80R10416 DAK-D

By: Haggerty H.B. No. 3550

A BILL TO BE ENTITLED

AN ACT

relating to false claims against the state and school districts 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 2116 to read as follows: CHAPTER 2116. FALSE CLAIMS SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2116.001. DEFINITIONS. In this chapter:

(1) "Governmental unit" means this state and a school district in this state.

(2) "Qui tam action" means an action brought by a private person against a person for the commission of a false claim under Section 2116.051.

(3) "Qui tam plaintiff" means the person bringing a qui tam action.

(4) "State" means state government as defined by Section 101.001, Civil Practice and Remedies Code.

Sec. 2116.002. 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 against a member of the legislature, a member of the judiciary, or a senior official of the executive branch if the action is based on evidence or information known to the state when the action was brought.

(c) On motion of the attorney general, a court may, after considering all the equities, dismiss a qui tam action if the elements of the actionable false claims alleged in the qui tam complaint have been publicly disclosed, specifically in the news media or in a publicly disseminated governmental report, at the time the complaint is filed.

Sec. 2116.003. 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.

Sec. 2116.004. LIMITATIONS. A person must bring a civil action against a person committing a false claim as follows:

(1) if the false claim is known or reasonably should have been known by the official or employee of a governmental unit who has the responsibility to act in relation to the false claim on or before the third anniversary of the date the false claim occurred, not later than the sixth anniversary of the date that the false claim occurred; or

(2) if the false claim is not known or reasonably should not have been known by the official or employee of a governmental unit who has the responsibility to act in relation to the false claim on or before the third anniversary of the date the false claim occurred, not later than the earlier of:

(A) the third anniversary of the date the official or employee knew or should reasonably have known of the false claim; or

(B) the 10th anniversary of the date on which the false claim occurred. [Sections 2116.005-2116.050 reserved for expansion] SUBCHAPTER B. FALSE CLAIMS

Sec. 2116.051. 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 a governmental unit:

(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" does not require specific intent to defraud. "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, employee, or agent of a governmental unit, or to any contractor, grantee, or other recipient of the funds of a governmental unit, 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;

(3) conspires to defraud a governmental unit by getting a false or fraudulent claim allowed or paid, or conspires to defraud a governmental unit by knowingly making, using, or causing 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 a governmental unit;

(4) has possession, custody, or control of public property or money used or to be used by a governmental unit and knowingly 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 a governmental unit and knowingly makes or delivers a receipt that falsely represents the property used or to be used;

(6) knowingly buys, or receives as a pledge of an obligation or debt, public property from any person who lawfully may not sell or pledge the property;

(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 a governmental unit;

(8) is a beneficiary of an inadvertent submission of a false claim to any employee, officer, or agent of a governmental unit, or to any contractor, grantee, or other recipient of the funds of a governmental unit, subsequently discovers the falsity of the claim, and fails to disclose the false claim to a governmental unit within a reasonable time after discovery of the false claim; or

(9) knowingly presents, or causes to be presented, a claim for payment or approval in which the person has charged a governmental unit a higher charge for a product or service than the person would charge an entity other than a governmental unit for the identical product or service.

Sec. 2116.052. CIVIL PENALTY. (a) A person who commits a false claim against the state under Section 2116.051 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:

(1) that the person committing a false claim 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) that the person committing a false claim 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.

Sec. 2116.053. FALSE CLAIMS AGAINST SCHOOL DISTRICTS. (a) A person who commits a false claim against a school district has the same liability under this chapter as a person who commits a false claim against the state.

(b) For the purposes of this chapter, the attorney general and the courts shall treat a false claim against a school district in the same manner as a false claim against the state.

Sec. 2116.054. EXCLUSION. This subchapter does not apply to a claim, record, or statement made under the Tax Code. [Sections 2116.055-2116.100 reserved for expansion] SUBCHAPTER C. ACTIONS BY PRIVATE PERSONS

Sec. 2116.101. DEFINITION. In this subchapter, "proceeds of the action" means the amount of money awarded to the state in a final judgment 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. 2116.102. ACTIONS BY PRIVATE PERSON AUTHORIZED; ALTERNATIVE REMEDY SOUGHT BY STATE. (a) Subject to Section 2116.151, a private person may bring a civil action against a person committing a false claim under Section 2116.051 against a governmental unit.

(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. 2116.103. 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. 2116.104. 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. 2116.105. CHOICE OF STATE. (a) On or before the last day of the period described by Section 2116.103(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. 2116.106. ACTION CONDUCTED BY STATE. (a) This section applies to a qui tam action the state takes over under Section 2116.105(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 for good cause 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.

(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. 2116.107. ACTION CONDUCTED BY QUI TAM PLAINTIFF. (a) This section applies to a qui tam action the state declines to take over under Section 2116.105(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. 2116.108. 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. 2116.109. 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 2116.105(a)(1).

(b) Except as provided by Subsection (c), the court shall award the qui tam plaintiff at least 15 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. 2116.110. 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 2116.105(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. 2116.111. 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 2116.109 or 2116.110, 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. 2116.112. 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 2116.110(d).

Sec. 2116.113. 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 all relief necessary to make the person whole, including:

(1) reinstatement with the same seniority status the person would have had except for the discrimination; and

(2) 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 2116.114-2116.150 reserved for expansion] SUBCHAPTER D. ACTION BY STATE

Sec. 2116.151. 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 the time for filing an appeal has expired; or

(3) the finding or conclusion is not subject to judicial review.

Sec. 2116.152. RESPONSIBILITIES OF ATTORNEY GENERAL. The attorney general shall diligently investigate the commission of a false claim under Section 2116.051 and may bring a civil action against the person committing the false claim.

SECTION 2. This Act applies only to a false claim as described by Section 2116.051, 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.

SECTION 3. 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, 2007.