Court Opinion

ID: 9897373
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:10:46.5985+00
Date Added: 2024-06-11T09:15:44.423926
License: Public Domain

FILED
                                                                                 Jun 13 2023, 8:50 am

                                                                                     CLERK
                                                                                 Indiana Supreme Court
                                                                                    Court of Appeals
                                                                                      and Tax Court

ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEES
NETFLIX INC.                                               Andrew W. Hull
George M. Plews                                            Michael R. Limrick
Brett E. Nelson                                            Hoover Hull Turner LLP
Joanne R. Sommers                                          Indianapolis, Indiana
Plews Shadley Racher & Braun LLP                           Steven M. Berezney
Indianapolis, Indiana                                      Garrett R. Broshuis
Mary Rose Alexander                                        Korein Tillery, LLC
Robert C. Collins III                                      St. Louis, Missouri
Latham & Watkins LLP
Chicago, Illinois
Peter E. Davis
Jean A. Pawlow
Latham & Watkins LLP
Washington, D.C.
ATTORNEYS FOR APPELLANT DIRECTV,
LLC
F. Anthony Paganelli
Joshua R. Lowry
Paganelli Law Group
Indianapolis, Indiana
Adam H. Charnes
Kilpatrick Townsend & Stockton LLP
Dallas, Texas
Ava J. Conger
John P. Jett
Kilpatrick Townsend & Stockton LLP
Atlanta, Georgia
ATTORNEYS FOR APPELLANTS DISH
NETWORK CORP. AND DISH NETWORK
LLC
Offer Korin
Brooke Smith
Stoll Keenon Ogden PLLC

Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023                           Page 1 of 12
Indianapolis, Indiana
Jared R. Butcher
Berliner Corcoran & Rowe LLP
Washington, D.C.
Matthew R. Friedman
Pantelis Michalopoulos
Steptoe & Johnson LLP
Washington, D.C.
ATTORNEYS FOR APPELLANTS HULU, LLC
AND DISNEY DTC, LLC.
Jason R. Delk
Delk McNally, LLP
Muncie, Indiana
Victor Jih
Wilson Sonsini Goodrich & Rosati
Los Angeles, California

                                             IN THE
    COURT OF APPEALS OF INDIANA

Netflix, Inc., Disney DTC LLC,                             June 13, 2023
Hulu, LLC, DIRECTV, LLC,                                   Court of Appeals Case No.
Dish Network Corp., and Dish                               22A-PL-1630
Network, L.L.C.,                                           Appeal from the
Appellants-Defendants,                                     Marion Superior Court
                                                           The Honorable
        v.                                                 Heather A. Welch, Judge
                                                           Trial Court Cause No.
City of Fishers, Indiana, City of                          49D01-2008-PL-26436
Indianapolis, Indiana, City of
Evansville, Indiana, and City of
Valparaiso, Indiana on behalf of
themselves and all others
similarly situated,

Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023                      Page 2 of 12
      Appellees-Plaintiffs.

                                         Opinion by Judge Foley
                                     Judges Vaidik and Tavitas concur.

      Foley, Judge.

[1]   At issue in this interlocutory appeal is whether new and emerging technologies

      fit within a statutory scheme enacted prior to the emergence of those

      technologies. The resolution of this case is determined by whether the Indiana

      Video Service Franchises Act (“VSF Act”) applies to video streaming service

      providers.

[2]   Netflix, Inc., Disney DTC, LLC, Hulu, LLC, DIRECTV, LLC, Dish Network

      Corp., and Dish Network L.L.C. (collectively herein “streaming services”)

      appeal the trial court’s order denying their motions to dismiss. Appellees are

      four Indiana cities (“four cities”) that allege that the streaming services are

      subject to the requirements of the VSF Act1 and seek, inter alia, a declaratory

      1
          Indiana Code Chapter 8-1-34.

      Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023          Page 3 of 12
      judgment to that effect. We conclude that the trial court correctly determined

      that it has authority to hear the case pursuant to the Indiana Declaratory

      Judgment Act (“IDJA”).2 Nevertheless, on May 4, 2023, the Governor signed

      into law H.B. 1454, which expressly excluded “video programming accessed

      via a service that enables users to access content, information, electronic mail,

      or other services offered over the Internet, including digital audiovisual works

      (as defined in I.C. 6-2.5-1-16.3)[,]” from the definition of “video service.” H.B.

      1454 § 123. This amendment to the VSF Act is “retroactive” to July 1, 2006.

      Given that a dispute centering on whether the streaming services provide

      “video service” within the meaning of the VSF Act is at the core of this case,

      and that the trial court’s analysis preceded the passage of this new amendment,

      we remand the case with instructions to vacate the denials of the streaming

      services’ motions to dismiss.

      Facts and Procedural History
[3]   The four cities’ complaint,3 filed on August 5, 2020, alleges that the streaming

      services provide video service in Indiana. The VSF Act requires entities that

      provide video service in Indiana to obtain a franchise4 authorizing the

      2
          Indiana Code Chapter 34-14-1.
      3
        The action was temporarily removed to federal court, but both the federal district court and the Seventh
      Circuit court of appeals declined to exercise jurisdiction on the basis of the comity abstention doctrine and
      the general “hesitance to interfere with state and municipal fiscal matters . . . .” City of Fishers, Ind. v.
      DIRECTV, 5 F.4th 750, 753 (7th Cir. 2021).
      4
       “[A]n initial authorization, or a renewal of an authorization, that . . . is issued by the commission under this
      chapter after June 30, 2006; and [ ] authorizes the construction or operation of a video service system in a

      Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023                                   Page 4 of 12
construction of a video service system. A video service system is “a system,

consisting of a set of transmission paths and associated signal generation,

reception, and control equipment, that is designed to provide video service

directly to subscribers within a community.” Ind. Code § 8-1-34-15(a). The

VSF Act defines video service as:

           (1) the transmission to subscribers of video programming and
           other programming service:

                    (A) through facilities located at least in part in a public
                    right-of-way; and

                    (B) without regard to the technology used to deliver the
                    video programming or other programming service; and

           (2) any subscriber interaction required for the selection or use of
           the video programming or other programming service.

I.C. § 8-1-34-14.5 The four cities allege that the streaming services provide

video service via facilities that are located, at least in part, in public rights-of-

designated service area in Indiana.” I.C. § 8-1-34-4. Federal law permits states and local governments to
issue franchises in order to regulate and receive compensation for use of the public rights-of-way. 47 U.S.C §
541(a); § 521(3); see also City of Knoxville v. Netflix, Inc., 656 S.W.3d 106, 108 (Tenn. 2022).
5
    As previously noted, this statute was recently amended by H.B. 1454 and the following subsection added:

         (b) The term does not include:
           (1) commercial mobile service (as defined in 47 U.S.C. 332);
           (2) direct to home satellite service (as defined in 47 U.S.C. 303(v)); or
           (3) video programming accessed via a service that enables users to access content,
           information, electronic mail, or other services offered over the Internet, including digital
           audiovisual works (as defined in IC 6–2.5–1–16.3).

Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023                                         Page 5 of 12
      way, and such provisions generate gross revenue.6 The streaming services have

      not obtained a franchise from the Indiana Utilities Regulatory Commission

      (“IURC”), a failure which the four cities contend is a violation of the VSF Act’s

      requirements.7 And, as a result, the streaming services have not paid fees to the

      four cities which are “units” under the VSF Act. I.C. § 8-1-34-12.

[4]   The four cities’ complaint seeks: (1) a declaration that the VSF Act applies to

      the streaming services and that they have not complied with its requirements;

      (2) an accounting for the monies owed by the streaming services to the four

      cities; (3) an order enjoining the streaming services from providing video service

      in Indiana until such time as they obtain a franchise and pay the required fees;

      (4) an order that the streaming services comply with the requirements of the

      VSF Act and pay any franchise fees owed; and (5) attorney’s fees, costs, and

      expenses associated with the action.

[5]   On December 18, 2020, the streaming services filed various motions to dismiss

      the four cities’ complaint.8 The motions to dismiss raised an array of

      arguments, all of which find their procedural home in one of two claims: (1) the

      6
        “[A]ll consideration of any kind or nature, including cash, credits, property, and in kind contributions . . .
      received by a holder from the operation of a video service system in a particular unit in Indiana; and [ ]
      calculated by the holder under section 23 of this chapter.” I.C. § 8-1-34-5.
      7
       I.C. § 8-1-34-16 (“[A] person who seeks to provide video service in Indiana . . . shall file with the
      commission an application for a franchise.”)
      8
       DirecTV and Dish Network, and Hulu and Disney filed separate joint motions to dismiss respectively,
      while Netflix filed its own motion to dismiss.

      Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023                                     Page 6 of 12
      trial court lacks subject-matter jurisdiction;9 or (2) the complaint fails to allege a

      claim upon which relief can be granted.10 Specifically,11 the streaming services

      contended that: (1) the VSF Act does not provide a private cause of action; (2)

      the VSF Act does not apply to the streaming services; (3) application of the VSF

      Act would conflict with various federal laws;12 (4) the trial court should defer to

      the IURC with respect to whether the VSF Act applies to the streaming

      services; and (5) the four cities failed to exhaust their administrative remedies

      prior to filing their complaint.

[6]   After amendments to the motions to dismiss, additional motions practice,

      protracted briefing, and oral argument, the trial court denied all motions to

      dismiss on January 18, 2022.13 On February 17, 2022, the streaming services

      filed a motion for certification for interlocutory appeal, which the trial court

      granted on June 10, 2022. We accepted jurisdiction pursuant to Indiana

      Appellate Rule 14 on August 12, 2022.

      9
          Ind. Trial Rule 12(B)(1).
      10
           T.R. 12(B)(6).
      11
       For purposes of this appeal, we consolidate and categorize the various arguments made in the multiple
      motions to dismiss.
      12
         The streaming services (with the exception of Dish Network) have largely abandoned these arguments on
      appeal, and we do not address them. To the extent that the parties do reference federal preemption or
      constitutional concerns in passing, see, e.g. Netflix’s Br. pp. 47–49, we need not reach the arguments as we
      resolve the appeal on other grounds.
      13
           The trial court denied multiple motions to reconsider this order.

      Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023                                Page 7 of 12
      Discussion and Decision
[7]   We first address the streaming services’ contention that the trial court lacks

      jurisdiction over this case. “‘When a trial court is confronted with a motion to

      dismiss based on Ind. Trial Rule 12(B)(1), the trial court is required to

      determine whether it has the power to adjudicate the action.’” Walls v. Markley

      Enters., Inc., 116 N.E.3d 479, 482 (Ind. Ct. App. 2018) (quoting MHC Surgical

      Ctr. Assocs., Inc. v. State Off. of Medicaid Pol’y and Plan., 699 N.E.2d 306, 308 (Ind.

      Ct. App. 1998)). “‘In ruling on a motion to dismiss for lack of subject matter

      jurisdiction, the trial court may consider not only the complaint and motion but

      also any affidavits or evidence submitted in support.’” Id. at 482–83 (quoting

      GKN Co. v. Magness, 744 N.E.2d 397, 400 (Ind. 2001)). “If the facts before the

      trial court are not in dispute, then the question of subject matter jurisdiction is

      purely one of law.” Id. at 483 (citing GKN, 744 N.E.2d at 401). “Under those

      circumstances no deference is afforded the trial court’s conclusion because

      appellate courts independently, and without the slightest deference to the trial

      court determinations, evaluate those issues they deem to be questions of law.”

      Id. No facts, as of yet, have been presented to the trial court, and, thus, there

      can be no dispute by the parties with respect to any facts. We therefore review

      the trial court’s decision to deny the motions to dismiss for lack of subject

      matter jurisdiction de novo.

[8]   The streaming services contend that the trial court lacked subject matter

      jurisdiction for three distinct reasons: (1) the four cities have not exhausted their

      Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023            Page 8 of 12
      administrative remedies;14 (2) the VSF Act does not provide for a private cause

      of action; and (3) jurisdiction lies properly with the IURC. The four cities

      respond that subject matter jurisdiction in this case derives from the IDJA, and

      that the IURC is not empowered to render the relief they seek.

[9]   The streaming services argue that the four cities could have “presented

      ‘information’ to the IURC regarding the streaming companies’ alleged failure to

      secure the necessary video service franchise and requested a formal

      investigation as to whether the streaming companies have violated the VSF

      Act[,]” or “filed a ‘petition’ with the IURC seeking an ‘order’ regarding the

      streaming companies’ franchising obligations that would have triggered judicial

      review.” DirecTV’s Br. pp. 41–42. For authority, the streaming services cite

      various provisions of Title 170 of the Indiana Administrative Code. Crucially,

      however, we note that the Administrative Code with respect to the IURC

      governs “the practice and procedure in cases and other matters before the

      commission arising under the acts of the general assembly conferring powers upon

      the commission . . . .” 170 Ind. Admin. Code 1-1.1-1 (emphasis added). In other

      words, the General Assembly must first confer upon the IURC the authority to

      provide the relief sought by the four cities.

      14
         We dispense with this argument on other grounds, but we note that our Supreme Court has determined
      that the failure to exhaust administrative remedies does not implicate the question of subject matter
      jurisdiction. See First Am. Title Ins. Co. v. Robertson, 19 N.E.3d 757, 760 (Ind. 2014) (“We summarily affirm
      that portion of the Court of Appeals opinion holding that the exhaustion of administrative remedies under
      AOPA is a procedural error and does not implicate the trial court's subject matter jurisdiction.”).

      Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023                                  Page 9 of 12
[10]   The General Assembly has expressly conferred certain authorities upon the

       IURC. For example, the IURC may “summarily investigate” discriminatory

       rate changes or inadequate services. I.C. § 8-1-2-58. It may hold formal public

       hearings on complaints about unreasonable utility rates. I.C. § 8-1-2-54. But

       the General Assembly has not empowered the IURC to determine the scope of

       its own authority. Here, the four cities seek a declaration that the VSF Act

       applies to the streaming services. This is a pure question of law, implicating the

       secondary question of whether the IURC has some authority over the streaming

       services. Thus, it is a question properly before the courts of this state, and not

       the IURC. See Ind. Off. of Util. Consumer Couns. v. Duke Energy Ind., LLC, 183

       N.E.3d 266, 268 (Ind. 2022) (“[B]efore us is a legal question on which we owe

       the [IURC] no deference.”); see also U.S. Steel Corp. v. N. Ind. Pub. Serv. Co., 951

       N.E.2d 542, 551 (Ind. Ct. App. 2011) (citing Town of Chandler v. Ind.–Am. Water

       Co., 892 N.E.2d 1264, 1267–68 (Ind. Ct. App. 2008) (“However, the

       Commission’s interpretation of statutes defining the limits of its jurisdiction is

       reviewed de novo.”), trans denied.

[11]   “The courts of this state have already concluded that the IURC does not

       possess the power to make declaratory rulings in the manner contemplated by

       the Declaratory Judgment Act.” S.E. Ind. Nat. Gas Co. v. Ingram, 617 N.E.2d

       943, 948 (Ind. Ct. App. 1993) (citing U.S. Steel Corp. v. N. Ind. Pub. Serv. Co., 482

       N.E.2d 501, 506 (Ind. Ct. App. 1985), trans. denied.). “It has not been

       empowered to enter judgments which determine the parties’ rights, status or

       legal relationship, even when the subject matter of the determination appears to

       Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023          Page 10 of 12
       fall within the IURC’s broad grant of authority.” Id. (citing Nat’l Rural Utils.

       Coop. Fin. Corp. v. Pub. Serv. Comm’n of Ind., 552 N.E.2d 23, 25 (Ind. 1990)).

       Accordingly, we agree with the trial court’s conclusion that: “[t]here is no

       explicit procedural requirement in the VSF calling for the Plaintiffs to first seek

       a determination from the IURC on whether Defendants must apply for a

       franchise at all.” Appellants’ App. Vol. II p. 58. The four cities cannot be

       compelled to exhaust a remedy that does not exist.

[12]   We need not visit the streaming services’ arguments about whether the VSF Act

       creates a private right of action. The trial court correctly found that its

       jurisdiction derived from the IDJA. Indiana Code Section 34-14-1-2 provides:

               Any person interested under a deed, will, written contract, or
               other writings constituting a contract, or whose rights, status, or
               other legal relations are affected by a statute, municipal
               ordinance, contract, or franchise, may have determined any
               question of construction or validity arising under the instrument,
               statute, ordinance, contract, or franchise and obtain a declaration
               of rights, status, or other legal relations thereunder.

       This is precisely the type of relief that the four cities seek: a declaration

       clarifying the applicability of the VSF Act.

[13]   The trial court found that “[a] plain reading of the IDJA clearly contemplates

       that a party should bring a case to determine the extent of a party’s rights under

       a statute in situations where the moving party would be entitled to redress.”

       Appellants’ App Vol. II p. 56 (emphasis in the original). We agree. The four

       cities meet the definition of “person” under Indiana Code Section 34-14-1-13.

       Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023           Page 11 of 12
       Their rights to franchise fees are determined by the VSF Act, and the outcome

       of this case depends on the statutory construction of the VSF Act. Thus, the

       four cities meet the requirements of the IDJA, and the trial court properly

       exercised jurisdiction. See, e.g., Holcomb v. Bray, 187 N.E.3d 1268 (Ind. 2022).

[14]   Finally, the parties devote significant briefing to the question of whether the

       VSF Act applies to them. Mindful of our role as a court of review, and of the

       potentially significant impact on the question represented by H.B. 1454, we

       remand the remainder of this case to the trial court with instructions to vacate

       denials of the motions to dismiss and conduct further proceedings consistent

       with this opinion. See Guzzo v. Town of St. John, 131 N.E.3d 179, 180 (Ind.

       2019) (remanding in light of intervening, retroactively applicable amendment to

       pertinent statute).

[15]   Affirmed in part and remanded in part.

       Vaidik, J., and Tavitas, J., concur.

       Court of Appeals of Indiana | Opinion 22A-PL-1630 | June 13, 2023        Page 12 of 12