The City of Pearland joined 24 other Texas cities Tuesday in filing a lawsuit accusing three popular streaming services of failing to pay millions in municipal franchise fees as far back as 2007.
The suit against Disney DTC LLC, Hulu LLC and Netflix Inc. was filed Tuesday in Dallas County on behalf of the cities 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.
It alleges the streaming services failed to pay annual franchise fees mandated by the Texas Public Utility Regulatory Act. Under this law, a video service provider must pay a Texas municipality a 5% franchise fee if that company’s programming is delivered via wireline facilities located at least in part in the public right of way — such as utility poles over the streets or sidewalks or beneath the roads. These franchise fees help fund city services such as police, fire protection, libraries and road repairs.
“Disney, Hulu and Netflix have long withheld statutorily required payments to cities throughout Texas, depriving them of fees that help fund essential city services,” said McKool Smith principal Steven Wolens, who along with co-counsel is representing the cities.
“This case was filed on behalf of our municipal clients,” he said, “to ensure future compliance with PURA and recoup significant fees owed by some of the nation’s largest streaming services.”
Pearland is among cities now 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.
Dallas-based McKool Smith is co-counsel on the lawsuit, along with Austin-based Ashcroft Sutton Reyes and St. Louis-based Korein Tillery.
Additional cities are expected to join the lawsuit.
