AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Barratry is commonly known as vexatious incitement to litigation, typically by soliciting potential legal clients. Many refer to the practice as "case running." Under Section 38.12, Penal Code, "barratry" is generally defined as the illegal solicitation of professional employment. The Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas prohibit these solicitations as well. Adding a civil enforcement option would help curtail this practice.
Primarily, S.B. 1716 adds a cause of action for a client who has been unlawfully solicited to void the contract and recover any actual damages and any fees and expenses paid. The bill allows a potential client to recover a civil penalty of $5,000 from any person who committed barratry but did not succeed in getting the potential client to sign a contract. Actual damages and attorney's fees are also recoverable by a potential client. In addition, the bill allows equitable, quantum meruit recovery of reasonable fees and expenses by any other lawyer who did not commit barratry and did not know of it (the innocent lawyer safe harbor).
As proposed, S.B. 1716 amends current law relating to voidability of contracts procured through barratry and liability arising from conduct constituting barratry and provides a civil penalty.
RULEMAKING AUTHORITY
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 82.065, Government Code, as follows:
Sec. 82.065. New heading: CONTRACT FOR LEGAL SERVICES. (a) Requires that a contingent fee contract for legal services be in writing and signed by the attorney and client.
(b) Provides that any contract, rather than a contingent fee contract, for legal services is voidable by the client if it is procured as a result of conduct violating the laws of this state or the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas (disciplinary rules) regarding barratry by attorneys or other persons.
(c) Authorizes a lawyer who was paid or owed fees or expenses under a contract that is voided to recover in quantum meruit if the client does not prove the lawyer committed barratry or had actual knowledge, prior to undertaking the representation, that the contract was procured as a result of barratry by another person.
SECTION 2. Amends Subchapter C, Chapter 82, Government Code, by adding Section 82.067, as follows:
Sec. 82.067. CIVIL LIABILITY FOR PROHIBITED BARRATRY. (a) Authorizes a client to bring an action to void any contract for legal services that was procured as a result of conduct violating the laws of this state or the disciplinary rules regarding barratry by attorneys or other persons.
(b) Requires a client who prevails in an action under Subsection (a) to recover from any person who committed barratry:
(1) all fees and expenses paid to that person under any contract that is voided;
(2) actual damages caused by the prohibited conduct; and
(3) reasonable and necessary attorney's fees.
(c) Authorizes a person who was solicited by conduct violating the laws of this state or the disciplinary rules regarding barratry by attorneys or other persons, but who did not enter into a contract as a result of that conduct, to file a civil action against any person who committed barratry.
(d) Requires a person who prevails in an action under Subsection (c) to recover from each person who engaged in barratry:
(1) a civil penalty of $5,000;
(2) actual damages caused by the prohibited conduct; and
(3) reasonable and necessary attorney's fees.
(e) Requires that this section be liberally construed and applied to promote its underlying purposes, which are to protect those in need of legal services against unethical, unlawful solicitation and to provide efficient and economical procedures to secure such protection.
(f) Provides that the provisions of this subchapter are not exclusive. Provides that the remedies provided in this subchapter are in addition to any other procedures or remedies provided in any other law; provided, however, that no recovery shall be permitted under both this subchapter and another law of both damages and penalties for the same act or practice.
SECTION 3. (a) Provides that Section 82.065, Government Code, as amended by this Act, applies only to a contract entered into on or after the effective date of this Act. Provides that a contract entered into before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.
(b) Provides that Section 82.067, Government Code, as added by this Act, does not apply to prohibited conduct, as defined by that section, that occurred before the effective date of this Act. Provides that prohibited conduct that occurred before the effective date of this Act is governed by the law that applied to the conduct immediately before the effective date of this Act, and that law is continued in effect for that purpose.
SECTION 4. Effective date: September 1, 2011.