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A BILL TO BE ENTITLED
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AN ACT
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relating to false claims against the state and actions by the state |
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and private persons to prosecute those claims; providing a civil |
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penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle C, Title 10, Government Code, is |
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amended by adding Chapter 2116 to read as follows: |
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CHAPTER 2116. FALSE CLAIMS |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 2116.001. DEFINITIONS. In this chapter: |
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(1) "Claim" includes any request or demand, under a |
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contract or otherwise, for money or property that is made to a |
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contractor, grantee, or other recipient if this state: |
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(A) provides any portion of the money or property |
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that is requested or demanded; or |
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(B) will reimburse the contractor, grantee, or |
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other recipient for any portion of the money or property that is |
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requested or demanded. |
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(2) "Qui tam action" means an action brought by a |
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private person against a person for the commission of a false claim |
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under Section 2116.101. |
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(3) "Qui tam plaintiff" means the person bringing a |
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qui tam action. |
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(4) "State" means state government as defined by |
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Section 101.001, Civil Practice and Remedies Code. |
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Sec. 2116.002. WHEN A PERSON ACTS KNOWINGLY. In this |
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chapter, a person acts "knowingly" with respect to information if |
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the person: |
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(1) has knowledge of the information; |
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(2) acts with conscious indifference to the truth or |
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falsity of the information; or |
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(3) acts in reckless disregard of the truth or falsity |
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of the information. |
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Sec. 2116.003. CERTAIN ACTIONS BARRED. (a) A person may |
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not bring a qui tam action based on allegations or transactions that |
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are the subject of a civil suit or an administrative penalty |
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proceeding in which the state is already a party. |
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(b) A person may not bring a qui tam action against a member |
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of the legislature, a member of the judiciary, or a senior official |
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of the executive branch if the action is based on evidence or |
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information known to the state when the action was brought. |
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(c) On motion of the attorney general, a court may, after |
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considering all the equities, dismiss a qui tam action if the |
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elements of the actionable false claims alleged in the qui tam |
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complaint have been publicly disclosed specifically in the news |
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media or in a publicly disseminated governmental report, at the |
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time the complaint is filed. |
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Sec. 2116.004. CHAPTER NOT APPLICABLE TO MEDICAID FRAUD. |
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This chapter does not apply to an unlawful act described by Section |
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36.002, Human Resources Code, relating to Medicaid fraud. |
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[Sections 2116.005-2116.050 reserved for expansion] |
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SUBCHAPTER B. INVESTIGATION BY THE ATTORNEY GENERAL |
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Sec. 2116.051. RESPONSIBILITY OF THE ATTORNEY GENERAL. The |
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attorney general shall diligently investigate the commission of a |
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false claim under Section 2116.101 and may bring a civil action |
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against the person committing the false claim. |
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Sec. 2116.052. INVESTIGATION. (a) The attorney general |
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may take action under Subsection (b) if the attorney general has |
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reason to believe that: |
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(1) a person has information or custody or control of |
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documentary material relevant to the subject matter of an |
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investigation of an alleged false claim; |
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(2) a person is committing, has committed, or is about |
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to commit a false claim; or |
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(3) it is in the public interest to conduct an |
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investigation to ascertain whether a person is committing, has |
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committed, or is about to commit a false claim. |
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(b) In investigating a false claim, the attorney general |
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may: |
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(1) require the person to file on a prescribed form a |
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statement in writing, under oath or affirmation, as to all the facts |
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and circumstances concerning the alleged false claim and other |
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information considered necessary by the attorney general; |
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(2) examine under oath a person in connection with the |
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alleged false claim; and |
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(3) execute in writing and serve on the person a civil |
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investigative demand requiring the person to produce the |
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documentary material and permit inspection and copying of the |
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material under Section 2116.053. |
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(c) The office of the attorney general may not release or |
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disclose information that is obtained under Subsection (b)(1) or |
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(2) or any documentary material or other record derived from the |
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information except: |
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(1) by court order for good cause shown; |
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(2) with the consent of the person who provided the |
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information; |
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(3) to an employee of the attorney general; |
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(4) to an agency of this state, the United States, or |
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another state; |
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(5) to any attorney representing the state under |
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Section 2116.055 or in a civil action brought under Subchapter D; |
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(6) to a political subdivision of this state; or |
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(7) to a person authorized by the attorney general to |
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receive the information. |
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(d) The attorney general may use documentary material |
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derived from information obtained under Subsection (b)(1) or (2), |
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or copies of that material, as the attorney general determines |
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necessary in the enforcement of this chapter, including |
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presentation before a court. |
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(e) If a person fails to file a statement as required by |
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Subsection (b)(1) or fails to submit to an examination as required |
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by Subsection (b)(2), the attorney general may file in a district |
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court of Travis County a petition for an order to compel the person |
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to file the statement or submit to the examination within a period |
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stated by court order. Failure to comply with an order entered |
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under this subsection is punishable as contempt. |
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(f) An order issued by a district court under this section |
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is subject to appeal to the supreme court. |
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Sec. 2116.053. CIVIL INVESTIGATIVE DEMAND. (a) An |
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investigative demand must: |
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(1) state the rule or statute under which the alleged |
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unlawful act is being investigated and the general subject matter |
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of the investigation; |
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(2) describe the class or classes of documentary |
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material to be produced with reasonable specificity to fairly |
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indicate the documentary material demanded; |
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(3) prescribe a return date within which the |
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documentary material is to be produced; and |
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(4) identify an authorized employee of the attorney |
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general to whom the documentary material is to be made available for |
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inspection and copying. |
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(b) A civil investigative demand may require disclosure of |
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any documentary material that is discoverable under the Texas Rules |
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of Civil Procedure. |
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(c) Service of an investigative demand may be made by: |
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(1) delivering an executed copy of the demand to the |
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person to be served or to a partner, an officer, or an agent |
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authorized by appointment or by law to receive service of process on |
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behalf of that person; |
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(2) delivering an executed copy of the demand to the |
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principal place of business in this state of the person to be |
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served; or |
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(3) mailing by registered or certified mail an |
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executed copy of the demand addressed to the person to be served at |
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the person's principal place of business in this state or, if the |
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person has no place of business in this state, to a person's |
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principal office or place of business. |
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(d) Documentary material demanded under this section shall |
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be produced for inspection and copying during normal business hours |
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at the office of the attorney general or as agreed by the person |
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served and the attorney general. |
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(e) The office of the attorney general may not produce for |
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inspection or copying or otherwise disclose the contents of |
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documentary material obtained under this section except: |
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(1) by court order for good cause shown; |
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(2) with the consent of the person who produced the |
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information; |
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(3) to an employee of the attorney general; |
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(4) to an agency of this state, the United States, or |
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another state; |
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(5) to any attorney representing the state under |
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Section 2116.055 or in a civil action brought under Subchapter D; |
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(6) to a political subdivision of this state; or |
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(7) to a person authorized by the attorney general to |
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receive the information. |
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(f) The attorney general shall prescribe reasonable terms |
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and conditions allowing the documentary material to be available |
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for inspection and copying by the person who produced the material |
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or by an authorized representative of that person. The attorney |
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general may use the documentary material or copies of it as the |
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attorney general determines necessary in the enforcement of this |
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chapter, including presentation before a court. |
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(g) A person may file a petition, stating good cause, to |
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extend the return date for the demand or to modify or set aside the |
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demand. A petition under this section shall be filed in a district |
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court of Travis County and must be filed before the earlier of: |
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(1) the return date specified in the demand; or |
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(2) the 20th day after the date the demand is served. |
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(h) Except as provided by court order, a person on whom a |
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demand has been served under this section shall comply with the |
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terms of an investigative demand. |
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(i) A person who has committed a false claim has submitted |
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to the jurisdiction of this state, and personal service of an |
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investigative demand under this section may be made on the person |
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outside of this state. |
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(j) This section does not limit the authority of the |
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attorney general to conduct investigations or to access a person's |
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documentary materials or other information under another state or |
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federal law, the Texas Rules of Civil Procedure, or the Federal |
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Rules of Civil Procedure. |
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(k) If a person fails to comply with an investigative |
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demand, or if copying and reproduction of the documentary material |
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demanded cannot be satisfactorily accomplished and the person |
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refuses to surrender the documentary material, the attorney general |
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may file in a district court of Travis County a petition for an |
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order to enforce the investigative demand. |
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(l) If a petition is filed under Subsection (k), the court |
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may determine the matter presented and may enter an order to |
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implement this section. |
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(m) Failure to comply with a final order entered under |
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Subsection (l) is punishable by contempt. |
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(n) A final order issued by a district court under |
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Subsection (l) is subject to appeal to the supreme court. |
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Sec. 2116.054. INJUNCTIVE RELIEF. (a) If the attorney |
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general has reason to believe that a person is committing, has |
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committed, or is about to commit a false claim, the attorney general |
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may institute an action for an appropriate order to restrain the |
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person from committing or continuing the false claim. |
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(b) An action under this section shall be brought in a |
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district court of Travis County, or in a county in which any part of |
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the false claim occurred, is occurring, or is about to occur. |
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Sec. 2116.055. ATTORNEY GENERAL AS RELATOR IN FEDERAL |
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ACTION. To the extent permitted by 31 U.S.C. Sections 3729-3733, |
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the attorney general may bring an action as relator under 31 U.S.C. |
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Section 3730 with respect to an act for which a person may be held |
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liable under 31 U.S.C. Section 3729. The attorney general may |
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contract with a private attorney to represent the state under this |
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section. |
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Sec. 2116.056. STANDARD OF PROOF. The standard of proof for |
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all elements of a cause of action under this chapter is |
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preponderance of the evidence. |
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Sec. 2116.057. CHAPTER 41, CIVIL PRACTICE AND REMEDIES |
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CODE, INAPPLICABLE TO ACTION UNDER THIS CHAPTER. Chapter 41, Civil |
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Practice and Remedies Code, is not applicable to a cause of action |
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under this chapter. |
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[Sections 2116.058-2116.100 reserved for expansion] |
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SUBCHAPTER C. FALSE CLAIMS |
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Sec. 2116.101. FALSE CLAIMS. (a) A person commits a false |
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claim if the person: |
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(1) knowingly presents, or causes to be presented, to |
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an officer, employee, or agent of this state, or to any contractor, |
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grantee, or other recipient of state funds, a false or fraudulent |
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claim for payment or approval; |
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(2) knowingly makes, uses, or causes to be made or used |
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a false record or statement to get a false or fraudulent claim paid |
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or approved; |
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(3) conspires to defraud this state by getting a false |
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or fraudulent claim allowed or paid, or conspires to defraud this |
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state by knowingly making, using, or causing to be made or used, a |
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false record or statement to conceal, avoid, or decrease an |
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obligation to pay or transmit money or property to this state; |
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(4) has possession, custody, or control of public |
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property or money used or to be used by this state and knowingly |
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delivers or causes to be delivered less property than the amount for |
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which the person receives a certificate or receipt; |
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(5) is authorized to make or deliver a document |
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certifying receipt of property used or to be used by this state and |
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knowingly makes or delivers a receipt that falsely represents the |
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property used or to be used; |
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(6) knowingly buys, or receives as a pledge of an |
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obligation or debt, public property from any person who lawfully |
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may not sell or pledge the property; |
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(7) knowingly makes, uses, or causes to be made or used |
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a false record or statement to conceal, avoid, or decrease an |
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obligation to pay or transmit money or property to this state; or |
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(8) is a beneficiary of an inadvertent submission of a |
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false claim to any employee, officer, or agent of this state, or to |
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any contractor, grantee, or other recipient of state funds, |
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subsequently discovers the falsity of the claim, and fails to |
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disclose the false claim to this state within a reasonable time |
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after discovery of the false claim. |
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(b) Proof of the person's specific intent to commit a false |
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claim under Subsection (a) is not required in a civil or |
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administrative proceeding to show that a person acted "knowingly" |
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with respect to information under this chapter. |
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Sec. 2116.102. CIVIL REMEDIES. (a) A person who commits a |
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false claim under Section 2116.101 is liable to this state for: |
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(1) a civil penalty in an amount not less than $5,000 |
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and not more than $10,000 for each false claim committed by the |
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person; |
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(2) except as provided by Subsection (b), three times |
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the amount of damages that this state sustains directly or |
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indirectly as a result of the act of the person; and |
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(3) fees, expenses, and costs reasonably incurred in |
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obtaining relief or civil remedies or conducting investigations |
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under this chapter, including court costs, reasonable attorney's |
|
fees, witness fees, and deposition fees. |
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(b) A court may assess not less than two times the amount of |
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damages under Subsection (a)(2) if the court finds: |
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(1) that the person committing a false claim furnished |
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the attorney general with all information known to the person about |
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the false claim on or before the 30th day after the date the person |
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first obtained the information; |
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(2) that the person committing a false claim fully |
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cooperated with any investigation of the false claim; and |
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(3) at the time the person furnished information about |
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the false claim, a criminal prosecution, civil action, or |
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administrative action had not commenced in relation to the false |
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claim and the person did not have actual knowledge of the existence |
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of an investigation into the false claim. |
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Sec. 2116.103. EXCLUSION. This subchapter does not apply |
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to a claim, record, or statement made under the Tax Code. |
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[Sections 2116.104-2116.150 reserved for expansion] |
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SUBCHAPTER D. ACTIONS BY PRIVATE PERSONS |
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Sec. 2116.151. ACTIONS BY PRIVATE PERSON AUTHORIZED; |
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ALTERNATIVE REMEDY SOUGHT BY STATE. (a) Subject to Section |
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2116.201, a private person may bring a civil action against a person |
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committing a false claim under Section 2116.101. |
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(b) The action is a qui tam action on behalf of both the |
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person and the state. |
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(c) The qui tam action must be brought in the name of this |
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state. |
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(d) No person other than the attorney general may intervene |
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or bring a related action based on the facts underlying a pending |
|
action under this subchapter. |
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Sec. 2116.152. INITIATION OF ACTION. (a) A qui tam |
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plaintiff shall serve a copy of the petition and a written |
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disclosure of substantially all material evidence and information |
|
the person possesses on the attorney general in compliance with the |
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Texas Rules of Civil Procedure. |
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(b) The petition shall be filed in camera and, except as |
|
provided by Subsection (d) or (e), shall remain under seal until at |
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least the 180th day after the date the petition is filed or the date |
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on which the state elects to intervene, whichever is earlier. The |
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petition may not be served on the defendant until the court orders |
|
service on the defendant. |
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(c) The state may elect to intervene and proceed with the |
|
action not later than the 180th day after the date the attorney |
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general receives the petition and the material evidence and |
|
information. |
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(d) At the time the state intervenes, the attorney general |
|
may file a motion with the court requesting that the petition remain |
|
under seal for an extended period. |
|
(e) The state may, for good cause shown, move the court to |
|
extend the 180-day deadline under Subsection (b) or (c). A motion |
|
under this subsection may be supported by affidavits or other |
|
submissions in camera. |
|
(f) An action under this subchapter may be dismissed before |
|
the end of the period during which the petition remains under seal |
|
only if the court and the attorney general consent in writing to the |
|
dismissal and state their reasons for consenting. |
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Sec. 2116.153. ANSWER BY DEFENDANT. A defendant is not |
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required to file in accordance with the Texas Rules of Civil |
|
Procedure an answer to a petition filed under this subchapter until |
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the petition is unsealed and served on the defendant. |
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Sec. 2116.154. CHOICE OF STATE. (a) Not later than the |
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last day of the period described by Section 2116.152(c) or an |
|
extension of that period as provided by Section 2116.152(e), the |
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state shall: |
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(1) proceed with the action; or |
|
(2) notify the court that the state declines to take |
|
over the action. |
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(b) If the state declines to take over the action, the court |
|
shall dismiss the action. |
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Sec. 2116.155. ACTION CONDUCTED BY STATE. (a) This |
|
section applies to a qui tam action the state takes over under |
|
Section 2116.154(a)(1). |
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(b) The state has the primary responsibility for |
|
prosecuting the action and is not bound by an act of the qui tam |
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plaintiff. |
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(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. 2116.156. STAY OF CERTAIN DISCOVERY. (a) 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. |
|
(b) The court shall hear a motion to stay discovery under |
|
this section in camera. |
|
(c) The court may extend the period prescribed by Subsection |
|
(a) 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. 2116.157. AWARD TO QUI TAM PLAINTIFF WHEN STATE |
|
PROCEEDS WITH ACTION. (a) If the state proceeds with an action |
|
under this subchapter, the person bringing the action is entitled, |
|
except as provided by Subsection (b), to receive at least 15 |
|
percent, but not more than 25 percent, of the proceeds of the |
|
action, depending on the extent to which the person substantially |
|
contributed to the prosecution of the action. |
|
(b) If the court finds that the action is based primarily on |
|
disclosures of specific information, other than information |
|
provided by the person bringing the action, relating to allegations |
|
or transactions in a civil or criminal 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 seven percent of the proceeds of the |
|
action. The court shall consider the significance of the |
|
information and the role of the person bringing the action in |
|
advancing the case to litigation. |
|
(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 from the defendant an |
|
amount for reasonable expenses, reasonable attorney's fees, and |
|
costs that the court finds to have been necessarily incurred. The |
|
court's determination of expenses, fees, and costs to be awarded |
|
under this subsection shall be made only after the defendant has |
|
been found liable in the action. |
|
(d) In this section, "proceeds of the action" includes |
|
proceeds of a settlement of the action. |
|
Sec. 2116.158. REDUCTION OF AWARD. (a) 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 |
|
2116.157, taking into account the qui tam plaintiff's role in |
|
advancing the case to litigation and any relevant circumstances |
|
pertaining to the violation. |
|
(b) 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. 2116.159. 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. |
|
Sec. 2116.160. 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 but 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 2116.161-2116.200 reserved for expansion] |
|
SUBCHAPTER E. ACTION BY STATE |
|
Sec. 2116.201. STATE MAY PURSUE 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 D. |
|
(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. |
|
SECTION 2. Subsection (d), Section 41.002, Civil Practice |
|
and Remedies Code, is amended to read as follows: |
|
(d) Notwithstanding any provision to the contrary, this |
|
chapter does not apply to: |
|
(1) Section 15.21, Business & Commerce Code (Texas |
|
Free Enterprise and Antitrust Act of 1983); |
|
(2) an action brought under the Deceptive Trade |
|
Practices-Consumer Protection Act (Subchapter E, Chapter 17, |
|
Business & Commerce Code) except as specifically provided in |
|
Section 17.50 of that Act; |
|
(3) an action brought under Chapter 36, Human |
|
Resources Code; [or] |
|
(4) an action brought under Chapter 21, Insurance |
|
Code; or |
|
(5) an action brought under Chapter 2116, Government |
|
Code. |
|
SECTION 3. This Act applies only to a false claim as |
|
described by Section 2116.101, 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 4. 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. |
|
|
|
* * * * * |