By Hirschi H.B. No. 1469 74R3305 DLF-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to false claims made with certain state governmental 1-3 entities. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subtitle F, Title 10, Government Code, is 1-6 amended by adding Chapter 2258 to read as follows: 1-7 CHAPTER 2258. FALSE CLAIMS 1-8 SUBCHAPTER A. GENERAL PROVISIONS 1-9 Sec. 2258.001. DEFINITIONS. In this chapter: 1-10 (1) "Claim" means a claim for money, property, or 1-11 services made to: 1-12 (A) an employee, officer, or agent of a 1-13 governmental entity; or 1-14 (B) a government contractor, if a portion of the 1-15 money, property, or services claimed was or is to be provided by a 1-16 governmental entity. 1-17 (2) "Government contractor" means a person who 1-18 receives money from a governmental entity to provide goods or a 1-19 service, acting within the course and scope of the person's 1-20 obligation to the governmental entity. The term includes a 1-21 contractor, grantee, or other recipient of money without regard to 1-22 whether the contractor, grantee, or recipient is under contract to 1-23 the governmental entity. 1-24 (3) "Governmental entity" means: 2-1 (A) the state; 2-2 (B) a board, commission, department, office, or 2-3 other agency in the executive branch of state government, including 2-4 an institution of higher education as defined by Section 61.003, 2-5 Education Code; 2-6 (C) the legislature or a legislative agency; or 2-7 (D) the supreme court, the court of criminal 2-8 appeals, a court of appeals, or the State Bar of Texas or another 2-9 judicial agency having statewide jurisdiction. 2-10 (4) "Managing official" means an appointed or elected 2-11 official responsible for the management or oversight of a 2-12 governmental entity. In the case of the legislature, the term 2-13 means the speaker of the house of representatives or the lieutenant 2-14 governor. In the case of a court, the term means any judge or 2-15 justice of the court. 2-16 Sec. 2258.002. PROHIBITED ACTS. A person may not: 2-17 (1) present to an officer, employee, or agent of a 2-18 governmental entity or government contractor a false claim for 2-19 payment or approval; 2-20 (2) make or use a false record or statement to obtain 2-21 payment or approval of a false claim by a governmental entity or 2-22 government contractor; 2-23 (3) conspire to defraud a governmental entity or 2-24 government contractor by obtaining the payment or approval of a 2-25 false claim; 2-26 (4) deliver to a governmental entity or government 2-27 contractor less property than the amount of property for which the 3-1 person receives a receipt; 3-2 (5) make or deliver a receipt that falsely represents 3-3 the amount of property delivered that is to be used by a 3-4 governmental entity or government contractor; 3-5 (6) buy or accept as a pledge of an obligation or debt 3-6 public property from a person who may not sell or pledge the 3-7 property; 3-8 (7) make or use a false record or statement to 3-9 conceal, avoid, or decrease an obligation to pay or transmit money 3-10 or property to a governmental entity or government contractor; or 3-11 (8) cause an act described by Subdivisions (1) through 3-12 (7) to be committed by another person. 3-13 (Sections 2258.003-2258.010 reserved for expansion 3-14 SUBCHAPTER B. LIABILITY FOR VIOLATIONS 3-15 Sec. 2258.011. LIABILITY FOR KNOWING VIOLATION. (a) A 3-16 court that finds that a person knowingly violated Section 2258.002 3-17 shall award the affected governmental entity: 3-18 (1) the actual damages sustained by the governmental 3-19 entity because of the violation; 3-20 (2) exemplary damages equal to two times the amount of 3-21 actual damages; and 3-22 (3) reasonable expenses, attorney's fees, and costs 3-23 incurred by the governmental entity to recover the damages and 3-24 penalty. 3-25 (b) The court may reduce the amount of exemplary damages 3-26 awarded under Subsection (a)(2) to an amount not less than the 3-27 amount of actual damages if the person who knowingly violated 4-1 Section 2258.002: 4-2 (1) furnished an official of the governmental entity 4-3 responsible for investigating false claims violations with all 4-4 information known to the person about the violation not later than 4-5 the 30th day after the official requested the information; and 4-6 (2) otherwise fully cooperated with any investigation 4-7 by the governmental entity. 4-8 (c) A person knowingly violates Section 2258.002 if the 4-9 person: 4-10 (1) acts with actual knowledge of the facts that 4-11 constitute the violation; or 4-12 (2) acts in deliberate ignorance or reckless disregard 4-13 of those facts or the truth or falsity of those facts. 4-14 Sec. 2258.012. CIVIL PENALTY. In addition to amounts 4-15 awarded under Section 2258.011, the court shall award to the 4-16 affected governmental entity a civil penalty of at least $5,000 but 4-17 not more than $10,000 for each false claim unless the person who 4-18 knowingly violated Section 2258.002 cooperated in the investigation 4-19 as described by Sections 2258.011(b)(1) and (2). 4-20 Sec. 2258.013. LIABILITY JOINT AND SEVERAL. Liability under 4-21 this subchapter is joint and several for a violation committed by 4-22 more than one person. 4-23 Sec. 2258.014. DEPOSIT OF MONEY. Money collected on behalf 4-24 of a governmental entity shall be deposited to the credit of the 4-25 general revenue fund. 4-26 (Sections 2258.015-2258.020 reserved for expansion 4-27 SUBCHAPTER C. ATTORNEY GENERAL ACTION 5-1 Sec. 2258.021. ATTORNEY GENERAL INVESTIGATION. (a) The 5-2 attorney general shall investigate alleged violations of Section 5-3 2258.002. 5-4 (b) If the attorney general finds that a person has violated 5-5 Section 2258.002, the attorney general may bring an action under 5-6 Subchapter B against the person. 5-7 (Sections 2258.022-2258.030 reserved for expansion 5-8 SUBCHAPTER D. ACTION BY PRIVATE PERSON 5-9 Sec. 2258.031. PRIVATE CAUSE OF ACTION. A person may bring 5-10 an action for a violation of Section 2258.002 on behalf of the 5-11 person and the state. 5-12 Sec. 2258.032. COMPLAINT; SERVICE ON ATTORNEY GENERAL. (a) 5-13 A complaint filed under Section 2258.031 shall be filed in camera 5-14 and shall remain under seal until the day after the last day the 5-15 attorney general may intervene under Section 2258.033 or 2258.034. 5-16 (b) A copy of the complaint, with a written disclosure of 5-17 substantially all material evidence in the possession of the 5-18 plaintiff, shall be served on the attorney general not later than 5-19 the fifth day after the date the complaint is filed. 5-20 (c) Citation may not be served on the defendant except on 5-21 order of the court. 5-22 Sec. 2258.033. INTERVENTION BY ATTORNEY GENERAL. (a) Not 5-23 later than the 60th day after the date the attorney general 5-24 receives the complaint and the written disclosure of the evidence 5-25 under Section 2258.032(b), the attorney general shall notify the 5-26 court and the plaintiff: 5-27 (1) that the attorney general will conduct the action 6-1 in the name of the state; or 6-2 (2) that the attorney general declines to conduct the 6-3 action. 6-4 (b) If the attorney general notifies the court that the 6-5 attorney general will conduct the action, the attorney general 6-6 shall assume primary responsibility for conducting the action. If 6-7 the attorney general declines to conduct the action, the plaintiff 6-8 may continue to conduct the action. 6-9 (c) On motion of the attorney general for good cause shown, 6-10 the attorney general may intervene in an action under this 6-11 subchapter at any time. Intervention under this subsection does 6-12 not limit the right of the private plaintiff to conduct the action. 6-13 (d) A person other than the attorney general may not 6-14 intervene in an action brought under this subchapter. 6-15 Sec. 2258.034. EXTENSIONS OF TIME. On motion of the 6-16 attorney general, for good cause shown, the court may extend the 6-17 period during which the complaint remains under seal under this 6-18 subchapter. A motion made under this section, and any affidavit 6-19 supporting the motion, must be filed in camera. 6-20 Sec. 2258.035. DISMISSAL; SETTLEMENT. (a) An action 6-21 conducted by a private person under Section 2258.031 may be 6-22 dismissed at the request of the parties only on order of the court. 6-23 The court may not dismiss an action under this section unless the 6-24 written consent of the attorney general, stating the attorney 6-25 general's reasons for consenting, has been filed with the court. 6-26 (b) An action conducted by the attorney general may be 6-27 dismissed only after notice to the private plaintiff and the 7-1 private plaintiff has been provided an opportunity for a hearing. 7-2 (c) The attorney general may settle an action under this 7-3 chapter, without regard to the objection of the private plaintiff, 7-4 if the court determines, after hearing, that the settlement is 7-5 fair, adequate, and reasonable under the circumstances. On a 7-6 showing of good cause, a hearing under this subsection may be held 7-7 in camera. 7-8 Sec. 2258.036. PARTICIPATION OF PRIVATE PLAINTIFF. (a) The 7-9 court may limit the participation of a private plaintiff in an 7-10 action conducted by the attorney general if: 7-11 (1) the attorney general establishes that the private 7-12 plaintiff's participation would: 7-13 (A) interfere with or unduly delay the attorney 7-14 general's prosecution of the action; or 7-15 (B) be repetitious, irrelevant, or for the 7-16 purpose of harassment; or 7-17 (2) the defendant establishes that the private 7-18 plaintiff's participation would be for the purpose of harassment or 7-19 would result in an undue burden on or unnecessary expense to the 7-20 defendant. 7-21 (b) The court may limit the participation of a private 7-22 plaintiff under this section in any appropriate manner, including: 7-23 (1) limiting the number of witnesses the private 7-24 plaintiff may call; 7-25 (2) limiting the length of testimony of the private 7-26 plaintiff's witnesses; or 7-27 (3) limiting the private plaintiff's cross-examination 8-1 of a witness. 8-2 Sec. 2258.037. ACTION CONDUCTED BY PRIVATE PLAINTIFF; 8-3 PROVISION OF DOCUMENTS TO ATTORNEY GENERAL. In an action conducted 8-4 by a private plaintiff, the plaintiff shall, at the request of the 8-5 attorney general, serve the attorney general with all pleadings 8-6 filed in the action and provide the attorney general, at the 8-7 attorney general's expense, with copies of deposition transcripts. 8-8 Sec. 2258.038. SUSPENSION OF DISCOVERY. (a) On motion of 8-9 the attorney general, the court may stay discovery in an action 8-10 under this subchapter if the attorney general demonstrates that 8-11 discovery conducted by the private plaintiff would interfere with 8-12 the investigation or prosecution of a criminal or civil matter 8-13 arising out of the same facts. 8-14 (b) Suspension of discovery under this section may not 8-15 exceed 60 days, except that the court may extend the suspension if 8-16 the attorney general demonstrates that: 8-17 (1) the state has pursued the investigation or 8-18 prosecution with reasonable diligence; and 8-19 (2) discovery conducted by the private plaintiff would 8-20 interfere with the investigation or prosecution. 8-21 (c) A motion made under this section shall be filed in 8-22 camera, and any hearing under this section must be held in camera. 8-23 Sec. 2258.039. ALTERNATE REMEDY. (a) The state may elect 8-24 to pursue an alternate remedy to a violation of Section 2258.002, 8-25 including an administrative proceeding to obtain a civil penalty 8-26 under another applicable law. 8-27 (b) If an alternate civil remedy is pursued, the private 9-1 plaintiff may participate in that proceeding to the same extent and 9-2 subject to the same limitations as a plaintiff in an action 9-3 conducted by the attorney general under this subchapter. 9-4 Sec. 2258.040. AWARD TO PRIVATE PLAINTIFF IF ATTORNEY 9-5 GENERAL ASSUMES RESPONSIBILITY FOR ACTION. (a) Except as provided 9-6 by Subsection (b), in an action for which the attorney general 9-7 assumes primary responsibility, the court shall award the private 9-8 plaintiff a portion of the recovery, including any recovery 9-9 obtained by settlement, equal to at least 15 percent but not more 9-10 than 25 percent of the recovery. In making the award, the court 9-11 shall consider the extent to which the private plaintiff 9-12 substantially contributed to the prosecution of the action. 9-13 (b) The court's award to the private plaintiff may not 9-14 exceed 10 percent of the recovery if the court finds that the 9-15 action is based primarily on disclosure of specific information, 9-16 other than information for which the private plaintiff is the 9-17 original source under Section 2258.044, in: 9-18 (1) a criminal, civil, or administrative proceeding; 9-19 (2) a governmental report or audit; or 9-20 (3) a report published by a private entity. 9-21 (c) The court shall also award to the private plaintiff 9-22 reasonable expenses, attorney's fees, and costs. This award shall 9-23 be paid by the defendant. 9-24 Sec. 2258.041. AWARD IN ACTION CONDUCTED BY PRIVATE 9-25 PLAINTIFF. (a) In an action in which the attorney general does 9-26 not assume primary responsibility under this subchapter, the court 9-27 shall award the private plaintiff a portion of the recovery, 10-1 including any recovery obtained by settlement, equal to at least 25 10-2 percent but not more than 30 percent of the recovery to compensate 10-3 the plaintiff for conducting the action. 10-4 (b) The court shall also award to the private plaintiff 10-5 reasonable expenses, attorney's fees, and costs. This award shall 10-6 be paid by the defendant. 10-7 Sec. 2258.042. REDUCTION IN PAYMENT TO PRIVATE PLAINTIFF. 10-8 (a) The court may reduce the amount paid to a private plaintiff 10-9 under Section 2258.040 or 2258.041 if the court finds that the 10-10 private plaintiff planned or initiated the violation of Section 10-11 2258.002. 10-12 (b) In making a reduction under this section, the court 10-13 shall consider the role of the private plaintiff in advancing the 10-14 action and any relevant circumstance relating to the violation. 10-15 (c) If the private plaintiff is convicted of an offense in 10-16 connection with activity that is a violation of Section 2258.002, 10-17 the private plaintiff may not recover under this subchapter and may 10-18 be dismissed from the action on motion of any party. 10-19 Sec. 2258.043. FRIVOLOUS ACTIONS; ATTORNEY'S FEES. (a) In 10-20 an action in which the attorney general does not assume primary 10-21 responsibility under this subchapter, the court shall award 10-22 reasonable expenses, attorney's fees, and costs to the defendant 10-23 if: 10-24 (1) the defendant prevails in the action; and 10-25 (2) the court finds that the action was: 10-26 (A) groundless and brought in bad faith; or 10-27 (B) groundless and brought for the purpose of 11-1 harassment. 11-2 (b) The private plaintiff shall pay an award made under this 11-3 section. 11-4 (c) In this section, "groundless" means: 11-5 (1) having no basis in fact; or 11-6 (2) not warranted by existing law or a good faith 11-7 argument for the extension, modification, or reversal of existing 11-8 law. 11-9 Sec. 2258.044. CERTAIN ACTIONS BARRED. (a) A private 11-10 plaintiff may not bring an action against a managing official under 11-11 this subchapter if the action is based on information known to the 11-12 attorney general or another government official with authority to 11-13 investigate the matter at the time the action is brought. 11-14 (b) A private plaintiff may not bring an action under this 11-15 subchapter if the subject matter of the action is the subject of a 11-16 civil, administrative, or criminal action previously brought in the 11-17 name of the state. 11-18 (c) A private plaintiff may not bring an action under this 11-19 subchapter if the action is based solely on disclosures of specific 11-20 information, other than information for which the private plaintiff 11-21 is the original source, in: 11-22 (1) a criminal, civil, or administrative proceeding; 11-23 (2) a governmental report or audit; or 11-24 (3) a report published by a private entity. 11-25 (d) For purposes of Subsection (c), a person is the original 11-26 source of information if the person has direct and independent 11-27 knowledge of the information and has voluntarily provided the 12-1 information to the attorney general or another appropriate 12-2 government official before filing an action under this subchapter. 12-3 Sec. 2258.045. STATE NOT LIABLE FOR EXPENSES. The state is 12-4 not liable for and may not pay a private plaintiff's expenses 12-5 incurred in bringing an action under this subchapter. 12-6 (Sections 2258.046-2258.060 reserved for expansion 12-7 SUBCHAPTER E. INTERFERENCE WITH DISCLOSURE BY EMPLOYEES 12-8 Sec. 2258.061. RIGHT TO DISCLOSE INFORMATION AND PARTICIPATE 12-9 IN ACTION. A person is entitled to: 12-10 (1) disclose information relevant to an alleged 12-11 violation of Section 2258.002 to a governmental entity, the 12-12 attorney general, or a law enforcement agency; or 12-13 (2) testify or otherwise participate in the 12-14 furtherance of an action filed or to be filed under this chapter. 12-15 Sec. 2258.062. PROHIBITED CONDUCT BY EMPLOYER. (a) An 12-16 employer may not: 12-17 (1) adopt or enforce a rule or policy that prevents an 12-18 employee from exercising the employee's rights under Section 12-19 2258.061; or 12-20 (2) discriminate against an employee, including 12-21 discharging, demoting, suspending, threatening, harassing, or 12-22 denying promotion to the employee, because the employee has 12-23 exercised the employee's rights under Section 2258.061. 12-24 (b) An employer who violates Subsection (a) is liable to the 12-25 employee for: 12-26 (1) actual damages, including damages for lost wages; 12-27 (2) reinstatement to employment with the seniority 13-1 status, if applicable, that the employee would have had in the 13-2 absence of the discrimination; 13-3 (3) exemplary damages equal to not less than two times 13-4 the amount of lost wages; and 13-5 (4) reasonable expenses, attorney's fees, and costs. 13-6 SECTION 2. This Act takes effect September 1, 1995, and 13-7 applies only to conduct that occurs on or after that date. Conduct 13-8 that occurred before the effective date of this Act is governed by 13-9 the law applicable to the conduct immediately before the effective 13-10 date of this Act, and that law is continued in effect for that 13-11 purpose. 13-12 SECTION 3. The importance of this legislation and the 13-13 crowded condition of the calendars in both houses create an 13-14 emergency and an imperative public necessity that the 13-15 constitutional rule requiring bills to be read on three several 13-16 days in each house be suspended, and this rule is hereby suspended.