By:  Nixon, Van Arsdale                                           H.B. No. 2039


A BILL TO BE ENTITLED
AN ACT
relating to the adjudication of claims arising under written contracts with local governmental entities. 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. ADJUDICATION OF CLAIMS ARISING UNDER WRITTEN
CONTRACTS WITH LOCAL GOVERNMENTAL ENTITIES
Sec. 271.151. DEFINITIONS. In this subchapter: (1) "Adjudication" of a claim means the bringing of a civil suit and prosecution to final judgment in county or state court and includes the bringing of an arbitration proceeding and prosecution to final resolution in accordance with any mandatory procedures established in the contract subject to this subchapter for the arbitration proceedings. (2) "Contract subject to this subchapter" means a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity. (3) "Local governmental entity" means a political subdivision of this state, other than a county or a unit of state government, as that term is defined by Section 2260.001, Government Code, including a: (A) municipality; (B) public school district and junior college district; and (C) special-purpose district or authority, including any levee improvement district, drainage district, irrigation district, water improvement district, water control and improvement district, water control and preservation district, freshwater supply district, navigation district, conservation and reclamation district, soil conservation district, communication district, public health district, emergency service organization, and river authority. Sec. 271.152. WAIVER OF IMMUNITY TO SUIT FOR CERTAIN CLAIMS. A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim arising under the contract, subject to the terms and conditions of this subchapter. Sec. 271.153. LIMITATIONS ON ADJUDICATION AWARDS. (a) The total amount of money awarded in an adjudication brought against a local governmental entity arising under a contract subject to this subchapter is limited to the following: (1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration; (2) the amount owed for change orders or additional work required to carry out the contract; and (3) interest as allowed by law. (b) Damages awarded in an adjudication brought against a local governmental entity arising under a contract subject to this subchapter may not include: (1) consequential damages, except as allowed under Subsection (a)(1); (2) exemplary damages; or (3) damages for unabsorbed home office overhead. Sec. 271.154. CONTRACTUAL ADJUDICATION PROCEDURES ENFORCEABLE. Adjudication procedures, including requirements for serving notices or engaging in alternative dispute resolution proceedings before bringing a suit or an arbitration proceeding, that are stated in the contract subject to this subchapter or that are established by the local governmental entity and expressly incorporated into the contract are enforceable except to the extent those procedures conflict with the terms of this subchapter. Sec. 271.155. NO WAIVER OF OTHER DEFENSES. This subchapter does not waive a defense or a limitation on damages available to a party to a contract, other than a bar against suit based on sovereign immunity. Sec. 271.156. NO WAIVER OF IMMUNITY TO SUIT IN FEDERAL COURT. This subchapter does not waive sovereign immunity to suit in federal court. Sec. 271.157. NO GRANT OF IMMUNITY TO SUIT. Nothing in this subchapter shall constitute a grant of immunity to suit to a local governmental entity. SECTION 2. (a) Subchapter I, Chapter 271, Local Government Code, as added by this Act, applies only to a claim arising under a contract executed on or after September 1, 2005. A claim that arises under a contract executed before September 1, 2005, is governed by the law as it existed on the date the contract is executed, and the former law is continued in effect for that purpose. (b) Nothing in this Act is intended to create, rescind, expand, or limit any waiver of sovereign immunity to suit applicable to a contract executed before September 1, 2005. SECTION 3. This Act takes effect September 1, 2005.