HomeMy WebLinkAboutResolution 4740-02-2017 A Resolution
NO. 4740-02-2017
AUTHORIZING THE EMPLOYMENT OF KELLY HART & HALLMAN, LLP, AS
OUTSIDE LEGAL COUNSEL, PURSUANT TO CHAPTER VI, SECTION 3, OF THE
CITY CHARTER, TO DEFEND THE CITY IN A FEE DISPUTE BROUGHT BY
CANTEY HANGER LLP
WHEREAS, the City of Fort Worth entered in to numerous oil and gas leases of City property
within the Barnett Shale Field that provided for payment of royalty free of costs of any kind; and
WHEREAS, Chesapeake Operating, Inc., and Chesapeake Exploration, LLC ("Chesapeake")
and Total E&P (USA), Inc. ("Total") are the lessee or assignee of the lessee of many of the oil and gas
leases with the City of Fort Worth; and
WHEREAS, on September 23, 2013, the City of Fort Worth notified Chesapeake of its audit
findings that Chesapeake and Total remitted royalty payments to the City of Fort Worth for leases held
by Chesapeake and Total in violation of the terms of the leases; and
WHEREAS, on October 3, 2013, the City entered into an engagement agreement with the law
firm of Cantey Hanger LLP as outside legal counsel to pursue its claims against Chesapeake and Total;
and
WHEREAS, in 2016, the City settled its claims with Chesapeake and Total and paid Cantey
Hanger LLP a total of$7,000,000.00 in legal fees, based on a calculation of thirty-three and one-third
(33'/3)percent of the payments received by the City from Chesapeake and Total, after fees and expenses;
and
WHEREAS, on December 13, 2016, the City received notification from Baker Botts, LLP,
Austin, Texas, that it has been engaged by the firms of Cantey Hanger LLP and Cardwell, Hart &
Bennett in connection with claims against the City for additional attorneys' fees under the engagement
agreement; and
WHEREAS, the City disputes that Cantey Hanger is entitled to any additional fees under the
Engagement Agreement and is requesting that the City Council authorize the City Attorney to retain the
law firm of Kelly Hart & Hallman, LLP, as outside legal counsel, pursuant to Chapter VI, Section 3 of
the City Charter, to provide legal representation to defend the City against these claims.
WHEREAS, because of the extraordinary complexity of this area of law, the City Manager and
the City Attorney recommend that the City retain outside legal counsel with knowledge and expertise in
matters involving this area of contract law; and
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WHEREAS, the law firm of Kelly, 1 Hirt, and Hallman, L.L.P., possesses the required
knowledge and expertise in contract law;
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
FORT WORTH,TEXAS, THAT:
1.
The City is hereby authorized to employ the law firm of Kelly Hart & Hallman, LLP, as outside
legal counsel pursuant to Chapter VI, Section 3, of the City Charter to defend the City in a fee dispute
brought by Cantey Hanger LLP.
2.
The City is hereby authorized to compensate the law firm of Kelly Hart & Hallman, LLP, in an
amount not to exceed $100,000.00.
Adopted this 7th day of February, 2017.
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Mary J. se , Ci Secretary � , ;o oo;*�
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City of Fort Worth, Texas
Mayor and Council Communication
COUNCIL ACTION: Approved on 21712017 - Resolution No. 4740-02-2017
DATE: Tuesday, February 7, 2017 REFERENCE NO.: **G-18938
LOG NAME: 12KHH ENGAGEMENT 02-2017
SUBJECT:
Adopt Resolution Authorizing the City Attorney to Retain the Law Firm of Kelly Hart & Hallman, LLP, as
Outside Legal Counsel, Pursuant to Chapter VI, Section 3 of the City Charter, to Provide Legal
Representation to Defend the City in a Fee Dispute Brought by Cantey Hanger LLP (ALL COUNCIL
DISTRICTS)
RECOMMENDATION:
It is recommended that the City Council:
1. Authorize the City Attorney to retain the law firm of Kelly Hart & Hallman, LLP, as outside legal
counsel, pursuant to Chapter VI, Section 3 of the City Charter, to provide legal representation to
defend the City in a fee dispute brought by Cantey Hanger LLP; and
2. Adopt the attached resolution designating in advance, as far as practicable, that the amount to
be paid to Kelly Hart & Hallman, LLP, will not exceed $100,000.00.
DISCUSSION:
The City, as lessor, entered into a number of oil and gas leases with various lessees, including
Chesapeake Exploration, L.L.C. and its affiliates ("Chesapeake"). In 2010, Total E&P (USA)
("Total") acquired a (25 percent) working interest in the lease from a Chesapeake entity. In
2013, the City filed suits as Cause Nos. 48-268798-13 and 352-272138-14, alleging that Total
and Chesapeake breached their obligations under those leases by underpaying royalties.
On October 3, 2013, the City entered into an Engagement Agreement with Cantey Hanger to
pursue its claims against Chesapeake and Total. Cantey Hanger agreed to represent the City
pursuant to the Engagement Agreement's terms. Cantey Hanger independently associated with
the Austin firm of Cardwell, Hart & Bennett to assist it with the litigation.
In 2016, the City settled its claims with Chesapeake and Total and paid Cantey Hanger a total of
$7,000,000.00 in legal fees. The fee amount was paid based on a calculation of 33 1/3% of the
payments received by the City from Chesapeake and Total, after fees and expenses.
On December 13, 2016, the City Attorney received an email letter from Baker Botts, LLP,
informing the City that Baker Botts has been engaged by the law firms of Cantey Hanger and
Cardwell, Hart & Bennett in connection with their claims against the City for additional attorneys'
fees due under the Engagement Agreement. Cantey Hanger seeks a percentage of the City's
future royalty payments received from Chesapeake and Total. The City disputes that Cantey
Logname: 12KHH ENGAGEMENT 02-2017 Page 1 of 2
Hanger is entitled to any additional fees under the Engagement Agreement.
Because of the extraordinary complexity of this area of law, the City Manager and the City
Attorney recommend that the City retain outside legal counsel with knowledge and expertise in
matters involving contract law; and the law firm of Kelly, Hart, and Hallman, L.L.P., possesses the
required knowledge and expertise in contract law.
FISCAL INFORMATION / CERTIFICATION:
The Director of Finance certifies that funds are available in the current operating budget, as appropriated,
of the Risk Financing Fund. The Fiscal Year 2017 Budget includes appropriations in the amount of
$667,436.00 for lawsuit expenses. As of January 26, 2017, the account has year-to-date commitments
totaling $335,455.26; upon approval of the recommendation, remaining funds will be $331,980.74.
FUND IDENTIFIERS (FIDs):
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FROM
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CERTIFICATIONS:
Submitted for City Manager's Office by: Susan Alanis (8180)
Originating Department Head: Sarah Fullenwider (7606)
Gerald Pruitt (7616)
Additional Information Contact: Judy Lacker (8006)
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