By Sims S.B. No. 27
74R903 DLF-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to protection of injured parties by certain limitations on
1-3 the amount of attorney's contingency fees after a settlement or
1-4 settlement offer.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Title 6, Civil Practice and Remedies Code, is
1-7 amended by adding Chapter 137 to read as follows:
1-8 CHAPTER 137. INJURED PARTIES PROTECTION ACT
1-9 SUBCHAPTER A. GENERAL PROVISIONS
1-10 Sec. 137.001. DEFINITIONS. In this chapter:
1-11 (1) "Claimant" means a person, including a plaintiff,
1-12 counterclaimant, cross-claimant, or third-party claimant, seeking
1-13 compensation for damages for personal injury or death. The term
1-14 includes a party who is seeking compensation for a personal injury
1-15 to or death of a person other than the claimant. A person seeking
1-16 compensation for damages for personal injury or death is a claimant
1-17 without regard to whether a court action has been commenced.
1-18 (2) "Contingent fee" means a fee that is payable only
1-19 from the proceeds of a claimant's recovery.
1-20 (3) "Contingent-fee agreement" means a fee agreement
1-21 between an attorney and a claimant under which the attorney
1-22 receives a percentage of part or all of the claimant's recovery.
1-23 The term includes a fee collected under an hourly rate to the
1-24 extent the fee is payable only from the proceeds of the claimant's
2-1 recovery.
2-2 (4) "Contingent-fee attorney" means an attorney who
2-3 agrees to represent a claimant for a contingent fee.
2-4 (5) "Defendant" means:
2-5 (A) a person alleged by the claimant to be
2-6 responsible for at least part of the claimant's personal injury,
2-7 without regard to whether a court action has been commenced,
2-8 including a counter-defendant, cross-defendant, or third-party
2-9 defendant; and
2-10 (B) the insurer of a person described by
2-11 Paragraph (A), if known to the claimant or the claimant's attorney.
2-12 (6) "Fixed fee" means a fee paid to an attorney under
2-13 an agreement between the attorney and a claimant under which the
2-14 attorney performs a specific legal task in exchange for a specific
2-15 sum.
2-16 (7) "Health care provider" means a person who provides
2-17 health care under a license issued by this state, including a
2-18 person who is licensed to practice medicine under the Medical
2-19 Practice Act (Article 4495b, Vernon's Texas Civil Statutes) and a
2-20 general or special hospital licensed under Chapter 241, Health and
2-21 Safety Code.
2-22 (8) "Hourly rate" means a rate under which an attorney
2-23 is paid a fee computed by multiplying the hourly rate by the number
2-24 of hours that the attorney has worked for the claimant.
2-25 (9) "Postdemand settlement offer" means a settlement
2-26 offer made by a defendant to a claimant after the claimant's
2-27 attorney has made a demand for compensation under Section 137.021.
3-1 (10) "Postretention settlement offer" means a
3-2 settlement offer made by a defendant to a claimant after the
3-3 claimant has retained an attorney but before the claimant's
3-4 attorney has made a demand for compensation.
3-5 (11) "Preretention settlement offer" means a
3-6 settlement offer made by a defendant to a claimant before the
3-7 claimant has retained an attorney.
3-8 (12) "Recovery" means the amount of money obtained by
3-9 a claimant from a defendant for the claimant's injury or death,
3-10 including money obtained under a settlement agreement after any
3-11 reasonable expenses, other than attorney's fees, have been
3-12 deducted.
3-13 (13) "Settlement offer" means a written offer of
3-14 settlement.
3-15 Sec. 137.002. SCOPE OF CHAPTER. (a) This chapter does not
3-16 apply to an agreement between a claimant and an attorney to:
3-17 (1) retain the attorney on an hourly-rate or fixed-fee
3-18 basis solely to evaluate a preretention settlement offer; or
3-19 (2) retain the attorney to collect overdue amounts
3-20 from an accepted settlement offer.
3-21 (b) This chapter does not apply to contingent-fee agreements
3-22 in cases in which a settlement offer is not made.
3-23 (c) This chapter does not apply to a claim for which an
3-24 attorney is not retained.
3-25 Sec. 137.003. SHORT TITLE. This chapter may be cited as the
3-26 Injured Parties Protection Act.
3-27 Sec. 137.004. WRITTEN COMMUNICATION. A person required by
4-1 this chapter to send a written communication must send the
4-2 communication by United States certified mail.
4-3 Sec. 137.005. WHEN ATTORNEY RETAINED. For purposes of this
4-4 chapter, a contingent-fee attorney is retained at the time a
4-5 claimant consults the attorney to seek professional services for
4-6 the claim.
4-7 Sec. 137.006. HOURLY RATE. (a) An hourly rate may be
4-8 established by agreement or by operation of law.
4-9 (b) A contingent-fee attorney who has not entered into a
4-10 written agreement with a claimant at the time the attorney is
4-11 retained that states the attorney's hourly rate is entitled to an
4-12 hourly rate that is reasonable.
4-13 (Sections 137.007-137.020 reserved for expansion
4-14 SUBCHAPTER B. DEMAND FOR COMPENSATION
4-15 Sec. 137.021. DEMAND FOR COMPENSATION. (a) A
4-16 contingent-fee attorney shall send a written demand for
4-17 compensation to a defendant.
4-18 (b) The attorney may make the demand at any time after the
4-19 attorney is retained by the claimant. The attorney must make the
4-20 demand before a resolution of the claim is reached.
4-21 (c) The attorney shall provide a copy of each demand for
4-22 compensation to the claimant and to each defendant at the time the
4-23 demand for compensation is sent.
4-24 Sec. 137.022. CONTENTS OF DEMAND. (a) The demand for
4-25 compensation must state the material facts relevant to the claim,
4-26 including:
4-27 (1) the name, address, age, marital status, and
5-1 occupation of the claimant or of the injured or deceased person, as
5-2 appropriate;
5-3 (2) the amount of compensation requested;
5-4 (3) a brief description of how the injury or death
5-5 occurred;
5-6 (4) the names and, if known, the addresses, telephone
5-7 numbers, and occupations of all known witnesses to the injury or
5-8 death;
5-9 (5) copies of photographs in the claimant's possession
5-10 that relate to the injury or death;
5-11 (6) the basis for claiming that the defendant to whom
5-12 the claim is addressed is responsible for the injury or death;
5-13 (7) a description of the injury or death;
5-14 (8) the names and addresses of each health care
5-15 provider that provided medical care to the claimant or injured or
5-16 deceased person, including the date and nature of the service;
5-17 (9) medical records involving a prior injury or
5-18 pre-existing medical condition that a defendant would be able to
5-19 introduce into evidence in a trial or executed releases allowing
5-20 the defendant to obtain the records directly from each health care
5-21 provider that provided care; and
5-22 (10) if the demand for compensation includes an amount
5-23 for medical expenses, lost wages, or other special damages suffered
5-24 because of the injury or death, documents that are relevant to
5-25 these losses, including records of earnings for a self-employed
5-26 claimant and employer records of earnings for an employed claimant.
5-27 (b) An attorney who does not include the information
6-1 required by Subsection (a) in a demand for compensation is subject
6-2 to sanctions for failure to comply with a proper discovery request
6-3 under Rule 215 2.b., Texas Rules of Civil Procedure.
6-4 Sec. 137.023. FAILURE TO MAKE DEMAND FOR COMPENSATION. A
6-5 contingent-fee attorney may not receive a fee greater than 10
6-6 percent of the claimant's recovery, if the attorney:
6-7 (1) does not make a demand for compensation under this
6-8 subchapter; or
6-9 (2) omits from the demand material information
6-10 required by Section 137.022 that is:
6-11 (A) in the possession of the attorney; or
6-12 (B) readily available to the attorney.
6-13 (Sections 137.024-137.040 reserved for expansion
6-14 SUBCHAPTER C. POSTDEMAND SETTLEMENT OFFER
6-15 Sec. 137.041. POSTDEMAND SETTLEMENT OFFER. (a) Not later
6-16 than the 60th day after the date a defendant receives a demand for
6-17 compensation, the defendant may make a written postdemand
6-18 settlement offer.
6-19 (b) The defendant shall send the postdemand settlement offer
6-20 to the claimant's attorney and shall send a copy of the offer to
6-21 the claimant.
6-22 (c) If the defendant, by written notice to the claimant's
6-23 attorney, requests a medical examination of the claimant before the
6-24 31st day after the date that the defendant received the demand for
6-25 compensation, the claimant must be available for the examination
6-26 not later than the 10th day after the date the attorney receives
6-27 the notice.
7-1 (d) The time for making a postdemand settlement offer
7-2 provided by Subsection (a) is extended by:
7-3 (1) one day for each day that the claimant is not
7-4 available for the examination after the expiration of the period
7-5 required by Subsection (c); and
7-6 (2) an additional 10 days after the date of the
7-7 completion of the medical examination.
7-8 (e) A postdemand offer must state the last date on which the
7-9 offer may be accepted or that the offer may be accepted until
7-10 notice of withdrawal of the offer is given. The offer may not
7-11 expire before the 31st day after the date the offer is received by
7-12 the claimant's attorney.
7-13 Sec. 137.042. INCREASE IN POSTDEMAND SETTLEMENT OFFER. (a)
7-14 A defendant may send an additional postdemand settlement offer that
7-15 increases the amount of the postdemand settlement offer during the
7-16 period in Section 137.041(a) and (d).
7-17 (b) The defendant shall send the additional postdemand
7-18 settlement offer to the claimant's attorney and shall send a copy
7-19 of the offer to the claimant.
7-20 (c) Unless the additional postdemand settlement offer
7-21 provides a longer period for acceptance, a claimant may accept the
7-22 additional settlement offer before the later of:
7-23 (1) the 11th day after the date the claimant's
7-24 attorney received the additional postdemand settlement offer; or
7-25 (2) the 31st day after the date the claimant's
7-26 attorney received the initial postdemand settlement offer.
7-27 Sec. 137.043. MATERIAL TO ACCOMPANY POSTDEMAND SETTLEMENT
8-1 OFFER. (a) A defendant and the defendant's attorney must include
8-2 with a postdemand settlement offer copies of materials in their
8-3 possession concerning the alleged personal injury that the
8-4 defendant relied on in making the offer.
8-5 (b) The defendant and the defendant's attorney are not
8-6 required to provide material that they believe in good faith would
8-7 not be discoverable by the claimant during the course of
8-8 litigation.
8-9 (c) If the cost of reproducing the material is significant
8-10 in relation to the amount of the offer, the defendant may offer
8-11 other means of access to the materials. The alternative means of
8-12 access must be convenient and provided at reasonable cost to the
8-13 claimant's attorney.
8-14 Sec. 137.044. FAILURE TO INCLUDE MATERIAL WITH POSTDEMAND
8-15 SETTLEMENT OFFER. (a) If a defendant does not comply with Section
8-16 137.043 in making a postdemand settlement offer:
8-17 (1) the claimant may revoke acceptance of the offer
8-18 not later than the second anniversary of acceptance of the offer;
8-19 (2) the defendant is liable for fees and costs
8-20 reasonably incurred by the claimant in revoking its acceptance of
8-21 the offer and reinstating its claim; and
8-22 (3) the claimant may bring an action against the
8-23 defendant for the value of the claim less any amount paid in
8-24 settlement if, before the 31st day after the date that the claimant
8-25 discovers the defendant's failure to comply with Section 137.043,
8-26 the claimant is precluded from reinstating the claim because of a
8-27 statute of limitations.
9-1 (b) Failure of a defendant or the defendant's attorney to
9-2 comply with Section 137.043 subjects the defendant or attorney to
9-3 the sanctions for failure to comply with a proper discovery request
9-4 under Rule 215 2.b., Texas Rules of Civil Procedure.
9-5 Sec. 137.045. ATTORNEY'S FEE AFTER POSTDEMAND SETTLEMENT
9-6 OFFER ACCEPTED. Except as provided by Sections 137.063 and
9-7 137.064, a claimant who accepts a postdemand settlement offer is
9-8 not required to pay the attorney a fee greater than the lesser of:
9-9 (1) the hourly rate; or
9-10 (2) 10 percent of the first $100,000 of the recovery
9-11 plus five percent of any amount above $100,000.
9-12 Sec. 137.046. DEFENDANT NOT REQUIRED TO MAKE POSTDEMAND
9-13 SETTLEMENT OFFER. (a) A defendant is not required to make a
9-14 postdemand settlement offer.
9-15 (b) A defendant's failure to make a settlement offer is not
9-16 admissible in the trial of the underlying claim and may not be used
9-17 to impose liability on the defendant in subsequent legal
9-18 proceedings or a subsequent arbitration.
9-19 (Sections 137.047-137.060 reserved for expansion
9-20 SUBCHAPTER D. OTHER SETTLEMENT OFFERS
9-21 Sec. 137.061. EFFECT OF POSTRETENTION SETTLEMENT OFFER. A
9-22 postretention settlement offer has the same effect as a postdemand
9-23 settlement offer under this chapter if the postretention offer:
9-24 (1) may be accepted during a period of not less than
9-25 60 days after the date the offer is received; and
9-26 (2) complies with the requirements of Section 137.043.
9-27 Sec. 137.062. PRERETENTION SETTLEMENT OFFER. (a) An
10-1 attorney may not enter into a contingent-fee agreement for a fee
10-2 payable from the proceeds of a preretention settlement offer.
10-3 (b) Subsection (a) applies only if the preretention
10-4 settlement offer remains in effect at least until the date that a
10-5 postdemand settlement offer must be made under Section 137.041.
10-6 (c) An attorney may not enter into a fee agreement that
10-7 results in a claimant's paying a percentage of a preretention
10-8 settlement offer.
10-9 (d) An attorney may contract with a claimant to receive an
10-10 hourly rate or fixed fee for advising the claimant regarding a
10-11 preretention settlement offer.
10-12 (e) An attorney may contract with a claimant to receive a
10-13 contingent fee applicable to the amount of the claimant's recovery
10-14 that exceeds a preretention settlement offer.
10-15 Sec. 137.063. ATTORNEY'S FEE AFTER SUBSEQUENT SETTLEMENT
10-16 OFFER ACCEPTED. Except as provided by Section 137.064, a claimant
10-17 who received a preretention settlement offer and who later accepts
10-18 a postdemand settlement offer is not required to pay the attorney a
10-19 fee greater than the lesser of:
10-20 (1) the hourly rate; or
10-21 (2) 20 percent of the amount the postdemand settlement
10-22 offer exceeds the amount of the preretention settlement offer.
10-23 Sec. 137.064. ATTORNEY'S FEE AFTER SUBSEQUENT RESOLUTION OF
10-24 THE CLAIM. (a) This section applies without regard to whether a
10-25 defendant makes a preretention settlement offer if:
10-26 (1) a postdemand settlement offer is rejected and a
10-27 later settlement offer is accepted; or
11-1 (2) there is a judgment in favor of the claimant.
11-2 (b) The claimant is not required to pay the attorney a fee
11-3 greater than the total of:
11-4 (1) the amount of the fee computed under Section
11-5 137.045 had the rejected postdemand settlement offer been accepted,
11-6 to the extent the amount of the recovery does not exceed the amount
11-7 of that offer; and
11-8 (2) the product of multiplying the contingent-fee
11-9 percentage by the amount by which recovery exceeds the rejected
11-10 postdemand settlement offer.
11-11 (Sections 137.065-137.080 reserved for expansion
11-12 SUBCHAPTER E. CLOSING STATEMENT
11-13 Sec. 137.081. CLOSING STATEMENT. Before payment of a
11-14 recovery, a contingent-fee attorney shall provide the claimant with
11-15 a written statement detailing how the proceeds are to be
11-16 distributed, including:
11-17 (1) the amount of the expenses paid out or to be paid
11-18 out of the proceeds;
11-19 (2) the amount of the attorney's fee;
11-20 (3) how the fee is calculated; and
11-21 (4) the amount due the claimant.
11-22 (Sections 137.082-137.100 reserved for expansion
11-23 SUBCHAPTER F. FEES CHARGED IN VIOLATION OF CHAPTER
11-24 Sec. 137.101. ILLEGAL FEES. (a) A contingent fee charged
11-25 in violation of this chapter is an illegal fee for purposes of the
11-26 Rules of the State Bar of Texas.
11-27 (b) A contingent-fee attorney who charges a fee in violation
12-1 of this chapter is liable for reasonable fees and costs incurred to
12-2 establish that the fee violated this chapter.
12-3 SECTION 2. (a) This Act takes effect September 1, 1995, and
12-4 applies only to a claim for which a claimant retains an attorney on
12-5 or after that date. A claim for which a claimant has retained an
12-6 attorney before the effective date of this Act is governed by the
12-7 law in effect at the time the action accrued, and that law is
12-8 continued in effect for that purpose.
12-9 (b) An attorney is retained before the effective date of
12-10 this Act for purposes of this section if any attorney, including an
12-11 attorney who has withdrawn, was retained by the claimant to handle
12-12 the claim.
12-13 SECTION 3. The importance of this legislation and the
12-14 crowded condition of the calendars in both houses create an
12-15 emergency and an imperative public necessity that the
12-16 constitutional rule requiring bills to be read on three several
12-17 days in each house be suspended, and this rule is hereby suspended.