DALLAS - More than a dozen Texas cities suffered a blow by the 5th Court of Appeals, as justices have found that a trial court abused its discretion by denying a Rule 91a motion to dismiss the cities’ suit over franchise fees.
Court records show the Texas cities filed suit against Netflix, Hulu and Disney on Aug. 3, 2022 in Dallas County District Court.
Like cable providers, the cities assert that streaming video service providers are also required to pay a percentage of their gross revenues under the Texas Public Utility Regulatory Act (PURA).
“For many years, providers of cable service… have remitted fees to Texas cities under PURA,” the suit states. “But in recent years, more Texans have shifted to subscription-based, streaming video services… to view television programs and movies.
“Despite transmitting their video programming through wireline facilities located at least in part in the public right-of-way, Defendants have ignored their statutory obligations to obtain state-issued certificate of franchise authority and pay the required franchise fees, depriving Texas municipalities of the required compensation for their use of the right-of-way.”
The Fifth Court concluded on Jan. 31 that the municipalities cannot meet the “high bar” of implying a cause of action.
“PURA vests exclusive franchising authority in the (Public Utility Commission),” the opinion states. “Only the attorney general and PUC have the power to instigate a suit or levy administrative penalties for noncompliance with PURA’s franchise requirements.
“The trial court abused its discretion by denying the Rule 91a motion. Accordingly, we conditionally issue a writ of mandamus compelling the trial court to (1) vacate its denial order and (2) grant the Rule 91a motion to dismiss.”
Some of the plaintiffs in the suit include the cities of Houston, Austin, Irving, Dallas, Sugar Land and Irving.
The cities are represented by the law firms of Ashcroft Sutton Reyes, McKool Smith, and Korein Tillery.
Appeals case No. 05-23-00485-CV