1-1 By: Ratliff S.B. No. 532 1-2 (In the Senate - Filed February 16, 1999; February 17, 1999, 1-3 read first time and referred to Committee on Economic Development; 1-4 April 22, 1999, reported favorably by the following vote: Yeas 4, 1-5 Nays 0; April 22, 1999, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to the awarding of litigation costs in certain civil 1-9 actions. 1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-11 SECTION 1. Subtitle C, Title 2, Civil Practice and Remedies 1-12 Code, is amended by adding Chapter 42 to read as follows: 1-13 CHAPTER 42. LITIGATION COSTS FOLLOWING AN OFFER TO SETTLE 1-14 SUBCHAPTER A. GENERAL PROVISIONS 1-15 Sec. 42.001. DEFINITIONS. In this chapter: 1-16 (1) "Claim" means a claim to recover monetary damages 1-17 or for other relief, including a counterclaim, cross-claim, or 1-18 third-party claim. The term does not include a claim for 1-19 injunctive relief or for litigation costs. 1-20 (2) "Claimant" means a person making a claim. 1-21 (3) "Defendant" means a person from whom a claimant 1-22 seeks recovery of damages on a claim, including a counterdefendant, 1-23 cross-defendant, or third-party defendant. 1-24 (4) "Litigation costs" means costs actually incurred 1-25 that are directly related to preparing an action for trial and 1-26 actual trial expenses, including: 1-27 (A) attorney's fees; 1-28 (B) costs of court; 1-29 (C) reasonable deposition costs; and 1-30 (D) reasonable fees for not more than two expert 1-31 witnesses. 1-32 (5) "Offer to settle" means an offer to settle or 1-33 compromise a claim made in compliance with Section 42.021. 1-34 Sec. 42.002. APPLICABILITY AND EFFECT. (a) This chapter 1-35 does not apply to: 1-36 (1) a class action; 1-37 (2) a shareholder's derivative action; 1-38 (3) an action brought under the Deceptive Trade 1-39 Practices-Consumer Protection Act (Sections 17.41 et seq., Business 1-40 & Commerce Code); 1-41 (4) an action brought under the Family Code; 1-42 (5) an action to collect workers' compensation 1-43 benefits under Subtitle A, Title 5, Labor Code; or 1-44 (6) an action for which another statute specifically 1-45 authorizes recovery of attorney's fees or litigation costs by the 1-46 prevailing party. 1-47 (b) This chapter does not limit or affect the ability of any 1-48 person to make an offer to settle or compromise a claim that does 1-49 not comply with this chapter. A party's offer to settle or 1-50 compromise that does not comply with Section 42.021 does not 1-51 entitle the party to recover litigation costs under this chapter. 1-52 Sec. 42.003. ELECTION BY GOVERNMENTAL UNITS; WAIVER. 1-53 (a) This chapter does not apply to an action by or against the 1-54 state, any unit of state government, or any political subdivision 1-55 of the state unless the governmental unit expressly elects both to 1-56 seek recovery of litigation costs under this chapter and to waive 1-57 immunity from liability for litigation costs awarded under this 1-58 chapter. 1-59 (b) To be effective as an election and waiver, the 1-60 governmental unit must make the election and waiver specifically 1-61 and affirmatively by a writing filed with the court within 45 days 1-62 of the filing of the governmental unit's original petition or 1-63 original answer. 1-64 (c) An election and waiver is effective only in the action 2-1 in which it is filed, even if the action is subsequently joined or 2-2 consolidated with another action. 2-3 Sec. 42.004. MODIFICATION OF TIME LIMITS. A court may 2-4 modify the time limits specified in this chapter in an order issued 2-5 following a pretrial conference directed pursuant to Rule 166, 2-6 Texas Rules of Civil Procedure. 2-7 Sec. 42.005. SERVICE. When this chapter requires a writing 2-8 to be served on another party, service is adequate if it is 2-9 performed in a manner described in Rule 21a, Texas Rules of Civil 2-10 Procedure. 2-11 (Sections 42.006 to 42.020 reserved for expansion 2-12 SUBCHAPTER B. OFFER TO SETTLE; AWARDING LITIGATION COSTS 2-13 Sec. 42.021. OFFER TO SETTLE. (a) A party may serve on an 2-14 opposing party an offer to settle all the claims in the action 2-15 between that party and the opposing party. 2-16 (b) The offer to settle: 2-17 (1) must be in writing; 2-18 (2) must state that it is an offer to settle under 2-19 this section; 2-20 (3) must specify the terms by which the claims may be 2-21 settled; 2-22 (4) must specify a deadline by which the offer must be 2-23 accepted; 2-24 (5) may not include a demand for litigation costs 2-25 except for costs of court; 2-26 (6) must offer to allow a judgment to be entered 2-27 consistent with the terms of the offer; and 2-28 (7) must be served on the party to whom the offer is 2-29 made. 2-30 (c) A party may not make an offer to settle a claim under 2-31 this section until the 45th day after the date the defendant filed 2-32 the first responsive pleading to the claim. 2-33 (d) A party may not make an offer to settle under this 2-34 section after the 10th day before the date set for trial, except 2-35 that a party may make an offer to settle that is a counteroffer on 2-36 or before the seventh day before the date set for trial. 2-37 (e) The parties are not required to file with the court an 2-38 offer to settle. 2-39 Sec. 42.022. ACCEPTANCE OF OFFER. (a) A party may accept 2-40 an offer to settle on or before 5:00 p.m. on the 14th day after the 2-41 date the party received the offer to settle or before the deadline 2-42 specified in the offer, whichever is later. 2-43 (b) Acceptance of an offer must be: 2-44 (1) in writing; and 2-45 (2) served on the party who made the offer. 2-46 Sec. 42.023. WITHDRAWING AN OFFER. (a) A party may 2-47 withdraw an offer to settle by a writing served on the party to 2-48 whom the offer was made before the party accepts the offer. A 2-49 party may not accept an offer to settle after it is withdrawn. A 2-50 party may not withdraw an offer to settle after it has been 2-51 accepted. 2-52 (b) If a party withdraws an offer to settle, that offer does 2-53 not entitle the party to recover litigation costs. 2-54 Sec. 42.024. REJECTION OF OFFER. For purposes of this 2-55 chapter, an offer to settle a claim is rejected if: 2-56 (1) the party to whom the offer was made rejects the 2-57 offer by a writing served on the party making the offer; or 2-58 (2) the offer is not withdrawn and is not accepted 2-59 before the deadline for accepting the offer. 2-60 Sec. 42.025. AWARD OF LITIGATION COSTS. (a) A party who 2-61 made an offer to settle the claims between that party and the party 2-62 to whom the offer was made may recover litigation costs provided: 2-63 (1) the offer to settle was rejected; 2-64 (2) the claims were tried, proceeded to a verdict, and 2-65 the court entered a judgment on the claims; 2-66 (3) if a party sought monetary damages: 2-67 (A) the amount of monetary damages awarded on 2-68 the claims in the judgment is more favorable to the party who made 2-69 the offer than the offer to settle the claims; and 3-1 (B) the difference between the amount of 3-2 monetary damages awarded on the claims in the judgment and the 3-3 amount of the offer to settle the claims is equal to or greater 3-4 than 10 percent of the amount of the offer to settle the claims; 3-5 and 3-6 (4) if a party sought nonmonetary relief, the judgment 3-7 is as favorable or more favorable to the party who made the offer 3-8 to settle the claims. 3-9 (b) Litigation costs awarded to a party under this section 3-10 shall include only those costs incurred by the party who made the 3-11 offer to settle after the rejection of the earliest offer to settle 3-12 which, if it had been accepted, would have been more favorable to 3-13 the person who rejected the offer than the judgment. 3-14 (c) Each element of litigation costs awarded under this 3-15 chapter must be both reasonable and necessary to the prosecution or 3-16 defense of the action. 3-17 (d) The court may review and reduce an award of litigation 3-18 costs as justice requires. 3-19 Sec. 42.026. AMOUNT OF ATTORNEY'S FEES. (a) A party may 3-20 not recover attorney's fees as litigation costs under this chapter 3-21 unless the party was represented by an attorney. 3-22 (b) The court shall limit the amount of attorney's fees 3-23 included in litigation costs awarded to a claimant against a 3-24 defendant under this chapter to one-third of the amount of damages 3-25 recovered by the claimant from the defendant on the claims that 3-26 were the subject of the offer to settle. 3-27 (c) The court shall limit the amount of attorney's fees 3-28 included in litigation costs awarded to a defendant against a 3-29 claimant under this chapter to one-third of the amount of damages 3-30 sought by the claimant against the defendant at the time the 3-31 claimant rejected the offer to settle. 3-32 Sec. 42.027. LIMITATION ON LITIGATION COSTS. The amount of 3-33 litigation costs awarded against the claimant in an action for 3-34 personal injury or death may not exceed the amount of the damages 3-35 recovered by the claimant in the action. 3-36 Sec. 42.028. EVIDENCE NOT ADMISSIBLE. (a) Evidence 3-37 relating to offers to settle is not admissible except in an action 3-38 to enforce the settlement or in a proceeding to obtain litigation 3-39 costs under this chapter. 3-40 (b) Except in an action or proceeding described in 3-41 Subsection (a), the provisions of this chapter may not be made 3-42 known to the jury through any means, including voir dire, 3-43 introduction into evidence, instruction, or argument. 3-44 SECTION 2. This Act takes effect September 1, 1999, and 3-45 applies only to a civil action described by Chapter 42, Civil 3-46 Practice and Remedies Code, as added by this Act, commenced on or 3-47 after the effective date of this Act. An action that commenced 3-48 before the effective date of this Act is governed by the law in 3-49 effect immediately before that date, and that law is continued in 3-50 effect for that purpose. 3-51 SECTION 3. The importance of this legislation and the 3-52 crowded condition of the calendars in both houses create an 3-53 emergency and an imperative public necessity that the 3-54 constitutional rule requiring bills to be read on three several 3-55 days in each house be suspended, and this rule is hereby suspended. 3-56 * * * * *