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`NETFLIX, INC.; HULU, LLC,
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` Plaintiff-Appellant,
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` Defendants-Appellees.
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` No. 21-16560
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`D.C. No.
`3:20-cv-00499-MMD-WGC
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`OPINION
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`FOR PUBLICATION
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`UNITED STATES COURT OF APPEALS
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`FOR THE NINTH CIRCUIT
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`FILED
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`OCT 28 2022
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`MOLLY C. DWYER, CLERK
`U.S. COURT OF APPEALS
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`Appeal from the United States District Court
`for the District of Nevada
`Miranda M. Du, Chief District Judge, Presiding
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`Argued and Submitted September 19, 2022
`San Francisco, California
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`Before: Susan P. Graber, Michelle T. Friedland, and Lucy H. Koh, Circuit Judges.
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`Per Curiam Opinion
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`SUMMARY*
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`Nevada Law / Declaratory Judgment Act
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`The panel affirmed the district court’s dismissal for failure to state a claim of the
`City of Reno’s complaint alleging that Netflix, Inc. and Hulu, LLC failed to pay
`franchise fees for the video streaming services they provide.
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`Reno’s complaint sought damages and declaratory relief under Nevada’s Video
`Service Law (“VSL”) and the federal Declaratory Judgment Act, respectively. The
`panel affirmed the dismissal because the VSL does not provide a private right of
`action and the Declaratory Judgment Act provides an affirmative remedy only when
`a cause of action otherwise existed.
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`Specifically, the panel first addressed the VSL. The VSL does not expressly
`create a private right of action for cities to sue for unpaid franchise fees. The test
`under Nevada law for whether a statute creates an implied right of action is set forth
`in Baldonado v. Wynn Las Vegas, LLC, 194 P.3d 96 (Nev. 2008). The panel held
`that all three Baldonado factors weigh against recognition of an implied right of
`action here. The VSL’s express provisions for enforcement by the Nevada Attorney
`General and the Consumer’s Advocate in the Office of Attorney General strongly
`suggest that the legislative scheme does not include other rights of action. The VSL
`does not clearly confer a special benefit on local governments. Finally, nothing in
`the legislative history suggested an intent to permit a private right of action. The
`panel concluded that under Baldonado, the VSL does not confer a right of action on
`Reno.
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`Concerning the federal Declaratory Judgment Act, the panel held that it does not
`provide a cause of action when a party, such as Reno, lacks a cause of action under
`a separate statute and seeks to use the Act to obtain affirmative relief. Here, Reno’s
`suit was offensive, not defensive, and Reno lacked an independent cause of action,
`so the Declaratory Judgment Act provided no basis for relief.
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`* This summary constitutes no part of the opinion of the court. It has been
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`prepared by court staff for the convenience of the reader.
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`COUNSEL
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`Jason H. Kim (argued), Schneider Wallace Cottrell Konecky LLP, Emeryville,
`California; Leonard Stone, Shook & Stone CHTD, Reno, Nevada; for Plaintiff-
`Appellant.
`Robert C. Collins (argued) and Mary R. Alexander, Latham & Watkins LLP,
`Chicago, Illinois; Gregory G. Garre, Jean A. Pawlow, and Peter E. Davis, Latham &
`Watkins LLP, Washington, D.C.; Michael A. Hale, Latham & Watkins LLP, Los
`Angeles, California; Rew R. Goodenow, Parsons Behle & Latimer, Reno Nevada;
`for Defendant-Appellee Netflix, INC.
`Victor Jih (argued) and Russell L. Kostelak, Wilson Sonsini Goodrich & Rosati, Los
`Angeles, California; Eric T. Kohan, Wilson Sonsini Goodrich & Rosati, Palo Alto,
`California; John K. Gallagher and Patrick H. Gallagher, Guild Gallagher & Fuller
`Ltd., Reno, Nevada; Praatika Prasad, Wilson Sonsini Goodrich & Rosati, New York,
`New York; for Defendant-Appellee HULU, LLC.
`Steven M. Berezney and Garrett R. Broshuis, Korein Tillery LLC, St. Louis,
`Missouri; for Amici Curiae, City of Creve Coeur, Gwinnett County, City of
`Brookhaven, and Unified Government of Athens-Clarke County.
`John P. Jett, Ava J. Conger, and K. Bradford Sears, Kilpatrick Townsend & Stockton
`LLP, Atlanta, Georgia; Adam H. Charnes, Kilpatrick Townsend & Stockton LLP,
`Dallas, Texas; for Amicus Curiae DIRECTV, LLC.
`Jared R. Butcher, Crosscastle PLLC, Washington, D.C.; Pantelis Michalopoulos and
`Matthew R. Friedman, Steptoe & Johnson LLP, Washington, D.C.; for Amici Curiae
`Dish Network LLC and Sling TV LLC.
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`PER CURIAM:
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`Plaintiff City of Reno appeals the dismissal for failure to state a claim of its
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`complaint alleging that Defendants Netflix, Inc. and Hulu, LLC failed to pay
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`franchise fees for the video streaming services they provide. Reno’s complaint
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`seeks damages and declaratory relief under Nevada’s Video Service Law (“VSL”),
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`Nev. Rev. Stat. § 711.020 et seq., and the federal Declaratory Judgment Act, 28
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`U.S.C. § 2201, respectively. Because the VSL does not provide a private right of
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`action and the Declaratory Judgment Act provides an affirmative remedy only
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`when a cause of action otherwise exists, we affirm.
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`I.
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`A.
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`Historically, cable operators have paid franchise fees to state and local
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`governments in exchange for the use of public rights-of-way. Comcast of
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`Sacramento I, LLC v. Sacramento Metro. Cable Television Comm’n, 923 F.3d
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`1163, 1165 (9th Cir. 2019). Before 2007, each local government in Nevada “ha[d]
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`the authority to grant local franchises for the operation of a community antenna or
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`cable television system within its jurisdiction.” J. Assemb. Nev., 74th Sess., at
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`1711 (Nev., Apr. 20, 2007). In 2007, however, the Nevada legislature passed the
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`VSL, “repeal[ing] the existing statutory scheme of regulating video service through
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`2
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`local franchises and replac[ing] it with a statutory scheme . . . intended to promote
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`more competition in the market for such service.” Id.
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`The VSL requires each “video service provider” to “obtain[] a certificate of
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`authority” from the Secretary of State. Nev. Rev. Stat. § 711.470. A certificate of
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`authority “is a state-issued franchise granting the holder of the certificate with the
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`authority to . . . [p]rovide video service in each service area designated in the
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`application and affidavit filed with the Secretary of State.” Nev. Rev. Stat.
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`§ 711.510(2). Although the VSL preempts most local regulation of the provision
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`of video service, Nev. Rev. Stat. § 711.400, it allows local governments to
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`“manage the use of any public right-of-way or highway by video service
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`providers,” including “[i]nspect[ing] the construction, installation, maintenance or
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`repair work performed on such facilities,” Nev. Rev. Stat. § 711.640(2), (3)(b), and
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`it permits them to impose franchise fees that do not exceed five percent of a video
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`service provider’s gross annual revenue from subscribers within the local
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`government’s jurisdiction, Nev. Rev. Stat. § 711.670(3).
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`Under the VSL, “[a]ny action to recover a disputed underpayment of a
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`franchise fee from a video service provider must be commenced and prosecuted by
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`the Attorney General on behalf of the affected local governments.” Nev. Rev. Stat.
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`§ 711.680(4). In addition, “[a] video service provider or a local government may
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`file with the Bureau of Consumer Protection [in the Office of the Attorney
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`3
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`General] a written complaint alleging a violation of” the VSL; upon filing of such
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`a complaint, “the Consumer’s Advocate [of the Bureau of Consumer Protection]
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`may commence in a district court an action to enforce the provisions of [the VSL]
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`and to seek equitable or declaratory relief.” Nev. Rev. Stat. § 711.850(1), (2).
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`B.
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`Reno filed a complaint in the United States District Court for the District of
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`Nevada against Netflix and Hulu1 seeking to represent a class of “[a]ll Nevada
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`cities and counties in which one or more of the Defendants has provided video
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`service.” Reno alleged that Netflix and Hulu “provide video service, and are video
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`service providers” under the VSL, and that they therefore must pay franchise fees.
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`For Netflix’s and Hulu’s alleged failures to pay franchise fees, Reno sought
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`damages in an amount to be determined at trial. Reno further sought a declaration
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`from the court under the Declaratory Judgment Act that Netflix and Hulu are
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`covered by the VSL and were required to receive certificates of authority and pay
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`franchise fees to Reno and all other class members.
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`Netflix and Hulu each filed a motion to dismiss pursuant to Rule 12(b)(6).
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`The district court granted both motions, holding that Defendants do not provide
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`“video services” as defined in the statute. Accordingly, the court held that
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`1 Neither Netflix nor Hulu is a citizen of Nevada, and Reno sought more
`than $75,000, so the district court had diversity jurisdiction. 28 U.S.C. § 1332.
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`4
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`Defendants are not subject to the franchise fee requirement. The court held, in the
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`alternative, that the complaint failed because Reno lacked a private right of action
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`under the VSL.2 Reno timely appealed.
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`II.
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`We review de novo an order granting a motion to dismiss for failure to state
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`a claim. Palm v. L.A. Dep’t of Water & Power, 889 F.3d 1081, 1085 (9th Cir.
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`2018). In interpreting state law, “we are bound to follow the decisions of the
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`state’s highest court.” Paulson v. City of San Diego, 294 F.3d 1124, 1128 (9th Cir.
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`2002) (en banc).
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`III.
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`We need not address the parties’ dispute over the meaning of “video service
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`provider” under the VSL because it is clear that Reno lacks a cause of action under
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`both the VSL and the Declaratory Judgment Act.
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`2 Because Reno did not defend against dismissal on the basis that the
`Declaratory Judgment Act provides an independent right of action, the district
`court did not address that argument. Although we “generally will not consider
`arguments raised for the first time on appeal,” we “have discretion to do so.” AMA
`Multimedia, LLC v. Wanat, 970 F.3d 1201, 1213 (9th Cir. 2020) (quotation marks
`omitted). We have exercised such discretion when “the issue presented is a pure
`question of law and the opposing party will suffer no prejudice as a result of the
`failure to raise the issue in the trial court.” Id. at 1214 (quotation marks omitted).
`Whether the Declaratory Judgment Act provides an independent right of action is a
`pure question of law, and because we ultimately affirm the district court’s
`judgment in Netflix’s and Hulu’s favor, there is no risk that they will suffer
`prejudice. We therefore exercise our discretion to forgive Reno’s forfeiture of this
`issue.
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`5
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`A.
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`As Reno acknowledges, the VSL does not expressly create a private right of
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`action for cities to sue for unpaid franchise fees. The test under Nevada law for
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`whether a statute creates an implied right of action is set forth in Baldonado v.
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`Wynn Las Vegas, LLC, 194 P.3d 96 (Nev. 2008). As the Nevada Supreme Court
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`explained, in the absence of clear statutory text, Nevada courts “examine the entire
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`statutory scheme, reason, and public policy” to determine the Legislature’s intent,
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`considering the following factors: “(1) whether the plaintiffs are of the class for
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`whose [special] benefit the statute was enacted; (2) whether the legislative history
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`indicates any intention to create or to deny a private remedy; and (3) whether
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`implying such a remedy is consistent with the underlying purposes of the
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`legislative [sch]eme.” Id. at 101 (quotation marks omitted) (second alteration in
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`original).
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`The third Baldonado factor weighs strongly against implying a private right
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`of action. The VSL’s express provisions for enforcement by the Nevada Attorney
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`General and the Consumer’s Advocate in the Office of the Attorney General, Nev.
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`Rev. Stat. §§ 711.680(4), 711.850, strongly suggest that the legislative scheme
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`does not include other rights of action. See Harvey v. Nevada, 473 P.3d 1015,
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`1019 (Nev. 2020) (observing that Nevada courts follow the maxim in interpreting
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`statutes that “the expression of one thing is the exclusion of another” (quotation
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`6
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`marks omitted)). In vesting enforcement of the VSL in state agencies, the
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`Legislature seems to have deprived local governments of enforcement powers
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`intentionally. The Nevada Supreme Court reasoned similarly in Baldonado when
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`holding that there was no implied right of action because the statutory scheme
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`contemplated enforcement of the provisions at issue by an administrative official
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`and created an adequate administrative remedy. 194 P.3d at 102.
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`The first two factors likewise weigh against the recognition of an implied
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`right of action here. The VSL does not clearly confer a special benefit on local
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`governments. The right to collect franchise fees predated the VSL, so it is not
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`clear that the Legislature “intended to confer a right on [local governments] as a
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`class.” Id. at 101 n.12. Finally, nothing in the legislative history suggests an intent
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`to permit a private right of action. To the extent that the legislative history is
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`informative, it confirms that the Legislature intended to “limit[] the regulatory
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`powers of local governments regarding video service providers.” J. Assemb. Nev.,
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`74th Sess., at 1711 (Nev., Apr. 20, 2007).
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`Under Baldonado, the VSL does not confer a right of action on Reno.
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`B.
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`The Declaratory Judgment Act does not provide a cause of action when a
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`party, such as Reno, lacks a cause of action under a separate statute and seeks to
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`use the Act to obtain affirmative relief. The availability of relief under the
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`7
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`Declaratory Judgment Act “presupposes the existence of a judicially remediable
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`right.” Schilling v. Rogers, 363 U.S. 666, 677 (1960); see also Republic of
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`Marshall Islands v. United States, 865 F.3d 1187, 1199 n.10 (9th Cir. 2017). We
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`agree with our sister circuits that have considered the issue that the Declaratory
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`Judgment Act does not provide an affirmative cause of action where none
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`otherwise exists. See Chevron Corp. v. Naranjo, 667 F.3d 232, 244–45 (2d Cir.
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`2012) (“[T]he DJA . . . does not create an independent cause of action.” (quotation
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`marks omitted)); Malhan v. Sec. U.S. Dep’t of State, 938 F.3d 453, 457 n.3 (3d Cir.
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`2019) (“[T]he Declaratory Judgment Act is procedural only and presupposes the
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`existence of a judicially remediable right. It creates a remedy, not rights.”
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`(quotation marks and citations omitted)); Okpalobi v. Foster, 244 F.3d 405, 423
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`n.31 (5th Cir. 2001) (en banc) (“[T]he law makes clear that—although the
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`Declaratory Judgment Act provides a remedy different from an injunction—it does
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`not provide an additional cause of action with respect to the underlying claim.”);
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`Ali v. Rumsfeld, 649 F.3d 762, 778 (D.C. Cir. 2011) (“[T]he plaintiffs have not
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`alleged a cognizable cause of action and therefore have no basis upon which to
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`seek declaratory relief. Nor does the Declaratory Judgment Act . . . provide a
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`cause of action.”); see also Davis v. United States, 499 F.3d 590, 594 (6th Cir.
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`2007) (“[Section] 2201 does not create an independent cause of action.”); Hanson
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`v. Wyatt, 552 F.3d 1148, 1157 (10th Cir. 2008) (declining to recognize a private
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`8
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`right of action under the Declaratory Judgment Act).
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`A plaintiff’s inability to rely on the Declaratory Judgment Act to obtain
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`affirmative relief where no cause of action otherwise exists contrasts with the well-
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`established availability of the Act for defensive use against anticipated claims. See
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`Peterson v. Highland Music, Inc., 140 F.3d 1313, 1322 (9th Cir. 1998) (observing
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`that, “[f]requently, the point of a declaratory action is to assert a defense
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`anticipatorily”). A potential defendant may preempt a suit by a potential
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`plaintiff―the latter of whom could sue pursuant to an independent cause of
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`action―and seek a declaration that the potential plaintiff’s claim would fail. For
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`example, a potential defendant in a patent infringement suit may proactively seek a
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`declaratory judgment of non-infringement before the potential plaintiff asserts a
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`cause of action under 35 U.S.C. § 281, which grants a patentee a remedy for patent
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`infringement. See, e.g., Medtronic, Inc. v. Mirowski Fam. Ventures, LLC, 571 U.S.
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`191, 197–98 (2014). In such a lawsuit, “the operation of the Declaratory Judgment
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`Act [is] only procedural, leaving substantive rights unchanged.” Id. at 199
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`(quotation marks and citations omitted). The potential defendant in effect borrows
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`the underlying cause of action that would be available to the potential plaintiff.
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`See Shell Gulf of Mexico Inc. v. Ctr. for Biological Diversity, Inc., 771 F.3d 632,
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`636 (9th Cir. 2014) (explaining that, in evaluating a “request for declaratory relief,
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`courts examine both the persons who can assert rights under that law and those
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`9
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`who have obligations under it,” and noting that “it is the underlying cause of action
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`of the defendant against the plaintiff that is actually litigated”) (citing Collin Cnty.,
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`Tex. v. Homeowners Ass’n for Values Essential to Neighborhoods, 915 F.2d 167,
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`171 (5th Cir. 1990)).
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`Here, Reno’s suit is offensive, not defensive, and Reno lacks an independent
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`cause of action, so the Declaratory Judgment Act provides no basis for relief.
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`AFFIRMED.
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`10
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