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By:  Nixon                                                        H.B. No. 2550


A BILL TO BE ENTITLED
AN ACT
relating to governmental contingency fee contracts for legal services entered into by a local governmental entity. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Chapter 271, Local Government Code, is amended by adding Subchapter I to read as follows:
SUBCHAPTER I. CONTINGENT FEE CONTRACT FOR LEGAL SERVICES
Sec. 271.131. DEFINITIONS. In this subchapter: (1) "Contingent fee" has the meaning assigned by Section 2254.101, Government Code. (2) "Contingent fee contract" has the meaning assigned by Section 2254.101. (3) "Local governmental entity" means: (A) a municipality; (B) a county; (C) a school district, including a junior college district; (D) a levee improvement district; (E) a drainage district; (F) an irrigation district; (G) a water improvement district; (H) a water control and improvement district; (I) a water control and preservation district; (J) a freshwater supply district; (K) a navigation district; (L) a conservation and reclamation district; (M) a soil conservation district; (N) an emergency services or communication district; (O) a public health or hospital authority district; (P) a river authority; (Q) an emergency service organization; or (R) any other political subdivision of this state. Sec. 271.132. TIME AND EXPENSE RECORDS REQUIRED; FINAL STATEMENT. (a) A contingency fee contract entered into by a local governmental entity must require that the contracting attorney or law firm keep current and complete written time and expense records that describe in detail the time and money spent each day in performing the contract. (b) The contracting attorney or law firm shall permit the governing body or governing officer of the local governmental entity or a person designated by that entity to inspect or obtain copies of the time and expense records at any time on request. (c) On conclusion of the matter for which legal services were obtained, the contracting attorney or law firm shall provide the contracting local governmental entity with a complete written statement that describes the outcome of the matter, states the amount of any recovery, shows the contracting attorney's or law firm's computation of the amount of the contingent fee, and contains the final complete time and expense records required by paragraph (a). The complete written statement required by this subsection is public information under Chapter 552, Government Code, and may not be withheld from a requestor under Section 552.103, Government Code, or any other exception from required disclosure. (d) All time and expense records required under this section are public information subject to required public disclosure under Chapter 552, Government Code. Information in the records may be withheld from a member of the public under Section 552.103, Government Code, only if, in addition to meeting the requirements of section 552.103, the chief legal officer or employee of the local governmental entity determines that withholding the information is necessary to protect the entity's strategy or position in pending or reasonably anticipated litigation. Information withheld from public disclosure under this subsection shall be segregated from information that is subject to required public disclosure. Sec. 271.133. CERTAIN GENERAL CONTRACT REQUIREMENTS. The contract must: (1) provide for the method by which the contingent fee is computed; (2) state the differences, if any, in the method by which the contingent fee is computed if the matter is settled, tried, or tried and appealed; (3) state how litigation and other expenses will be paid and, if reimbursement of any expense is contingent on the outcome of the matter or reimbursable from the amount recovered in the matter, state whether the amount recovered for purposes of the contingent fee computation is considered to be the amount obtained before or after expenses are deducted; (4) state that any subcontracted legal or support services performed by a person who is not a contracting attorney or a partner, shareholder, or employee of a contracting attorney or law firm is an expense subject to reimbursement only in accordance with this section; and (5) state that the amount of the contingent fee and reimbursement of expenses under the contract will be limited in accordance with this section. Sec. 271.134. CONTRACT REQUIREMENTS: COMPUTATION OF CONTINGENT FEE; REIMBURSEMENT OF EXPENSES. (a) The contract must establish the reasonable hourly rate for work performed by an attorney, law clerk, or paralegal who will perform legal or support services under the contract based on the reasonable and customary rate in the relevant locality for the type of work performed and on the relevant experience, demonstrated ability, and standard hourly billing rate, if any, of the person performing the work. The contract may establish the reasonable hourly rate for one or more persons by name and may establish a rate schedule for work performed by unnamed persons. The highest hourly rate for a named person or under a rate schedule may not exceed $1,000 an hour. This subsection applies to subcontracted work performed by an attorney, law clerk, or paralegal who is not a contracting attorney or a partner, shareholder, or employee of a contracting attorney or law firm as well as to work performed by a contracting attorney or by a partner, shareholder, or employee of a contracting attorney or law firm. (b) The contract must establish a base fee to be computed as follows. For each attorney, law clerk, or paralegal who is a contracting attorney or a partner, shareholder, or employee of a contracting attorney or law firm, multiply the number of hours the attorney, law clerk, or paralegal works in providing legal or support services under the contract times the reasonable hourly rate for the work performed by that attorney, law clerk, or paralegal. Add the resulting amounts to obtain the base fee. The computation of the base fee may not include hours or costs attributable to work performed by a person who is not a contracting attorney or a partner, shareholder, or employee of a contracting attorney or law firm. (c) The contract must provide that the contingent fee is computed by multiplying the base fee by a multiplier. The contract must establish a reasonable multiplier based on any expected difficulties in performing the contract, the amount of expenses expected to be risked by the contractor, the expected risk of no recovery, and any expected long delay in recovery. The multiplier may not exceed four. (d) In addition to establishing the method of computing the fee under Subsections (a), (b), and (c), the contract must limit the amount of the contingent fee to a stated percentage of the amount recovered. The contract may state different percentage limitations for different ranges of possible recoveries and different percentage limitations in the event the matter is settled, tried, or tried and appealed. The contract must state that the amount of the contingent fee will not exceed the lesser of the stated percentage of the amount recovered or the amount computed under Subsections (a), (b), and (c). (e) The contract also may: (1) limit the amount of expenses that may be reimbursed; and (2) provide that the amount or payment of only part of the fee is contingent on the outcome of the matter for which the services were obtained, with the amount and payment of the remainder of the fee payable on a regular hourly rate basis without regard to the outcome of the matter. SECTION 2. This Act takes effect September 1, 2003, and applies only to a contingency fee contract entered into by a local governmental entity on or after that date.