78(R) HB 400 - Introduced version


                                                                                

78R2733 DAK-D

By:  Mowery                                                       H.B. No. 400



A BILL TO BE ENTITLED

AN ACT

relating to false claims against the state and actions by private 
persons to prosecute those claims; providing a civil penalty.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Subtitle C, Title 10, Government Code, is 
amended by adding Chapter 2115 to read as follows:

CHAPTER 2115.  FALSE CLAIMS

SUBCHAPTER A.  GENERAL PROVISIONS
	Sec. 2115.001.  DEFINITIONS.  In this chapter:                          
		(1)  "Qui tam action" means an action brought by a 
private person against a person for the commission of a false claim 
under Section 2115.051.
		(2)  "Qui tam plaintiff" means the person bringing a 
qui tam action. 
		(3)  "State" means state government as defined by 
Section 101.001, Civil Practice and Remedies Code.
	Sec. 2115.002.  CERTAIN ACTIONS BARRED.  (a)  A person may 
not bring a qui tam action based on allegations or transactions that 
are the subject of a civil suit or an administrative penalty 
proceeding in which the state is already a party.
	(b)  A person may not bring a qui tam action based on the 
public disclosure of allegations or transactions in a criminal or 
civil hearing, in a legislative or administrative report, hearing, 
audit, or investigation, or from the news media, unless the person 
bringing the action is an original source of the information.  In 
this subsection, "original source" means an individual who has 
direct and independent knowledge of the information on which the 
allegations are based and has voluntarily provided the information 
to the state before filing an action under this chapter that is 
based on the information.
	Sec. 2115.003.  CHAPTER NOT APPLICABLE TO MEDICAID 
FRAUD.  This chapter does not apply to an unlawful act described by 
Section 36.002, Human Resources Code, relating to Medicaid fraud.

[Sections 2115.004-2115.050 reserved for expansion]

SUBCHAPTER B.  FALSE CLAIMS
	Sec. 2115.051.  FALSE CLAIMS.  (a)  In this section:                    
		(1)  "Claim" includes any request or demand, under a 
contract or otherwise, for money or property that is made to a 
contractor, grantee, or other recipient if this state:
			(A)  provides any portion of the money or property 
that is requested or demanded; or
			(B)  will reimburse the contractor, grantee, or 
other recipient for any portion of the money or property that is 
requested or demanded.
		(2)  "Knowingly" means:                                                
			(A)  actual knowledge of the information;                             
			(B)  deliberate ignorance of the truth or falsity 
of the information; or
			(C)  reckless disregard of the truth or falsity of 
the information. 
	(b)  A person commits a false claim if the person:                      
		(1)  knowingly presents, or causes to be presented, to 
an officer or employee of this state a false or fraudulent claim for 
payment or approval;
		(2)  knowingly makes, uses, or causes to be made or used 
a false record or statement to get a false or fraudulent claim paid 
or approved by this state;
		(3)  conspires to defraud this state by getting a false 
or fraudulent claim allowed or paid;
		(4)  has possession, custody, or control of property or 
money used or to be used by this state and, intending to defraud 
this state or wilfully to conceal the property, delivers or causes 
to be delivered less property than the amount for which the person 
receives a certificate or receipt;
		(5)  is authorized to make or deliver a document 
certifying receipt of property used or to be used by this state and, 
intending to defraud this state, makes or delivers the receipt 
without completely knowing that the information on the receipt is 
true;
		(6)  knowingly buys or receives as a pledge of an 
obligation or debt public property from an officer or employee of 
this state who lawfully may not sell or pledge the property; or
		(7)  knowingly makes, uses, or causes to be made or used 
a false record or statement to conceal, avoid, or decrease an 
obligation to pay or transmit money or property to this state.
	Sec. 2115.052.  CIVIL PENALTY.  (a)  A person who commits a 
false claim under Section 2115.051 is liable to this state for a 
civil penalty equal to the sum of:
		(1)  an amount not less than $5,000 and not more than 
$10,000;       
		(2)  except as provided by Subsection (b), three times 
the amount of damages that this state sustains because of the act of 
the person; and
		(3)  the costs of a civil action brought to recover the 
penalty.     
	(b)  A court may assess not less than two times the amount of 
damages under Subsection (a)(2) if the court finds that the person 
committing a false claim:
		(1)  furnished the attorney general with all 
information known to the person about the false claim on or before 
the 30th day after the date the person first obtained the 
information;
		(2)  fully cooperated with any investigation of the 
false claim; and 
		(3)  at the time the person furnished information about 
the false claim, a criminal prosecution, civil action, or 
administrative action had not commenced in relation to the false 
claim and the person did not have actual knowledge of the existence 
of an investigation into the false claim.

[Sections 2115.053-2115.100 reserved for expansion]

SUBCHAPTER C.  ACTIONS BY PRIVATE PERSONS
	Sec. 2115.101.  DEFINITION.  In this subchapter, "proceeds 
of the action" means the amount of money awarded to the state in a 
final judgement or agreed to be paid to the state in a settlement 
agreement as a result of the qui tam action.  The term does not 
include attorney's fees, costs, or expenses incurred in bringing 
the action.
	Sec. 2115.102.  ACTIONS BY PRIVATE PERSON AUTHORIZED; 
ALTERNATIVE REMEDY SOUGHT BY STATE.  (a)  Subject to Section 
2115.151, a private person may bring a civil action against a person 
committing a false claim under Section 2115.051.
	(b)  The action is a qui tam action on behalf of both the 
person and the state.
	(c)  The qui tam action must be brought in the name of this 
state.    
	Sec. 2115.103.  INITIATION OF ACTION.  (a)  A qui tam 
plaintiff shall serve a copy of the petition and a written 
disclosure of substantially all material evidence and information 
the person possesses on the attorney general in compliance with the 
Texas Rules of Civil Procedure.
	(b)  The petition shall be filed in camera and shall remain 
under seal until at least the 60th day after the date the petition 
is filed.  The attorney general is entitled to access to the 
petition.  The petition may not be served on the defendant until the 
court orders service on the defendant.
	(c)  The state may elect to intervene and proceed with the 
action not later than the 60th day after the date the attorney 
general receives the petition and the material evidence and 
information.
	(d)  The state may, for good cause shown, move the court to 
extend the time during which the petition remains under seal under 
Subsection (b).  A motion under this subsection may be supported by 
affidavits or other submissions in camera.
	(e)  An action under this subchapter may be dismissed before 
the end of the period prescribed by Subsection (b), as extended as 
provided by Subsection (d), if applicable, only if the court and the 
attorney general consent in writing to the dismissal and state 
their reasons for consenting.
	Sec. 2115.104.  ANSWER BY DEFENDANT.  A defendant is not 
required to file an answer to a petition filed under this subchapter 
until the 20th day after the date the petition is unsealed and 
served on the defendant in compliance with the Texas Rules of Civil 
Procedure.
	Sec. 2115.105.  CHOICE OF STATE.  (a)  On or before the last 
day of the period described by Section 2115.103(c), the state 
shall:
		(1)  take over the qui tam action and proceed to conduct 
it; or      
		(2)  notify the court that it declines to take over the 
action and allow the qui tam plaintiff to conduct it.
	(b)  The court shall not permit any person other than the 
attorney general to intervene in the action or bring a related 
action based on the facts underlying the pending action.
	Sec. 2115.106.  ACTION CONDUCTED BY STATE.  (a)  This 
section applies to a qui tam action the state takes over under 
Section 2115.105(a)(1).
	(b)  The state has the primary responsibility for 
prosecuting the action and is not bound by an act of the qui tam 
plaintiff.
	(c)  Subject to this section, the qui tam plaintiff is 
entitled to continue as a party to the action.
	(d)  Notwithstanding the objection of the qui tam plaintiff, 
the state may dismiss the action if:
		(1)  the state notifies the qui tam plaintiff that a 
motion to dismiss has been filed; and
		(2)  the court provides the qui tam plaintiff with an 
opportunity for a hearing on the motion.
	(e)  Notwithstanding the objection of the qui tam plaintiff, 
the state may settle the action if the court determines, after a 
hearing, that the proposed settlement is fair, adequate, and 
reasonable under all the circumstances.  On a showing of good cause, 
the court may hold the hearing in camera.
	(f)  On a showing by the state that unrestricted 
participation in the litigation of the action by the qui tam 
plaintiff would interfere with or unduly delay the state's 
prosecution of the case or would be repetitious, irrelevant, or for 
purposes of harassment, the court may impose limitations on the 
person's participation, including:
		(1)  limiting the number of witnesses the qui tam 
plaintiff may call;
		(2)  limiting the length of the testimony of witnesses 
called by the qui tam plaintiff;
		(3)  limiting the qui tam plaintiff's cross-examination 
of witnesses; or
		(4)  otherwise limiting the participation by the qui 
tam plaintiff in the litigation.
	(g)  On a showing by the defendant that unrestricted 
participation in the litigation of the action by the qui tam 
plaintiff would be for purposes of harassment or would cause the 
defendant undue burden or unnecessary expense, the court may limit 
the participation by the qui tam plaintiff in the litigation.
	Sec. 2115.107.  ACTION CONDUCTED BY QUI TAM PLAINTIFF.  (a)  
This section applies to a qui tam action the state declines to take 
over under Section 2115.105(a)(2).
	(b)  The qui tam plaintiff is entitled to conduct the action.           
	(c)  At the request of the state, the qui tam plaintiff shall 
serve the state with a copy of each pleading filed in the action, 
each motion filed related to discovery, and all documents related 
to discovery, including interrogatories and deposition 
transcripts.  The state is responsible for the expense of making and 
serving the copies.
	(d)  On a showing of good cause, the court may, during the 
course of the action, permit the state to intervene.  The court may 
not, as a result of the intervention, limit the status or 
entitlement of the qui tam plaintiff to conduct the action.
	Sec. 2115.108.  STAY OF CERTAIN DISCOVERY.  (a)  This 
section applies without regard to whether the state takes over or 
declines to take over the qui tam action.
	(b)  On a showing by the state that certain actions of 
discovery by the qui tam plaintiff would interfere with the state's 
investigation or prosecution of a criminal or civil matter arising 
out of the same facts, the court may stay the discovery for a period 
not to exceed 60 days.
	(c)  The court shall hear a motion to stay discovery under 
this section in camera.
	(d)  The court may extend the period prescribed by Subsection 
(b) on a further showing in camera that the state has pursued the 
criminal or civil investigation or proceedings with reasonable 
diligence and that any proposed discovery in the civil action will 
interfere with the ongoing criminal or civil investigation or 
proceedings.
	Sec. 2115.109.  AWARD TO QUI TAM PLAINTIFF WHEN STATE 
PROCEEDS WITH ACTION.  (a)  This section applies to a qui tam action 
the state takes over under Section 2115.105(a)(1).
	(b)  Except as provided by Subsection (c), the court shall 
award the qui tam plaintiff at least 10 percent but not more than 25 
percent of the proceeds of the action, depending on the extent to 
which the court determines the person substantially contributed to 
the prosecution of the action.
	(c)  If the court finds that the action is based primarily on 
disclosures of specific information, other than information 
provided by the qui tam plaintiff, relating to allegations or 
transactions in a criminal or civil hearing, in a legislative or 
administrative report, hearing, audit, or investigation, or from 
the news media, the court may award the amount the court considers 
appropriate but not more than 10 percent of the proceeds of the 
action.  The court shall consider the significance of the 
information and the role of the qui tam plaintiff in advancing the 
case to litigation.
	(d)  A payment to a person under this section shall be made 
from the proceeds of the action.  A person receiving a payment under 
this section is also entitled to receive an amount for reasonable 
expenses that the court finds to have been necessarily incurred, 
plus reasonable attorney's fees and costs.  Expenses, fees, and 
costs shall be awarded against the defendant.
	Sec. 2115.110.  AWARD TO QUI TAM PLAINTIFF WHEN STATE DOES 
NOT PROCEED WITH ACTION.  (a)  This section applies to a qui tam 
action the state declines to take over under Section 
2115.105(a)(2).
	(b)  The court shall award the qui tam plaintiff an amount 
the court decides is reasonable for collecting the civil penalty 
and damages but not less than 25 percent and not more than 30 
percent of the proceeds of the action.
	(c)  A payment to a person under this section shall be made 
from the proceeds of the action.  A person receiving a payment under 
this section is also entitled to receive an amount for reasonable 
expenses that the court finds to have been necessarily incurred, 
plus reasonable attorney's fees and costs.  Expenses, fees, and 
costs shall be awarded against the defendant.
	(d)  The court may award to the defendant reasonable 
attorney's fees and expenses incurred in defending against the 
action if:
		(1)  the defendant prevails in the action; and                         
		(2)  the court finds that the claim of the qui tam 
plaintiff was clearly frivolous or vexatious, or brought primarily 
for purposes of harassment.
	Sec. 2115.111.  REDUCTION OF AWARD.  (a)  This section 
applies without regard to whether the state takes over or declines 
to take over the qui tam action.
	(b)  If the court finds that the qui tam plaintiff planned 
and initiated the false claim that is the basis of the qui tam 
action, the court may, to the extent the court considers 
appropriate, reduce the share of the proceeds of the action the 
person would otherwise receive under Section 2115.109 or 2115.110, 
taking into account the qui tam plaintiff's role in advancing the 
case to litigation and any relevant circumstances pertaining to the 
violation.
	(c)  If the qui tam plaintiff is convicted of criminal 
conduct arising from the person's role in the false claim, the court 
shall dismiss the plaintiff from the civil action and the plaintiff 
may not receive any share of the proceeds of the action.  A 
dismissal under this subsection does not prejudice the right of the 
state to continue the qui tam action.
	Sec. 2115.112.  STATE NOT LIABLE FOR CERTAIN EXPENSES.  The 
state is not liable for expenses that a qui tam plaintiff incurs in 
bringing an action under this subchapter, including any award the 
court may make on behalf of the defendant under Section 
2115.110(d).
	Sec. 2115.113.  RETALIATION BY EMPLOYER AGAINST PERSON 
BRINGING SUIT PROHIBITED.  (a)  A person who is discharged, 
demoted, suspended, threatened, harassed, or in any other manner 
discriminated against in the terms of employment by the person's 
employer because of a lawful act taken by the person in furtherance 
of a qui tam action, including investigation for, initiation of, 
testimony for, or assistance in a qui tam action filed or to be 
filed, is entitled to:
		(1)  reinstatement with the same seniority status the 
person would have had but for the discrimination; and
		(2)  not less than two times the amount of back pay, 
interest on the back pay, and compensation for any special damages 
sustained as a result of the discrimination, including litigation 
costs and reasonable attorney's fees.
	(b)  A person may bring an action in the appropriate district 
court for the relief provided in this section.

[Sections 2115.114-2115.150 reserved for expansion]

SUBCHAPTER D.  ACTION BY STATE
	Sec. 2115.151.  STATE MAY PURSUE AN ALTERNATE REMEDY.  (a)  
After a qui tam action is filed, the state may elect to prosecute 
the false claim that is the subject of the action through any 
alternate remedy available to the state, including any 
administrative proceeding to determine an administrative penalty.
	(b)  The qui tam plaintiff has the same rights in the other 
proceeding as the person would have had if the action had continued 
in the original forum, including a monetary award as provided by 
Subchapter C.
	(c)  A finding of fact or conclusion of law made in the other 
proceeding that has become final is conclusive on all parties to the 
qui tam action.  For purposes of this subsection, a finding or 
conclusion is final if:
		(1)  the finding or conclusion has been finally 
determined on appeal to the appropriate court;
		(2)  no appeal has been filed with respect to the 
finding or conclusion and all time for filing an appeal has expired; 
or
		(3)  the finding or conclusion is not subject to 
judicial review.    
	Sec. 2115.152.  RESPONSIBILITIES OF THE ATTORNEY 
GENERAL.  The attorney general shall diligently investigate the 
commission of a false claim under Section 2115.051 and may bring a 
civil action against the person committing the false claim.
	SECTION 2.  (a)  This Act takes effect immediately if it 
receives a vote of two-thirds of all the members elected to each 
house, as provided by Section 39, Article III, Texas Constitution.  
If this Act does not receive the vote necessary for immediate 
effect, this Act takes effect September 1, 2003.
	(b)  This Act applies only to a false claim as described by 
Section 2115.051, Government Code, as added by this Act, that takes 
place on or after the effective date of this Act.  A false claim 
takes place on or after the effective date of this Act only if all 
elements of the false claim take place on or after the effective 
date of this Act.