Law

Texas cities seeking to sue Netflix, other streamers over franchise fees shot down by AG’s Office, records show

AUSTIN – Texas cities seeking to sue Netflix, Hulu, Disney and other streaming companies for a cut of the action having seemingly hit a wall – getting their contingent contracts with outside law firms approved by the office of the state’s top lawyer.

Since the start of 2021, more than a half dozen Texas cities have sought approval from the Office of the Attorney General (OAG) to press forward with their franchise fee suits against the streaming video service providers (VSPs).

As Oct. 1, the OAG has rejected every request, according to documents obtained by The Record.

As more and more Americans cut the cable cord, more and more cities are arguing that VSPs are also required to pay 5 percent of their gross revenues under the Texas Public Utility Regulatory Act.   

The Texas cities seeking to sue Netflix and the other streamers include Dallas, Plano, Waco, Abilene, Carrollton, Frisco and Garland – all of which are represented by the law firms of Ashcroft Sutton Reyes, McKool Smith, and Korein Tillery.

The contracts with the firms were not approved for a variety of reasons, records show.

In the case for Frisco, for example, the OAG took issue with the city’s written public notice and that the “governing body” did not approve the contract in an open meeting.”

Garland’s proposed contract failed “to state the differences, if any, in the method by which the contingent fee is computed if the matter is settled, tried, or tried and appealed,” records state.

The OAG found “ambiguity” in Dallas’ proposed contract.

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Many of the reasons for the OAG declining approval for the other cities were the same as the aforementioned reasons. 

Until two years ago, Texas trial lawyers routinely solicited local governments for litigious purposes and then sent contingency fee contracts to the Comptroller’s Office for approval.

That changed on Sept. 1, 2019 – the date House Bill 2826 went into effect, a law designed to bring transparency to how local governments go about hiring law firms and place contract approval in the hands of the attorney general.

HB 2826 requires local governmental entities to provide notice and negotiate with well-qualified attorneys, instead of just hiring those who solicit them.

The aim of HB 2826 was to end attorney solicitation and backroom deals between trial lawyers and local governments, while empowering the OAG to stop litigation waves before they can start so the state can file one master lawsuit.

Written by Staff reports

Categories: Law

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