Court Opinion

ID: 9943176
Source: CourtListenerOpinion
Date Created: 2024-02-22 20:02:50.709555+00
Date Added: 2024-06-11T13:46:20.497163
License: Public Domain

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,                  B321481

      Plaintiff and Appellant,       Los Angeles County
                                     Super. Ct. No.
      v.                             21STCV01881
 NETFLIX, INC., et al.,

      Defendants and Respondents.

      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.
      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.

                                    2
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 non-
franchise 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.

                                 3
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.

                                 4
      ◦    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).)

                                     5
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.

                                    6
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.

                                    7
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.

                                    8
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

                                 9
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 non-
franchise 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.

                                10
      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.

                                   11
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.)

                                 12
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.

                                   13
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

                                 14
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

                                 15
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.

                                16
       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

                                 17
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 non-
franchise 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

                                 18
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

                                 19
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.

                                20
      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 non-
             franchise 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.

                                    21
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.”].)

                                 22
       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

                                23
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.

                                    24
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

                                  25
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

                                 26
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 state-
issued 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.

                                  27
      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.

                                28
                       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.

                              29