BILL ANALYSIS
By: Nixon
BACKGROUND AND PURPOSE
Currently, under Texas law, local governments may enter into contingent fee agreements with outside counsel at will. This bill would establish a specific process which local governments must use if they wish to enter into contingency fee contracts with outside counsel.
As proposed, H.B. 3356 would establish a specific process local governments must use to enter into contingency fee contracts with outside legal counsel.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
HB 3356 amends Chapter 271, Local Government Code, by adding Subchapter I to mandate that a contract entered into by a local government entity must require the contracting attorney or law firm to keep current, complete and detailed written time and expense records that describe the time and money spent each day in performing the contact. The contracting attorney must allow an authorized local governmental agent to inspect or obtain copies of the records. Further, the contracting attorney or law firm must supply to the local governmental entity a final written statement describing the final outcome of the matter, any recovery amount, the computation of the contingent fee, and the complete time and expense records required. The records required are public information under Chapter 552, Government Code.
HB 3356 authorizes a local governmental entity to enter into a contingent fee contract for legal services only if the entity provides for the method by which the contingent fee is computed; states the differences, if any, in the method by which the contingent fee is computed if the matter is settled, tried or tried and appealed; 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 contingent fee computation is considered to be the amount obtained before or after expenses are deducted and state that any subcontracted services performed by a person who is not a contracting attorney is an expense subject to reimbursement only in accordance with this subchapter and state that the amount of the contingent fee and reimbursement of expenses under the contract will be limited in accordance with this chapter.
HB 3356 requires the contract to establish the reasonable hourly rate for any attorney, law clerk, or paralegal who will perform services under the contract and establishes that the highest hourly rate may not exceed $1,000 and requires the contract to establish a base fee. Further, HB 3356 requires the contract to establish a base fee and to provide that the contingent fee is computed by multiplying the base fee by a reasonable multiplier, not to exceed four. Additionally, the contract must limit the amount of the contingent fee to a stated percentage of the amount recovered. The contract may limit the amount of expenses that may be reimbursed and provide that the amount or payment of only part of the fee is contingent on the outcome of the matter, 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.
EFFECTIVE DATE
September 1, 2005
The amendment excepts the collection of delinquent taxes under Section 6.30, Tax Code; the collection of debts, accounts receivable, and other items under Article 103.0031, Code of Criminal Procedure; the collection of other receivables owing to a local governmental entity, including utility bills, bills for medical services, and miscellaneous fees and penalties; and legal representation to a school district in an audit under Section 403.302, Government Code, a protest under Section 403.303, Government Code, or an appeal under Section 403.303, Government Code, from the term "contingent fee contract".