Opponent of Tacoma Click deal gives up legal fight as part of $392K in debt reduction
The continuing saga of Tacoma’s Click network, which provides cable and internet services, took another turn recently as the Tacoma Public Utilities board approved a settlement with Advanced Stream and its CEO, Mitchell Shook.
The settlement allows for Advanced Stream to pay a reduced amount of its outstanding account balance on Click network. In exchange, Shook has agreed to drop all litigation he has brought against the city in regard to the network over changes to its operating structure.
According to the board action memo from TPU director Jackie Flowers, “The recommended cancelation is intended to minimize any impact during this public health emergency to Advanced Stream customers from the transfer of operational control of the Click! Network to Rainier Connect.”
The memo also states: “Approval of the reduction would bring value to the Utility by reducing the ongoing costs of litigation, lessening the uncertainty regarding the outcome of that litigation, removing obstacles to the successful transfer of operational control, and maintaining the viability of the long-term use of the Tacoma Power Commercial Network by Rainier Connect.”
Shook was involved in at least four lawsuits listed in the settlement, including two combined with other litigants that are still active. Those cases can continue without Shook, according to the agreement.
The recent transfer of Click network operations to Rainier Connect, a local competitor to Shook’s Advanced Stream, was approved in November and went into effect April 1.
Rainier Connect was selected after a selection process involving both Tacoma’s Public Utility board and the City Council.
Opponents, including Shook, took issue with the structuring of the deal and repeatedly have called for putting the matter to a public vote, both at public hearings and in court.
Now, Shook’s part of that fight appears to be over.
According to April 10 board records, the board approved a settlement that includes a reduction of Advanced Stream’s total outstanding account balance of $672,799.11 “by $284,187.22 and $108,000 for a total reduction of $392,187.22, leaving a remaining outstanding account balance in the amount of $280,611.89.”
In response to questions from The News Tribune, representatives with the city’s legal department said the amount due is “typical of the amounts owed to Click under the ISP Advantage agreements. The ISPs have 60 days to make payments under the ISP Advantage Agreement.”
According to the city, the amounts owed by Advanced Stream are, for the most part, not past due, and no previous attempts at collection have been made. The fees represent a per-customer charge based on each customer’s level of service, of which Advanced Stream collected the retail rate from the customer and paid TPU the corresponding wholesale rate. The amounts cover a period of Jan. 20 to March 31.
Additionally, according to the settlement terms, Shook “shall not, following the effective date of this agreement and for a period of five years thereafter, disparage this agreement, the Click Network, the CBTA (Click Business Transaction Agreement), the parties to the CBTA, the transfer of operational control of the Tacoma Power Commercial Network to Rainier Connect North, LLC, and the facts and circumstances underlying the transfer of operational control of the Tacoma Power Commercial Network to Rainier Connect.
“The Parties agree and acknowledge that this non-disparagement provision is a material term of this agreement, the absence of which would have resulted in the City refusing to enter into this Agreement.”
The agreement also calls for Shook to withdraw all of his public records requests submitted to the city since January 1, 2018.
Longstanding fight
Last fall, TPU’s board and the City Council voted to approve agreements with Rainier Connect to operate the municipally owned Click while still retaining city ownership of the network.
The deal involved approving a surplus declaration of anything in the system not needed for utility purposes, allowing Rainier Connect the right to use excess capacity over the network to provide video and broadband services.
Shook had been a vocal critic of the city’s actions, and repeatedly argued that Click was a profitable venture for the city.
The city has consistently maintained that the network was a money loser and defended the surplus declaration. In a statement Oct. 30 posted on TPU’s website, director Flowers cited the benefits to the expanded public-private partnership: “Rainier Connect will invest in our aging infrastructure, including expanding service to equitable 1G service throughout the territory within three years. They will also guarantee that Tacoma has at least three service providers to choose from, which is more than what is available in most other communities.”
Opposition to the deal has persisted through various court challenges.
While the agreement means Shook and his company are no longer involved in litigation with the city, two cases that had been consolidated with two of his own are not affected by the settlement.
Those include a case brought against the city by two Click customers, Thomas McCarthy and Christopher Anderson, over the transfer of operations to Rainier Connect, and a petition for review/appeal now with the State Supreme Court filed by Darrel Bowman. Both cases have presented similar arguments contending that Click network is a separate utility and that the transfer of operations to Rainier Connect needed to be put to a public vote.
According to the agreement: “In the matters consolidated with Bowman and McCarthy/Anderson ... the foregoing obligation of dismissal applies only to the claims brought by Mitchell Shook.”
Meanwhile, as the clock ran out on landing a deal with Rainier Connect in March, Shook continued to assure his customers via email that there was no need to switch to Rainier Connect.
Advanced Stream and Rainier Connect never reached a deal for Advanced Stream to continue operating on the network.
Ultimately, Rainier Connect and TPU had to repeatedly alert Advanced Stream customers that they needed to pick another service provider, and help assist customers through the transition.
Reached Friday, Shook told The News Tribune, “Yes, I wanted to be on this network. ... We did everything possible to participate in supporting our customers, but that was unobtainable.”
He said when choosing between continuing his battle with the city or ending it, “I needed to do what was right.”
The decision “was made in the best interest of the community in the time of a pandemic. They need to know their modems are a gift. You can keep your modem. I have a million dollars’ worth of modems out there, please don’t try to call or return them. You can use your modem going forward; they are already in the system.”
Shook added that the settlement benefits the customers to provide certainty to Click.
“We have made this decision to turn the page and put the past behind us and look to the future,” he said.
The settlement set a time line for Advanced Stream’s business with Click to wind down. Part of the requirement is for Advanced Stream “to continue to maintain e-mail and voice services for customers transferred to Click Network until either May 31, 2020 or until the customer has initiated e-mail and voice services with another provider, whichever time-period is shorter.”
Lorie Hills, sales and marketing manager for Rainier Connect, told The News Tribune via email that the company would be “honoring the Advanced Stream prepays at the same level of service they had with Advanced Stream.“
However, “If the customer does not want our service, they will need to work with Advanced Stream directly,” she added.
The cost of settling
According to the agreement with Shook, credits totaling $284,187.22 will be applied in two equal installments; the first one tied to final dismissal of his litigation; the second will be applied June 30, “provided that the obligations of Advanced Stream and Mitch Shook .... have been satisfactorily completed. All late penalties, fees and interest on the Credit shall be suspended from the effective date of this Agreement through June 30, 2020.”
Not everyone on TPU’s board voted in favor of settling with Shook. For board member Bryan Flint, the price was too high amid the coronavirus pandemic as hundreds of customers faced financial hardship.
Flint, during the April 13 special meeting, elaborated on the reason behind his no vote. The meeting was held via teleconference among members, as per the governor’s stay-at-home order during the coronavirus outbreak, and was also broadcast live on TV Tacoma.
“The amount that we are considering letting him walk away from is almost the same amount that we’ve provided 2,000 of our customers with utility assistance,” Flint said. “I do not think we should reward bad behavior by signing this agreement, and I encourage Mr. Shook to take the high road to pay his bill, to understand that he fought the good fight, and that Click has moved into a new phase.”
Board chairwoman Karen Larkin, who voted in favor of the settlement and spoke after Flint, said at the meeting: “I too believe we could have had a better partnership in this transition with Advanced Stream, and it’s been a difficult process to work through.”
She added, “I think this is in the best interest of our customers, Advanced Stream customers and our new partners Rainier Connect to lend some certainty to this process .... and to move forward into the future with a clean slate.”
When asked Friday by The News Tribune for response, Shook defended the settlement, again referring to the cost of modems, the work his company had provided, in some cases at no cost, and what future litigation or judgment potentially could have cost the city in his own legal battles.
Shook on Friday also said that emails had been sent to Advanced Stream monthly customers about the changeover, which directs the customers to sign up for new services at Rainier Connect’s website.
“Going forward, Internet access over Click will be provided by Rainier Connect. During this transition, no one will lose their connections,” the email states, a copy of which he sent to The News Tribune on Friday.
The email closes with: “Thank you for allowing Advanced Stream to be your ISP. We enjoyed 20 great years, but all things must pass. We appreciate your messages of support. Advanced Stream will continue to provide IT support for the community, so keep us in mind for those house calls!”
As for what’s next, Shook said, “We went out of our way every day as a local hometown ISP, and now we’re going to do that work for other communities and states, and keep doing it wherever we’re invited.”
This story was originally published April 18, 2020 at 8:00 AM.
