To our friends, clients and colleagues in local and regional government, higher education and the nonprofit sector, welcome to our latest Monday Message from the Public Law Group at McDonald Hopkins. In today’s email, assembled by attorney Kevin Butler, you’ll find insights into areas of law we’re watching on your behalf.

In today’s edition:

• Maple Heights v. Netflix: The latest on a class action attempt to recoup video service payments from online streaming behemoths
• Shoreline erosion problems growing more acute by the day: How special improvement districts can help

Maple Heights v. Netflix: The latest on a class action attempt to recoup video service payments from online streaming behemoths

Content streaming giants Netflix and Hulu are contesting a purported class action lawsuit pending in federal court in Cleveland seeking to compensate municipalities under an Ohio law traditionally applicable to cable providers.

Filed in August 2020 by the City of Maple Heights, the suit alleges that Netflix and Hulu are governed by the same statute, R.C. Chapter 1332, that requires cable providers offering “video service” to pay municipalities a quarterly fee of up to five percent of their gross revenue derived from customers within the municipality.

Netflix and Hulu have filed motions to dismiss, alleging they are not subject to R.C. Chapter 1332’s requirements. They argue that because they create no infrastructure within the public right-of-way – the hallmark of traditional cable providers under old local franchise agreements, which were supplanted by video service authorizations under Chapter 1332 – they are exempt from the statute obligating them to register with the state and pay local fees. In briefs filed last month for Maple Heights, the city counters that the statute plainly obligates any providers of video service to register and pay fees, regardless of whether they construct and operate video service networks within municipalities. Now fully briefed, the motions are ripe for a ruling by the court.

The outcome of the lawsuit has broad implications for municipalities and their residents. Because the Revised Code allows video service providers to pass the fees imposed under Chapter 1332 onto customers, any windfall for local governments will equate to pain felt either by the streaming services or by customers within the municipalities’ borders. If the lawsuit should fail, on the other hand, it will have at least revealed a yawning policy gap in the context of modern TV-watching: many of the vestiges of old cable franchise agreements benefiting municipalities will have been entirely sidestepped by the popular streaming services, proving them to be more nimble than cable giants and unfettered by state regulation and the financial burdens it imposes.

The case is City of Maple Heights, Ohio v. Netflix, Inc., Case No. 1:20-cv-01872 pending in U.S. District Court for the Northern District of Ohio. We’ll continue to follow the case and keep you updated here.

Shoreline erosion problems growing more acute by the day: How special improvement districts can help

The recent headlines portray something dire. In Conneaut, officials scrambled to protect the pump house, which delivers water to the city’s residents, from rising water levels. Last year Geneva-on-the-Lake recorded losing three feet a day to erosion and rising lake levels. In Bay Village, residents recently bid adieu to an iconic cottonwood tree at Huntington Beach, damaged by lightning with contribution from Lake Erie erosion. And in Lakewood, where the cliffs reach upwards of 65 feet, residents are struggling to keep pace with the damage wave action is causing.

Coastal property owners don’t have the luxury of sitting on their hands, and so they’re turning to novel ways to address erosion problems up and down the Lake Erie shoreline. At McDonald Hopkins members of our Public Law team are leading the efforts in Ashtabula, Cuyahoga, Erie, Lake and Lorain Counties to address the issue, counseling clients on how to take advantage of specialized state law that authorizes the creation of special improvement districts and economical financing opportunities for shoreline protection.

Often these efforts are spearheaded by regional and local government on behalf of their constituents. In Lorain County, for example, communities are banding together with the county government to explore the creation of a shoreline special improvement district. In Lakewood, lakefront residents are leading the way with valuable support from City Hall. And in Lake County, 13 communities have already teamed up to formulate a special improvement district for erosion control, the state’s very first, with our assistance.

Read more here on our capabilities in this area, which bring together decades of experience in public law and public finance, and let any one of us know if we can bring the discussion on shoreline protection to your community.

Feel free to contact any member of the McDonald Hopkins Public Law team if you have questions or need assistance on any of the matters we’ve covered above or with your legal needs in general.

Teresa Metcalf Beasley
Chair, Public Law