City of Fishers, Indiana v. DIRECTTV

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In the United States Court of Appeals For the Seventh Circuit ____________________ No. 20-3478 CITY OF FISHERS, INDIANA, et al., Plaintiffs-Appellees, v. DIRECTV, et al., Defendants-Appellants. ____________________ Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:20-cv-02351 — Jane Magnus-Stinson, Judge. ____________________ ARGUED APRIL 21, 2021 — DECIDED JULY 21, 2021 ____________________ Before FLAUM, BRENNAN, and SCUDDER, Circuit Judges. SCUDDER, Circuit Judge. In the lawsuit underlying this ap- peal, a group of Indiana cities seeks a declaration that Netflix and other video streaming platforms owe them past and fu- ture franchise fees under an Indiana statute. The cities filed the action in state court, but the defendant streaming plat- forms removed the case to federal court. Relying on the doc- trine of comity abstention, the district court declined to exer- cise federal jurisdiction and remanded the case. At this early 2 No. 20-3478 stage, the only question before us is whether the district court properly abstained under the teachings of Levin v. Commerce Energy, Inc., 560 U.S. 413 (2010), and like cases. We conclude that it did and therefore affirm. I The Indiana Video Service Franchises Act of 2006 regu- lates the way cable television companies do business within the Hoosier state. See Ind. Code § 8-1-34. By the Act’s terms, anyone offering “video service” must enter into a franchise agreement with the Indiana Utility Regulatory Commission in exchange for use of a public right-of-way. Id. § 8-1-34-16(a), (b). For years, traditional cable and communications compa- nies like Comcast and AT&T have signed the franchise agree- ments and paid the required fees. The direct beneficiaries of this arrangement are local gov- ernments. Video service providers must pay quarterly fran- chise fees to government “units,” including counties, munici- palities, or townships within the provider’s service area. Id. §§ 8-1-34-24(a), 36-1-2-23. Indiana law requires that the Com- mission survey the participating units on an annual basis about revenue from the franchise agreements. See id. § 8-1-34- 24.5(b). According to the Commission’s most recent annual report, the units that responded to the survey earned fran- chise fees totaling $19.4 million in 2019. The Commission also reported that most units deposit the franchise fees into gen- eral operating accounts, to be spent on public safety, road maintenance, infrastructure, and the like. Although enacted in 2006, the Act is arguably behind the times. Most people do not consume media today in the same way they did 15 years ago. Traditional cable television, for No. 20-3478 3 example, has been supplanted in many ways by on-demand streaming platforms like Netflix or Hulu. This modernization has left municipalities questioning whether streaming plat- forms, too, should be paying a fair share of franchise fees be- fore enjoying the financial benefit of Hoosiers’ business. Many cities seem to have concluded that these streaming platforms offer “video service” within the meaning of the Act and should have applied for franchise agreements with the Com- mission some time ago. To date, though, the streaming …

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