Houston has joined 24 other Texas cities in suing streaming service giants Netflix, Hulu and Disney+ for failing to pay millions of dollars in municipal franchise fees — which are used to fund basic city services — dating as far back as 2007.
A lawsuit filed Thursday in Dallas County alleges that the streaming giants have not paid annual franchise fees required by the Texas Public Utility Regulatory Act of 2005 (PURA) which says municipalities can collect a 5 percent franchise fee from a video service provider if its programming is delivered over wireline facilities located entirely or at least partially in the public right of way.
The streaming service giants are receiving revenue from Texas customers, but have not obtained state-issued certificates of franchise authorities from the Texas Public Utility Commission that PURA requires, the lawsuit said.
"Under Texas law, these companies are technically video service providers, and even if they say they aren't, they're using public property without paying for it, so they're trespassing," Steve Wolens, McKool Smith principal and co-counsel on the case, told the Dallas Morning News. In addition to Dallas-based McKool Smith, co-counseling firms on the case include Austin-based Ashcroft Sutton Reyes LLC and St. Louis-based Korein Tillery.
Texas cities currently listed in the filing are: Abilene, Allen, Amarillo, Arlington, Austin, Beaumont, Carrollton, Dallas, Denton, Frisco, Fort Worth, Garland, Grand Prairie, Houston, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Sugar Land, Tyler and Waco.
The cities are seeking reimbursement of annual franchise fees, as well as interest from Disney+, Hulu and Netflix dating back to the time each began streaming services in the Lone Star State.
"Disney, Hulu and Netflix have long withheld statutorily require payments to cities throughout Texas, depriving them of fees that help fund essential city services," Wolen said in a news release. "This case was filed on behalf of our municipal clients to ensure future compliance with PURA and recoup significant fees owed by some of the nation's largest streaming services."
Attempts to reach Hulu, Netflix and Disney+ for comment were not immediately returned Friday morning.
Netflix has previously been the subject of legal action brought about by a Texas grand jury. In September, 2021 a grand jury in Tyler County indicted the streaming giant over its release of "Cuties," a French film about an 11-year-old Senegalese girl who joins a twerking dance team. The indictment stated that Netflix knowingly promoted "visual material which depicts the lewd exhibition of the genitals or pubic area of a clothed or partially clothed child who was younger than 18 years of age at the time the visual material was created."
The indictment was thrown out in March, according to a KLTV report, after a motion to dismiss the case was submitted by Tyler County District Attorney Lucas Babin, one of the key figures in initiating the case.
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