By: Ratliff S.B. No. 532 A BILL TO BE ENTITLED AN ACT 1-1 relating to the awarding of litigation costs in certain civil 1-2 actions. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subtitle C, Title 2, Civil Practice and Remedies 1-5 Code, is amended by adding Chapter 42 to read as follows: 1-6 CHAPTER 42. LITIGATION COSTS FOLLOWING AN OFFER TO SETTLE 1-7 SUBCHAPTER A. GENERAL PROVISIONS 1-8 Sec. 42.001. DEFINITIONS. In this chapter: 1-9 (1) "Claim" means a claim to recover monetary damages 1-10 or for other relief, including a counterclaim, cross-claim, or 1-11 third-party claim. The term does not include a claim for 1-12 injunctive relief or for litigation costs. 1-13 (2) "Claimant" means a person making a claim. 1-14 (3) "Defendant" means a person from whom a claimant 1-15 seeks recovery of damages on a claim, including a counterdefendant, 1-16 cross-defendant, or third-party defendant. 1-17 (4) "Litigation costs" means costs actually incurred 1-18 that are directly related to preparing an action for trial and 1-19 actual trial expenses, including: 1-20 (A) attorney's fees; 1-21 (B) costs of court; 1-22 (C) reasonable deposition costs; and 1-23 (D) reasonable fees for not more than two expert 1-24 witnesses. 2-1 (5) "Offer to settle" means an offer to settle or 2-2 compromise a claim made in compliance with Section 42.021. 2-3 Sec. 42.002. APPLICABILITY AND EFFECT. (a) This chapter 2-4 does not apply to: 2-5 (1) a class action; 2-6 (2) a shareholder's derivative action; 2-7 (3) an action brought under the Deceptive Trade 2-8 Practices-Consumer Protection Act (Sections 17.41 et seq., Business 2-9 & Commerce Code); 2-10 (4) an action brought under the Family Code; 2-11 (5) an action to collect workers' compensation 2-12 benefits under Subtitle A, Title 5, Labor Code; or 2-13 (6) an action for which another statute specifically 2-14 authorizes recovery of attorney's fees or litigation costs by the 2-15 prevailing party. 2-16 (b) This chapter does not limit or affect the ability of any 2-17 person to make an offer to settle or compromise a claim that does 2-18 not comply with this chapter. A party's offer to settle or 2-19 compromise that does not comply with Section 42.021 does not 2-20 entitle the party to recover litigation costs under this chapter. 2-21 Sec. 42.003. ELECTION BY GOVERNMENTAL UNITS; WAIVER. 2-22 (a) This chapter does not apply to an action by or against the 2-23 state, any unit of state government, or any political subdivision 2-24 of the state unless the governmental unit expressly elects both to 2-25 seek recovery of litigation costs under this chapter and to waive 2-26 immunity from liability for litigation costs awarded under this 3-1 chapter. 3-2 (b) To be effective as an election and waiver, the 3-3 governmental unit must make the election and waiver specifically 3-4 and affirmatively by a writing filed with the court within 45 days 3-5 of the filing of the governmental unit's original petition or 3-6 original answer. 3-7 (c) An election and waiver is effective only in the action 3-8 in which it is filed, even if the action is subsequently joined or 3-9 consolidated with another action. 3-10 Sec. 42.004. MODIFICATION OF TIME LIMITS. A court may 3-11 modify the time limits specified in this chapter in an order issued 3-12 following a pretrial conference directed pursuant to Rule 166, 3-13 Texas Rules of Civil Procedure. 3-14 Sec. 42.005. SERVICE. When this chapter requires a writing 3-15 to be served on another party, service is adequate if it is 3-16 performed in a manner described in Rule 21a, Texas Rules of Civil 3-17 Procedure. 3-18 (Sections 42.006 to 42.020 reserved for expansion 3-19 SUBCHAPTER B. OFFER TO SETTLE; AWARDING LITIGATION COSTS 3-20 Sec. 42.021. OFFER TO SETTLE. (a) A party may serve on an 3-21 opposing party an offer to settle all the claims in the action 3-22 between that party and the opposing party. 3-23 (b) The offer to settle: 3-24 (1) must be in writing; 3-25 (2) must state that it is an offer to settle under 3-26 this section; 4-1 (3) must specify the terms by which the claims may be 4-2 settled; 4-3 (4) must specify a deadline by which the offer must be 4-4 accepted; 4-5 (5) may not include a demand for litigation costs 4-6 except for costs of court; 4-7 (6) must offer to allow a judgment to be entered 4-8 consistent with the terms of the offer; and 4-9 (7) must be served on the party to whom the offer is 4-10 made. 4-11 (c) A party may not make an offer to settle a claim under 4-12 this section until the 45th day after the date the defendant filed 4-13 the first responsive pleading to the claim. 4-14 (d) A party may not make an offer to settle under this 4-15 section after the 10th day before the date set for trial, except 4-16 that a party may make an offer to settle that is a counteroffer on 4-17 or before the seventh day before the date set for trial. 4-18 (e) The parties are not required to file with the court an 4-19 offer to settle. 4-20 Sec. 42.022. ACCEPTANCE OF OFFER. (a) A party may accept 4-21 an offer to settle on or before 5:00 p.m. on the 14th day after the 4-22 date the party received the offer to settle or before the deadline 4-23 specified in the offer, whichever is later. 4-24 (b) Acceptance of an offer must be: 4-25 (1) in writing; and 4-26 (2) served on the party who made the offer. 5-1 Sec. 42.023. WITHDRAWING AN OFFER. (a) A party may 5-2 withdraw an offer to settle by a writing served on the party to 5-3 whom the offer was made before the party accepts the offer. A 5-4 party may not accept an offer to settle after it is withdrawn. A 5-5 party may not withdraw an offer to settle after it has been 5-6 accepted. 5-7 (b) If a party withdraws an offer to settle, that offer does 5-8 not entitle the party to recover litigation costs. 5-9 Sec. 42.024. REJECTION OF OFFER. For purposes of this 5-10 chapter, an offer to settle a claim is rejected if: 5-11 (1) the party to whom the offer was made rejects the 5-12 offer by a writing served on the party making the offer; or 5-13 (2) the offer is not withdrawn and is not accepted 5-14 before the deadline for accepting the offer. 5-15 Sec. 42.025. AWARD OF LITIGATION COSTS. (a) A party who 5-16 made an offer to settle the claims between that party and the party 5-17 to whom the offer was made may recover litigation costs provided: 5-18 (1) the offer to settle was rejected; 5-19 (2) the claims were tried, proceeded to a verdict, and 5-20 the court entered a judgment on the claims; 5-21 (3) if a party sought monetary damages: 5-22 (A) the amount of monetary damages awarded on 5-23 the claims in the judgment is more favorable to the party who made 5-24 the offer than the offer to settle the claims; and 5-25 (B) the difference between the amount of 5-26 monetary damages awarded on the claims in the judgment and the 6-1 amount of the offer to settle the claims is equal to or greater 6-2 than 10 percent of the amount of the offer to settle the claims; 6-3 and 6-4 (4) if a party sought nonmonetary relief, the judgment 6-5 is as favorable or more favorable to the party who made the offer 6-6 to settle the claims. 6-7 (b) Litigation costs awarded to a party under this section 6-8 shall include only those costs incurred by the party who made the 6-9 offer to settle after the rejection of the earliest offer to settle 6-10 which, if it had been accepted, would have been more favorable to 6-11 the person who rejected the offer than the judgment. 6-12 (c) Each element of litigation costs awarded under this 6-13 chapter must be both reasonable and necessary to the prosecution or 6-14 defense of the action. 6-15 (d) The court may review and reduce an award of litigation 6-16 costs as justice requires. 6-17 Sec. 42.026. AMOUNT OF ATTORNEY'S FEES. (a) A party may 6-18 not recover attorney's fees as litigation costs under this chapter 6-19 unless the party was represented by an attorney. 6-20 (b) The court shall limit the amount of attorney's fees 6-21 included in litigation costs awarded to a claimant against a 6-22 defendant under this chapter to one-third of the amount of damages 6-23 recovered by the claimant from the defendant on the claims that 6-24 were the subject of the offer to settle. 6-25 (c) The court shall limit the amount of attorney's fees 6-26 included in litigation costs awarded to a defendant against a 7-1 claimant under this chapter to one-third of the amount of damages 7-2 sought by the claimant against the defendant at the time the 7-3 claimant rejected the offer to settle. 7-4 Sec. 42.027. LIMITATION ON LITIGATION COSTS. The amount of 7-5 litigation costs awarded against the claimant in an action for 7-6 personal injury or death may not exceed the amount of the damages 7-7 recovered by the claimant in the action. 7-8 Sec. 42.028. EVIDENCE NOT ADMISSIBLE. (a) Evidence 7-9 relating to offers to settle is not admissible except in an action 7-10 to enforce the settlement or in a proceeding to obtain litigation 7-11 costs under this chapter. 7-12 (b) Except in an action or proceeding described in 7-13 Subsection (a), the provisions of this chapter may not be made 7-14 known to the jury through any means, including voir dire, 7-15 introduction into evidence, instruction, or argument. 7-16 SECTION 2. This Act takes effect September 1, 1999, and 7-17 applies only to a civil action described by Chapter 42, Civil 7-18 Practice and Remedies Code, as added by this Act, commenced on or 7-19 after the effective date of this Act. An action that commenced 7-20 before the effective date of this Act is governed by the law in 7-21 effect immediately before that date, and that law is continued in 7-22 effect for that purpose. 7-23 SECTION 3. The importance of this legislation and the 7-24 crowded condition of the calendars in both houses create an 7-25 emergency and an imperative public necessity that the 7-26 constitutional rule requiring bills to be read on three several 8-1 days in each house be suspended, and this rule is hereby suspended.