Case 3:21-cv-00807-MAB Document 46 Filed 08/16/21 Page 1 of 10 Page ID #125
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF ILLINOIS
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`VILLAGE OF SHILOH,
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`Plaintiff,
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`vs.
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`NETFLIX, INC., et al.
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`Defendants.
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`Case No. 3:21-CV-00807-MAB
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`PLAINTIFF VILLAGE OF SHILOH’S MEMORANDUM IN SUPPORT OF
`MOTION TO REMAND
`Plaintiff Village of Shiloh respectfully moves this Court to remand the above case to the
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`Circuit Court of St. Clair County. City of Fishers, Indiana v. DIRECTV, No. 20-3478, 2021 WL
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`3073368 (7th Cir. July 21, 2021) clearly directs that under the Levin comity abstention doctrine
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`for state tax-related matters, this type of case should be resolved by a state court. See Levin v.
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`Commerce Energy Inc. 560 U.S. 413 (2010). The state law claims in this suit are closely
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`comparable to the claims in City of Fishers that the Seventh Circuit determined federal courts
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`should abstain from hearing. It is a novel question of state tax law – whether video streaming
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`services are liable for the same fee that video cable companies now pay under state law. It is a
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`claim that Illinois state courts have not resolved and a federal court is not competent to decide. As
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`the Seventh Circuit stated in City of Fishers:
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`“Regardless of who brought the underlying suit, the district court’s resolution of the merits
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`issues will risk or result in federal court interference with the fiscal affairs of local
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`government – the principal concern of Levin”.
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`Id at *12 (emphasis supplied)
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`Defendants’ various attempts to distinguish City of Fishers should be dismissed out of
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`hand. Defendants’ arguments, set forth in their response (Dkt. 40) to this Court’s order to show
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`Case 3:21-cv-00807-MAB Document 46 Filed 08/16/21 Page 2 of 10 Page ID #126
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`cause why this matter should not be remanded (Dkt. 34), hinge entirely on the fact that East St.
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`Louis filed a similar but not identical lawsuit in this District against some of the Defendants to this
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`case five days before Village of Shiloh filed its case in state court. Defendants claim that the East
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`St. Louis case “triggers the duty to avoid duplicative litigation” under the first-to-file rule. But all
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`the cases cited by Defendants refer to multiple original filings in federal court. Whether East St
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`Louis filed “first” in a federal case just a few days before plaintiff Shiloh filed a state case has
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`nothing to do with the applicable abstention principle here, which is based on the necessary
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`avoidance of interference in state fiscal affairs.
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`The Seventh Circuit’s decision in City of Fishers is controlling, regardless of the East St.
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`Louis case. For all the reasons set forth in City of Fishers and the reasons discussed herein, this
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`Court should remand the instant case to the Circuit Court of St. Clair County.
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`FACTUAL AND PROCEDURAL BACKGROUND
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`A.
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`The Village of Shiloh’s claims under the Cable and Video Competition Law of 2007.
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`On June 14, 2021, the Village of Shiloh filed this putative class action against Netflix, Inc.,
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`DirectTV, LLC, Dish Network Corp., Dish Network, LLC, Hulu, LLC, and Disney DTC, LLC,
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`(collectively, “Defendant”) in the Circuit Court of St. Clair County, Illinois. The Village of Shiloh
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`seeks declaratory and injunctive relief and damages relating to Defendants failure to pay franchise
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`fees under Illinois’s Cable and Video Competition Law of 2007, 220 ILCS 5/21-100, et seq., on
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`behalf of a putative class of all local units of government in which Defendants provide video
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`service.
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`The Cable and Video Competition Law of 2007 authorizes Illinois political subdivisions
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`and municipalities to collect franchise fees from any provider of “video service” doing business
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`within their boundaries. 220 ILCS 5/21-801. “‘Video service’ means video programming and
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`Case 3:21-cv-00807-MAB Document 46 Filed 08/16/21 Page 3 of 10 Page ID #127
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`subscriber interaction, if any, that is required for the selection or use of such video programming
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`services, and that is provided through wireline facilities located at least in part in the public rights-
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`of-way without regard to delivery technology, including Internet protocol technology.” 220 ILCS
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`5/21-201(v). “Video programming”, in turn, means “that term as defined in item (20) of 47 U.S.C.
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`522”, which defines the term as “programming provided by, or generally considered comparable
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`to programming provided by, a television broadcast station”. 220 ILCS 5/21-201(v). “‘Video
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`service’ . . . does not include any video programming provided by a commercial mobile service
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`provider defined in subsection (d) of 47 U.S.C. 332 or any video programming provided solely as
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`part of, and via, service that enables users to access content, information, electronic mail, or other
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`services offered over the public Internet.” 220 ILCS 5/21-201(v).
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`The Village of Shiloh alleges that Defendants provide video service within the meaning of
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`220 ILCS 5/20l(v), and do not qualify for the exemption for "video programming provided solely
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`as part of, and via, service that enables users to access content, information, electronic mail, or
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`other services offered over the public Internet." Nonetheless, Defendants have failed to pay
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`franchise fees as required by law. In its complaint, the Village of Shiloh requests a declaration
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`that Defendants provide video service within the meaning of 220 ILCS 5/201(v); a declaration that
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`Defendants have failed to comply with their obligations to register with the Illinois Commerce
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`Commission as a provider of video services and pay the fees required by 220 ILCL 5/21-801; an
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`accounting; and damages.
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`B.
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`Prior relevant rulings.
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`Notably, this is not the first lawsuit of its kind that Defendants have attempted to remove
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`to federal court. In 2018, the City of Creve Coeur, Missouri filed cases against Defendants (with
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`the exception of Disney DTC, LLC) in Missouri state court based on Defendants’ failure to pay
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`fees under Missouri’s version of the Cable and Video Competition Law of 2007. City of Creve
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`Coeur v. DIRECTV, LLC, No. 4:18cv1453, 2019 WL 3604631 (E.D. Mo. Aug. 6, 2019).
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`Defendants removed both cases to federal court. The federal court remanded under comity
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`abstention, and the Eighth Circuit denied immediate review. City of Creve Coeur v. DirecTV,
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`LLC, No. 19-8016, 2019 WL 7945996 (8th Cir. Sept. 12, 2019).
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`Likewise, in August 2020, four cities in Indiana filed a case against Defendants in Indiana
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`state court based on Defendants’ failure to pay franchise fees to Indiana municipalities under
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`Indiana’s version of the Cable and Video Competition Law of 2007. Again, Defendants removed
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`to federal court, and the district court remanded based on the doctrine of comity abstention. City
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`of Fishers v. Netflix, Inc., 501 F. Supp. 3d 653, 2020 WL 6778426 (S.D. Ind. Nov. 18, 2020). The
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`Seventh Circuit affirmed. City of Fishers v. DIRECTV, --- F.4th ---, 2021 WL 3073368 (7th Cir.
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`July 21, 2021).
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`Most recently, cities in Georgia filed a case against Defendants in Georgia state court based
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`on Defendants failure to pay franchise fees to Georgia municipalities under Georgia’s version of
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`the Cable and Video Competition Law of 2007. Again, Defendants removed the action to federal
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`court, and the district court remanded based on the doctrine of comity abstention. Gwinnett Cty.
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`v. Netflix, Inc., No. 1:21-CV-21-MLB, 2021 WL 3418083 (N.D. Ga. Aug. 5, 2021).
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`STANDARD OF REVIEW
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`As the parties invoking federal jurisdiction, Defendants bear the burden of proving that
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`removal was proper. Dancel v. Groupon, Inc., 940 F.3d 381, 385 (7th Cir. 2019). Defendants must
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`show by a preponderance of the evidence that all the prerequisites for removal have been met.
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`Carroll v. Stryker Corp., 658 F.3d 675, 680 (7th Cir. 2011). “[D]oubts regarding removal are
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`Case 3:21-cv-00807-MAB Document 46 Filed 08/16/21 Page 5 of 10 Page ID #129
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`resolved in favor of the plaintiff’s choice of forum in state court.” Morris v. Nuzzo, 718 F.3d 660,
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`668 (7th Cir. 2013).
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`The Supreme Court has “repeatedly cautioned” that statutes conferring federal jurisdiction
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`“should be read with sensitivity to ‘federal-state relations’ and ‘wise judicial administration.’”
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`Levin, 560 U.S. at 423. This admonition applies with equal force to CAFA, which is “such a
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`jurisdictional statute.” Saskatchewan Mut. Ins. Co. v. CE Design, Ltd., 865 F.3d 537, 542 (7th Cir.
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`2017).
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`ARGUMENT
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`With the Supreme Court’s caution in mind, even if Defendants have otherwise established
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`the prerequisites of federal court jurisdiction, the doctrine of comity abstention is still controlling.
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`This case presents significant questions of first impression concerning the proper interpretation of
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`Illinois statutes governing the ability of Illinois municipalities to collect revenues from Defendants.
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`Those questions should be decided by Illinois state courts.
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`A.
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`The Seventh Circuit’s decision is City of Fishers calls for abstention.
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`The Seventh Circuit’s decision in City of Fischers is exactly on point. The Plaintiffs in
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`City of Fishers were a group of Indiana cities that sought a declaration in Indiana state court that
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`Defendants owed them franchise fees under the Indiana Video Service Franchise Act of 2006. City
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`of Fishers, 2021 WL 3073368, at *1. After Defendants removed the case to federal court, the
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`district court remanded the case back to state court based on the doctrine of comity abstention. Id.
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`at * 2.
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`On appeal from the district court’s remand order, the Seventh Circuit concluded that the
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`Levin comity abstention analysis applied. Id. at *5 (stating that the Court was “Confident that this
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`case calls for a Levin abstention analysis). At the outset, the Seventh Circuit specifically rejected
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`Defendants’ argument that abstention is inapplicable to cases involving franchise fees, as opposed
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`to taxes, explaining that the comity doctrine is implicated when the state’s collection of revenue is
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`challenged, regardless of whether that revenue takes the form of fees or taxes. Id. at *4 (stating
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`that “we can dispatch this distinction without much difficulty”). Likewise, the Court quickly
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`dismissed Defendants’ argument that comity abstention is inapplicable to suits initiated by state or
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`local governments, explaining that “Regardless of who brought the underlying suit, the district
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`court’s resolution of the merits issues will risk or result in federal court interference with the fiscal
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`affairs of local government—the principal concern of Levin.” Id.
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`Next, the Seventh Circuit considered the Levin factors and concluded that all three weighed
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`in favor of abstention. As to the first, the Court found that “the State of Indiana and its municipal
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`governments exercise broad authority over utility and right-of-way regulation within the State”
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`and that by asking a federal court to interpret Indiana’s Video Service Franchise Act, the
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`Defendants sought “to inject a federal court into matters affecting local revenue over which the
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`State of Indiana and its municipalities enjoy wide regulatory latitude.” Id. at *5. As for the second
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`factor, the Court concluded that Defendants sought to improve their competitive position, since a
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`victory for the plaintiffs would compel Defendants to begin paying the same franchise fees that
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`are paid by cable companies. Id. Finally, regarding the third factor, the Court concluded that
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`Indiana’s state courts were well positioned to interpret for the first time the state’s Video Service
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`Franchise Act, as well as any federal defenses raised by Defendants along the way. Id. at 14 (citing
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`Burt v. Titlow, 571 U.S. 12, 19 (2013) (highlighting “a foundational principle of our federal
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`system: State courts are adequate forums for the vindication of federal rights”). Id. at *6.
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`Accordingly, the Seventh Circuit “agree[d] with the district court that all signs point to the need
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`for comity-based abstention” and affirmed the district’s order remanding the case to Indiana state
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`court. Id.
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`The same analysis applies here. The primary issue in this case is the interpretation of
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`Illinois’ Cable and Video Competition Law of 2007, 220 ILCS 5/21-100, et seq., which has never
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`interpreted by an Illinois appellate court. Pursuant to that law, and like the Missouri, Georgia, and
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`Indiana actions, this case seeks to require Defendants to pay a small percentage of their earnings
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`to local units of government in which they do business. By removing this case, Defendants seek
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`to inject a federal court into matters affecting local revenue over which the State of Illinois and its
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`municipalities enjoy wide regulatory latitude. And they seek to do so in order to improve their
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`competitive position, since a victory for the plaintiffs would compel Defendants to begin paying
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`the same franchise fees that are paid by cable companies. Thus, every Levin factor weighs in favor
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`of abstention.
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`In sum, the Seventh Circuit in City of Fischers was as clear as a bell that under the Levin
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`comity abstention doctrine for state tax related matters, this exact case belongs in state court. Here,
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`just as in City of Fischer, “all signs point to the need for comity-based abstention”. Id.
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`B.
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`Defendants’ attempts to distinguish City of Fishers are without merit.
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`Defendants’ joint response to this Court’s order to show cause why this matter should not
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`be remanded pursuant to City of Fishers fails to identify any distinguishing feature of this case.
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`Defendants purport to identify multiple reasons why this case should be treated differently, but all
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`of their arguments hinge entirely on the fact that East St. Louis filed a similar but not identical
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`lawsuit in this District against some of the Defendants to this case five days before Village of
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`Shiloh filed its case in state court.
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`Defendants primarily argue that the East St. Louis case “triggers the duty to avoid
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`duplicative litigation” under the first-to-file rule. But that rule applies only to cases simultaneously
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`litigated in two federal courts. Ironshore Indem., Inc. v. Synergy L. Grp., LLC, 926 F. Supp. 2d
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`1005, 1009 (N.D. Ill. 2013); AmSouth Bank v. Dale, 386 F.3d 763, 791 (6th Cir. 2004). The first-
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`to-file rule has never been invoked when there are separate filings in state and federal court. See
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`generally Morris v. Gulfport Energy Corp., No. 2:15-CV-1342, 2015 WL 4365498, at *6 (S.D.
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`Ohio July 16, 2015) (characterizing the argument that first-to-file rule required federal court to not
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`remand case removed from state court where similar lawsuit was filed first in federal court as
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`“attempting to fit a square peg into a round hole”). Whether East St Louis filed “first” in a federal
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`case just a few days before plaintiff Shiloh filed a state case has nothing to do with the purpose of
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`abstention – to avoid interference in state fiscal affairs. City of Fishers directs abstention
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`regardless of who filed or when.
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`Defendants’ judicial efficiency argument is without merit as well. There is no efficiency
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`in having a federal court decide what a federal court is not competent to decide. That is the
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`teaching of City of Fishers, citing Levin and singling out questions of state tax law. Furthermore,
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`under practice of this Circuit, it is near inevitable that a state court – indeed, the Illinois Supreme
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`Court – would end up resolving the issue anyway in the form of an advisory opinion. See Craig
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`v. FedEx Ground Package Sys. 686 F.3d 423 (7th Cir. 2012); Chicago Teachers Union, Local 1
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`AFT v. Board of Education of the City of Chicago, 662 F.3d 761 (7th Cir. 2011). In these and other
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`cases, the Seventh Circuit has “certified” the legal question under state law to the Illinois Supreme
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`Court to decide – so that a case litigated up to the federal appellate level then is sent over for
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`litigation by the Illinois or other state supreme court. As the Seventh Circuit has held, certification
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`is the practice when the state court has not considered the issue and there would be no opportunity
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`for a state court to correct an erroneous decision. Id. at 429. It is hard to imagine a greater waste
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`of federal judicial resources than to litigate a state law claim that in the end is sent to the state
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`supreme court to decide. Of course that would have to occur here – for the plaintiff East St. Louis
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`is seeking a class action judgment that would bind every local unit of government in the state –
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`and would be impossible for a state court to correct if the federal court with no state law guidance
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`decided the issue the wrong way.
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`Thus, Defendants’ attempts to distinguish this case from City of Fishers are without merit.
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`CONCLUSION
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`For the foregoing reasons, Plaintiff Village of Shiloh respectfully moves this Court to
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`remand the above case to the Circuit Court of St. Clair County.
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`/s/ Thomas H. Geoghegan
`By:
`One of Plaintiff’s Attorneys
`Thomas H. Geoghegan
`Michael P. Persoon
`Will Bloom
`Despres, Schwartz & Geoghegan, Ltd.
`77 West Washington Street, Suite 711
`Chicago, Illinois 60602
`(312) 372-2511
`tgeoghegan@dsgchicago.com
`mpersoon@dsgchicago.com
`wbloom@dsgchicago.com
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`Case 3:21-cv-00807-MAB Document 46 Filed 08/16/21 Page 10 of 10 Page ID #134
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`CERTIFICATE OF SERVICE
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`I hereby certify that on August 16, 2021, a true and correct copy of the foregoing was
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`filed electronically. Service of this filing will be made on all ECF-registered counsel by
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`operation of the Court’s electronic filing system.
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`/s/ Thomas H. Geoghegan
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