossible for a state court to correct if the federal court with no state law guidance decided the issue the wrong way,” he wrote.
He adds that the defendants’ judicial efficiency argument is also without merit.
“There is no efficiency in having a federal court decide what a federal court is not competent to decide,” he wrote.
The Village of Shiloh filed the putative class action on June 14 in the St. Clair County Circuit Court against Netflix Inc., DirectTV LLC, Dish Network Corp., Dish Network LLC, Hulu LLC and Disney DTC LLC. Shiloh alleges the defendants have failed to comply with the Illinois Cable and Video Competition Law of 2007 by failing to apply for a franchise or pay franchise fees.
Netflix Inc. removed the U.S. District Court for the Southern District of Illinois on July 15 through attorney Mary Rose Alexander of Latham & Watkins LLP in Chicago.
In its complaint, Shiloh seeks to collect fees it claims video service providers owe for services using the village’s public right of way. Shiloh alleges that video streaming services using wires and cables located at least in part in public rights of way are obligated to pay a “service provider fee” to any local unit of government that adopted an ordinance requiring the fee. The service provider fee is five percent of the service provider’s gross revenue from customers or subscribers residing within the local governments.
According to its complaint, Shiloh adopted an ordinance requiring a five percent fee from service providers on Feb. 1.
“The defendants named in this action all provide streaming of video programs comparable to programming provided by broadcast television stations to customers or subscribers who reside in the Village. Defendants’ content is available only to paying customers or subscribers, and is not available for free to the general public,” the suit states.
“These customers view defendants’ video programming using an internet-connected device such as smart phone, smart television, a streaming media player, a tablet, a Blu ray player, or similar device having software capable of receiving such programming. By the use of such devices the defendants employ an ‘internet protocol technology’ to connect customers to receive their programs through the internet,” it continues.
Shiloh alleges the defendants make use of the public rights of way by relying on wireline facilities to provide their services. The video content is delivered in a way specifically designed to bypass the public internet.
“All of the defendants deliver their programming using private content delivery networks,” the suit states. “The defendants place servers hosting their content throughout the country so that they can be directly connected to internet service providers’ private network facilities without using the public internet. Defendants’ content is then delivered to customers using the internet service providers’ private network facilities, also without using the public internet.”
Shiloh alleges the defendants have not paid for any use or access to the right of way managed by the Village. It also alleges the defendants are not registered with the state as a provider of video services and failed to notify Shiloh before offering the services in breach of their obligation to do so.
“Nonetheless, all defendants have made free use of such public rights of way without payment of the required fee in the same manner as the video and cable program providers authorized by the Illinois Interstate Commerce Commission,” the suit states.
Shiloh argues that the defendants unlawfully attempted to avoid liability by failing to register with the Illinois Commerce Commission as a provider of video services, depriving the plaintiff of revenues through the required fee.
Shiloh seeks to certify a class of all local units of government in which the defendants provide their services. The Village seeks a certification for monetary relief, arguing that “the class is sufficiently numerous, there are common questions of law and fact, the claims and defenses with respect to the named plaintiff are identical with respect to other class members, and the Village will adequately represent the interests of the class.”
Shiloh also seeks monetary damages or reimbursement for lost revenue, injunctive relief and declaratory relief.
U.S. District Court for the Southern District of Illinois case number 3:21-cv-807