HBA-ALS H.B. 2741 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2741 By: Junell State Affairs 4/14/1999 Introduced BACKGROUND AND PURPOSE Under current law, the legislature can waive sovereign immunity by enacting a law granting general permission to sue the state, by approving a constitutional provision granting a right to sue the state, or by granting a specific entity permission to sue or collect a judgement over a specific issue. Although permission may be granted by special law, the usual means of granting permission to sue is through a concurrent resolution. After a resolution is passed granting a party permission to sue, the party must then sue the state in state court. If successful, the party must return to the legislature to seek passage of another bill to allow the state to pay any judgement over $250,000. During this process, legislative committee members are required to act as both the finders of fact and of law. H.B. 2741 creates the State Claims Commission to as an independent third-party to hear certain contract claims against the state, issue orders, and issue recommendations to the legislature. This bill establishes the powers and duties of the commission, including the power to conduct hearings. This bill requires the commission to adopt rules governing its hearing procedures and negotiation of claims. This bill sets forth provisions governing the resolution and negotiations of certain contract claims against the state. This bill also sets forth procedures governing commission hearings relating to hearing requests, notice requirements, the use of discovery, venue, fees, hearing panels, and payment of claims. In addition, this bill requires the commission, after a hearing is held, to issue a report to the legislature containing its recommendations and findings as to whether the claim is valid and should be paid to the claimant. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the State Claims Commission in SECTION 1 (Sections 2259.052 and 2260.105, Government Code) and that rulemaking authority previously delegated to each unit of state government is modified in SECTION 1 (Section 2260.052) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subtitle F, Title 10, Government Code, by adding Chapters 2259 and 2260, as follows: CHAPTER 2259. STATE CLAIMS COMMISSION SUBCHAPTER A. GENERAL AND ADMINISTRATIVE PROVISIONS Sec. 2259.001. Provides that in this chapter, "commission" means the State Claims Commission. Sec. 2259.002. SUNSET PROVISION. Provides that the State Claims Commission (commission) is subject to Chapter 325 (Texas Sunset Act) and is abolished and this chapter expires September 1, 2011, unless continued in existence as provided by that chapter. Sec. 2259.003. COMPOSITION OF COMMISSION; QUALIFICATIONS. (a) Specifies the composition of the commission. (b) Provides that to be eligible for appointment as a member of the commission, an individual must be licensed to practice law in this state; have practiced administrative law; and have experience in the adjudication of contract disputes. (c) Requires the commission to annually elect one of its members as presiding officer. Sec. 2259.004. TERMS; VACANCY. (a) Provides that members of the commission serve staggered terms of six years, with the term of one member expiring on February 1 of each odd-numbered year. (b) Requires an appointing authority to fill the vacancy for the unexpired term if a vacancy occurs during a term. Sec. 2259.005. COMPENSATION; EXPENSES. (a) Authorizes a member of the commission to receive compensation for the member's services. (b) Entitles a member of the commission to reimbursement from commission funds for travel expenses incurred by the member while conducting the business of the commission, as provided by the General Appropriations Act. Sec. 2259.006. MEETINGS. (a) Requires the commission to hold at least four meetings each year. (b) Authorizes the commission to meet at the times and places within the state as the commission designates. Sec. 2259.007. STAFF. Requires the State Office of Administrative Hearings to provide to the commission staff and facilities sufficient to perform its powers and duties. Sec. 2259.008. ANNUAL REPORT. Requires the commission to prepare annually a written report accounting for all funds received and disbursed by the commission during the preceding fiscal year. Provides that the report must meet the reporting requirements applicable to financial reporting provided by the General Appropriations Act. SUBCHAPTER B. POWERS AND DUTIES Sec. 2259.051. GENERAL POWERS AND DUTIES. (a) Requires the commission to conduct hearings and issue findings related to breach of contract claims against a unit of state government brought under Chapter 2260. Authorizes the commission to hold hearings; administer oaths; take testimony; rule on a question of evidence; and issue an order relating to discovery or another hearing matter. Sec. 2259.052. PROCEDURAL RULES. (a) Requires the commission to adopt rules that govern the procedures, including discovery procedures, relating to a hearing conducted by the commission. (b) Requires the commission to develop rules that govern the negotiation of claims under Subchapter B, Chapter 2260, by units of state government that do not have rulemaking authority. (c) Provides that the procedural rules of the unit of state government on behalf of which the hearing is conducted govern procedural matters that relate to the hearing to the extent that the commission's rules adopt the unit's procedural rules by reference, notwithstanding other law. CHAPTER 2260. RESOLUTION OF CERTAIN CONTRACT CLAIMS AGAINST THE STATE SUBCHAPTER A. GENERAL PROVISIONS Sec. 2260.001. Defines "commission," "contract," "contractor," "institution of higher education," and "unit of state government." Sec. 2260.002. APPLICABILITY. Provides that this chapter does not apply to a claim for personal injury or wrongful death arising from the breach of a contract. Sec. 2260.003. APPLICATION OF ADMINISTRATIVE PROCEDURE AND TEXAS REGISTER ACT. Provides that Chapter 2001, Government Code (Administrative Procedure), does not apply to a hearing under this chapter, except as otherwise provided by this chapter. Sec. 2260.004. DAMAGES. (a) Prohibits the total amount of damages awarded to a claimant based on a claim for breach of contract under this chapter from exceeding the total value of consideration the claimant was to receive under the contract. (b) Prohibits an award of damages from including consequential or similar damages; exemplary damages; any damages based on an unjust enrichment theory; attorney's fees; or home office overhead. Sec. 2260.005. REQUIRED CONTRACT PROVISION. (a) Requires a unit of state government that enters into a contract under this chapter to include a provision in the contract stating that the dispute resolution process used by the unit of state government must be used to attempt to resolve a dispute arising under the contract. (b) Requires the attorney general to provide assistance to a unit of state government in developing the contract provision required by this section. Sec. 2260.006. EXCLUSIVE PROCEDURE. Provides that the procedures contained in this chapter are exclusive and required prerequisites to seeking consent to suit under Chapter 107, Civil Practice and Remedies Code (Permission to Sue the State) Sec. 2260.007. SOVEREIGN IMMUNITY REAFFIRMED AND NOT WAIVED. (a) Reaffirms the rule of sovereign immunity from suit without legislative consent, and the inability of the immunity to be waived by the conduct of any person. (b) Provides that any conduct, act, or inaction by any person in the execution, administration, or performance of any contract subject to this chapter does not constitute a waiver of the state's immunity from suit. SUBCHAPTER B. NEGOTIATION OF CLAIM Sec. 2260.051. CLAIM FOR BREACH OF CONTRACT; NOTICE. (a) Authorizes a claimant to make a claim against a unit of state government that alleges that the unit of state government breached a contract with the claimant. Authorizes the unit of state government to file a counterclaim against the claimant. (b) Provides that a claimant must provide written notice to the unit of state government of a claim for breach of contract not later than the 180th day after the date of the alleged breach. (c) Specifies the items that must be contained in the notice. (d) Provides that a claimant must file a claim for breach of contract with the chief administrative officer, or another officer of the unit of state government designated in the contract, no later than the 30th day after the date notice is provided under Subsection (b). Specifies the items that must be contained in the claim. (e) Provides that a unit of state government must file any counterclaim not later than the 90th day after the date of notice. Sec. 2260.052. NEGOTIATION. (a) Requires the chief administrative officer or another officer of the unit of state government designated in the contract to examine the claim and any counterclaim and negotiate in good faith with the claimant in an effort to resolve them. Specifies the latest date by which the negotiation must begin. (b) Entitles a unit of state government against which a claim is filed to delay the beginning of negotiation until after the 180th day after the date of the alleged breach. (c) Requires each unit of state government with rulemaking authority to develop rules to govern the negotiation of a claim under this section. Requires a unit that does not have rulemaking authority to follow the rules adopted by the commission under Section 2259.052, unless that unit has created its own procedures that have been approved by the commission. Sec. 2260.053. PARTIAL RESOLUTION OF CLAIM. (a) Requires the parties, if the negotiation under Section 2260.052 results in the resolution of some issues by agreement or in a settlement, to reduce the agreement or settlement to writing and sign the agreement or settlement. (b) Requires an agreement or settlement to be filed with the commission. Sec. 2260.054. PAYMENT OF CLAIM FROM APPROPRIATED FUNDS. Authorizes a unit of state government to pay the claim from money appropriated to it for payment of contract claims or for payment of the contract that is the subject of the claim. Sec. 2260.055. INCOMPLETE RESOLUTION. Authorizes the claimant to file a request for hearing with the commission if a claim is not entirely resolved under Section 2260.052 on or before the 180th day after the date the claim is filed with the commission, unless the parties agree to an extension of time and file that agreement with the commission. SUBCHAPTER C. COMMISSION HEARING Sec. 2260.101. REQUEST FOR HEARING. (a) Authorizes a claimant to file a request for hearing with the commission if the claimant is unsatisfied with the results of negotiation. (b) Specifies the items that must be included in a request for hearing. Sec. 2260.102. NOTICE OF HEARING. (a) Requires the commission to set a hearing date and provide written notice to the claimant and the unit of state government, no later than the seventh day after the day a claimant files a request for hearing. (b) Requires the commission to schedule the hearing for a date no earlier than the 60th day after the date the claimant filed the request for hearing. Sec. 2260.103. DISCOVERY. Provides that commission rules adopted under Section 2259.052 must provide that the claimant and the unit of state government have limited discovery. Sec. 2260.104. VENUE FOR HEARING. Requires the commission to hold the hearing in Travis County unless it determines that good cause exists for the selection of a different location. Sec. 2260.105. HEARING FEE. (a) Authorizes the commission to set a fee for a hearing. (b) Requires the commission to set the fee in an amount that is not less than $250 and allows the commission to recover all or a substantial part of its costs in holding hearings. (c) Requires the commission, by rule, to establish a graduated fee scale, increasing the fee in relation to the amount in controversy. (d) Authorizes the commission to assess the fee against the party who does not prevail in the hearing or apportion the fee against the parties in an equitable manner. Sec. 2260.106. DESIGNATION OF HEARING PANEL. (a) Authorizes the commission to hear the claim brought before it or designate a person or a panel of persons the commission determines are qualified to hear the claim. (b) Entitles a person who hears a claim under this section to compensation for the person's services, as determined by the commission. Sec. 2260.107. HEARING ON RECORD. Authorizes the commission to hear a claim on the record without live testimony if it determines that a hearing on the record is equitable and efficient. Sec. 2260.108. HEARING. (a) Requires the commission to conduct a hearing in accordance with the procedures adopted by the commission. (b) Requires the commission to issue a written order detailing the commission's findings and recommendations at the conclusion of the hearing. Sec. 2260.109. PAYMENT OF CLAIM. (a) Requires a unit of state government to pay the amount of the claim or part of the claim if a majority of the commission finds, by a preponderance of the evidence, that the claim or part of the claim is valid and the total amount of damages, after taking into account any counterclaim, is less than $250,000. (b) Requires a unit of state government to pay the claim in accordance with Section 2260.054. Sec. 2260.110. REPORT AND RECOMMENDATION TO LEGISLATURE. (a) Requires the commission, if after a hearing it determines that a claim involves damages of $250,000 or more, to issue a written report containing the commission's findings and recommendations to the legislature. (b) Authorizes the commission to recommend that the legislature appropriate money to pay the claim or not appropriate money to pay the claim and that consent to suit under Chapter 107, Civil Practice and Remedies Code, be denied. SECTION 2.Effective date: September 1, 1999. SECTION 3. Makes application of this Act prospective. Provides that a claimant must provide written notice to the unit of state government for breach of a contract entered into before the effective date of this Act not later than the 180th day after that date, notwithstanding Section 2260.051(b), Government Code, as added by this Act. SECTION 4.Emergency clause.