CROFTON, Neb. — The City of Crofton has reached a $54,000 settlement in a law firm’s suit against the city for alleged breach of contract and violation of the state’s open meetings law.
The Crofton City Council approved the settlement Monday night after meeting for about 15-20 minutes with City Attorney James McNally and Norfolk attorney Kathleen Rockey, who had served as outside counselor and negotiator in the lawsuit.
The council approved the settlement 4-0, with approval from councilors Larry Peitz, Don Meink, Arlene Steffen and Illa Roeder. The council then approved payment of the settlement as part of the monthly bills.
“Of the $54,000 settlement, $37,000 will come from city funds and $17,000 from the EMC Insurance Company,” said Mayor Sharol Lawhead.
Daniel Hendrix and Charlie Gail Hendrix, a husband and wife doing business as the Hendrix Law Firm, had sought $96,000 plus other damages and costs in the civil lawsuit. They had filed suit in Knox County District Court and had sought a jury trial.
The Hendrixes had sought compensation for what was owed under the terms of their contract with the city for legal and administrative services. In their lawsuit, they said the city had improperly terminated the firm’s three-year contract with the city and did so without compensation.
A pre-trial conference was scheduled later this month. However, the two sides have reached an agreement that ends the litigation.
In exchange for the payment, the pending lawsuit will be dismissed with prejudice. The payment will be made by the City within 14 days of execution of the settlement agreement.
In their suit, the Hendrixes sought the remaining sums of money due under the terms of the contract from Jan. 14, 2019, through October 2020. The total amount due and owing for this time period was $96,010.84.
In addition, the Hendrixes had filed a second claim that the city violated the open meetings act when it discussed the termination of Hendrix Law “ in secret.”
In their suit, the Hendrixes requested for this amount plus any costs, fees, pre- and post-judgment interest the court determines to be equitable.
The Hendrixes were represented in the suit by Domina Law Group of Omaha.
The City of Crofton, represented by McNally, has filed a response disputing portions of the Hendrixes’ claims.
Those areas of dispute include Mayor Sharol Lawhead’s ability to vote on the contract, whether a quorum was achieved and the accuracy of the Hendrixes’ description of certain events.
The city also contends that no response is required for certain legal conclusions by the Hendrixes.
In addition, the city has filed affirmative defenses in its response to the lawsuit.
During Monday night’s meeting, Lawhead said the settlement represented the end of litigation in the matter.
An audience member asked where the city’s $37,000 share of the settlement will come from in the budget.
“The general fund,” Lawhead replied. “It’s here in the financial statements (of claims to be paid).”
During the meeting, the council approved the payment of $11,024 to Rockey for her work on the lawsuit negotiations and settlement.
At that point, an audience member raised questions about the payments for outside legal services.
One man questioned why the city was paying additional legal fees in the first place. He asked why the city didn’t use the legal services already available through the city’s insurance company for the lawsuit and settlement.
“The linebacker policy in place protects the city in situations like this, so we don’t need to,” he said. “Why didn’t the city take advantage of it?”
The situation warranted outside counsel, Lawhead said.
“We felt it was in our best interests,” the mayor said. “We’ve used Kathleen Rockey before, and she has advised us from the beginning (with this litigation).”
The council approved payment of $11,024 for Rockey, along with a $1,714 to McNally for his October legal fee. He did not perform any services in relation to the Hendrixes’ lawsuit.
Lawhead explained the meaning of McNally’s retainer and billable hours, which can amount to additional legal fees. McNally receives the monthly retainer even if he performs no services during the month, the mayor said.
“Sometimes, he receives $1,000 (in a given month),” she said. “If he does extra work, he bills us for that extra time. It’s the same as we always had. It’s pretty common for city attorneys. We pay a flat fee, and then extra work involves more (cost). He receives $250 a month. He’s going to get it no matter what happens. If he does nothing, he still gets it.”
An audience member questioned the city’s handling of finances.
“On the former city website, there was a place for ‘financial transparency’ but not one thing was posted,” he said. “Now, there is nothing (on the new site).”
Lawhead said the city has been conducting its affairs above board, and the financial records are available for inspection at any time.
Crofton residents shouldn’t become concerned about the wording on the city website, Lawhead said. “Transparency, that’s a word we just throw around,” the mayor added.
At that point, Lawhead said she considered the lawsuit concluded and the city could move forward.
The Press & Dakotan reached out Monday evening by email to Charlie Gail Hendrix for comment. She referred the matter to the couple’s attorney, Christian Williams of Domina Law Group, who had no comment at this time.
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