Dish Network is urging Magistrate Judge Mark Beatty to reconsider his order granting the Village of Shiloh's motion to remand a fee dispute to the St. Clair County Circuit Court after concluding that state courts should preside over the suit under the doctrine of comity abstention.
In an order filed March 24, Beatty wrote that the comity doctrine “reflects ‘proper respect for state functions’ and a ‘proper reluctance to interfere by prevention with the fiscal operations of the state governments.’”
“For over 150 years, the Supreme Court has underscored the need for federal courts to avoid interfering with state and municipal fiscal operations,” he added.
Beatty held that the State of Illinois and its municipalities “enjoy wide regulatory latitude” on local revenue matters. The order states that if the issues raised in the complaint are resolved by the district court, it would result in the federal court’s “interference with the fiscal affairs of local government … either by permitting the collection of franchise fees or by cutting off a line of potential income.”
Beatty acknowledged that the federal court will hear “substantially similar” claims in a putative class action filed in the U.S. District Court for the Southern District of Illinois by East St. Louis, but held that Shiloh’s case should be decided in state court.
“The court acknowledges that remand will result in a situation where duplicative lawsuits are proceeding in state and federal court. This situation is certainly not ideal,” he wrote.
The order states that the defendants argued that they sought to invoke federal jurisdiction to avoid duplicative litigation rather than “to improve their competitive position.”
It may very well be true that in removing this case, the defendants were trying to avoid duplicative litigation,” Beatty wrote. “But that does not negate the fact that they invoked federal court jurisdiction and a win for defendants in this tribunal would improve their competitive position by allowing them to avoid the fees that traditional cable companies are forced to pay.”
The defendants argued that the duty to avoid duplicative litigation outweighs any comity concerns.
Beatty rejected the argument, holding that the defendants failed to file any motions to formally consolidate, stay or dismiss Shiloh’s case. The defendants specifically asked the court to exclude them from filing anything in the case until after the motion to remand was resolved.
“Of course, this case presented a wrinkle in that a similar lawsuit was filed as an original action in this court and the undersigned may soon be deciding motions to dismiss in that case,” he wrote. “But here, the defendants never formally committed to moving this court to stay this case. Nor did they formally ask the court to consolidate or coordinate the two, or employ some other case-management tool with respect to the two cases. The court is not a clairvoyant and this is simply not the type of issue this court can and should address sua sponte without formal briefing and a full-throated discussion on the topic because the path forward is manifestly clear.”
“As the court sees it, defendants put the cart before the horse,” he added.
Beatty suggested the defendants could move to stay one of the two cases to avoid litigating both lawsuits at the same time. However, the defendants would still have to defend each case separately.
“East St. Louis voluntarily chose to submit to a federal forum to decide the same questions that the Village of Shiloh contends should not be decided by a federal court. But defendants are not doomed to proceed simultaneously in both forums. Perhaps they will ask the state court judge to stay this case once it is remanded. Or they can move to stay the East St. Louis case that will remain in this district,” he wrote. “Simply put, there are options that can be used to avoid duplicative efforts in the state court or in this court.”
DISH Network Corp. and DISH Network LLC filed a motion to reconsider on April 21 and an amended motion on April 22 through attorney Matthew Friedman of Steptoe & Johnson LLP in Washington, D.C. They argue that the words they used “amount to an effective alternative request for consolidation.”
“The absence of a formal request should not stand in the way of the court’s considering the substantial efficiencies of consolidation and, conversely, the inefficiencies of two separate proceedings on exactly the same subject,” Friedman wrote.
The defendants argue that they expressed their agreement with consolidation and explained that Congress urged for duplicative cases to be consolidated in federal court.
“In short, defendants made no qualm about consolidation as a requested alternative and there was no obvious reason not to wait for the court first to resolve its jurisdiction, which is typically the threshold issue, before turning to consolidation in a formal motion,” Friedman wrote.
They add that the factors favoring consolidation outweigh the comity abstention factors.
On May 5, Shiloh filed a memorandum in opposition to the motion to reconsider through attorney Thomas Geoghegan of Despres Schwartz & Geoghegan Ltd. in Chicago, arguing that Dish chose to litigate each case on its own.
“That was a tactical decision they made and with which they must live,” Geoghegan wrote. “Dish is not entitled to a mulligan.”
He added that a motion for reconsideration is not a chance for a “do-over” to “escape the consequences of prior litigation decisions.”
“The court did not misapprehend anything in ruling on the motion to remand, there has been no intervening change in the law,” Geoghegan wrote.
The plaintiff argues that Dish misunderstands the purpose of a motion for reconsideration, and all of the other defendants have “abandoned efforts to maintain removal.”
They add that all of the defendants, as well as Dish, have also filed motions to dismiss in the state court.
“Rather than move that court of general jurisdiction for some stay of proceedings, each defendant - including Dish - elected to seek a ruling from that court,” Geoghegan wrote.
As a result, the plaintiff argues that Dish has waived its right to seek reconsideration.
“A litigant must take a position - it cannot ride the fence,” Geoghegan wrote. “By not moving to consolidate but instead briefing the motion to remand and then filing a motion to dismiss in state court, Dish made tactical decisions and now must live with the results.”
“Like so many other Hail Marys, Dish’s motion falls short of the end zone and should be denied,” he added.
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 removed the case to 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. Shiloh then filed a motion to remand on Aug. 16. All of the defendants responded by filing a joint opposition to the motion to remand.
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.
“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