HBA-JRA C.S.H.B. 69 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 69 By: Nixon, Joe Civil Practices 4/26/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, to seek legal redress against the state, a party must seek permission from the legislature to sue the state. However, if the legislature waives this sovereign immunity, and the plaintiff prevails in the action against the state, the state remains immune from liability. A plaintiff cannot recover a court judgment from the state unless the state agrees to pay the judgment. C.S.H.B. 69 establishes a process by which claims against a unit of state government for breach of contract may be made. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to each unit of state government with rulemaking authority and the chief administrative law judge of the State Office of Administrative Hearings in SECTION 1 (Sections 2260.052 and 2260.103, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subtitle F, Title 10, Government Code, by adding Chapter 2260, as follows: CHAPTER 2260. RESOLUTION OF CERTAIN CONTRACT CLAIMS AGAINST THE STATE SUBCHAPTER A. GENERAL PROVISIONS Sec. 2260.001. DEFINITIONS. Defines "contract," "contractor," "institution of higher education," and "unit of state government." Sec. 2260.002. APPLICABILITY. Provides that this chapter does not apply to a claim for personal injury or wrongful death arising from the breach of a contract. Sec. 2260.003. DAMAGES. Prohibits the total amount of money recoverable on a claim for breach of contract under this chapter from exceeding the balance due and owing on the contract price after deducting any amount owed the unit of state government for work not performed under a contract or in substantial compliance with its terms. Sec. 2260.004. REQUIRED CONTRACT PROVISION. Requires each unit of state government that enters into a contract to which this chapter applies to include as a term of the contract a provision stating that the dispute resolution process used by the unit of state government under this chapter must be used to attempt to resolve a dispute arising under the contract. Requires the attorney general to provide assistance to a unit of state government in developing the contract provision required by this section. Sec. 2260.005. EXCLUSIVE PROCEDURE. Provides that the procedures contained in this chapter are exclusive and required prerequisites to suit in accordance with Chapter 107 (Permission to Sue the State), Civil Practice and Remedies Code. SUBCHAPTER B. NEGOTIATION OF CLAIM Sec. 2260.051. CLAIM FOR BREACH OF CONTRACT; NOTICE. Authorizes a contractor to make a claim against a unit of state government for breach of a contract between the unit of state government and the contractor. Authorizes the unit of state government to assert a counterclaim against the contractor. Provides that a contractor must provide written notice to the unit of state government of a claim for breach of contract by the 180th day after the date of the event giving rise to the claim, which states with particularity the nature of the alleged breach, the amount the contractor seeks as damages, and the legal theory of recovery. Provides that a unit of state government must assert any counterclaim, in writing, by the 90th day after the date of the notice or waive its right to assert the counterclaim. Sec. 2260.052. NEGOTIATION. Requires the chief administrative officer or another officer of the unit of state government designated in the contract to examine the claim and any counterclaim and negotiate with the contractor in an effort to resolve them. Provides that the negotiation must begin by the 60th day after the later of the date of termination of the contract, the completion date in the original contract, or the date the claim is received. Entitles a unit of state government to delay negotiation until after the 180th day after the date of the event giving rise to the claim. Requires each unit of state government with rulemaking authority to develop rules to govern the negotiation of a claim under this section. Requires a unit that does not have rulemaking authority to follow the rules adopted by the attorney general. Sec. 2260.053. PARTIAL RESOLUTION OF CLAIM. Requires the parties to reduce the agreement or settlement to writing and each party to sign it if the negotiation results in the resolution of some disputed issues. Provides that a partial settlement or resolution of a claim does not waive a party's rights under this chapter as to the parts of the claim that are not resolved. Sec. 2260.054. PAYMENT OF CLAIM FROM APPROPRIATED FUNDS. Authorizes a unit of state government to pay a resolved claim only from money appropriated to it for payment of contract claims or for payment of the contract that is the subject of the claim. Authorizes the balance of the claim to be paid only from money appropriated by the legislature for payment of the claim if money previously appropriated for payment of contract claims or payment of the contract is insufficient to pay the claim or settlement. Sec. 2260.055. INCOMPLETE RESOLUTION. Authorizes a contractor to file a request for hearing under Subchapter C if a claim is not entirely resolved on or before the 270th day after the date the claim is filed with the unit of state government, unless the parties agree in writing to an extension of time. SUBCHAPTER C. CONTESTED CASE HEARING Sec. 2260.101. DEFINITION. Defines "office" in this subchapter. Sec. 2260.102. REQUEST FOR HEARING. Authorizes a contractor to file a request for hearing with the unit of state government. Sets forth the information the request must include. Requires the unit of state government to refer the claim to the State Office of Administrative Hearings (SOAH) for a contested case hearing under Chapter 2001 (Administrative Procedure), Government Code. Sec. 2260.103. HEARING FEE. Authorizes the chief administrative law judge (ALJ) of SOAH to set a fee for a hearing that is not less than $250 and allows SOAH to recover all or a substantial part of its costs in holding hearings. Authorizes the chief ALJ of SOAH, by rule, to establish a graduated fee scale, increasing the fee in relation to the amount in controversy. Authorizes SOAH to assess the fee against the party who does not prevail in the hearing or apportion the fee against the parties in an equitable manner. Sec. 2260.104. HEARING. Requires an ALJ of SOAH to conduct a hearing in accordance with the procedures adopted by the chief ALJ of SOAH. Requires the ALJ to issue a written decision containing the ALJ's findings and recommendations within a reasonable time after the conclusion of the hearing. Requires the ALJ to base the decision on the pleadings filed with SOAH and evidence received. Provides that the decision must include the findings of fact and conclusions of law on which the ALJ's decision is based and a summary of the evidence. Sec. 2260.105. PAYMENT OF CLAIM. Requires the unit of government to pay the amount of the claim or part of the claim if the ALJ finds, by a preponderance of the evidence, that under the laws of this state the claim or part of the claim is valid. Requires the unit of government to pay a claim under this subchapter from money appropriated to it for payment of contract claims or for payment of the contract that is the subject of the claim. Authorizes the balance of the claim to be paid only from money appropriated by the legislature for payment of the claim if money previously appropriated for payment of contract claims or payment of the contract is insufficient to pay the claim or settlement. Sec. 2260.106. PREJUDGMENT INTEREST. Provides that Chapter 304 (Judgment Interest), Finance Code, applies to a judgment awarded to a claimant under this chapter, but prohibits the applicable rate of interest from exceeding six percent. Sec. 2260.107. EXECUTION OF STATE PROPERTY NOT AUTHORIZED. Provides that this chapter does not authorize execution on property owned by the state or a unit of state government. SECTION 2. Effective date: September 1, 1999. SECTION 3. Makes this Act applicable to a claim pending or arising on or after the effective date of this Act, without regard to whether the contract was entered into before, on, or after that date. Provides that, notwithstanding Section 2260.051(b), Government Code, a claimant must provide written notice to the unit of state government for a claim pending before the effective date of this Act by the 180th day after that date. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in the caption to make a conforming change. The substitute modifies the original in SECTION 1 by amending Subtitle F, Title 10, Government Code, rather than Title 5, Civil Practice and Remedies Code. The substitute defines "contract," "contractor," and "institution of higher education," and redefines "unit of state government." The substitute provides that this chapter does not apply to a claim for personal injury or wrongful death arising from the breach of a contract. The substitute also adds a provision to require each unit of state government that enters into a contract to which this chapter applies to include as a term of the contract a provision stating that the dispute resolution process used by the unit of state government under this chapter must be used to attempt to resolve a dispute arising under the contract. The substitute requires each unit of state government with rulemaking authority to develop rules to govern the negotiation of a claim under this section. In addition, the substitute adds a provision to authorize the chief administrative law judge of the State Office of Administrative Hearings to set fees for a hearing and to issue a written decision containing findings and recommendations within a reasonable time after the conclusion of the hearing. For a more complete analysis of the new text please see the Section-by-Section Analysis of this document. The substitute deletes the requirement that the parties mediate the claim with an independent mediator and extends the mediation period from 31 days to at least 210 days. The substitute also deletes the authorization of a claimant to appeal a unit of government's final order to an appellate court and the provision that sovereign immunity is waived for purposes of such an appeal. In addition, the substitute deletes the authorization of the attorney general to settle or compromise an appeal. The substitute prohibits the total amount of money recoverable on a claim for breach of contract under this chapter from exceeding the balance due and owing on the contract price after deducting any amount owed the unit of state government for work not performed under a contract or in substantial compliance with its terms, rather than the amount of consideration the claimant was entitled to receive under the contract.