April 26 , 2019

Inside this edition of Capitol Roundup:

Passing the House:

Three major construction industry bills advance from the House and head to the Senate...

House Bill 1734: School construction defects

House Bill 1999: Right to Repair 

House Bill 790: Attorney's Fees

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Quote of the Week

"To do property tax reform for schools, you really have to do it in the Education Code. I think that all of the experts agree. This bill has never touched the Education Code. It can't touch the Education Code, that is House Bill 3.

-State Rep. Dustin Burrows
Rep. Burrows (R-Lubbock), who chairs the House's tax-writing Ways & Means Committee, made the comment Thursday after his committee passed Senate Bill 2, which contains the Senate's plan to lower property taxes and includes provisions to slow the growth of school district property taxes. However, Burrows and other House Republicans believe school district tax reform should be addressed apart from taxes levied by other government entities. The House proposal to address school district tax reform is contained in House Bill 3.
High-priority AGC-TBB bills pass in Texas House, advance to Senate

Texas House members this week gave the thumbs-up to three crucial construction industry bills, clearing a major hurdle as they move to Senate committees for further consideration. 

While all three approved measures are supported by AGC Texas Building Branch, two of the bills in particular -  House Bill 1734 and House Bill 1999 - are top AGC-TBB priorities this session. Those two bills address construction defects in school buildings and the right of contractors to inspect and repair defects on public projects. The third bill - House Bill 790 - addresses the recovery of attorney's fees involved in breach of contract lawsuits. 

See below for a more detailed analysis about how these bills cleared the House floor and how stakeholders came together to reach consensus on the bills during the committee process.
HB 1734: School Construction Defects

House Bill 1734 - Rep. Justin Holland (R-Rockwall)

Rep. Justin Holland
This bill passed 111-30-2 (two present, not voting) on the House floor on April 24 after advancing from a House committee on a 6-2 vote on March 25. The bill has advanced to the Senate where it awaits consideration in the Senate Education Committee. 
When a school district is awarded funds from a court verdict or settlement regarding construction defects, this bill requires the district to use the funds to actually repair those defects. The bill also requires the districts to notify the Texas Education Agency (TEA) of the suit once it has been filed or face dismissal, and they would need to itemize any repairs made to the agency.

In the committee process, the bill was amended to give districts a little more time - 30 days - to notify TEA of a defects lawsuit before facing dismissal of the claim. The bill was also tweaked to require the court to dismiss the action if the district fails to satisfy the notification requirements; however, the dismissal is without prejudice, meaning the district would have another chance to bring the suit on the same grounds. Finally, an amendment was made on the House floor to require the Attorney General to give districts a two-week notice before taking action against a district that violates the measures in the bill. 

Background: The issue behind this bill gained steam when a handful of contingency-fee attorneys began pursuing lawsuits on behalf of school districts over alleged construction defects before actually notifying the parties of the defects or giving them a chance to inspect or fix them. However, oftentimes, the school districts have failed to use awarded settlement funds for actual repair of the defects. 
HB 1999: Right to Inspect & Repair

House Bill 1999 by Chairman Jeff Leach (R-Plano)
This bill passed 99-34-1 (1 present, not voting) on April 25 on the House floor after passing 7-2 in a House committee on April 10. The bill has now moved to the Senate where it awaits committee assignment. 

The bill is aimed at providing contractors and design
Rep. Jeff Leach
professionals the opportunity to inspect and repair alleged defects involved in designing or constructing public, commercial buildings. The measure also requires the government entity to provide all contracted parties a report detailing the nature of the defects and any repairs or modification already made to the affected  structure . The bill gives contractors a timeline to inspect and make repairs and outlines which parties will be allowed to make such repairs.  

Several changes were made to this bill during the committee process to clean up the language and attract more support from stakeholders. One substantial change expanded the scope to include civil works projects like work on roads, bridges, utilities, water treatment facilities, and transit projects. The bill sponsor also added stronger language to ensure contractors and subcontractors are allowed back on job sites to inspect and repair. However, in the following cases, the government would not be required to allow for inspection and repair: when the contractor is a felon; has been previously fired for good cause by the government entity; cannot provide liability or workers' compensation insurance; or cannot provide payment or performance bonds to cover the work. Furthermore, contractors who fail to correct a valid defect or make repairs that result in further defects would not be entitled to a second right to repair. 

Other changes to the bill spell out more specifically the time allowed for the involved parties to inspect and correct defects. Under the bill's current form, contractors would have 30 days after the government sends its report to inspect any alleged defects. Once the inspection is complete, parties would have 120 days to make repairs or enter an agreement with the government to make repairs. If the government fails to comply with the provisions in the bill, the court must dismiss the action. While original language in the bill allowed for up to a year of abatement and gave the court the option to dismiss with or without prejudice, the current bill would require the court to dismiss the bill right away without prejudice. However, if the government fails again in a second action to comply with the bill, the claim must be dismissed for good. 

Finally, the last amendment made to the bill this week limits the number of government entities who could sue contractors and design professionals for alleged defects. Under the bill's original version, lawsuits could be filed by government entities whose interest in the affected structure only came about by purchasing the structure  after the work was bid or work began on the structure. The bill's current version deletes that provision and only allows for claims to be filed by entities with direct interests in the structure affected by the alleged defect.

Background: This issue is similar to the ones addressed in HB 1734, in that some attorneys in Texas have developed a cottage industry around getting local governments (mostly school districts) to sue contractors, architects, and engineers for alleged construction defects before actually notifying the parties of the defects or giving them a chance to inspect or fix them. These lawsuits quickly round up several insurance policies to effect a quick, nuisance settlement. Like the school construction defect lawsuits, there are many cases where the funds obtained are not actually used toward making repairs.
HB 790: Attorney's Fees in Breach of Contract Claims

House Bill 790 by Rep. Sarah Davis (R-Houston)
This bill passed 136-1-1 (1 present, not voting) on April 25 on the House floor after passing 9-0 in a House committee on April 1. The bill has now moved to the Senate where it awaits committee assignment. 

Rep. Sarah Davis
The bill allows for the recovery of reasonable attorney's fees from individuals and corporations in certain civil cases. The measure  would include the state and government entities of the state to the list of parties from which a person could recover attorney's fees. These fees would be in addition to costs associated with a valid claim when the claim is of a specified nature. 

The bill also would allow for recovery of attorney's fees from a corporation, limited or general partnership, limited liability company, business trust, real estate investment trust, joint venture, joint stock company, cooperative, association, bank, insurance company, credit union, savings and loan association, or other organization, regardless of whether the organization is for-profit, nonprofit, domestic, or foreign.

Background: Current state law makes it problematic and difficult to recover attorney's fees in certain civil cases from some legal entities, such as state agencies and other classes of business entities. While state entities became subject to recovery of attorney's fees after passage of House Bill 2121 (Rep. John Cyrier and Sen. Bryan Hughes) in 2017, the bill was limited  to cases with an amount in controversy less than $250,000.  The bill seeks to remedy the issue by expanding the types of entities from which attorney's fees may be recovered without limiting recovery to cases with a certain dollar amount in controversy
April 2019
FRI 26th - TBB Board meeting
May 2019
MON 27th - Last Day of 86th Legislature
June 2019
WED 5th - SAT 8th - Convention @ Jackson Hole, WY
August 2019
THU 22nd - OCA awards @ Georgetown, TX
FRI 23rd - Board meeting
November 2019
FRI 15th - Board meeting