Filed 2/22/24

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

CITY OF LANCASTER,

Plaintiff and Appellant,

v.

NETFLIX, INC., et al.,

Defendants and Respondents.

B321481

Los Angeles County

Super. Ct. No.

21STCV01881

APPEAL from a judgment of the Superior Court of Los

Angeles County, Yvette M. Palazuelos, Judge. Affirmed.

Schneider Wallace Cottrell Konecky, Todd M. Schneider, 

Jason H. Kim; Andrus Anderson, Jennie Lee Anderson; 

Messing & Spector, Noah A. Messing, and Phillip M. Spector for 

Plaintiff and Appellant.

Korein Tillery, Steven M. Berezney, and Garrett R. 

Broshuis for City of Creve Coeur, Missouri, Gwinnett County, 

Georgia, City of Brookhaven, Georgia, and Unified Government 

of Athens-Clarke County, Georgia as Amici Curiae on behalf of 

Plaintiff and Appellant.

Latham & Watkins, Jean A. Pawlow, Mary Rose Alexander, 

Peter E. Davis, Ward A. Penfold, Robert C. Collins III, and 

Michael A. Hale for Defendant and Respondent Netflix, Inc.
2

Wilson Sonsini Goodrich & Rosati, Victor Jih, Conor 

Tucker, Eric Kohan, and Christopher Hurley for Defendant and 

Respondent Hulu, LLC.

Kilpatrick Townsend & Stockton, Adam H. Charnes, and 

Samuel Z. Hyams for DIRECTV, LLC as Amicus Curiae on behalf 

of Defendants and Respondents.

Steptoe & Johnson, William Travis West, Robyn C. 

Crowther, and Melanie A. Ayerh for DISH Network, L.L.C. and 

Sling TV LLC as Amici Curiae on behalf of Defendants and 

Respondents.

_______________________________________

INTRODUCTION

Plaintiff and appellant City of Lancaster (the City) 

challenges a judgment of dismissal entered after the trial court 

sustained demurrers to its first amended complaint without leave 

to amend. Defendants and respondents are Netflix, Inc. (Netflix) 

and Hulu, LLC (Hulu).

The City brings the present action against Netflix and 

Hulu under the Digital Infrastructure and Video Competition Act 

of 2006 (Pub. Util. Code, § 5810 et seq.)1 (the Act), legislation that 

governs video service providers in this state. Among other things, 

the Act requires all video service providers to obtain a franchise 

from the Public Utilities Commission (the Commission) before 

operating in the state. In addition, all franchise holders must pay 

franchise fees to local governments in exchange for the use of 

public rights-of-way to construct and operate video service 

1 All undesignated section references are to the Public Utilities Code.
3

networks. The City contends Netflix and Hulu are video service 

providers within the meaning of the Act and that they have been 

providing video service within its boundaries without the benefit 

of a state franchise. The City seeks monetary damages (unpaid 

past franchise fees) and declaratory relief (an order compelling 

Netflix and Hulu to obtain state franchises and pay franchise fees

going forward).

Netflix and Hulu demurred to the operative first amended 

complaint, asserting they are not video service providers and 

that, in any event, the Act does not authorize the City to bring a 

private enforcement action against them. The trial court 

sustained the demurrers on multiple grounds and without leave 

to amend and entered a judgment of dismissal.

We affirm the judgment. Although the Act expressly 

authorizes a local government to sue a franchise holder 

concerning unpaid or underpaid franchise fees, the Act does not 

authorize a local government to seek franchise fees from nonfranchise holders. And because the City’s declaratory relief claim 

is wholly derivative of its claim for damages, it also fails.

REGULATION OF VIDEO SERVICE PROVIDERS

At the time the Legislature enacted the Act, a majority of 

California residents (63 percent) received their television 

programming through cable companies. Cable companies had 

previously negotiated individual contracts with local 

governments in approximately 400 jurisdictions to use public 

rights-of-way for their cable networks. Non-cable subscribers 

used digital satellite (27 percent) and over-the-air broadcast (10

percent). (Senate Energy, Utilities and Communications 

Committee, Analysis of Assembly Bill No. 2987 (2005–2006 Reg.
4

Sess.) June 29, 2006 [“Committee Analysis of June 29, 2006”]

p. 2.)

But as telephone companies upgraded their networks with

fiber-optic cables, they gained the ability to transmit television

programming—and compete directly with cable operators. The 

telephone companies, which were investing billions in 

infrastructure upgrades, favored a single, statewide system 

authorizing the construction and maintenance of their new 

networks. (Committee Analysis of June 29, 2006, p. 2.) The 

Legislature agreed.

The Legislature had the following concerns, among others,

in mind when it adopted the Act:

◦ Creating a fair and level playing field for all 

market competitors that does not disadvantage or 

advantage one service provider or technology over 

another.

◦ Promoting widespread access to the most 

technologically advanced cable and video services 

to all California communities in a 

nondiscriminatory manner regardless of 

socioeconomic status.

◦ Protecting local government revenues and their 

control of public rights-of-way.

◦ Requiring market participants to comply with all 

applicable consumer protection laws.

◦ Complementing efforts to increase investment in 

broadband infrastructure and close the digital 

divide.
5

◦ Continuing access to and maintenance of the 

public, education, and government channels.

◦ Maintaining all existing authority of the 

Commission as established in state and federal 

statutes.

(§ 5810, subd. (a)(2).)

The Act regulates all “video service providers”, i.e., cable 

operators and other providers of “video programming.”2 As 

pertinent here, the Legislature transferred responsibility for 

contracting with video service providers from local governments 

to the state. Specifically, the Act directs the Commission to issue 

state franchises authorizing the provision of video services in the 

state. (§ 5840.) The Act includes a requirement that video service 

providers pay local governments a franchise fee, i.e., a rent or toll 

2 “ ‘Video programming’ means programming provided by, or generally 

considered comparable to programming provided by, a television 

broadcast station, as set forth in Section 522(20) of Title 47 of the 

United States Code.” (§ 5830, subd. (r).)

“ ‘Video service’ means video programming services, cable service, or 

OVS service provided through facilities located at least in part in 

public rights-of-way without regard to delivery technology, including 

Internet protocol or other technology. This definition does not include 

(1) any video programming provided by a commercial mobile service 

provider defined in Section 332(d) of Title 47 of the United States 

Code, or (2) video programming provided as part of, and via, a service 

that enables users to access content, information, electronic mail, or 

other services offered over the public Internet.” (§ 5830, subd. (s).) 

“ ‘Video service provider’ means an entity providing video service.” (§ 

5830, subd. (t).)
6

for use of the public rights-of-way to construct and maintain their 

networks. (Id., subd. (q)(1).)

FACTS AND PROCEDURAL BACKGROUND

1. Original Complaint; Demurrers

The City initiated this putative class action suit against 

Netflix and Hulu (together, the Companies) in January 2021. The 

original complaint was purportedly filed on behalf of “[a]ll 

California cities, counties, and/or joint powers authorities”

(collectively, local governments) in which Netflix, Hulu, or both,

have provided video service.3 The complaint asserted two claims: 

violation of the Act and declaratory relief.

The complaint generally alleged that the Companies

provide video service in numerous California jurisdictions using 

broadband wireline facilities located at least in part in public 

rights-of-way. As such, the Companies were obligated to pay a 

video service provider fee to local governments based on the gross 

revenue generated from the provision of video service in each 

local government’s jurisdiction. But, according to the City, the 

Companies have failed to pay the required video service provider 

fees to local governments.

The Companies demurred to the original complaint on a 

variety of grounds, including that the Act does not apply to the 

Companies because they do not operate any “networks” or 

“systems” in public rights-of-way, and that the Companies are not 

required to remit franchise fees to the local governments because 

3 Because no class has been certified, we will refer to the City as the 

sole plaintiff.
7

they do not hold state franchises. The Companies also argued 

that the City did not have a private right of action under the Act.

The court sustained both demurrers with leave to amend.

2. First Amended Complaint

The City filed the operative first amended complaint in 

October 2021. Like the original complaint, the operative 

complaint states two claims: violation of the Act and declaratory 

relief.4

In the first cause of action for violation of the Act, the City 

alleges the Companies provide video service in California and are 

video service providers within the meaning of section 5830. As 

video service providers, the Companies are required under 

section 5840 to pay a franchise fee to local governments in each 

service area. The complaint alleges the Companies have not paid 

such fees to local governments and seeks monetary damages for 

unpaid fees as well as pre- and post-judgment interest.

The City’s declaratory relief claim seeks a judicial 

declaration that the Companies have violated the Act by failing 

to obtain state franchises from the Commission (§ 5840, subd. (c))

and by failing to pay franchise fees owed to local governments 

(Id., subd. (q)). The City seeks an order compelling the 

Companies to “cure their noncompliance with the California 

Public Utilities Code[.]”

4 Most of the allegations of the amended complaint relate to the 

content provided by the Companies and how that content is delivered 

to customers. Because we do not decide whether Netflix and Hulu are 

video service providers under the Act, these allegations are largely 

irrelevant. For the sake of brevity and clarity, we limit our discussion 

of the operative complaint to the issues essential to our analysis.
8

3. Demurrers; Oppositions

3.1. Demurrers

Netflix demurred to the amended complaint on several 

grounds, including that the City does not have a private right of 

action against Netflix and Hulu. Specifically, Netflix argued that

the Act provides only limited rights of action for local 

governments under sections 5870 (public access channels), 5890 

(prohibition of redlining), and 5900 (customer service standards).

And as to franchise fees in particular, the Act only authorizes a 

suit by a local government against a franchise holder concerning

nonpayment or underpayment of franchise fees. (§ 5860, 

subd. (i).) However, because the Companies do not hold state 

franchises, only the Commission is authorized to bring an 

enforcement action against them. Netflix also asserted that it 

does not “use” public rights-of-way or provide “video services” 

within the meaning of the Act and that its services fall within the 

“public Internet exception” of the Act.

5 Hulu demurred on the 

same grounds.

3.2. Opposition

The City opposed both demurrers. On the private right of 

action issue, the City asserted the Act is silent regarding both 

express and implied rights of action for nonpayment of franchise 

fees against video service providers that fail to apply for and 

5 Netflix also asserted several constitutionally-based arguments, urged 

that federal law preempts the Act, and claimed that the Act, if applied 

as suggested by the City, would violate the Internet Tax Freedom Act 

(47 U.S.C. §§ 151, 1101 et seq.). Finally, Netflix urged the court, if it 

were inclined to overrule the demurrer, to refer the matter to the 

Commission for decision in the first instance.
9

obtain a state franchise. But the City argued that nothing in the 

legislative history of the Act suggests the Legislature intended to 

deny a private right of action in the circumstances presented. 

Further, the City maintained, the absence of a private right of 

action against unauthorized video service providers would leave 

an enforcement gap because the Commission is not authorized to 

maintain such an action. According to the City, the Commission’s 

authority is purely ministerial and very limited. And section 444 

only authorizes the Commission to enforce fee provisions that 

relate to application and annual fees due from video service 

providers to the Commission. That section makes no mention of 

the franchise fees payable to local governments. In any event, the 

City asserted, even if the court were to decide that it does not 

have a private right of action under the Act, the court should still 

address and resolve its request for declaratory relief.

The City also addressed the alternative arguments asserted 

by Netflix, including the definition of “video service” in the Act, 

the qualitative similarities between Netflix’s programming and 

traditional broadcast television programming, constitutional 

arguments, federal preemption, and the Internet Tax Freedom 

Act.

3.3. Replies

In reply, Netflix again requested that the court sustain its 

demurrer without leave to amend. On the issue of the private 

right of action, Netflix argued that the Act is not silent on the 

question, as the City had asserted. Instead, the Act includes 

several limited private rights of action for local governments, 

thus evidencing the Legislature’s intention that entities such as 

the City have certain specific rights of action to the exclusion of 

all others. In addition, Netflix urged that the Commission is 
10

authorized to initiate an enforcement action under section 444, as 

that provision authorizes actions against “video service 

providers,” in contrast to the narrower terms “franchise holder” 

and “holder” found in section 5840. Hulu argued similarly in its 

reply and, in response to the City’s assertion that the Act would 

contain an enforcement gap in the absence of a private right of 

action, noted that section 2101 gives broad enforcement powers to 

the Commission.

4. Trial Court Order

The court sustained both demurrers without leave to 

amend.

Regarding the City’s claim that it could maintain this suit

against Netflix and Hulu, the court found the Act does not 

expressly authorize such an action. With respect to disputes over 

franchise fees, the court noted that section 5860, subdivision (i)

(section 5860(i)), provides a private right of action to local 

governments seeking to recover unpaid or underpaid franchise 

fees. But that private right of action is limited. First, only 

franchise holders are required to pay franchise fees to local 

government entities. And the City alleged that Netflix and Hulu 

do not hold state franchises. Second, section 5860(i) authorizes a 

narrow private right of action by a local government or a 

franchise holder “in the event of a dispute concerning 

compensation under this section,” i.e., regarding franchise fees 

owed by franchise holders under section 5860. The court observed 

that nothing in section 5860 generally, or in section 5860(i) in 

particular, authorizes a local government entity to compel a nonfranchise holder to obtain a franchise from the Commission (and 

thereby establish the obligation to pay franchise fees) as the City 

seeks to do in this case.
11

The court also noted that the Act only authorizes private 

rights of action by local government entities in specific and 

limited circumstances. (E.g., §§ 5870, 5890, 5900.) The court 

therefore inferred that the Legislature did not intend to create a 

broad private right of action in favor of government entities 

which was not clearly set forth in the statute.

Finally, the court rejected the City’s contention that an 

enforcement gap would exist in the absence of a private right of 

action on the part of local government entities. The court noted 

that the Act explicitly provides the Commission broad 

enforcement rights under section 444, which would encompass an 

enforcement action against a video service provider that does not 

hold a state franchise.

5. Judgment; Appeal

The court entered a final judgment of dismissal in favor of 

Netflix and Hulu on May 3, 2022. This timely appeal followed.

DISCUSSION

Although the primary focus of the parties’ and the court’s 

efforts below relates to the applicability of the Act to the 

Companies, we focus our analysis on the threshold question of 

whether the Act authorizes the City to bring an action against a 

non-franchise holder to collect franchise fees. We conclude it does 

not and, on that basis, affirm the judgment in favor of Netflix and 

Hulu.

6

6 We do not consider the correctness of the court’s ruling on the 

remaining issues contained in its order sustaining the Companies’ 

demurrers. Nothing in this opinion should be construed to address the

merits of those arguments.
12

1. Standard of Review

We independently review a trial court’s order sustaining a 

demurrer to determine whether the operative complaint alleges 

facts sufficient to state a cause of action. (Ivanoff v. Bank of 

America, N.A. (2017) 9 Cal.App.5th 719, 725.) We assume the 

truth of all properly pled factual allegations and matters that are 

judicially noticeable. (Ibid.) We also liberally construe the 

complaint’s allegations with a view toward substantial justice. 

(Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 

26, 43, fn. 7.)

When a demurrer is sustained without leave to amend, we 

decide whether there is a reasonable possibility that the plaintiff 

can amend the pleading to cure the defect. (Blank v. Kirwan 

(1985) 39 Cal.3d 311, 318.) If the defect can be cured, the trial 

court has abused its discretion and we reverse; if not, there has 

been no abuse of discretion and we affirm. (Ibid.) The burden of 

proving such reasonable possibility is squarely on the plaintiff. 

(Ibid.) Such a showing may be made for the first time on appeal. 

(Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 

Cal.App.4th 700, 711; City of Torrance v. Southern California 

Edison Co. (2021) 61 Cal.App.5th 1071, 1083–1084.)

Finally, “ ‘we do not review the validity of the trial court’s 

reasoning but only the propriety of the ruling itself. [Citations.]’ 

[Citation.]” (Align Technology, Inc. v. Tran (2009) 179 

Cal.App.4th 949, 958.) Accordingly, we will affirm the court’s 

decision to sustain the demurrer if it is correct on any theory. 

(Ibid.)
13

2. The Act does not authorize local governments to seek 

franchise fees from non-franchise holders.

2.1. Statutory Interpretation

The question before us is whether the Act authorizes the 

City, expressly or impliedly, to bring a private right of action 

against a non-franchised video service provider to collect past-due 

franchise fees.7 Familiar principles of law govern our

interpretation of the Act and related statutory provisions. 

“ ‘ “[O]ur task is to ascertain the intent of the Legislature so as to 

effectuate the purpose of the enactment. [Citation.] We look first 

to the words of the statute, which are the most reliable 

indications of the Legislature’s intent. [Citation.] We construe the 

words of a statute in context, and harmonize the various parts of 

an enactment by considering the provision at issue in the context 

of the statutory framework as a whole.” ’ (Kim v. Reins 

International California, Inc. (2020) 9 Cal.5th 73, 83 (Kim).) If 

‘ “the [statutory] language supports more than one reasonable 

construction, then we may look to extrinsic aids, including the 

ostensible objects to be achieved and the legislative history.” ’ 

(Ibid.)” (Rodriguez v. Superior Court (2023) 15 Cal.5th 472, 496–

497.)

As to whether the Act authorizes the present action by the 

City, our Supreme Court has provided additional guidance: “A 

violation of a state statute does not necessarily give rise to a 

private cause of action. (Vikco Ins. Services, Inc. v. Ohio 

7 For purposes of our analysis we assume, as the City has alleged, that 

Netflix and Hulu are “video service providers” under the Act. Nothing 

in this opinion should be construed as a legal or factual finding on that 

issue.
14

Indemnity Co. (1999) 70 Cal.App.4th 55, 62 (Vikco).) Instead, 

whether a party has a right to sue depends on whether the 

Legislature has ‘manifested an intent to create such a private 

cause of action’ under the statute. (Moradi-Shalal v. Fireman’s 

Fund Ins. Companies (1988) 46 Cal.3d 287, 305 (Moradi-Shalal) 

[no legislative intent that Ins. Code, §§ 790.03 & 790.09 create 

private cause of action against insurer for bad faith refusal to 

settle claim]; Crusader Ins. Co. v. Scottsdale Ins. Co. (1997) 54 

Cal.App.4th 121, 131, 135 (Crusader) [no legislative intent that 

Ins. Code, § 1763 gave admitted insurers private right to sue 

surplus line brokers].) Such legislative intent, if any, is revealed 

through the language of the statute and its legislative history. 

(See Moradi-Shalal, supra, 46 Cal.3d at pp. 294–295.)

“A statute may contain ‘ “clear, understandable, 

unmistakable terms,” ’ which strongly and directly indicate that 

the Legislature intended to create a private cause of action. 

(Moradi-Shalal, supra, 46 Cal.3d at p. 295.) For instance, the 

statute may expressly state that a person has or is liable for a 

cause of action for a particular violation. (See, e.g., Civ. Code, 

§ 51.9 [‘A person is liable in a cause of action for sexual 

harassment’ when a plaintiff proves certain elements]; Health & 

Saf. Code, § 1285, subd. (c) [‘Any person who is detained in a 

health facility solely for the nonpayment of a bill has a cause of 

action against the health facility for the detention ... .’].) Or, more 

commonly, a statute may refer to a remedy or means of enforcing 

its substantive provisions, i.e., by way of an action. (See, e.g., 

§ 218 [‘Nothing in this article shall limit the right of any wage 

claimant to sue directly or through an assignee for any wages or 

penalty due him under this article’]; Bus. & Prof. Code, § 17070 

[‘Any person ... may bring an action to enjoin and restrain any 
15

violation of this chapter and, in addition thereto, for the recovery 

of damages.’]; id., § 6175.4, subd. (a) [‘A client who suffers any 

damage as the result of a violation of this article by any lawyer 

may bring an action against that person to recover or obtain one 

or more of the following remedies.’]; Civ. Code, § 1748.7, subd. (d) 

[‘Any person injured by a violation of this section may bring an 

action for the recovery of damages, equitable relief, and 

reasonable attorney’s fees and costs.’]; see Crusader, supra, 

54 Cal.App.4th at p. 136 [listing other statutes expressly creating 

cause of action].) If, however, a statute does not contain such 

obvious language, resort to its legislative history is next in order. 

(Moradi-Shalal, supra, 46 Cal.3d at pp. 300–301; see Crusader, 

supra, 54 Cal.App.4th at pp. 133–134, 136 [relying on principles 

of general statutory interpretation].)” (Lu v. Hawaiian Gardens 

Casino, Inc. (2010) 50 Cal.4th 592, 596–597 (Lu).)

2.2. The private right of action created by 

section 5860(i) does not expressly authorize an

action against a non-franchise holder.

The City contends section 5860(i) expressly authorizes the 

present action because it provides a right of action for damages

on the part of local governments against franchise holders and 

non-franchise holders alike. The City is wrong.

We examine the text of section 5860(i) as well as the text 

and structure of section 5860 generally. Section 5860 relates to

the state franchise fee owed to local government entities by 

franchise holders. (Id., subd. (a).) The section references the 

franchise fee formula (a percentage of the gross revenue 

generated within a particular jurisdiction) and prohibits a local 

government entity from imposing any additional fees or charges

on a franchise holder relating to the provision of video services 
16

within its jurisdiction. (Id., subds. (b), (c).) Additional 

subdivisions further define the term “gross revenue” for the 

purpose of calculating the franchise fee. (Id., subds. (d)–(g).) 

Subdivision (h) specifies the frequency of and deadline for 

payment of the franchise fee and provides for a late payment 

charge. It also requires the franchise holder to provide a 

summary to the local government entity explaining the basis of 

its franchise fee calculation. Subdivision (j) permits the franchise 

fee holder to pass the cost of the franchise fee to each customer 

using a separate line item. In sum, section 5860 provides details

to franchise holders and local governments concerning the 

calculation and payment of the franchise fee.

The specific subsection relied upon by the City, section 

5860(i), sets out the process a local government may use to 

determine whether a franchise holder operating within its 

jurisdiction has accurately calculated and fully paid the required

franchise fee. It also provides a timeframe in which any dispute 

on that issue must be resolved. The final sentence of 

section 5860(i) states, “Either a local entity or the holder may, in 

the event of a dispute concerning compensation under this 

section, bring an action in a court of competent jurisdiction.” The 

City asserts that it is a “local entity” and that the present action 

is a “dispute concerning compensation.” Therefore, the City 

reasons, section 5860(i) empowers the City to bring this action for 

damages against the Companies because the Companies are 

“providing video service without paying mandated fees.” Like the 

trial court, we reject the City’s overly broad reading of 

section 5860(i) and conclude this provision only authorizes a local 

government to bring an action concerning the underpayment or 

nonpayment of franchise fees against a franchise holder.
17

The City focuses narrowly on a few words found in the final 

sentence of section 5860(i), quoted above, to argue the present 

action is a “dispute concerning compensation.” But as that 

sentence states, the right of action created in favor of a local 

government does not relate simply to a “dispute concerning 

compensation,” as asserted by the City, but must involve “a 

dispute concerning compensation under this section.” (Italics 

added.) “This section,” as used in the final sentence of 

section 5860(i), is limiting language referring to section 5860

specifically. (See, e.g., Noe v. Superior Court (2015) 237 

Cal.App.4th 316, 339 [noting Labor Code provision creating 

private right of action for wage claimants seeking penalties due 

“under th[e] article” precluded claimant from seeking penalties

outlined in other articles].) 

Further, the compensation at issue—the franchise fee—is 

only owed by a franchise holder. As explained, section 5860 

concerns the state franchise fee owed to local government entities

under section 5840, subdivision (q). (See, e.g., § 5860, subd. (a) 

[“The holder of a state franchise that offers video service within 

the jurisdiction of the local entity shall calculate and remit to the 

local entity a state franchise fee, adopted pursuant to 

subdivision (q) of Section 5840, as provided in this section.”].) 

Section 5840, subdivision (q)(1), in turn, provides in pertinent 

part: “There is hereby adopted a state franchise fee payable as 

rent or a toll for the use of the public rights-of-way by holders of 

the state franchise issued pursuant to this division,” i.e., under 

the Act. (See Stats. 2006, ch. 700 (A.B. 2987), § 3 [adding

Division 2.5 to the Public Utilities Code].) These two provisions, 

taken together, establish that only “holders of the state 

franchise” are obligated to pay the franchise fee required under 
18

section 5840, subdivision (q). Accordingly, the “dispute 

concerning compensation” referenced in section 5860(i), could 

only relate to the “franchise fee payable as rent or a toll for the 

use of the public rights-of-way by holders of the state franchise,”

and such a dispute could only arise between a local government 

entity and a franchise holder. The City concedes, and indeed 

alleges, that neither Netflix nor Hulu holds a state franchise.

The City complains that this interpretation of the statute is 

incorrect because the Legislature used broad rather than limiting 

language in the final sentence of section 5860(i). Specifically, the 

City notes that sentence authorizes an action concerning 

“compensation” and does not use the more specific and limiting 

language, “franchise fee.” But as already explained, the only 

“compensation” required under section 5860 is the state franchise 

fee.

The City also believes it can bring an action under 

section 5860(i) against a non-franchise holder because the final 

sentence of section 5860(i) does not expressly state that a local 

government may only bring “an action against a holder of a 

franchise.” Again, the City focuses too narrowly on specific words 

in the abstract, rather than looking at all the words in context. 

Section 5860(i) authorizes an action by either “a local entity or 

the holder.” We reject the City’s assertion that the Legislature’s 

use of “the holder” rather than “the holder of a state franchise” in 

the final sentence of section 5860(i) evidences an intent to expand 

a local government’s right of action to include claims against nonfranchise holders. The term “holder” is used interchangeably with 

“franchise holder” throughout section 5860. (See, e.g., § 5860, 

subd. (a) [“The holder of a state franchise that offers video service 

within the jurisdiction of the local entity shall calculate and remit 
19

to the local entity a state franchise fee ...”]; id., subd. (b) [“The 

state franchise fee shall be a percentage of the holder’s gross 

revenues”]; id., subd. (c) [“No local entity or any other political 

subdivision of this state may demand any additional fees or 

charges or other remuneration of any kind from the holder of a 

state franchise”]; id., subd. (d) [“For purposes of this section, the 

term ‘gross revenues’ means all revenue actually received by the 

holder of a state franchise, as determined in accordance with 

generally accepted accounting principles, that is derived from the 

operation of the holder”].) 

And even section 5860(i), cited repeatedly by the City to 

support its contention that “[t]here is no requirement that the 

dispute be ‘with a franchise holder,’ ” uses “holder of a state 

franchise” and “holder” interchangeably: “Not more than once 

annually, a local entity may examine the business records of a 

holder of a state franchise to the extent reasonably necessary to 

ensure compensation in accordance with this section. The holder

shall keep all business records reflecting any gross revenues, 

even if there is a change in ownership, for at least four years 

after those revenues are recognized by the holder on its books and 

records. If the examination discloses that the holder has 

underpaid franchise fees by more than 5 percent during the 

examination period, the holder shall pay all of the reasonable and 

actual costs of the examination. If the examination discloses that 

the holder has not underpaid franchise fees, the local entity shall 

pay all of the reasonable and actual costs of the examination. In 

every other instance, each party shall bear its own costs of the 

examination. Any claims by a local entity that compensation is 

not in accordance with subdivision (a), and any claims for refunds 

or other corrections to the remittance of the holder of a state 
20

franchise, shall be made within three years and 45 days of the 

end of the quarter for which compensation is remitted, or three 

years from the date of the remittance, whichever is later. Either a 

local entity or the holder may, in the event of a dispute 

concerning compensation under this section, bring an action in a 

court of competent jurisdiction.” (Italics added.)

Finally, the City argues that the court erred in following 

Lu, supra, and requiring “ ‘ “clear, understandable, unmistakable 

terms,” ’ which strongly and directly indicate that the Legislature 

intended to create a private cause of action.” (Lu, supra, 50 

Cal.4th at p. 597.) According to the City, the “clear and 

unmistakable” standard only applies when the question is 

whether a statute creates any private right of action. To the 

extent the question relates to the scope rather than the existence 

of a private right of action, the City claims that conventional 

rules of statutory interpretation apply. (See Kim v. Reins, supra, 

9 Cal.5th at p. 83; Sevour-Lloff v. LaPaille (2022) 80 Cal.App.5th 

427, 441, review granted Oct. 26, 2022, S275848.) As noted,

however, we review the correctness of the court’s ruling, not the 

reasoning behind it. (See, e.g., Align Technology, Inc. v. Tran, 

supra, 179 Cal.App.4th at p. 958.) And in the present case, we 

would reach the same result under either standard.
21

2.3. The Act does not contain an implied right of 

action authorizing a local government entity to 

maintain an action for damages against a nonfranchise holder.

In light of our conclusion that section 5860(i)

8 does not 

expressly create a private right of action for local government 

entities against non-franchise holders, we consider whether the 

Act contains an implied private right of action for local 

governments against non-franchise holders.

The City relies on two cases, Mabry v. Superior Court

(2010) 185 Cal.App.4th 208 (Mabry) and Ragland v. U.S. Bank 

National Assn. (2012) 209 Cal.App.4th 182 (Ragland), to assert 

that “a ‘private right of action may inhere within a statute, 

otherwise silent on the point, when such a private right of action 

is necessary to achieve the statute’s policy objectives.’ ” Further, 

according to the City, “courts will recognize an implied cause of 

action when ‘[t]here is no administrative mechanism to enforce 

[the statute], and a private remedy is necessary to make it 

effective.’ ” This is not an accurate statement of the law, however.

Mabry, decided by the Court of Appeal in June 2010, held 

that Civil Code section 2923.5, though not expressly creating a 

private right of action, impliedly created one because there was 

no administrative mechanism to enforce the statute, a private 

remedy furthered the purpose of the statute and was necessary 

for it to be effective, and California courts do not favor 

8 The City relies solely on section 5860(i) to argue that a private right 

of action is expressly created by the Act. For the sake of completeness, 

we note that no other section of the Act expressly creates the private 

right of action the City seeks.
22

constructions of statutes that render them advisory only. (Mabry, 

supra, 185 Cal.App.4th at p. 218.) Two months later, our 

Supreme Court issued its opinion in Lu.

9 There, the court 

considered whether Labor Code section 351, which precludes 

employers from taking gratuities intended for employees, 

contained an express or implied right of action on the part of 

employees. The court concluded the statute contained no express 

right of action and the plaintiff argued it would be absurd to 

“conclude that the Legislature would declare that gratuities 

belong to employees and yet deny them access to the courts to 

enforce these property rights.” (Lu, supra, 50 Cal.4th at pp. 601–

602.) The plaintiff urged, therefore, that the Legislature must 

have implicitly created such a right of action and argued that the

court could recognize a private right to sue, even if the 

Legislature never considered creating such a right, if the court 

believed a private right to sue was “appropriate” and “needed.”

(Ibid.) The court acknowledged it had used that principle in a 

prior case to decide whether to recognize the existence of a tort 

remedy for a constitutional violation. (Id., at pp. 602–603.) But

the court rejected the approach where, as here, the question is 

whether a statute provides a private right of action. In that 

regard, the court limited its analysis of the Legislature’s intent to 

the language of the statute and the legislative history. (Id., at 

p. 603.) In short, the court rejected the approach suggested by the 

City here.

9 Although Ragland was decided two years later, in 2012, the opinion 

makes no mention of Lu. Instead, the Court of Appeal followed Mabry

without additional analysis. (See Ragland, supra, 209 Cal.App.4th at

p. 201 [“Following the reasoning of Mabry ... , we conclude section 

2924g(d) creates a private right of action and is not preempted.”].)
23

Following Lu, we examine the statements of legislative 

intent included in the text of the Act and the Act’s legislative 

history to determine if the Legislature intended to allow local 

government entities to sue non-franchise holders. (Lu, supra, 50

Cal.4th at p. 597 [noting court may consider legislative history to 

ascertain whether Legislature intended to create private right of 

action].) The City first argues the statements of legislative intent 

found in section 5810 “should be interpreted to prevent 

companies from evading their DIVCA fees.” As the City notes, the 

Legislature intended, by adopting the Act, to “[c]reate a fair and 

level playing field for all market competitors,” to “[p]rotect local 

government revenues and control of public rights-of-way,” and to 

compensate local entities for the use of their public rights-of-way. 

(§ 5810, subd. (a)(2)(A), (2)(C), (4)(B).) The City also cites 

section 5840, subdivision (q)(2)(A), which states: “The state 

franchise fee shall apply equally to all video service providers in 

the local entity’s jurisdiction.” While we agree with the City that 

the Legislature intended for video service providers to pay 

franchise fees in any jurisdiction where they provide video 

programming services, it does not follow that the Legislature also 

intended for a local government to bring a legal action in state 

court against any company it believes should, but does not, hold a 

franchise.

Indeed, the only reference to enforcement of the state 

franchise requirement found in section 5810 suggests that the 

Commission is tasked with enforcement. Section 5810, 

subdivision (a)(3), provides in pertinent part: “The public interest 

is best served when sufficient funds are appropriated to the 

commission to provide adequate staff and resources to 

appropriately and timely process applications of video service 
24

providers and to ensure full compliance with the requirements of 

this division.[10] It is the intent of the Legislature that, although 

video service providers are not public utilities or common

carriers, the commission shall collect any fees authorized by this 

division in the same manner and under the same terms as it 

collects fees from common carriers, electrical corporations, gas 

corporations, telephone corporations, telegraph corporations, 

water corporations, and every other public utility providing 

service directly to customers or subscribers subject to its 

jurisdiction such that it does not discriminate against video 

service providers or their subscribers.” In particular, the 

provisions that the Commission should “ensure full compliance 

with the requirements of this division” and may “collect any fees 

authorized by this division” are strong indications that the 

Legislature intended for the Commission, and not local 

governments, to prosecute a video service provider that does not 

hold a state franchise.

The overall structure of the Act also suggests that the 

Commission, rather than local governments, is responsible for 

any enforcement issue relating to the state franchise 

requirement. Specifically, section 5840 sets forth the duties and 

responsibilities of the Commission. That section expressly 

provides that “[t]he commission is the sole franchising authority 

for a state franchise to provide video service under the division”

and sets forth the Commission’s responsibilities. (Id., subd. (a).) 

Section 5840 defines the franchise application process to be 

administered by the Commission (id., subds. (c)–(g)), imposes 

10 As already noted, “this division” refers to Division 2.5 of the Public 

Utilities Code, i.e., the Act.
25

notice requirements on the Commission (id., subd. (h)), and 

outlines the information the Commission must include in any 

state-issued franchise (id., subd. (i)). The section also imposes 

responsibilities on the recipient of a franchise and provides a 

process for a franchise holder to cancel a franchise. (Id., subds. (j), 

(l)–(p).) Critically, section 5840 also provides that it is unlawful to 

provide video service in the state without a franchise. (Id., 

subd. (k).) The Commission is generally empowered, on its own or 

with the assistance of the Office of the Attorney General, to bring 

an action in the name of the People of the State of California 

against a video service provider that fails to obtain a state-issued 

franchise. (§ 2101.)

Further, the Legislature delegated certain enforcement 

tasks to local governments in other sections of the Act. 

Specifically, the Act expressly provides limited rights of action for 

local governments under sections 5870 (public access channels), 

5890 (prohibition of redlining), and 5900 (customer service 

standards). The fact that the Legislature expressly provided 

rights of action in some areas also suggests it did not intend, 

impliedly or otherwise, to create private rights of action in other 

areas.

In addition to considering the text and structure of the Act, 

we may also find evidence of legislative intent in portions of a 

statute’s legislative history. (E.g., Kaufman & Broad 

Communities, Inc. v. Performance Plastering, Inc. (2005) 133 

Cal.App.4th 26, 29–39.) In this case, however, the legislative 

history is notable only in that it does not include any discussion 

of the issue presented here. In addition, we note that the 

Legislative Counsel makes no mention of a private right of action 

against non-franchise holders, which “ ‘is a strong indication the 
26

Legislature never intended to create such a right of action.’ ” (Lu,

supra, 50 Cal.4th at p. 601.)

In sum, we conclude that the Legislature did not intend to 

allow local governments to sue non-franchise holders under the 

Act.

3. The court did not err in rejecting the City’s claim for 

declaratory relief.

The City argues the court erred in concluding that it cannot 

obtain a declaratory judgment that requires the Companies to 

obtain state-issued franchises. We disagree.

In the operative complaint, the City realleges in the 

declaratory relief claim each of the allegations that provide the 

basis for its damages claim under the Act. It then alleges that 

“[a]n actual controversy has arisen and now exists between 

Plaintiff and the other Class members, on the one hand, and 

Defendants on the other” because the Companies “have failed to 

comply with their obligations under the California Public 

Utilities Code by failing to obtain a certificate of franchise 

authority and failing to pay the required franchise fees to 

Plaintiff and the other Class members.” The City seeks “[a]

judicial determination of these issues and of the legal rights and 

respective duties of Plaintiff, the other Class members, and 

Defendants” as well as an order directing the Companies “to cure 

their noncompliance with the California Public Utilities Code.”

Code of Civil Procedure section 1060, which governs actions 

for declaratory relief, provides: “Any person interested under a 

written instrument ... , or under a contract, or who desires a 

declaration of his or her rights or duties with respect to 

another ... may, in cases of actual controversy relating to the 

legal rights and duties of the respective parties, bring an original 
27

action ... for a declaration of his or her rights and duties in the 

premises, including a determination of any question of 

construction or validity arising under the instrument or 

contract.” As the City notes, declaratory relief may be 

appropriate in a broad range of circumstances. And “ ‘[t]he 

correct interpretation of a statute is a particularly suitable 

subject for a judicial declaration. [Citation.] Resort to declaratory 

relief therefore is appropriate to attain judicial clarification of the 

parties’ rights and obligations under the applicable law. 

[Citation.]’ [Citation.]” (California Public Records Research, 

Inc. v. County of Yolo (2016) 4 Cal.App.5th 150, 185.)

But a declaratory relief claim is subject to general 

demurrer where it relates to a substantive claim that is invalid 

as a matter law. (Weil & Brown, Cal. Practice Guide: Civil 

Procedure Before Trial (The Rutter Group 2023) ¶ 7:42.12.) 

“Where a trial court has concluded the plaintiff did not state 

sufficient facts to support a statutory claim and therefore 

sustained a demurrer as to that claim, a demurrer is also 

properly sustained as to a claim for declaratory relief which is 

‘wholly derivative’ of the statutory claim. [Citation.]” (Ball v. 

FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800.) As 

is evident from the complaint, the City’s declaratory relief claim

is wholly derivative of the proposed cause of action for violation of 

the Act. The first cause of action seeking past due franchise fees 

is based on the Companies’ failure to obtain state-issued 

franchises. The declaration sought by the second cause of action 

is a judicial declaration that the Companies must obtain stateissued franchises. Our decision, however, makes clear that it is 

the Commission, not the City, that should enforce issues relating 

to the issuance of a video service franchise.
28

Further, although the City’s action is directed at the 

Companies, the City’s declaratory relief claim is essentially a 

thinly veiled request that we order the Commission to issue 

franchises to the Companies or to institute an enforcement action 

against them. “Declaratory relief generally is not available to use 

the courts to tell an administrative agency how to do its job. An 

action for declaratory relief ‘does not confer upon the court the 

authority to make pronouncements in a field reserved to other 

branches of government. [Citation.]’ [Citation.]” (Monterey 

Coastkeeper v. California Regional Water Quality Control Bd., etc.

(2022) 76 Cal.App.5th 1, 18.) We have interpreted the Act to 

delegate the enforcement of franchise-related issues, including 

enforcement, to the Commission. The court appropriately 

preserved the Commission’s jurisdiction by dismissing the 

declaratory relief claim.
29

DISPOSITION

The judgment is affirmed. Respondents Netflix, Inc. and 

Hulu, LLC shall recover their costs on appeal.

CERTIFIED FOR PUBLICATION

LAVIN, J.

WE CONCUR:

EDMON, P. J.

EGERTON, J.