CHICAGO - East St. Louis can’t tax Netflix and other video streamers as cable providers, U.S. Seventh Circuit appellate judges ruled on Oct. 13.
They found state cable television law applies to programming on closed circuits, and internet providers don’t employ closed circuits.
Justice Frank Easterbrook wrote, “The Internet is as open as any circuit gets.”
The judges affirmed Magistrate Judge Mark Beatty of East St. Louis, who dismissed the city’s claim, and they made the decision more certain.
Beatty found the law didn’t provide a right of action to the city, but Seventh Circuit Justice Frank Easterbrook wrote, “We think it cleaner to reach the merits.”
He found the absence of a statutory right of action does not affect jurisdiction, and a judgment may be affirmed on any ground.
“A decision on the merits will bring the dispute to a close,” he wrote.
Justices David Hamilton and Doris Pryor concurred.
Cable providers in Illinois must obtain permission from state or local authorities and pay a fee for using public right of way.
East St. Louis sued streamers in 2021, claiming they must pay 5% like cable providers because they depend on cables under and over the streets.
The city named Netflix, Disney, Apple, Hulu, Amazon, Warner Media, You Tube, Peacock TV, DirecTV, Dish Network, Curiosity Stream, and CBS Interactive as defendants.
The city alleged trespass and violation of state law against resale of cable programs.
John Driscoll of Puerto Rico filed the suit in association with Charles J. Baricevic and Grey Chatham Jr. of Belleville.
Defendants moved to dismiss the complaint, and Beatty granted the motion last September.
He found the cable law does not affirmatively delegate any sort of power or authority to local governments when it comes to enforcement.
He added that the law says it doesn’t deprive local governments of the right to enforce rights and obligations and added, “This is the language that Plaintiff gloms on to.”
Beatty found that when the General Assembly intends to create a right of action, it certainly knows how to do so.
He found video content transmitted through the Internet was incapable of taking up any physical space that could interfere with the public right of way.
“It is the internet service provider’s wire lines that are the actual physical intrusion,” he wrote.
“The internet content that travels through the wire lines has no physical presence,” he added.
East St. Louis appealed, and Seventh Circuit judges heard argument on Sept. 12.
They reached a decision in a month and a day.
Easterbrook found that if the city was right, the New York Times, CNN, major league baseball, and any other entity that transmits video must pay fees to every municipality in Illinois.
He found East St. Louis did not cite a decision of any state court in Illinois holding that the original definition of video service includes over the top streaming services.
Easterbrook added that defendants insisted that sending signals through wires owned and operated by other firms does not constitute use of the public way.
He found no one thinks a conversation over a landline phone exposes the speaker and the recipient to state regulation just because the wires cross public land.
He found the definition of use remained potentially relevant to an assertion that the transmission is a trespass on the city’s lands.
“Still, if phone calls over landline cables, electricity over wires, and gas routed through pipes are not trespasses on the City’s land, and they are not, neither are the electrons that carry movies and other videos,” he wrote.
Easterbrook found the ordinance against resale of cable programs didn’t help the city.
“First, over the top streaming services do not resell cable TV service,” he wrote.
“The internet service provider is paid for bandwidth, and Netflix is paid for content. Nothing is resold,” he added.
Easterbrook found it would take an exceedingly creative reading of the ordinance to support the city’s claims yet the city did not identify any helpful decision by any state court.
“It is not an appropriate function of a federal court in a diversity suit to read a state or local statute in an unnatural way without the support of the state judiciary,” he wrote.