22-350ORDINANCENO. 22-350
AN ORDrNANCE OF THE CITY OF DENTON, A TEXAS HOME-RULE MUNICIPALCORPORATION, AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTINGENTFEE AGREEMENT WITH MCKOOL SMITH, P.C., ASHCROFT SUTTON REYES, LLC, ANDKOREIN TILLERY, LLC. FOR LITIGATION AGAINST VIDEO SERVICE PROVIDERS FORNON-PAYMENT OF FRANCHISE FEES AS SET FORTH IN THE AGREEMENT; ANDPROVIDING AN EFFECTIVE DATE.
WHEREAS, the City intends to pursue claims for monetary damages, declaratory relief,
and other legal remedies (“Damages”) against Netflix, Inc., Hulu LLC, Disney DTC LLC, and
other video service providers (“VSPs”) as determined for non-payment of franchise fees as
required in the Texas Video Service Providers Act, Texas Utilities Code Sec. 66 (the “Litigation”);and
WHEREAS, the City’s desired outcome in the Litigation is to recover from the VSPs
Damages owed to the City for failure to pay franchise fees and obtain an order requiring the VSPs
to pay the franchise fees going forward, in addition to other relief allowed under the law; and
WHEREAS, the VSPs deliver video programming to their customers via broadband
internet through wireline facilities located at least partially in the public right of way; and
WHEREAS, the VSPs do not pay franchise fees to the City as required in section 66.005of the Texas Utilities Code; and
WHEREAS, the City has a substantial need of the legal services of counsel to represent
it in the Litigation; and
WHEREAS, the City requires legal counsel that specialize in complex litigation and are
highly knowledgeable and experienced in the legal issues surrounding the non-payment of
franchise fees by the VSPs; and
WHEREAS, the City now desires to enter into a contingent fee contract (“Contract”) for
legal services with McKool Smith, P.C., Ashcroft Sutton Reyes LLC, and Korein Tillery LLC
(“Counselors”) to represent the City in the Litigation; and
WHEREAS, Subchapter C of Chapter 2254 of the Texas Government Code (“Chapter
2254”) requires that a political subdivision of the State of Texas, including the City, may enter into
a contingent fee contract for legal services only after: (i) the governing body of the political
subdivision has provided written notice to the public stating certain provisions enumerated within
Chapter 2254; (ii) the governing body of the political subdivision approved such contract in an
open meeting called, in part or in whole, for the purposes of considering such contract; and (iii)
the governing body of the political subdivision stated in writing certain findings made by the
governing body upon the approval of such contract; and
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WHEREAS, before the contingent fee contract for legal services is effective and
enforceable, the City must receive approval of the Contract by the Office of the Attorney General
of Texas or the Contract is otherwise allowed under Tex. Gov’t Code §2254, as amended; and
WHEREAS, the City has caused notice of this ordinance, this meeting, and certain
provisions enumerated within Chapter 2254 to be provided to the public in accordance with the
Texas Open Meetings Act and Chapter 2254; and
WHEREAS, the meeting at which this ordinance is being considered is an open meeting
called, in part or in whole, for the purpose of considering: (i) the City’s need for legal counsel to
represent it in the Litigation; (ii) terms of the Contract; (iii) the competence, qualifications, and
experience of the Counselors; and (iv) the reasons that the Contract is in the best interest of the
City and complies with Chapter 2254; and
WHEREAS, the City Council hereby finds and determines that the adoption of thisordinance is in the best interests of the residents of the City; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1. The recitals contained in the preamble hereof are hereby found to be true,
and such recitals are hereby made a part of this ordinance for all purposes and are adopted as a part
of the judgment and findings of the City Council.
SECTION 2. The City Council hereby finds that: (i) there is a substantial need for the
legal services to be provided in the Litigation; (ii) the legal services to be provided in the Litigation
cannot adequately be performed by the attorneys and supporting personnel currently employed by
the City; (iii) the legal services to be provided in the Litigation cannot reasonably be obtained from
attorneys in private practice under a contract providing only for the payment of hourly fees, without
regard to the outcome of the matter, because of the nature of the Litigation and without imposing
an unnecessary cost and burden on the City’s finances; and (iv) the relationship between the City
or the City Council and the Counselors is not improper and would not appear improper to a
reasonable person.
SECTION 3. Based on the findings by the City Council described above, the City Council
hereby authorizes the City Manager to execute a legal services contract with McKool Smith, P.C.,Ashcroft Sutton Reyes LLC, and Korein Tillery LLC, approved as to form by the City Attorney,
effective only upon approval by the Office of the Attorney General of Texas or as otherwise
allowed under Tex. Gov’t Code §2254, as amended.
SECTION 4. It is officially found, determined, and declared that the meeting at which
this ordinance is adopted was open to the public and public notice of the time, place, and subject
matter of the public business to be considered at such meeting, including this ordinance, was given,all as required by Chapter 551 as amended, Texas Government Code.
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Counselors fee andSECTION 5 The City will the contrngency expensespaya In
accordance with the rates in Attachment A to this ordinance and contingent upon the recovery, if
any, by the City in the Litigation.
SECTION 6. This Ordinance shall take effect immediately from and after its passage and
approval.
:o: nc:{:a T :0 r d i n a n c e w a s m : d eTh sILp: : es;1: 1 1::
Aye,/Mayor Gerard Hudspeth:
,/Vicki Byrd, District 1 :
Brian Beck. District 2 :
Jesse L. Davis. District 3 :
Alison Maguire, DistrIct 4: /
Deb Armintor, At Large Place 5 : /
Paul Meltzer, At Large Place 6: /
PASSED AND APPROVED thi, th, 15 +- d,y ,f FIL fu„ y , 2022.a#.g -GERARD HUDSPETH, MAYOR
,/J
ROSA RIOS, CITY SECRETARY
BY:
APPROVED AS TO LEGAL FORM:MACK REINWAND. CITY ATTORNEY
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ATTACHMENT A
The fees for legal services provided by the Counselors in connection with the Litigation are
contingent upon the recovery by the City of Damages in the Litigation and will be paid out of such
recovery, if any, as follows:
If the City obtains a recovery and collection on behalf of the City before a trial or appeal, the
Counselors will receive attorneys’ fees in the amount of Thirty Percent (30%) of the gross
recovery. If recovery for the City occurs after (1 ) the beginning of trial (at the beginning of opening
argument), or (2) upon appeal of any judgment, the Counselors will instead receive attorneys’ feesin the amount of the Thirty-Three and One-Third (33 1/3%).
The Counselors will advance all costs associated with the Litigation. The City agrees to reimburse
the Counselors for all reasonable costs out of its share of the gross recovery.