ZEM H.B. 494 75(R)BILL ANALYSIS CIVIL PRACTICES H.B. 494 By: Alvarado 3-25-97 Committee Report (Unamended) BACKGROUND Texas does not have a statutory provision addressing false claims against state and local entities. Currently, there is no offense or remedy under which a governmental entity can find relief when a false claim for money, property, or services is brought against that governmental entity. PURPOSE Creates an offense and remedies for exposing and prosecuting false claims against state and local entities and their agents. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant 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. FALSE CLAIMS SUBCHAPTER A. GENERAL PROVISIONS Sec. 2259.001 Defines "claim," "government contractor," "governmental entity," "local governmental entity," "managing official," and "prosecuting authority." Sec. 2259.002 Sets out the Subchapter's prohibited acts (9). Sec. 2259.003- 2259.010 Reserves sections for expansion. SUBCHAPTER B. LIABILITY FOR VIOLATIONS Sec. 2259.011 (a) Provides that a court shall grant the following awards to a government entity when a person knowingly violates Sec. 2259.002: (1) actual damages suffered by the government entity due to the violation; (2) exemplary damages equal to two times the amount of actual damages; and (3) attorney's fees and costs of the government entity incurred to recover the damages and penalty. (b) Provides reduction of exemplary damages of (a)(2) to an amount not less than the actual damages if the person who knowingly violated Sec. 2259.002: (1) assists in the investigation of the false claim within 30 days of a request for such assistance; and (2) otherwise fully cooperates in any investigation by the government entity. (c) Provides that a person knowingly violates Sec. 2259.002 if the person: (1) acts with actual knowledge of the violation; (2) acts with deliberate ignorance or reckless disregard of the violation; or (3) acts without actual knowledge, but after the violation, learns of the violation and does not take action to mitigate or rectify the violation. Sec. 2259.012 Provides the court with the option of awarding an additional $10,000 civil penalty for each false claim if the violator of Sec. 2259.002 does not cooperate in the investigation as described in Secs. 2259.011(b)(1) and (2). Sec. 2259.013 Provides that if a violation is committed by more than one person, the liability under this subchapter is joint and several. Specifies that comparative responsibility is not applicable. Sec. 2259.014 (a) Exempts attorney's fees and costs, exemplary damages and the $10,000 civil penalty awards under Secs. 2259.011 and 2259.012 if actual damages are less than $500. (b) Provides that this chapter does not apply to Texas workers' compensation laws. Sec. 2259.015 (a) Specifies where collected money shall be deposited. (b) Specifies how collected money shall be apportioned if the action is brought in the names of both the state and one or more local governmental entities. Sec. 2259.016 Specifies the deadlines for bringing an action under this subchapter. Sec. 2259.017 Provides that Chapter 41, Civil Practice and Remedies Code, is inapplicable to the exemplary damages and civil penalty awards of this Chapter. Secs. 2259.018- 2259.020 Reserves sections for expansion. SUBCHAPTER C. ATTORNEY GENERAL ACTION Sec. 2259.021 (a) Provides that the attorney general shall investigate alleged violations of Sec. 2259.002 involving state funds. (b) Provides that if the attorney general determines that there is a violation of Sec. 2259.002, the attorney general may bring Subchapter B action. Sec. 2259.022 (a) Provides that if the attorney general brings Subsection B action on a claim involving both local government and state funds, the attorney general shall provide a copy of the complaint to the appropriate prosecuting authority. (b) Provides when and how the attorney general shall mail the complaint to the prosecuting authority. (c) Specifies when the prosecuting authority may intervene in an action brought by the attorney general. Secs. 2259.023- 2259.030 Reserves sections for expansion. SUBCHAPTER D. ACTION BROUGHT BY PROSECUTING AUTHORITY Sec. 2259.031 (a) Provides that a prosecuting authority shall investigate alleged violations of Sec. 2259.002 involving local government funds. (b) Provides that if the prosecuting authority determines that there is a violation of Sec. 2259.002, the prosecuting authority may bring Subchapter B action. Sec. 2259.032 (a) Provides that if the prosecuting authority brings Subchapter B action on a claim involving both local government and state funds, the prosecuting authority shall provide a copy of the compliant to the attorney general. (b) Provides when and how the prosecuting authority shall mail the complaint to the attorney general. (c) Specifies when the attorney general must notify the court whether or not the attorney general intends to assume primary responsibility for conducting the action. (d) Determines the role of the prosecuting authority, dependant on the choice of the attorney general of whether or not to conduct the action. Secs. 2259.033- 2259.040 Reserves sections for expansion. SUBCHAPTER E. PRIVATE CAUSE OF ACTION Sec. 2259.041 Provides that a person may bring a civil action in a Texas district court for a violation of Sec. 2259.002. Determines the proper names in which the person may bring such action. Sec. 2259.042 (a) Specifies the appropriate authorities that should receive a copy of the petition in a private action. (b) Provides that Rule 21a, Texas Rules of Civil Procedure governs the appropriate service of petition. Sec. 2259.043 Provides for intervention by the attorney general and/or prosecuting authority in a private cause of action. Specifies the deadlines for the attorney general and/or the prosecuting authority's intervention, dependant on the roles of the attorney general and the prosecuting authority in the action. Sec. 2259.044 (a) Provides that if the attorney general or prosecuting authority assumes responsibility for prosecution of action under this subchapter, a reasonable portion of a judgment or settlement shall be awarded to the person who commenced the action. (b) Specifies considerations of the court in determining the person's award; states that 10 percent of the settlement or judgment is presumed to be reasonable. Sec. 2259.045 (a) Provides that if the attorney general or prosecuting authority does not assume responsibility for prosecution of action under this subchapter, a reasonable portion of a judgment or settlement shall be awarded to the person who prosecuted the action. (b) Specifies considerations of the court in determining the person's award; states that 25 percent of the settlement or judgment is presumed to be reasonable. (c) Specifies that the court may also award the prosecuting person reasonable expenses incurred by the person in prosecuting the action. Sec. 2259.046- 2259.050 Reserves sections for expansion. SUBCHAPTER F. INTERFERENCE WITH DISCLOSURE BY EMPLOYEES Sec. 2259.051 Outlines a person's rights in disclosing information and participating in the action. Sec. 2259.052 (a) Outlines prohibited conduct by an employer that would interfere with an employee's rights outlined in Sec. 2259.051 or discriminate against the employee because the employee has exercised the rights outlined in Sec. 2259.051. (b) Outlines the liability of an employer who violates Subsection (a). (c) Provides when an employee may recover under Subsection (b). SECTION 2 Effective date: September 1, 1997. Savings clause. SECTION 3 Emergency clause.