By:  Ratliff                                          S.B. No. 1290
       73R7142 DLF-D
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to award of damages and litigation costs in certain civil
    1-3  actions.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Subtitle C, Title 2, Civil Practice and Remedies
    1-6  Code, is amended by adding Chapter 42 to read as follows:
    1-7          CHAPTER 42.  JUDGMENT FOLLOWING OFFER OF SETTLEMENT
    1-8                   SUBCHAPTER A.  GENERAL PROVISIONS
    1-9        Sec. 42.001.  DEFINITIONS.  In this chapter:
   1-10              (1)  "Claim" means a claim seeking recovery of money,
   1-11  property, or other relief, including a counterclaim, cross-claim,
   1-12  or third-party claim.
   1-13              (2)  "Claimant" means a party making a claim.
   1-14              (3)  "Defendant" means a party, including a
   1-15  counterdefendant, cross-defendant, or third-party defendant, from
   1-16  whom a claimant seeks damages or other relief.
   1-17              (4)  "Litigation costs" means costs that are directly
   1-18  related to preparing a case for trial and actual trial expenses,
   1-19  including:
   1-20                    (A)  attorney's fees under Section 42.007;
   1-21                    (B)  costs;
   1-22                    (C)  reasonable deposition costs; and
   1-23                    (D)  reasonable fees for not more than two expert
   1-24  witnesses.
    2-1              (5)  "Offer to settle" means an offer to settle made
    2-2  under Section 42.004.
    2-3        Sec. 42.002.  APPLICABILITY.  (a)  This chapter does not
    2-4  apply to a class action or shareholder's derivative action.
    2-5        (b)  This chapter does not apply to an action brought under
    2-6  the Family Code, except that this chapter does apply to an action
    2-7  brought under Chapter 33, Family Code.  An action in which a
    2-8  husband and wife are joined as parties under Section 4.04, Family
    2-9  Code, and an action that is an asset or liability of a party to a
   2-10  divorce are not considered to be brought under the Family Code for
   2-11  purposes of this section.
   2-12        Sec. 42.003.  EFFECT OF OFFER TO SETTLE.  A party to a civil
   2-13  action in a court of this state who makes an offer to settle in
   2-14  compliance with Section 42.004 is entitled to litigation costs
   2-15  under the conditions specified by Section 42.006.
   2-16        Sec. 42.004.  OFFER TO SETTLE.  (a)  A party to an action may
   2-17  serve on another party an offer to settle under this section.
   2-18        (b)  The offer to settle must:
   2-19              (1)  be in writing;
   2-20              (2)  state that it is an offer to settle under this
   2-21  section;
   2-22              (3)  offer to settle a claim as specified in the offer;
   2-23  and
   2-24              (4)  offer to allow judgment to be entered in
   2-25  accordance with the terms of the offer.
   2-26        (c)  An offer to settle may not be made after the 30th day
   2-27  before the date set for trial, except that an offer to settle that
    3-1  is a counteroffer may not be made after the 20th day before the
    3-2  date set for trial.  The time limits of this subsection may be
    3-3  modified by the court under Rule 166, Texas Rules of Civil
    3-4  Procedure.
    3-5        (d)  An offer to settle need not be filed with the court.
    3-6        Sec. 42.005.  ACCEPTANCE OR REJECTION OF OFFER.  (a)  A party
    3-7  may accept an offer to settle not later than 5 p.m. on the 30th day
    3-8  after:
    3-9              (1)  the date on which the offer to settle was
   3-10  deposited in the United States mail; or
   3-11              (2)  if the offer was not mailed, the date on which the
   3-12  offer to settle was delivered.
   3-13        (b)  An acceptance of an offer must be made in writing and
   3-14  served on the party making the offer.
   3-15        (c)  An offer may be withdrawn by a writing served on the
   3-16  party to whom the offer was made before the party accepts the
   3-17  offer.  An offer may not be accepted after it is withdrawn.
   3-18        (d)  For purposes of this chapter, an offer is considered
   3-19  rejected if:
   3-20              (1)  a written rejection of the offer is served on the
   3-21  party making the offer;
   3-22              (2)  the offer has not been accepted or withdrawn on or
   3-23  before 5 p.m. on the last date the offer may be accepted under
   3-24  Subsection (a); or
   3-25              (3)  acceptance of the offer is later withdrawn.
   3-26        (e)  To determine the time of day for purposes of Subsection
   3-27  (a) or (d), the local time of the recipient of the acceptance or
    4-1  the withdrawal controls.
    4-2        Sec. 42.006.  LITIGATION COSTS.  (a)  The court shall award
    4-3  litigation costs to a party who made an offer to settle if that
    4-4  party's last offer is rejected and the judgment finally awarded is
    4-5  not more favorable to the person to whom the offer to settle was
    4-6  made than the offer.
    4-7        (b)  Litigation costs awarded to a party under this section
    4-8  may include only those costs incurred after the date the last offer
    4-9  to settle was made by that party.
   4-10        (c)  This section does not require an award of litigation
   4-11  costs in a judgment arising from an offer to settle made under this
   4-12  chapter.
   4-13        Sec. 42.007.  AMOUNT OF ATTORNEY'S FEES.  (a)  In determining
   4-14  the amount of attorney's fees to be included in litigation costs
   4-15  awarded under this chapter, the court shall consider:
   4-16              (1)  the time and labor required;
   4-17              (2)  the novelty and difficulty of the questions;
   4-18              (3)  the skill requisite to perform the legal service
   4-19  properly;
   4-20              (4)  the preclusion of other employment by the attorney
   4-21  due to acceptance of the case;
   4-22              (5)  the customary fee;
   4-23              (6)  whether the fee is fixed or contingent;
   4-24              (7)  time limitations imposed by the client or the
   4-25  circumstances;
   4-26              (8)  the amount involved and the results obtained;
   4-27              (9)  the experience, reputation, and ability of the
    5-1  attorney;
    5-2              (10)  the undesirability of the case;
    5-3              (11)  the nature and length of the professional
    5-4  relationship with the client; and
    5-5              (12)  awards in similar cases.
    5-6        (b)  If the claim is for monetary relief only, the court
    5-7  shall limit the amount of attorney's fees included in litigation
    5-8  costs awarded to a claimant under this chapter to one-third of the
    5-9  damages recovered by the claimant and shall limit the amount of
   5-10  attorney's fees included in litigation costs awarded to a defendant
   5-11  under this chapter to one-third of the damages pled by the
   5-12  claimant.
   5-13        Sec. 42.008.  MUST BE REPRESENTED BY ATTORNEY.  To recover
   5-14  attorney's fees under this chapter a party must be represented by
   5-15  an attorney.
   5-16        Sec. 42.009.  EVIDENCE OF OFFER NOT ADMISSIBLE.  (a)
   5-17  Evidence of an offer to settle is not admissible except in:
   5-18              (1)  an action to enforce the settlement; or
   5-19              (2)  a proceeding to obtain litigation costs under
   5-20  Section 42.006.
   5-21        (b)  Admission of evidence of an offer to settle in violation
   5-22  of this section is presumed to be harmful error for purposes of an
   5-23  appeal of the action in which the evidence is admitted.
   5-24        Sec. 42.010.  LIBERAL CONSTRUCTION.  This chapter shall be
   5-25  liberally construed to achieve its purposes.
   5-26        Sec. 42.011.  PROVISIONS NOT TO BE MADE KNOWN TO JURY.  The
   5-27  provisions of this chapter may not be made known to the jury
    6-1  through any means, including voir dire, introduction into evidence,
    6-2  or instruction.
    6-3            (Sections 42.012-42.020 reserved for expansion
    6-4    SUBCHAPTER B.  DECLARATION OF INABILITY TO PAY LITIGATION COSTS
    6-5        Sec. 42.021.  DEFINITION.  In this subchapter, "declaration"
    6-6  means a declaration of inability to pay litigation costs made under
    6-7  this subchapter.
    6-8        Sec. 42.022.  CLAIMANT'S DECLARATION OF INABILITY TO PAY
    6-9  LITIGATION COSTS.  (a)  A claimant in an action in which litigation
   6-10  costs may be awarded under Subchapter A may file a declaration of
   6-11  inability to pay all or part of the defendant's litigation costs.
   6-12  The declaration must be served on all parties.
   6-13        (b)  The declaration must be filed at the time the claim is
   6-14  served.
   6-15        (c)  A claimant who does not file a declaration at the time
   6-16  specified by Subsection (b) may later file a declaration if,
   6-17  because of changed circumstances, the claimant cannot pay all or
   6-18  part of the defendant's litigation costs.  A declaration under this
   6-19  subsection must be filed not later than the 15th day after the date
   6-20  on which the claimant knew or should have known that the changed
   6-21  circumstances would make the claimant unable to pay the costs.
   6-22        Sec. 42.023.  REBUTTAL OF DECLARATION.  A defendant may, at
   6-23  any time before a hearing is held under Section 42.024, file a
   6-24  rebuttal to the declaration offering proof that the claimant is
   6-25  able to pay litigation costs.
   6-26        Sec. 42.024.  COURT ORDER.  (a)  After a hearing, the court
   6-27  shall enter an order stating the maximum amount of the defendant's
    7-1  litigation costs a claimant who filed a declaration would be
    7-2  required to pay in the action.  The order may require the claimant
    7-3  to pay all of the litigation costs awarded to the defendant under
    7-4  Subchapter A.
    7-5        (b)  In determining the maximum amount under Subsection (a),
    7-6  the court shall consider:
    7-7              (1)  the maximum amount the claimant can pay without
    7-8  falling below the federal poverty level based on the federal Office
    7-9  of Management and Budget poverty index; and
   7-10              (2)  whether, at any time after the limitations period
   7-11  for the claim began, the claimant made a transfer that is
   7-12  fraudulent as to present or future creditors under Chapter 24,
   7-13  Business & Commerce Code.
   7-14        (c)  The court may not order payment of an amount that would
   7-15  require liquidation of assets of the claimant that are exempt from
   7-16  a creditor's claims under Chapter 41 or 42, Property Code.
   7-17        Sec. 42.025.  AWARD FROM LITIGATION COSTS FUND.  (a)  The
   7-18  court shall order the comptroller to pay all or a portion of an
   7-19  award of litigation costs from the litigation costs fund
   7-20  established under Subchapter C to the extent the amount of
   7-21  litigation costs awarded against a claimant exceeds both:
   7-22              (1)  the maximum that the claimant is required to pay
   7-23  under an order entered under Section 42.024; and
   7-24              (2)  the amount of any monetary damages recovered by
   7-25  the claimant.
   7-26        (b)  The comptroller shall pay the remaining portion of the
   7-27  award in accordance with the order as money in the litigation costs
    8-1  fund becomes available.
    8-2        (c)  The state may recoup any amount paid from the litigation
    8-3  costs fund under Subsection (a) from the claimant.
    8-4        Sec. 42.026.  PAYMENT OUT OF JUDGMENT.   Notwithstanding any
    8-5  order issued under Section 42.024, a claimant shall pay litigation
    8-6  costs awarded to the defendant to the extent of any monetary
    8-7  recovery made by the claimant in the action.
    8-8            (Sections 42.027-42.030 reserved for expansion
    8-9                 SUBCHAPTER C.  LITIGATION COSTS FUND
   8-10        Sec. 42.031.  DEFINITIONS.  In this subchapter:
   8-11              (1)  "Exemplary damages" has the meaning assigned by
   8-12  Section 41.001.
   8-13              (2)  "Fund" means the litigation costs fund established
   8-14  by this subchapter.
   8-15        Sec. 42.032.  LITIGATION COSTS FUND.  (a)  The litigation
   8-16  costs fund is a fund in the state treasury.
   8-17        (b)  A court that orders an award of exemplary damages in an
   8-18  action subject to this chapter shall order the payment of a
   8-19  percentage of those damages, as determined under Subsection (d), to
   8-20  the comptroller for credit to the fund.
   8-21        (c)  In any action subject to this chapter in which a
   8-22  settlement is reached after a jury has rendered a verdict awarding
   8-23  exemplary damages, the court shall order the payment of a
   8-24  percentage of those damages, as determined under Subsection (d), to
   8-25  the comptroller for credit to the fund.
   8-26        (d)  The comptroller annually shall compute the percentage of
   8-27  each award of exemplary damages to be paid into the fund in a
    9-1  calendar year by dividing the total amount of awards made against
    9-2  the fund in the 12-month period ending the August 31st preceding
    9-3  the calendar year by the total amount of exemplary damages awarded
    9-4  in actions subject to this chapter in that 12-month period.  If the
    9-5  computed percentage exceeds 100 percent, the percentage is 100
    9-6  percent.
    9-7        (e)  Not later than December 31 of each year, the comptroller
    9-8  shall publish in the Texas Register the percentage of an award of
    9-9  exemplary damages to be paid into the fund in the following
   9-10  calendar year.
   9-11        SECTION 2.  Sections 17.505(c), (d), and (e), Business &
   9-12  Commerce Code, are amended to read as follows:
   9-13        (c)  An action subject to this section is also subject to
   9-14  Chapter 42, Civil Practice and Remedies Code.  <Any person who
   9-15  receives the written notice provided by Subsection (a) of this
   9-16  section may, within 60 days after the receipt of the notice, tender
   9-17  to the consumer a written offer of settlement, including an
   9-18  agreement to reimburse the consumer for the attorneys' fees, if
   9-19  any, reasonably incurred by the consumer in asserting his claim up
   9-20  to the date of the written notice.  A person who does not receive
   9-21  such a written notice due to the consumer's suit or counterclaim
   9-22  being filed as provided for by Subsection (b) of this section may,
   9-23  within 60 days after the filing of such suit or counterclaim,
   9-24  tender to the consumer a written offer of settlement, including an
   9-25  agreement to reimburse the consumer for the attorneys' fees, if
   9-26  any, reasonably incurred by the consumer in asserting his claim up
   9-27  to the date the suit or counterclaim was filed.  Any offer of
   10-1  settlement not accepted within 30 days of receipt by the consumer
   10-2  shall be deemed to have been rejected by the consumer.>
   10-3        (d)  <A settlement offer made in compliance with Subsection
   10-4  (c) of this section, if rejected by the consumer, may be filed with
   10-5  the court together with an affidavit certifying its rejection.  If
   10-6  the amount tendered in the settlement offer is the same as or more
   10-7  than, or if the court finds that amount to be substantially the
   10-8  same as, the actual damages found by the trier of fact, the
   10-9  consumer may not recover an amount in excess of the amount tendered
  10-10  in the settlement offer or the amount of actual damages found by
  10-11  the trier of fact, whichever is less.  Such settlement offer shall
  10-12  not be admissible as evidence before a jury.>
  10-13        <(e)>  The tender of an offer of settlement is not an
  10-14  admission of engaging in an unlawful act or practice or of
  10-15  liability under this Act.  <Evidence of a settlement offer may be
  10-16  introduced only to determine the reasonableness of the settlement
  10-17  offer as provided for by Subsection (d) of this section.>
  10-18        SECTION 3.  Sections 16(g), (h), and (i), Article 21.21,
  10-19  Insurance Code, are amended to read as follows:
  10-20        (g)  An action under this section is also subject to Chapter
  10-21  42, Civil Practice and Remedies Code.  <A person who receives the
  10-22  written notice provided by Subsection (e) of this section may
  10-23  tender, not later than the 30th day after the date of receipt of
  10-24  the notice, to the person seeking damages, a written offer of
  10-25  settlement, including an agreement to reimburse the person for any
  10-26  attorneys' fees reasonably incurred in asserting the claim to the
  10-27  date of the written notice.  A person who does not receive a
   11-1  written notice because the suit or counterclaim is filed as
   11-2  provided for by Subsection (f) of this section may tender, not
   11-3  later than the 30th day after the date of filing of the suit or
   11-4  counterclaim, a written offer of settlement, including an agreement
   11-5  to reimburse the person for any attorneys' fees reasonably incurred
   11-6  in asserting the claim to the date the suit or counterclaim was
   11-7  filed.  An offer of settlement is rejected if it is not accepted on
   11-8  or before the 30th day after the date of receipt by the person
   11-9  seeking damages.>
  11-10        (h)  <A rejected settlement offer made in compliance with
  11-11  Subsection (g) of this section may be filed with the court with an
  11-12  affidavit certifying its rejection.  If the court finds that the
  11-13  amount tendered in the settlement offer is the same or
  11-14  substantially the same as the actual damages found by the trier of
  11-15  fact, the plaintiff may not recover an amount that exceeds the
  11-16  lesser of:>
  11-17              <(1)  the amount tendered in the settlement offer; or>
  11-18              <(2)  the amount of actual damages found by the trier
  11-19  of fact.>
  11-20        <(i)>  The tender of an offer of settlement is not an
  11-21  admission of engaging in an unlawful act or practice or of
  11-22  liability under this Article.  <Evidence of a settlement offer may
  11-23  be introduced only to determine the reasonableness of the
  11-24  settlement offer as provided for by Subsection (h) of this
  11-25  section.>
  11-26        SECTION 4.  Chapter 105, Civil Practice and Remedies Code, is
  11-27  amended to read as follows:
   12-1            CHAPTER 105.  AWARD OF LITIGATION COSTS AGAINST
   12-2                   <FRIVOLOUS CLAIM BY> STATE AGENCY
   12-3        Sec. 105.001.  Definitions.  In this chapter:
   12-4              (1)  <"Fees and other expenses" means:>
   12-5                    <(A)  the reasonable expenses of witnesses
   12-6  incurred in preparing to testify or in attending or testifying;>
   12-7                    <(B)  a reasonable fee for the professional
   12-8  services of an expert witness; and>
   12-9                    <(C)  the reasonable costs of a study, analysis,
  12-10  engineering report, test, or other project the court finds to be
  12-11  necessary for the preparation of the party's case.>
  12-12              <(2)>  "Party" means an individual, partnership,
  12-13  corporation, association, or public or private organization other
  12-14  than a state agency.
  12-15              (2) <(3)>  "State agency" means a board, commission,
  12-16  department, office, or other agency that:
  12-17                    (A)  is in the executive branch of state
  12-18  government;
  12-19                    (B)  was created by the constitution or a statute
  12-20  of this state; and
  12-21                    (C)  has statewide jurisdiction.
  12-22        Sec. 105.002.  Recovery of Litigation Costs <Fees, Expenses,
  12-23  and Attorney's Fees>.  (a)  This chapter applies <A party> to a
  12-24  civil suit in a court of this state brought by or against a state
  12-25  agency in which the agency asserts a cause of action against a
  12-26  <the> party, either originally or as a counterclaim or cross
  12-27  claim<, is entitled to recover, in addition to all other costs
   13-1  allowed by law or rule, fees, expenses, and reasonable attorney's
   13-2  fees incurred by the party in defending the agency's action if:>
   13-3              <(1)  the court finds that the action is frivolous,
   13-4  unreasonable, or without foundation; and>
   13-5              <(2)  the action is dismissed or judgment is awarded to
   13-6  the party>.
   13-7        (b)  In a suit subject to this chapter litigation costs are
   13-8  recoverable by or against the state agency in the manner provided
   13-9  by Chapter 42.
  13-10        Sec. 105.003.  <Motion of Frivolous Claim><.  (a)  To recover
  13-11  under this chapter, the party must file a written motion alleging
  13-12  that the agency's claim is frivolous, unreasonable, or without
  13-13  foundation.  The motion may be filed at any time after the filing
  13-14  of the pleadings in which the agency's cause of action is alleged.>
  13-15        <(b)  The motion must set forth the facts that justify the
  13-16  party's claim.>
  13-17        <(c)  The motion must state that if the action is dismissed
  13-18  or judgment is awarded to the party, the party intends to submit a
  13-19  motion to the court to recover fees, expenses, and reasonable
  13-20  attorney's fees.>
  13-21        <Sec. 105.004.>  Payment of Litigation Costs.  The state
  13-22  agency shall pay the litigation costs <fees and expenses> from
  13-23  funds appropriated for operation of the agency, funds appropriated
  13-24  for the payment of costs <fees and expenses> under this chapter, or
  13-25  other funds available for that purpose.
  13-26        SECTION 5.  This Act takes effect September 1, 1993, and
  13-27  applies to all actions:
   14-1              (1)  commenced on or after the effective date of this
   14-2  Act; or
   14-3              (2)  pending on that effective date.
   14-4        SECTION 6.  (a)  The comptroller shall determine the
   14-5  percentage of an award of exemplary damages to be paid into the
   14-6  litigation costs fund in 1994, as required by Section 42.032, Civil
   14-7  Practice and Remedies Code, as added by this Act, on the basis of
   14-8  the comptroller's estimate of:
   14-9              (1)  the amount needed by the fund in 1994 to pay
  14-10  awards of litigation costs under Section 42.025, Civil Practice and
  14-11  Remedies Code, as added by this Act; and
  14-12              (2)  the amount of exemplary damages that will be
  14-13  awarded in 1994 in actions subject to Chapter 42, Civil Practice
  14-14  and Remedies Code, as added by this Act.
  14-15        (b)  Not later than December 31, 1993, the comptroller shall
  14-16  publish in the Texas Register the percentage of an award of
  14-17  exemplary damages to be paid into the litigation costs fund in
  14-18  1994.
  14-19        SECTION 7.  The importance of this legislation and the
  14-20  crowded condition of the calendars in both houses create an
  14-21  emergency   and   an   imperative   public   necessity   that   the
  14-22  constitutional rule requiring bills to be read on three several
  14-23  days in each house be suspended, and this rule is hereby suspended.