After years in court trying - and failing - to overturn the city of Chicago’s so-called “Netflix tax” on streaming entertainment services, Apple has dropped its legal challenge.
On July 21, Cook County Judge Daniel Duffy ordered the case dismissed. The order indicated the dismissal came at the agreement of the two sides.
No court filings to date have included any settlement terms. The dismissal order merely states “it is … agreed that this action be dismissed with prejudice and without costs to either party.”
The order was signed by attorneys for both Apple and the city of Chicago.
Because the case has been dismissed with prejudice, Apple will not be able to attempt to try again to resume its lawsuit in the future.
A spokesperson for the Chicago City Department of Law, which represented the city in the action, declined comment on the apparent settlement, and declined to discuss any possible settlement terms.
Apple filed the lawsuit in 2018, challenging Chicago’s city ordinance imposing a 9% tax “amusement tax” on subscription streaming entertainment services, such as Netflix, Hulu, and Apple, among others.
Apple’s lawsuit followed attempts by others to challenge the tax.
Apple and the other streaming services claimed the city’s tax violates the Internet Tax Freedom Act. Apple also added claims under the Illinois state constitution and the commerce and due process clauses of the U.S. Constitution.
According to an analysis completed by Bloomberg, the city collects as much as $30 million per year from the streaming services amusement tax.
Apple’s complaint was always on difficult legal footing, as it followed a May 2018 Cook County court ruling taking out a different attempted class action on behalf of city residents and consumers, similarly challenging the tax. That ruling was upheld on appeal in 2019 by the Illinois First District Appellate Court.
In those rulings, they said the city is on firm legal footing to tax the streaming services as “amusements,” just as the city does coin-operated machines and live performances.
Apple attempted a different tact, however. Rather than address the constitutionality of the tax itself, Apple’s complaint assailed the way the tax is applied.
“To the extent Apple is intending to mount an ‘as applied’ challenge to the Amusement Tax, the amended complaint is lacking,” Judge Duffy wrote in the March decision. “None of the four counts of the amended complaint is pleaded with remotely sufficient specificity to set out an ‘as applied’ challenge to the constitutionality of the Amusement Tax on any of the grounds cited.”
Judge Duffy’s dismissal at the time was without prejudice, giving Apple another chance to revise its lawsuit to address the perceived legal deficiencies.
Apple, however, appears to have opted to quit the episode, and drop the litigation altogether.
Apple has been represented in the action by attorney Catherine Battin, and others with the firm of McDermott, Will & Emery, of Chicago.