1-1 By: Lucio, et al. S.B. No. 31 1-2 (In the Senate - Filed January 11, 1995; January 16, 1995, 1-3 read first time and referred to Committee on Economic Development; 1-4 January 31, 1995, reported adversely, with favorable Committee 1-5 Substitute by the following vote: Yeas 11, Nays 0; 1-6 January 31, 1995, sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 31 By: Lucio 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to the assessment of attorney's fees, costs, and damages 1-11 for certain frivolous lawsuits and defenses. 1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-13 SECTION 1. Subtitle A, Title 2, Civil Practice and Remedies 1-14 Code, is amended by adding Chapter 10 to read as follows: 1-15 CHAPTER 10. CERTAIN FRIVOLOUS LAWSUITS AND DEFENSES 1-16 Sec. 10.001. DEFINITION. In this chapter, "litigant" means: 1-17 (1) a party that brings or defends an action or part 1-18 of an action; or 1-19 (2) an attorney representing that party. 1-20 Sec. 10.002. APPLICABILITY. This chapter applies to any 1-21 civil action unless other applicable law provides for an assessment 1-22 of attorney's fees, costs, or damages in an amount greater than 1-23 that which would be assessed pursuant to the provisions of this 1-24 chapter. 1-25 Sec. 10.003. ASSESSMENT OF ATTORNEY'S FEES, COSTS, AND 1-26 DAMAGES FOR FRIVOLOUS SUIT OR DEFENSE. (a) Except as provided by 1-27 Section 10.008, on the motion of any party or its own motion, a 1-28 court shall assess reasonable attorney's fees and costs against a 1-29 litigant who brings or defends an action or a part of an action in 1-30 a manner that the court finds: 1-31 (1) is frivolous, groundless in fact or in law, or 1-32 vexatious; 1-33 (2) is for delay or harassment; or 1-34 (3) unnecessarily expands the action because of 1-35 improper conduct by the litigant, including abuse of discovery 1-36 procedures. 1-37 (b) If the court makes the finding required by Subsection 1-38 (a), the court may also award additional damages for inconvenience, 1-39 harassment, and any out-of-pocket expense incurred. 1-40 (c) A party may make a motion under this section at any time 1-41 while proceedings are pending before the trial court. 1-42 (d) Attorney's fees, costs, or damages under this chapter 1-43 may not be awarded for the filing of a general denial under Rule 1-44 92, Texas Rules of Civil Procedure. 1-45 (e) Attorney's fees, costs, or damages under this chapter 1-46 may not be awarded if the court determines that a litigant has 1-47 asserted a claim or defense in good faith to establish a new theory 1-48 of law. 1-49 Sec. 10.004. FACTORS IN ASSESSING ATTORNEY'S FEES, COSTS, 1-50 AND DAMAGES. In determining whether to assess attorney's fees, 1-51 costs, or damages under Section 10.003 against a litigant who 1-52 brings or defends an action and the amount to be assessed, the 1-53 court shall consider: 1-54 (1) any effort by the litigant to determine the 1-55 validity of the action before bringing it; 1-56 (2) any effort by the litigant after the commencement 1-57 of the action to reduce the number of claims or defenses asserted 1-58 or to dismiss claims or defenses found invalid; 1-59 (3) the availability to the litigant of facts to 1-60 determine the validity of the action or defense; 1-61 (4) whether the litigant brought or defended the 1-62 action in bad faith; 1-63 (5) whether facts relating to the validity of the 1-64 action or defense were reasonably in conflict; 1-65 (6) the extent to which the litigant prevailed 1-66 compared with the number of claims in controversy and the amount of 1-67 the judgment; 1-68 (7) whether the litigant asserted a claim or defense 2-1 in a good faith attempt to establish a new theory of law; 2-2 (8) the amount or conditions of any offer of judgment 2-3 or settlement compared to the amount or conditions of any judgment; 2-4 (9) whether the litigant made a reasonable effort to 2-5 determine whether a party sued or joined to the action owed the 2-6 litigant a legally defined duty; and 2-7 (10) any effort by the litigant to reduce the number 2-8 of parties in the action. 2-9 Sec. 10.005. NOTICE AND HEARING REQUIREMENTS. (a) A court 2-10 may not assess attorney's fees, costs, or damages unless the court 2-11 gives the litigant against whom the award of attorney's fees, 2-12 costs, or damages would be made: 2-13 (1) notice; 2-14 (2) a reasonable opportunity to respond; and 2-15 (3) a hearing. 2-16 (b) Notice under this chapter must be given in accordance 2-17 with the Texas Rules of Civil Procedure. 2-18 Sec. 10.006. STATEMENT OF REASONS FOR AWARD. A court that 2-19 assesses attorney's fees, costs, or damages under this chapter 2-20 shall state the reasons for the assessment in writing. 2-21 Sec. 10.007. METHOD OF ASSESSMENT. (a) Attorney's fees, 2-22 costs, or damages assessed under this chapter are in addition to 2-23 any other fees, costs, or damages assessed by the court. 2-24 (b) A court may assess attorney's fees, costs, or damages 2-25 under this chapter directly against a litigant or the court may 2-26 include the fees, costs, or damages as a part of its judgment. 2-27 (c) A court may allocate attorney's fees, costs, or damages 2-28 assessed under this chapter among more than one litigant. 2-29 Sec. 10.008. EXCEPTION FOR PARTY APPEARING WITHOUT ATTORNEY. 2-30 (a) A court may not assess attorney's fees, costs, or damages 2-31 under this chapter against a party who is not represented by an 2-32 attorney unless the court finds that the party clearly knew or 2-33 reasonably should have known that action or part of an action 2-34 brought or defended by the party was frivolous, groundless in fact 2-35 or in law, or vexatious. 2-36 (b) This section does not apply to a party who is an 2-37 attorney. 2-38 Sec. 10.009. APPROVAL OF CERTAIN STIPULATIONS. (a) A court 2-39 may approve a written stipulation filed with the court or an oral 2-40 stipulation in open court agreeing to: 2-41 (1) no award of attorney's fees, costs, or damages as 2-42 provided by this chapter; or 2-43 (2) an award of attorney's fees, costs, or damages in 2-44 a manner different from that provided by this chapter. 2-45 (b) Once filed, the stipulation may not be withdrawn and 2-46 remains effective throughout the pendency of the litigation, unless 2-47 the court determines that the stipulation: 2-48 (1) was obtained by fraud; or 2-49 (2) is void on another ground that would void a 2-50 contract, other than the requirement for consideration necessary 2-51 for the formation of a contract. 2-52 Sec. 10.010. MANDATORY APPELLATE REVIEW. On timely filing 2-53 of an appeal or other submission to a court with appellate 2-54 jurisdiction, including a court of appeals or the supreme court, as 2-55 appropriate, the court with appellate jurisdiction shall review: 2-56 (1) the determination of a court to award or deny 2-57 attorney's fees, costs, or damages under this chapter; or 2-58 (2) the determination of an appellate court to uphold 2-59 or reverse an award or denial of attorney's fees, costs, or damages 2-60 under this chapter. 2-61 SECTION 2. This Act takes effect September 1, 1995, and 2-62 applies only to an action commenced on or after that date. An 2-63 action commenced before the effective date of this Act is governed 2-64 by the law in effect at the time the action was commenced, and that 2-65 law is continued in effect for that purpose. 2-66 SECTION 3. The importance of this legislation and the 2-67 crowded condition of the calendars in both houses create an 2-68 emergency and an imperative public necessity that the 2-69 constitutional rule requiring bills to be read on three several 2-70 days in each house be suspended, and this rule is hereby suspended. 3-1 * * * * *