Exhibit A

Case 1:20-cv-00560-RP Document 128-1 Filed 01/08/22 Page 1 of 4
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Austin joins legal fight over fees not

paid to cities by Netflix, other

streaming services

Ryan Autullo Austin American-Statesman

Published 3:00 p.m. CT Dec. 9, 2021

Texas law allows for cable and video service providers to deliver services through

transmission lines on public property in exchange for remitting 5% of gross revenue to the

municipality.

Streaming services such as Netflix, Hulu and Disney+ have their content moved through

those lines, but they do not pay the fees imposed on traditional cable TV providers.

Austin officials say they should.

Setting the table for what could turn into a protracted legal battle, the Austin City Council

voted Thursday in favor of teaming with about a dozen Texas cities that are attempting to

recover what they say are years of unpaid fees from the video streaming giants.

The action mirrors litigation in Georgia, Indiana, Ohio and Nevada over franchise fee laws

that were written to target traditional cable providers, and whether those same laws apply

to video streaming services that do not have their own transmission lines and deliver their

product via the internet. Texas' law is from 2005.

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Case 1:20-cv-00560-RP Document 128-1 Filed 01/08/22 Page 2 of 4
Thursday's vote approved a contingency services agreement with three law firms that are

representing many, if not all, of the other Texas cities seeking the fees. Those law firms

won't get paid by Austin unless they secure a judgment against the video service providers.

Austin's participation means three of the state's four largest cities are involved in the

litigation. Houston and Dallas have taken steps similar to the one Austin took

Thursday. Others involved include Arlington, Abilene, Waco, Frisco, Plano, Carrollton,

Garland, Mesquite, Sugar Land, Amarillo, Grand Prairie and Arlington.

An Austin spokesperson said that, to the city's knowledge, those cities' lawsuits have not

commenced yet.

Netflix, Hulu and Disney representatives did not respond to separate messages left seeking

comment. Other providers could be pulled into the litigation, according to staff

documents, but for now only those three are targeted.

In a response from January on this issue, a Netflix spokesperson told the Verge, a tech

industry website, that streaming services should not be required to pay the same fees as

traditional cable providers.

“These cases falsely seek to treat streaming services as if they were cable and internet

access providers, which they aren’t,” the spokesperson said. “They also threaten to place a

tax on consumers that the legislature never intended, and we are confident that the courts

will conclude that these cases are meritless.

State law required City Council approval to hire outside counsel on a contingency fee basis.

The city's legal department said it preferred that model to an hourly rate model. 

In a public notice addressing the need for obtaining outside counsel, the city's legal

department said it is not appropriately staffed to handle such a complex matter while

juggling the other demands on the office. The memo said the dispute is an "unsettled

matter of law" and that the legal department expects the video streaming providers will

oppose all aspects of the litigation.

Austin is not only hoping to recover past unpaid fees but obtain a judgment ordering the

video service providers to pay fees in the future.

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The fees the city hopes to collect, known as franchise fees, date to 2007. Documents

associated with Thursday's action do not place a dollar figure estimating the amount the

city believes it is owed, but do shed light on what the outside lawyers will make if they

score a victory.

If the lawyers collect funds on behalf of Austin without going to trial, they will receive 30%

of the gross recovery. If a trial is needed to secure a judgment, the lawyers will get 331⁄3%

— one-third — of recovered fees.

If successful, any past and future funds recovered by the city would be used to fund other

municipal services, city staff said.

The law firms engaged by the city are McKool Smith, Ashcroft Sutton Reyes and Korein

Tillery.

The city has no prior relationship with Korein Tillery or Ashcroft Sutton Reyes. Austin was

among several cities represented by McKool Smith to recover municipal hotel occupancy

taxes.

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