Austin joins million-dollar lawsuit against Disney, Hulu and Netflix

NACOGDOCHES, Texas (KETK) — Austin is among 24 other Texas cities that have filed a lawsuit accusing Disney DTC LLC, Hulu, LLC and Netflix Inc. of failing to pay millions of dollars in municipal franchise fees since 2007.

The lawsuit was filed in Dallas County on behalf of Abilene, Allen, Amarillo, Arlington, Austin, Beaumont, Carrollton, Dallas, Denton, Frisco, Fort Worth, Garland, Grand Prairie, Houston, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Rowlett, Sugar Land, Tyler, and Waco.

The lawsuit alleges that the transmission services have not paid the annual franchise fees required by the Texas Public Utility Regulation Act (PURA) and are used to fund basic city services.

The PURA states that a video service provider must pay a Texas municipality a 5% franchise fee if programming for a video service is delivered “through fixed telephone facilities located at least in part in the right public walk,
as utility poles on streets or sidewalks or under highways.”

According to a release from the City of Nacogdoches, the franchise fee funds city services, including police, fire protection, libraries and road repair.

“Disney, Hulu and Netflix have long withheld legally required payments to Texas cities,
depriving them of fees that help fund essential city services,” said McKool Smith Director Steven
Wolens, who along with co-counsel represents the cities of Texas in this lawsuit. “This case was filed on
on behalf of our municipal customers to ensure future PURA compliance and recover significant fees owed
by some of the largest streaming services in the country.”

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Nacogdoches city officials said the city is seeking reimbursement of annual franchise fees, as well as interest, since Disney, Hulu and Netflix began streaming their platforms in Texas in 2007, 2011 and 2019, respectively.

“With this lawsuit, we hope to ensure the compliance of streaming video companies with their PURE
obligations in the future and also recover unpaid franchise fees from Disney, Hulu and Netflix
streaming services as tracking relief,” said Steven Kirkland, City Attorney for the City of Nacogdoches.
“If the transmission companies refuse to pay these fees, the city has to cut the services or look for alternative sources of transmission.
income. We have an obligation to our residents to ensure that these businesses comply with state law and
pay what is owed to the city.”

McKool Smith, based in Dallas, is co-counsel in the lawsuit with Ashcroft Sutton Reyes, based in Austin, and
Korein Tillery, based in St. Louis. Additional cities are expected to join the lawsuit, according to the statement.

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