Last month, the city of Plano submitted for the approval of state Attorney General Ken Paxton a proposed contingency-fee contract with outside law firms Ashcroft Sutton Reyes, McKool Smith, and Korein Tillery.
If Paxton approves, the firms will represent the city in a suit against Netflix, Hulu, Disney, and other video service providers (VSPs) for their failure to pay the municipality five percent of their gross revenues, as allegedly required by the Texas Public Utility Regulatory Act. The terms of the act have long been enforced against cable companies but not previously applied to streamers.
“The City’s Attorney’s office is engaged in overseeing, managing, and litigating hundreds of matters,” asserts the request for approval submitted by Plano to justify the need for outside attorneys. “Thus, the City does not have the resources it believes will be necessary to engage in protracted, time-consuming, and expensive litigation.”
Prior to the passage of House Bill 2826, Texas law required local governments to secure approval from the state comptroller for contingency-fee contracts. Approval for such contracts must now be obtained from the state attorney general. Some of the more than 100 Texas counties that had negotiated contracts for opioid litigation failed to have those contracts approved by the comptroller before authority passed to the AG, thus rendering those contracts null and void.
Even a contingency-fee contract signed after the implementation date of HB 2826 can be rejected, however, as happened last year when the AG’s office refused to approve an opioid contract submitted by the Tarrant County Hospital District, noting that the state was already conducting its own opioid litigation.
Municipalities across the country have seen revenues decline as consumers switch from cable to VSPs, which explains their desire to extend the fee to the latter. Of course, cable companies just pass on the costs to customers, which is what streamers will likely do if Plano and other cities win in court.
If Paxton approves the contract and Plano prevails, the citizens of Plano will be the ones who pay for it.