HBA-NMO C.S.H.B. 101 76(R)BILL ANALYSIS
Office of House Bill AnalysisC.S.H.B. 101
By: Alvarado
Civil Practices
4/21/1999
Committee Report (Substituted)
BACKGROUND AND PURPOSE
Currently, there is no statutory provision under which a state or local
governmental entity can find relief when a false claim for money, property,
or services is brought against that entity. In 1998, the House Committee
on Civil Practices appointed the Subcommittee on False Claims to address
the committee's second interim charge, the evaluation of the potential of a
state "false claims" law. C.S.H.B. 101 creates an offense for knowingly
presenting a false claim to a governmental entity or its agent, and
provides remedies for exposing and prosecuting individuals who present such
claims.
RULEMAKING AUTHORITY
It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subtitle F, Title 10, Government Code, by adding Chapter
2259, as follows:
CHAPTER 2259. CIVIL REMEDIES FOR CERTAIN FALSE CLAIMS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2259.001. DEFINITIONS. Defines "claim," "government contractor,"
"governmental entity," "knowingly," "local governmental entity,"
"prosecuting authority," and "public employee."
Sec. 2259.002. PROHIBITED ACTS. Prohibits a person from:
(1) knowingly presenting to an officer, employee, or agent of a
governmental entity or government contractor a false claim for payment or
approval;
(2) knowingly making or using a false record or statement to obtain payment
or approval of a false claim;
(3) conspiring to defraud a governmental entity or government contractor by
obtaining payment or approval of a false claim;
(4) knowingly delivering to a governmental entity or government contractor
less property than the amount on the received receipt.
(5) knowingly making or delivering a receipt that falsely represents the
amount of property received that is to be used by a governmental entity or
government contractor;
(6) knowingly buying or accepting as a pledge of an obligation or debt
public property from a person who may not sell or pledge the property;
(7) knowingly making or using a false record or statement to conceal,
avoid, or decrease an obligation to pay or transmit money or property to a
governmental entity or government contractor;
(8) knowingly causing an act described by the seven previous subdivisions
to be committed by another person.
SECTION 2259.003. SOVEREIGN IMMUNITY NOT WAIVED. Provides that this
chapter does not waive sovereign immunity.
SUBCHAPTER B. LIABILITY FOR VIOLATIONS
Sec. 2259.011. LIABILITY FOR VIOLATION. Requires a court that finds that
a person violated Section 2259.002 to award the affected governmental
entity actual damages, exemplary damages equal to two times the amount of
actual damages, and reasonable attorney's fees and costs incurred to
recover the damages and penalty. Authorizes the court to reduce the
exemplary damages to an amount not less than the amount of the actual
damages if the person who violated Section 2259.002 furnished all requested
information within 30 days of obtaining the information and fully
cooperated with any investigation by the governmental agency.
2259.012. CIVIL PENALTY. Authorizes a court, in addition to amounts
awarded under Section 2259.011, to award to the affected governmental
entity a civil penalty of not more than $10,000 for each false claim unless
the person who violated Section 2259.002 cooperated in the investigation as
described in Section 2259.011.
Sec. 2259.013. LIABILITY JOINT AND SEVERAL; PROPORTIONATE RESPONSIBILITY
INAPPLICABLE. Provides that liability under this subchapter is joint and
several for a violation committed by more than one person. Provides that
Chapter 33, Civil Practice and Remedies Code (Proportionate
Responsibility), does not apply to an action brought under this chapter.
Sec. 2259.014. EXCEPTIONS. Prohibits a court from awarding exemplary
damages and attorney's fees and costs under Section 2259.011 or a civil
penalty under Section 2259.012 against a person if the total actual damages
being assessed against the person in the case is less than $25,000.
Provides that this chapter does not apply to a claim made under a workers'
compensation law of this state or Chapter 36 (Medicaid Fraud Prevention),
Human Resources Code.
Sec. 2259.015. DEPOSIT OF MONEY. Requires that money collected on behalf
of a governmental entity be deposited to the general revenue fund of the
state or paid to the local governmental entity, as appropriate. Requires
the court, if the action is brought in the names of both the state and one
or more local governmental entities, to apportion the award of damages and
civil penalties among the affected governmental entities according to the
loss incurred by each affected entity and requires that attorney's fees and
costs be awarded to the entity that incurred the fees and costs.
Sec. 2259.016. LIMITATIONS. Prohibits a civil action under this chapter
from being brought after the later of the sixth anniversary of the date on
which the violation of Section 2259.002 was committed, or the third
anniversary of the date on which facts material to the right of action are
known or reasonably should have been known by the official of the
governmental entity charged with responsibility to act in the
circumstances. Prohibits an action under this chapter from being brought
after the 10th anniversary of the date on which the violation was
committed.
Sec. 2259.017. APPLICATION OF LAW GOVERNING EXEMPLARY DAMAGES. Provides
that Chapter 41, Civil Practice and Remedies Code (Exemplary Damages), does
not apply to exemplary damages awarded under Section 2259.011 or to the
civil penalty awarded under Section 2259.012.
Sec. 2259.018. VENUE. (a) Requires that an action under this chapter that
is brought by or on behalf of only the state be brought in Travis County,
in a county in which the defendant resides or has a place of business, or
in a county in which all or part of the acts or omissions giving rise to
the cause of action occurred.
(b) Requires that an action under this chapter that is brought by or on
behalf of only a local governmental entity be brought in the county in
which the entity's seat of government is located.
(c) Requires that an action under this chapter that is brought by or on
behalf of both the state and one or more local governmental entities be
brought in Travis County, or in a county in which a local governmental
entity's seat of government is located.
(d) Provides that venue as to the claim of the local governmental entity
continues in the county which the action was initially brought, if an
action is initially brought by or on behalf of only the state in a county
of proper venue and a local governmental entity intervenes or is otherwise
subsequently joined as a plaintiff.
SUBCHAPTER C. ATTORNEY GENERAL ACTION
Sec. 2259.051. ATTORNEY GENERAL INVESTIGATION. Requires the attorney
general to investigate alleged violations of Section 2259.002 involving
state funds. Authorizes the attorney general to bring an action under
Subchapter B against a person if the person has violated Section 2259.002.
Provides that this action must be brought in a district court.
Sec. 2259.052. AFFECTED LOCAL GOVERNMENTAL ENTITY. Requires the attorney
general to provide a copy of the petition to the appropriate prosecuting
authority if the attorney general brings an action under Subchapter B on a
claim that involves local government funds as well as state funds.
Requires the attorney general to mail the petition to the prosecuting
authority by certified mail not later than the date on which the petition
is filed. Authorizes the prosecuting authority to intervene in an action
not later than 60 days after receiving the copy of the petition.
Authorizes the court to permit the prosecuting authority to intervene after
that date for good cause.
SUBCHAPTER D. ACTION BROUGHT BY PROSECUTING AUTHORITY
Sec. 2259.101. PROSECUTING AUTHORITY INVESTIGATION. Requires a
prosecuting authority to investigate alleged violations of Section 2259.002
involving funds belonging to a local governmental entity. Authorizes the
prosecuting authority to bring an action under Subchapter B against a
person if the person has violated Section 2259.002. Provides that this
action must be brought in a district court.
Sec. 2259.102. ATTORNEY GENERAL. Requires the prosecuting authority to
provide a copy of the petition to the attorney general if bringing an
action under Subchapter B on a claim that involves state funds as well as
local government funds. Requires the prosecuting authority to mail the
petition to the attorney general by certified mail not later than the date
on which the petition is filed. Requires the attorney general, not later
than 60 days after receiving the copy of the petition, to notify the court
of intent to proceed with the action and assume primary responsibility for
conducting the action, or to notify the court that the attorney general
declines to assume primary responsibility for conducting the action.
Authorizes the prosecuting authority, if the attorney general assumes
primary responsibility for conducting the action, to continue as a party in
the action. Authorizes the prosecuting attorney, if the attorney general
declines to assume primary responsibility, to continue to conduct the
action.
SUBCHAPTER E. PRIVATE CAUSE OF ACTION
Sec. 2259.151. PRIVATE ACTION. Authorizes a person to bring a civil
action on behalf of the person and a governmental entity for a violation of
Section 2259.002. Provides that the action must be brought in district
court. Prohibits a person other than the attorney general or the
prosecuting attorney from intervening in, or bringing a separate action
based on the facts underlying, a pending action filed under this
subchapter. Prohibits a person from bringing a private action based on the
facts underlying a civil action or an administrative proceeding for a
monetary penalty in which a governmental entity is already a party.
Sec. 2259.152. SERVICE OF PETITION; PETITION FILED IN CAMERA. (a)
Requires a person who brings an action under this subchapter to serve a
copy of the petition in the action, accompanied by a written disclosure of
substantially all material evidence and information the person possesses,
on the attorney general, if the claim involves state funds, and the
prosecuting authority of the local government, if the claim involves local
government funds.
(b) Requires that the petition be filed in camera and remain under seal
until at least 60 days after the date on which the petition was filed, and
prohibits it from being unsealed or served on the defendant until the court
orders that the petition be unsealed or served. Authorizes the attorney
general or the prosecuting attorney, for good cause shown, to move to
extend the time during which the petition remains under seal. Requires
that the motion be filed in camera, and requires that a copy of the motion
be served on the person bringing the action.
(c) Requires service on the attorney general and prosecuting attorney under
this section to be made in the manner provided by Rule 21a, Texas Rules of
Civil Procedure (Notice).
(d) Requires that service on the defendant, on the unsealing of an action
under this subchapter, be made in the manner provided by Rule 106, Texas
Rules of Civil Procedure (Service of Citation).
Sec. 2259.153. INTERVENTION. (a) Authorizes the attorney general, in an
action involving only state funds, to assume responsibility for prosecution
of the action by intervening not later than the later of 60 days after
receiving service of the petition and written disclosure under Section
2259.152, or the date on which the petition is unsealed by the order of the
court.
(b) Authorizes the prosecuting authority, in an action involving only local
government funds, to assume responsibility for prosecution of the action
by intervening not later than the later of 60 days after receiving service
of the petition and written disclosure under Section 2259.152, or the date
on which the petition is unsealed by the order of the court.
(c) Authorizes the attorney general and the prosecuting authority, in an
action involving state and local government funds, to assume primary
responsibility for prosecution of the action by intervening not later than
the later of 60 days after receiving service of the petition and written
disclosure under Section 2259.152, or the date on which the petition is
unsealed by the order of the court.
(d) Provides that the attorney general, in an action subject to Subsection
(c) in which only the attorney general intervenes, has primary
responsibility for prosecuting the action. Provides that the prosecuting
authority, if only it intervenes, has primary responsibility for
prosecuting the action. Authorizes the attorney general to assume primary
responsibility for prosecuting the action or to delegate that
responsibility to the prosecuting authority, if both intervene in the
action.
(e) Authorizes the person filing the action, in an action in which the
attorney general or the prosecuting authority intervenes, to continue as a
party to and participate in the action, subject to any limitation imposed
by the court on motion of the attorney general or the prosecuting
authority.
(f) Authorizes the person filing the action, in an action in which neither
the attorney general nor the prosecuting authority intervenes, to prosecute
the action.
Sec. 2259.154. AWARD TO PRIVATE PARTY IF GOVERNMENT PROSECUTES ACTION.
(a) Requires the court, if the attorney general or prosecuting authority
assumes responsibility for prosecuting the action, subject to Subsections
(b) and (c), to award to the person bringing the action at least 15
percent, but not more than 25 percent, of the proceeds of any settlement or
judgment, considering the significance of the information provided by the
person and the person's role in advancing the action to settlement or
judgment.
(b) Requires the court to award the person bringing the action at least 5
percent, but not more than 15 percent, of the proceeds of any settlement or
judgment, considering the significance of the information provided by the
person and the person's role in advancing the action to settlement or
judgment, if the court finds that certain conditions are met.
(c) Prohibits the court from awarding the person bringing the action any
portion of the proceeds of any settlement or judgment if the court finds
that certain conditions are met.
(d) Entitles a person receiving an award under this section to recover from
the defendant reasonable attorney's fees, costs, expenses.
Sec. 2259.155. AWARD TO PRIVATE PARTY IF GOVERNMENT DOES NOT PROSECUTE
ACTION. (a) Requires the court, if the attorney general or prosecuting
authority does not intervene and assume responsibility for prosecution of
the action, to award to the person bringing the action at least 25 percent,
but not more than 35 percent, of the proceeds of any settlement or
judgment, considering the significance of the information provided by the
person and the person's role in advancing the action to settlement or
judgment.
(b) Entitles a person receiving an award under this section to recover from
the defendant reasonable attorney's fees, costs, and expenses.
(c) Authorizes the court to award to the defendant, against the person
bringing the action, reasonable attorney's fees and expenses if the
defendant prevails in the action and the court finds that action was
clearly frivolous, clearly vexatious, or brought primarily for purposes of
harassment. Provides that a governmental entity is not liable for
attorney's fees and expenses incurred by a defendant.
Sec. 2259.156. LIMITATIONS ON AWARD TO PRIVATE PARTY. Authorizes the
court, if it finds that a private action was brought by a person who
planned and initiated the violation of Section 2259.002 on which the action
was brought, to reduce the award the person would otherwise receive.
Prohibits a person from receiving an award under this chapter if the person
bringing the action is convicted of a criminal offense arising from the
person's role in violation of Section 2259.002.
Sec. 2259.157. LIMITATION ON PRIVATE ACTIONS BY PUBLIC EMPLOYEES.
Authorizes a public employee who, in the course and scope of the employee's
employment, obtains knowledge of a violation of Section 2259.002, to bring
a private action under this subchapter only if certain conditions are met.
SUBCHAPTER F. INTERFERENCE WITH DISCLOSURE
BY EMPLOYEES
Sec. 2259.201. RIGHT TO DISCLOSE INFORMATION AND PARTICIPATE IN ACTION.
Entitles a person to:
(1) disclose information relevant to an alleged violation of Section
2259.002 to the attorney general, prosecuting authority, a governmental
entity, or a law enforcement agency;
(2) assist, at the request of the attorney general or prosecuting
authority, in the investigation of an alleged violation of Section
2259.002; or
(3) testify or otherwise participate, at the request of the attorney
general or prosecuting authority, in the furtherance of an action under
this chapter.
(4) take any other lawful action in furtherance of an action filed or to be
filed under this chapter.
Sec. 2259.202. PROHIBITED CONDUCT BY EMPLOYER. (a) Prohibits an employer
from adopting or enforcing a rule or policy that prevents an employee from
exercising the employee's rights under Section 2259.201; or discriminating
against an employee who has exercised those rights.
(b) Provides that an employer who violates Subsection (a) is liable to the
employee for actual damages including lost wages, reinstatement to
employment with any applicable seniority status, exemplary damages equal to
not less than two times the amount of lost wages; and attorney's fees and
costs.
(c) Prohibits an employee from recovering under Subsection (b) unless the
employee's rights under Section 2259.201 were exercised; and to the extent
the employee participated in the violation of Section 2259.002, the
participation was in response to harassment, threats of termination or
demotion, or other coercion by the employer.
(d) Provides that Chapter 554 (Protection for Reporting Violation of Law)
establishes the exclusive procedures and remedies available to a public
employee for a violation of Section 2259.201.
SECTION 2. Effective date: September 1, 1999.
Makes application of this Act prospective.
SECTION 3. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute differs from the original in SECTION 1 as follows:
Modifies the title of proposed Chapter 2259 (False Claims), Government
Code, to yield "Civil Remedies for Certain False Claims."
Modifies proposed Section 2259.001 (Definitions) by changing the definition
of "governmental entity" and "prosecuting authority," adding the
definition of "knowingly," and "public employee," and deleting the
definition of "managing official." Makes conforming changes.
Modifies proposed Section 2259.002 (Prohibited Acts) by adding the mental
state of "knowing" to the proposed prohibited acts, and by deleting
Subdivision (8), which prohibits a person from accepting the benefits from
a false claim made by any person. Make conforming and nonsubstantive
changes.
Adds Section 2259.003 (Sovereign Immunity Not Waived), which provides that
this chapter does not waive sovereign immunity.
Modifies proposed Section 2259.011 (Liability for Knowing Violation) by
changing the title to yield "Liability for Violation." Provides for the
awarding of reasonable attorney's fees, rather than attorney's fees.
Authorizes the court to reduce the amount of exemplary damages if the
person furnished the proper official with all information known the person
about the violation not later than the 30th day after the date on which the
person obtained the information, rather than the date the official
requested the information. Deletes Subsection (c) to make a conforming
change. Makes other conforming changes.
Modifies proposed Section 2259.012 (Civil Penalty) by making a conforming
change.
Modifies proposed Section 2259.014 (Exceptions) by prohibiting a court from
awarding exemplary damages and attorney's fees and costs or a civil penalty
against a person if the total actual damages resulting from all violations
for which damages are being assessed against a person is less than $25,000,
rather than $500. Further modifies this proposed section by providing that
this chapter does not apply to a claim made under Chapter 36 (Medicaid
Fraud Prevention), Human Resources Code, in addition to a workers'
compensation law of this state.
Modifies proposed Section 2259.015 (Deposit of Money) by requiring that
money collected on behalf of a governmental entity be deposited to the
general revenue fund of the state or paid to the local governmental entity,
as appropriate, rather than deposited to the credit of the general revenue
fund of the state or of the local governmental entity, as appropriate.
Further modifies this section by requiring the court, if the action is
brought in the names of both the state and one or more local governmental
entities, to apportion the award of damages and civil penalties among the
affected governmental entities according to the loss incurred by each
affected entity, rather than among the state and those local entities on
the basis of the loss incurred. Makes a conforming change.
Modifies proposed Section 2259.016 (Limitations) by prohibiting a civil
action under this chapter from being brought after the later of the sixth
anniversary of the date on which the violation of Section 2259.002 was
committed, or the third anniversary of the date on which facts material to
the right of action are known or reasonably should have been known by the
official of the governmental entity charged with responsibility to act in
the circumstances; rather than providing that an action under this
subchapter must be brought not later than the third anniversary of the date
on which the violation was discovered. Makes a conforming change.
Adds Section 2259.018 (Venue). For a complete analysis of this new section
see the Sectionby-Section Analysis portion of this document.
Modifies proposed Section 2259.021 (Attorney General Investigation) by
renumbering it as 2259.051, and by providing that an attorney general
action must be brought in a district court.
Modifies proposed Section 2259.022 (Affected Local Governmental Entity) by
renumbering it as 2259.052, and by changing all references to "complaint"
to "petition."
Modifies proposed Section 2259.031 (Prosecuting Authority Investigation) by
renumbering it as 2259.101, and by providing that a prosecuting authority
action must be brought in a district court.
Modifies proposed Section 2259.032 (Attorney General) by renumbering it as
2259.102, and by making conforming changes.
Modifies proposed Section 2259.041 (Private Action) by renumbering it as
2259.151 and by authorizing a person to bring a civil action on behalf of
the person and a governmental entity for a violation of Section 2259.002,
rather than authorizing a person to bring a civil action in a district
court in this state for a violation of Section 2259.002 in the name of the
person on behalf of the state, the prosecuting authority, or both, as
appropriate. Provides that the action must be brought in district court.
Adds Subsection (b) to prohibit a person other than the attorney general or
the prosecuting attorney from intervening in, or bringing a separate action
based on the facts underlying, a pending action filed under this
subchapter. Adds Subsection (c) to prohibit a person from bringing a
private action based on the facts underlying a civil action or an
administrative proceeding for a monetary penalty in which a governmental
entity is already a party.
Modifies proposed Section 2259.042 (Service of Petition) by renumbering it
as 2259.152 and changing the title to read "Service of Petition; Petition
Filed in Camera." Modifies this section by requiring a person who brings
an action under this subchapter to submit written disclosure of
substantially all material evidence and information the person possesses,
in addition to serving a copy of the petition in the action. Adds a new
Subsection (b) to require that the petition be filed in camera and remain
under seal until the at least 60 days after the date on which the petition
was filed, and prohibits it from being unsealed or served on the defendant
until the court orders that the petition be unsealed or served. Authorizes
the attorney general or the prosecuting attorney, for good cause shown, to
move to extend the time during which the petition remains under seal.
Requires that the motion be filed in camera, and requires that a copy of
the motion be served on the person bringing the action. Redesignates
proposed Subsection (b) as Subsection (c), and adds Subsection (d) to
require that service on the defendant, on the unsealing of an action under
this subchapter, be made in the manner provided by Rule 106, Texas Rules of
Civil Procedure (Service of Citation).
Modifies proposed Section 2259.043 (Intervention) by renumbering it as
2259.153 and by authorizing the attorney general in Subsection (a), in an
action involving only state funds, to assume responsibility for prosecution
of the action by intervening not later than the later of 60 days after
receiving service of the petition and written disclosure under Section
2259.152, or the date on which the petition is unsealed by the order of the
court, rather than by entering an appearance not later than the 60 day
after the date the attorney general receives service of the petition under
Section 2259.042. Modifies proposed Subsections (b) and (c) by making
conforming changes. Deletes the proposed text of Subsection (d) regarding
attorney general primary responsibility, and the proposed text of
Subsection (e) regarding the prosecuting authority assuming primary
responsibility. Adds new Subsections (d), (e), and (f). For complete
analysis of these new subsections see the Section-by-Section Analysis
portion of this document.
Modifies proposed Section 2259.044 (Award to Private Party if Government
Prosecutes Action) by renumbering it as 2259.154, and by requiring the
court in Subsection (a), if the attorney general or prosecuting authority
assumes responsibility for prosecuting the action, subject to Subsections
(b) and (c), to award to the person bringing the action at least 15
percent, but not more than 25 percent, of the proceeds of any settlement or
judgment, considering the significance of the information provided by the
person and the person's role in advancing the action to settlement or
judgment. The original Subsection (a) requires the court, if the attorney
general or the prosecuting authority assume responsibility for prosecution
of the action under Section 2259.043 (renumbered by the substitute as
2259.153) and the action is settled or the court enters a judgment for the
state or the local government, to award a reasonable portion of the
settlement or judgment to the person who prosecuted the action under this
subchapter. Deletes proposed Subsection (b) regarding determination of the
amount of the award, which presumes 10 percent of the settlement or
judgment to be reasonable. Adds new Subsections (b)-(d). For complete
analysis of these new subsections see the Section-by-Section Analysis
portion of this document.
Modifies proposed Section 2259.045 (Award to Private Party if Government
Does Not Prosecute Action) by renumbering it as 2259.155, and by requiring
the court, if the attorney general or prosecuting authority does not
intervene and assume responsibility for prosecution of the action, to award
to the person bringing the action at least 25 percent, but not more than 35
percent, of the proceeds of any settlement or judgment, considering the
significance of the information provided by the person and the person's
role in advancing the action to settlement or judgment. The original
Subsection (a) requires the court, if the attorney general or the
prosecuting authority does not assume responsibility for prosecution of the
action under Section 2259.043 (renumbered by the substitute as 2259.153)
and the action is settled or the court enters a judgment for the state or
the local government, to award a reasonable portion of the settlement or
judgment to the person who prosecuted the action under this subchapter.
Deletes text of proposed Subsection (b), which presumes 25 percent of the
settlement or judgment as reasonable, and Subsection (c) regarding the
award reasonable expenses. Adds new Subsections (b) and (c). For complete
analysis of these new subsections see the Section-by-Section Analysis
portion of this document.
Adds Sections 2259.156 (Limitations on Award to Private Party) and 2259.157
(Limitations on Private Actions by Public Employees). For complete
analysis of these new sections see the Section-by-Section Analysis portion
of this document.
Modifies proposed Section 2259.051 (Right to Disclose Information and
Participate in Action) by renumbering it as 2259.201, and by adding
Subdivision (4), which entitles a person to take any other lawful action in
the furtherance of an action filed or to be filed under this chapter.
Makes nonsubstantive changes.
Modifies proposed Section 2259.052 (Prohibited Conduct by Employer) by
renumbering it as 2259.202, and by adding Subsection (d) to provide that
Chapter 554 (Protection for Reporting Violation of Law) establishes the
exclusive procedures and remedies available to a public employee for a
violation of Section 2259.201. Makes conforming changes.