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Texas Legislation Would Limit Contingency Fee Contracts with Local Governments

April 8, 2019 | Posted in : Contingency Fees / POF, Expenses / Costs, Fee Agreements, Legislation / Politics

A recent Texas Lawyer story by Angela Morris, “Bill Would Limit Some Attorney Contingency Fee Contracts with Local Governments,” reports that local governmental entities would have to follow a new procedure to hire contingent-fee plaintiffs law firms for cases involving engineering and architects under a bill that a Texas legislative committee passed.  Current law already restricts state agencies and departments from entering contingent-fee representations, and now the House Judiciary and Civil Jurisprudence Committee has passed a version of House Bill 2826, by Rep. Greg Bonnen, R-League City, that would make the procedure apply to governmental entities at the county and city level as well.

When the committee was considering the bill during a March 25 public hearing, a representative of the tort reform lobbying group, Texans for Lawsuit Reform, testified in support of the proposal along with seven other witnesses.  Meanwhile, testifying against the bill were two representatives of the plaintiffs attorney trade group Texas Trial Lawyers Association and five other witnesses.

The county- and city-level governmental entities, under the bill, would only be able to pick a contingent-fee lawyer or law firm if it was well qualified with demonstrated competence, qualifications and experience in the type of legal services at issue.  The governmental entity would have to negotiate for a fair and reasonable price.  It would be able to require the lawyer or firm to indemnify it from claims of acts or omissions of the lawyer, firm or firm employees.

Before hiring the lawyer or firm, the city or county officials involved would have to provide a notice for a public meeting to explain the reasons they wanted to pursue the legal matter for which they were hiring the lawyer or firm.  They’d have to explain their desired outcome, and explain why it was in the public’s best interests.  The notice would have to explain the lawyer’s competence, qualifications and experience in that type of matter.  Officials would have to reveal in the notice what relationship they had with the lawyer or firm, and how the relationship began.  They’d have to tell why they could not use their governmental entity’s own resources rather than hiring the outside contingent-fee law firm.  The officials would also have to say why they couldn’t get the same legal services from a lawyer charging an hourly fee, rather than a contingency.

When holding the public meeting regarding the contingent-fee representation, public officials would have to approve the contract in an open meeting where they considered the need for the legal services, terms of the contract, the lawyer’s or firm’s competence and experience, and why the contract served the public’s interest.  Once they approved the contract, officials would have to state in writing why they needed the legal services, why they couldn’t use their own resources for it, why they couldn’t hire an hourly rate lawyer for the job, and more.

Before the contract could become effective, the city or state governmental entity would have to submit it for review and approval by the Texas attorney general, along with documentation that it held a public meeting and officials approved it.  It would have to describe the matter and say whether the state or any other governmental entity may have an interest in the matter.  If the governmental entity had not followed the right procedure, the attorney general could refuse to approve the legal contract, and he could also disapprove if he found the matter was similar to a matter that the state was also pursuing, and the other governmental entity’s similar matter wouldn’t help resolve the dispute.  The bill lays out a 90-day deadline for the attorney general to make a decision, or else the contract would be considered approved.

When state governmental agencies or departments enter legal contracts, those lawyers or firms already have to reveal their time and expense records on request, and after the matter is resolved, they must provide a written statement about the outcome, recovery, the contingent-fee amount, final time and expense records and more.  The bill creates the same requirement for lawyers or firms representing city- or county-level governmental entities, and makes it clear that some of that information on time and expenses would be public records under the state’s open-records law, with some exceptions.

The bill places limits on expenses the contingent-fee lawyer and firm could collect from the city- or county-level governmental entity, with a requirement to ensure they’re reasonable and necessary, similar to limits in current law for state agencies or departments that contract with outside lawyers.  If a governmental entity didn’t follow the right procedures as laid out in the bill, then any legal services contract it improperly entered would be void under the bill, and it would be prohibited from paying any fees for work under the voided contract.