HBA-NMO H.B. 101 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 101 By: Alvarado Civil Practices 2/8/1999 Introduced BACKGROUND AND PURPOSE Currently, there is no statutory provision under which a state or local governmental entity can find relief when a false claim for money, property, or services is brought against that entity. In 1998, the House Committee on Civil Practices appointed the Subcommittee on False Claims to address the committee's second interim charge, the evaluation of the potential of a state "false claims" law. H.B. 101 creates an offense for presenting a false claim to a governmental entity or its agent, and provides remedies for exposing and prosecuting individuals who present such claims. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subtitle F, Title 10, Government Code, by adding Chapter 2259, as follows: CHAPTER 2259. FALSE CLAIMS SUBCHAPTER A. GENERAL PROVISIONS Sec. 2259.001. DEFINITIONS. Defines "claim," "government contractor," "governmental entity," "local governmental entity," "managing official," and "prosecuting authority." Sec. 2259.002. PROHIBITED ACTS. Prohibits a person from: (1) presenting to an officer, employee, or agent of a governmental entity or government contractor a false claim for payment or approval; (2) making or using a false record or statement to obtain payment or approval of a false claim; (3) conspiring to defraud a governmental entity or government contractor by obtaining payment or approval of a false claim; (4) delivering to a governmental entity or government contractor less property than the amount on the received receipt. (5) making or delivering a receipt that falsely represents the amount of property delivered that is to be used by a governmental entity or government contractor; (6) buying or accepting as a pledge of an obligation or debt public property from a person who may not sell or pledge the property; (7) making or using a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to a governmental entity or government contractor; (8) accepting the benefits from a false claim made by any person; or (9) causing an act described by the eight previous subdivisions to be committed by another person. SUBCHAPTER B. LIABILITY FOR VIOLATIONS Sec. 2259.011. LIABILITY FOR KNOWING VIOLATION. Requires a court that finds that a person knowingly violated Section 2259.002 to award the affected governmental entity actual damages, exemplary damages equal to two times the amount of actual damages, and attorney's fees and costs incurred to recover the damages and penalty. Authorizes the court to reduce the exemplary damages to an amount not less than the amount of the actual damages if the person who knowingly violated Section 2259.002 furnished all requested information within 30 days of a request to and fully cooperated with any investigation by the governmental agency responsible for investigating false claims violations. Provides that a person knowingly violates Section 2259.002 if the person acts with knowledge of the facts that constitute the violation, acts in deliberate ignorance or reckless disregard of those facts or their validity, acts without actual knowledge of the facts and, after the violation, learns the facts and fails to take action to mitigate or rectify the violation. Sec. 2259.012. CIVIL PENALTY. Authorizes a court, in addition to amounts awarded under Section 2259.011, to award to the affected governmental entity a civil penalty of not more than $10,000 for each false claim unless the person who knowingly violated Section 2259.002 cooperated in the investigation as described in Section 2259.011. Sec. 2259.013. LIABILITY JOINT AND SEVERAL; PROPORTIONATE RESPONSIBILITY INAPPLICABLE. Provides that liability under this subchapter is joint and several for a violation committed by more than one person. Provides that Chapter 33, Civil Practice and Remedies Code (Proportionate Responsibility), does not apply to an action brought under this chapter. Sec. 2259.014. EXCEPTIONS. Prohibits a court from awarding exemplary damages and attorney's fees and costs under Section 2259.011 or a civil penalty under Section 2259.012 against a person if the total actual damages being assessed against the person in the case is less than $500. Provides that this chapter does not apply to a claim made under a workers' compensation law of this state. Sec. 2259.015. DEPOSIT OF MONEY. Requires that money collected on behalf of a governmental entity be deposited to the credit of the general revenue fund of the state or local governmental entity, as appropriate. Requires the court, if the action is brought in the names of both the state and one or more local governmental entities, to apportion the award of damages and civil penalties among the state and the local entities on the basis of the loss incurred. Requires attorney's fees and costs to be awarded to the entity that incurred the fees and costs. Sec. 2259.016. LIMITATIONS. Provides that an action under this subchapter must be brought not later than the third anniversary of the date on which the violation was discovered by the attorney general, prosecuting authority, or a managing official of the affected governmental entity, other than a managing official who participated in the violation. Prohibits an action under this subchapter from being brought after the 10th anniversary of the date on which the violation was committed. Sec. 2259.017. APPLICATION OF LAW GOVERNING EXEMPLARY DAMAGES. Provides that Chapter 41, Civil Practice and Remedies Code (Exemplary Damages), does not apply to exemplary damages awarded under Section 2259.011 or to the civil penalty awarded under Section 2259.012. SUBCHAPTER C. ATTORNEY GENERAL ACTION Sec. 2259.021. ATTORNEY GENERAL INVESTIGATION. Requires the attorney general to investigate alleged violations of Section 2259.002 involving state funds. Authorizes the attorney general to bring an action under Subchapter B against a person if the person has violated Section 2259.002. Sec. 2259.022. AFFECTED LOCAL GOVERNMENTAL ENTITY. Requires the attorney general to provide a copy of the complaint to the appropriate prosecuting authority if the attorney general brings an action under Subchapter B on a claim that involves local government funds as well as state funds. Requires the attorney general to mail the complaint to the prosecuting authority by certified mail not later than the date on which the complaint is filed. Authorizes the prosecuting authority to intervene in an action not later than 60 days after receiving the copy of the complaint. Authorizes the court to permit the prosecuting authority to intervene after that date for good cause. SUBCHAPTER D. ACTION BROUGHT BY PROSECUTING AUTHORITY Sec. 2259.031. PROSECUTING AUTHORITY INVESTIGATION. Requires a prosecuting authority to investigate alleged violations of Section 2259.002 involving funds belonging to a local governmental entity. Authorizes the prosecuting authority to bring an action under Subchapter B against a person if the person has violated Section 2259.002. Sec. 2259.032. ATTORNEY GENERAL. Requires the prosecuting authority to provide a copy of the complaint to the attorney general if bringing an action under Subchapter B on a claim that involves state funds as well as local government funds. Requires the prosecuting authority to mail the complaint to the attorney general by certified mail not later than the date on which the complaint is filed. Requires the attorney general, not later than 60 days after receiving the copy of the complaint, to notify the court of intent to proceed with the action and assume primary responsibility for conducting the action, or to notify the court that the attorney general declines to assume primary responsibility for conducting the action. Authorizes the prosecuting authority, if the attorney general assumes primary responsibility for conducting the action, to continue as a party in the action. Authorizes the prosecuting attorney, if the attorney general declines to assume primary responsibility, to continue to conduct the action. SUBCHAPTER E. PRIVATE CAUSE OF ACTION Sec. 2259.041. PRIVATE ACTION. Authorizes a person to bring a civil action in a district court for a violation of Section 2259.002 in the name of the person on behalf of the state, the prosecuting authority, or both, as appropriate. Sec. 2259.042. SERVICE OF PETITION. Requires a person who brings an action under this subchapter to serve a copy of the petition in the action on the attorney general, if the claim involves state funds, and the prosecuting authority of the local government, if the claim involves local government funds. Requires service to be made in the manner provided by Rule 21a, Texas Rules of Civil Procedure (Notice). Sec. 2259.043. INTERVENTION. (a) Authorizes the attorney general, in an action involving only state funds, to assume responsibility for prosecution of the action by entering an appearance not later than 60 days after receiving service of the petition under Section 2259.042. (b) Authorizes the prosecuting authority, in an action involving only local government funds, to assume responsibility for prosecution of the action by entering an appearance not later than 60 days after receiving service of the petition under Section 2259.042. (c) Authorizes the attorney general, in an action involving state and local government funds, to assume primary responsibility for prosecution of the action by entering an appearance not later than 60 days after receiving service of the petition under Section 2259.042. (d) Authorizes the prosecuting authority, if the attorney general assumes primary responsibility for prosecution under Subsection (c), to enter an appearance and proceed as a party in the action not later than 60 days after receiving service of the petition under Section 2259.042. (e) Authorizes the prosecuting authority, if the attorney general does not assume primary responsibility for the action under Subsection (c), to assume responsibility for prosecution of the action not later than the 30th day after the last date the attorney general may enter an appearance under this section. Sec. 2259.044. AWARD TO PRIVATE PARTY IF GOVERNMENT PROSECUTES ACTION. Requires the court, if the attorney general or prosecuting authority assumes responsibility for the action under Section 2259.043 and the action is settled or a judgment is entered for the state or local government, to award a reasonable portion of the settlement or judgment to the person who commenced the action under this subchapter. Requires the court, in determining the amount to award a person, to consider the value of any information or evidence disclosed by the person. Provides that an award of 10 percent of the settlement or judgment is presumed to be reasonable. Sec. 2259.045. AWARD TO PRIVATE PARTY IF GOVERNMENT DOES NOT PROSECUTE ACTION. Requires the court, if the attorney general or prosecuting authority does not assume responsibility for prosecution of the action under Section 2259.043 and the action is settled or a judgment is entered for the state or local government, to award a reasonable portion of the settlement or judgment to the person who prosecuted the action. Requires the court, in determining the amount to award a person, to consider the value of the person's prosecution of the action. Provides that an award of 25 percent of the settlement or judgment is presumed to be reasonable. Authorizes the court to award the person who prosecuted the action reasonable expenses in prosecuting the action. SUBCHAPTER F. INTERFERENCE WITH DISCLOSURE BY EMPLOYEES Sec. 2259.051. RIGHT TO DISCLOSE INFORMATION AND PARTICIPATE IN ACTION. Entitles a person to: (1) disclose information relevant to an alleged violation of Section 2259.002 to a governmental entity, prosecuting authority, the attorney general, or a law enforcement agency; (2) assist, at the request of the attorney general or prosecuting authority, in the investigation of an alleged violation of Section 2259.002; or (3) testify or otherwise participate, at the request of the attorney general or prosecuting authority, in the furtherance of an action under this chapter. Sec. 2259.052. PROHIBITED CONDUCT BY EMPLOYER. (a) Prohibits an employer from adopting or enforcing a rule or policy that prevents an employee from exercising the employee's rights under Section 2259.051; or discriminating against an employee who has exercised those rights. (b) Provides that an employer who violates Subsection (a) is liable to the employee for actual damages including lost wages, reinstatement to employment with any applicable seniority status, exemplary damages equal to not less than two times the amount of lost wages; and attorney's fees and costs. (c) Prohibits an employee from recovering under Subsection (b) unless the employee's rights under Section 2259.051 were exercised; and to the extent the employee participated in the violation of Section 2259.002, the participation was in response to harassment, threats of termination or demotion, or other coercion by the employer. SECTION 2. Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 3. Emergency clause.