State Bar of Texas Administrative and Public Law Section

Featured Article - November 1999

• Introduction

• Administrative Procedure Act
  H.B. 2105 Leapfrog Appeals
  S.B. 178 Rule Review
  S.B.211 Deemed Notice Date
  S.B. 382 Rulemaking Procedures & Challenges
  S.B. 801 Internet Access to Rules

• Open Meetings Act
  H.B. 156 Staff Briefings
  H.B. 595 Exam Items
  H.B. 3407 Houston Homeowners Groups
  S.B. 753 MHMR HMOs
  S.B. 916 Meeting Notices on the Internet
  S.B. 1252 Meetings on Internet Broadcast

• Public Information
  H.B. 211 Open-enrollment Charter Schools
  H.B. 692 Social Security Number
  H.B. 836 Birth/Death Record Indexes
  H.B. 1379 Inmate Information
  S.B. 613 Taxpayer Information
  S.B. 744 Request from Inmate's Agent
  S.B. 785 Autopsy Photographs
  S.B. 974 Internet Filings?
  S.B. 1367 Confidential Information to Legislative Agencies for Free
  S.B. 1846 Officers' Numbers
  S.B. 1851 Omnibus Public Information Bill

• General Administrative Law
  HJR 29 Breaking the Rule of Three
  H.B. 801 Public Participation
  H.B. 826 Government ADR and Contracts
  H.B. 1016 Reports to the Legislature
  H.B. 2085 TDH Sunset Bill
  H.B. 2835 Post Information on Internet
  S.B. 7 Electric Deregulation
  S.B. 177 More Budget Riders
  S.B. 183 Acknowledging Gifts
  S.B. 583 Deadbeat Contractors
  S.B. 757 SOAH

• Footnotes

Administrative law stands at the confluence — some might say the crosshairs — of the three branches of government. Each branch affects, and is affected by, legislation establishing administrative law. This article reviews several pieces of legislation enacted during the 76th Regular Session of the Texas Legislature affecting the practice of administrative law.

I tried to select legislation that affects the administrative bar generally. I began with the bills tracked at the Administrative Law Section's web site and included other legislation topically related to the tracked bills. I also selected specialty bills that seemed to portend future trends or changes in the general administrative law. In a few cases, I merely flagged legislation that may be important to some of our colleagues, especially those employed by state agencies.

The paper is presented in four sections. The first section covers bills amending or affecting the Administrative Procedure Act.^[1] The second section focuses on the Open Meetings Act.^[2] The third section reviews bills that amend the Public Information Act^[3] or that otherwise restrict or expand government information subject to public disclosure. The fourth section — with the uninformative rubric "general administrative law" — reviews a miscellany of bills. It is the catchall section.

In each section, bills originating in the Texas House of Representatives are discussed in numerical order, followed by bills originating in the Texas Senate. The bills reviewed are enactments   of the 76th Texas Legislature (1999), Regular Session. Now you know; I won't repeat that information in footnotes.

H.B. 2105 Leapfrog Appeals

Section Affected: Gov't Code, §§ 2001.038, 2001.176

A Travis County district court may request that an appeal of a rulemaking or a contested case be transferred to the Third Court Appeals if the district court finds that the public interest demands prompt resolution of the issues and the case normally would be appealed.^[4] The case is transferred if the court of appeals agrees with the district court's findings.^[5] The court of appeals may direct the district court to conduct an evidentiary hearing.^[6]

Comment

The bill expedites appeals that are based primarily on questions of law.

[Full Text Of Bill] [Bill History]

The bill codifies the former appropriations bill rider requiring agencies to review each rule every four years.^[7]

Comment

S.B. 178 is one of three lengthy bills initially drafted to put into statute budget riders that prescribed policies, practices, or procedures state agencies had to follow. S.B. 178, as amended, contains numerous new provisions affecting state contracting. In particular, it adds new law on historically under-utilized businesses ("HUB") and limits contingent fees in state contracts. S.B. 178 is must reading for attorneys involved in state procurement or contracting.

[Full Text Of Bill] [Bill History]

S.B. 211 Deemed Notice Date

S.B. 211 changes that notification date to the third day after the order was mailed. ^[8] The change applies to orders issued on or after September 1, 1999.^[9]

Comment

The caption of the bill (and this explanation) are longer than the substantive part of the bill.

[Full Text Of Bill] [Bill History]

The bill modifies rulemaking procedures and judicial review of rules. It reverses recent holdings of the Supreme Court of Texas and the Third Court of Appeals.^[10] One major purpose of the bill appears to be to reduce the frequency and impact of procedural challenges to adopted rules.

A state agency^[11] may take administrative actions and adopt rules to implement a statute before the statute becomes effective.^[12] The rule or action does not have the force of law before the statute does, however.^[13]

"Reasoned justification" of a rule now consists solely of: (1) a summary of comments on the rule, which identifies the groups commenting on the rule and their position; (2) a summary of the factual basis of the rule (not a restatement of the facts) that shows a rationale nexus between the rule and its factual basis; and (3) reasons why the agency disagrees with parties' proposals or submissions.^[14] The requirement to state a reasoned justification for an adopted rule does not require additional analysis of alternatives not adopted.^[15] A reasoned justification substantially complies with the APA if it "demonstrates in a relatively clear and logical fashion that the rule is a reasonable means to a legitimate objective."^[16]

Rules are voidable, not invalid nor void, if the agency does not substantially comply with the APA's procedural requirements.^[17] If the agency has not substantially complied, the court may remand the rule, or part of the rule, and provide a reasonable time for the agency to readopt the rule correctly.^[18] The initial rule remains in effect unless the court finds "good cause" to invalidate it immediately.^[19] Courts may not invalidate rules based on technical defects that do not prejudice a person's rights or privileges.^[20]

State agencies must evaluate the economic impact a rule would have on micro-businesses^[21] and must mitigate the impact if it is legal and feasible to do so.^[22] Apparently, however, the agencies must treat small businesses and micro-businesses alike.^[23]

The changes apply to rules adopted on or after January 1, 1998, but not to lawsuits challenging those rules if filed before September 1, 1999.^[24]

Comment

"[T]he judiciary is assigned the task of policing the process of rulemaking" leaving to the executive and legislative branches the task of policing the substantive consequences of rulemaking.^[25] In a string of recent cases, the district courts and appellate courts did what any rational generalist would do when faced with arcane rules; they invalidated the rules on procedural grounds, demanding ever clearer and detailed explanations of what the agencies did and why. Each decision added judicial gloss to the procedural statute. The legislature stripped some of the gloss to restore the original meaning of the statute.

The APA now treats errant agency orders adopting rules like courts treat errant judicial orders.^[26] Failure to follow a procedural statute makes the order voidable, that is, "binding until disaffirmed" by a timely appeal.^[27] The order may be validated by the failure to appeal timely or by subsequent ratification or confirmation.^[28]

[Full Text Of Bill] [Bill History]

S.B. 801 Internet Access to Rules

Each state agency must make its rules and the documents interpreting its rules accessible through the Internet.^[29] The agency also must allow members of the public to submit questions about rules electronically and to receive the agency's responses electronically.^[30]

State agency's strategic plans must include a plan for receiving forms and payments through the Internet.^[31]

[Full Text Of Bill] [Bill History]

The new law bars briefings for a quorum of a governmental body except in an open meeting. It amends the definition of "meeting" to include a gathering called by the governmental body that is attended by a quorum if the members give or receive information or questions to or from any third person, including staff, about pubic business or public policy under the body's supervision.^[32]

The law transmutes the former section on conferences with employees to an exception for the trustees of the Texas Growth Fund. The trustees may meet in a closed meeting to receive information about investments.^[33]

Finally, the new law creates an affirmative defense to prosecution for alleged violations of the Open Meetings Act. Members of governmental bodies have a defense when they reasonably rely on written interpretations of the Act by courts, the attorney general, or a staff attorney.^[34]

Comment

The Senate Research Center bill analysis states the bill was intended to bar informal gatherings, such as staff briefings. The Senate removed an exception for gatherings of the Texas Transportation Commission.

[Full Text Of Bill] [Bill History]

H.B. 595 Exam Items

The law resolves an anomaly by which test items were exempted from public disclosure as public records,^[35] but apparently had to be disclosed during the deliberations held in a public meeting.

[Full Text Of Bill] [Bill History]

H.B. 3407 Houston Homeowners Groups

[Full Text Of Bill] [Bill History]

S.B. 753 MHMR HMOs

[Full Text Of Bill] [Bill History]

[Full Text Of Bill] [Bill History]

[Full Text Of Bill] [Bill History]

Open-enrollment charter schools are subject to the Open Meetings Act and the Public Information Act.^[36] The State Board of Education must disclose information about these schools, including information regarding their bylaws, governance structure, and officers.^[37]

Information held by school districts that identifies informants and whistleblowers is not subject to public disclosure.^[38]

If an attorney general decision requires a school district to disclose to a parent information about the parent's child, the school district must file any lawsuit challenging that decision within 30 days of receiving the decision, or within a shorter period provided by other law.^[39] The school district may not appeal the resulting decision of the district court.^[40]

[Full Text Of Bill] [Bill History]

[Full Text Of Bill] [Bill History]

[Full Text Of Bill] [Bill History]

The new law generally excludes from public disclosure information maintained by the Department of Criminal Justice about individual prisoners in state facilities.^[41] It requires disclosure, however, of information about the prisoner's name, location, crime, and release date, and information on incidents involving use of force or alleged crimes.

Comment

The bill analysis by the Senate Research Center states the exception is needed to prevent one inmate from obtaining through relatives information about other inmates that could be used to compromise security or safety.

[Full Text Of Bill] [Bill History]

Taxpayer information is subject to public disclosure if the comptroller or attorney general obtained the information while examining a governmental body, unless the information was confidential when in the hands of the governmental body.^[42] It is a defense to criminal prosecution under the Public Information Act^[43] that employees of the comptroller's office released information in reliance on a state agency's determination about confidentiality of accounting, payroll, or personnel information supplied by the state agency.^[44]

[Full Text Of Bill] [Bill History]

S.B. 744 Request from Inmate's Agent

[Full Text Of Bill] [Bill History]

S.B. 785 Autopsy Photographs

[Full Text Of Bill] [Bill History]

[Full Text Of Bill] [Bill History]

S.B. 1367 Confidential Information to Legislative Agencies for Free

State agencies must provide one free copy of public information to legislative agencies and committee, on request.^[45]

The bill authorizes the Texas Legislative Council to gather information and data: to conduct statistical and demographic analysis, to produce reports, and to evaluate legislative policy.^[46] Agencies in all branches of state government must provide data, including confidential information, to the TLC^[47]

Appraisal districts that keep information in an electronic format must provide information free of charge to the TLC within 30 days of a request for the information.^[48]

Comment

The new Gov't Code, Section 323.019 appears redundant with Section 552.008 of the Public Information Act with two exceptions. First, the new law allows the collection of confidential "data" without requiring a confidentiality agreement; Section 552.008 allows collection of confidential "information," but the governmental body may require the legislative agency to enter into a confidentiality agreement. Does the new law circumvent that requirement, at least with respect to data?

[Full Text Of Bill] [Bill History]

Prior law excluded from public disclosure home addresses, home phone numbers, and social security numbers of peace officers.^[51] The bill added peace officers killed in the line of duty.

Comment

The bill analysis by the Office of House Bill Analysis states that the change is needed to continue to protect the anonymity of the family members of deceased peace officers.

[Full Text Of Bill] [Bill History]

S.B.1851 substantially revises and clarifies the Public Information Act. The bill enacts many of the recommendations of the Senate Interim Committee on Public Information.^[52] This bill affects exclusions from disclosure, procedures for requesting or challenging disclosure, charges for access to information, and other general issues.

1. Exclusions Vel Non.

   Eighteen categories of public information are always subject to disclosure, and courts may not order the information to be withheld unless another law expressly makes the information confidential.^[53]

   The new law narrows the litigation exception to apply only if litigation is pending or is reasonably anticipated at the time the requestor asks for the information.^[54] It also deletes a requirement that the attorney general or the local government's attorney must determine that the litigation information should be withheld.^[55] S.B. 1851 appears to delete the exclusion for settlement negotiations.^[56] Amendments to the ADR statutes as applied to governmental bodies, however, clarify that material related to settlement negotiations remains confidential, but the final settlement agreement is subject to disclosure.^[57]

   In a similar vein, information involving negotiations with an economic development prospect, including the incentives proposed by a government body, are excluded from disclosure.^[58] Once an agreement is reached with the prospect, information about incentives becomes subject to disclosure.^[59] Discussions about the negotiations and information may be held in closed meetings.^[60]

   Commercial and financial information (other than trade secrets) is subject to disclosure unless specific facts demonstrate that disclosure would cause substantial competitive harm.^[61]

   The bill clarifies that the audit work paper exception includes all investigations authorized by law.^[62] However, a record separately maintained is not excluded from disclosure merely because the auditor includes it in audit work papers.^[63]

   Identifying information about applicants for crime victim compensation are excluded from disclosure, but only if the applicant specifically elects to bar disclosure.^[64] If the victim receives compensation, the victim's name and amount of compensation may be disclosed.^[65]

   Access to judicial records is governed by rules promulgated by the Supreme Court of Texas.^[66] The new law ratifies the Supreme Court's decision holding that judicial records are not regulated by the Public Information Act.^[67]

2. Procedures. The new law revises the procedures for requesting, and for challenging, disclosure of information. In general, the changes require faster decisions and more notice to affected parties.

   The bill directs the attorney general to apply and interpret the act uniformly and authorizes the attorney general to publish information and decisions about the act.^[68]

   Governmental bodies must post signs informing the public about the about its rights and informing employees about their responsibilities under the act.^[69] The General Service Commission must adopt rules prescribing the signs in time for entities to display the signs beginning January 3, 2000.^[70]

   If a governmental body seeks an attorney general decision about an information request, the body must notify the requestor and provide a copy of the communication with the attorney general, which may be redacted to prevent disclosure of the requested information.^[71] The governmental body must release the information if it fails to notify the requestor of the challenge, unless there is a compelling reason to withhold the information.^[72] If the challenge involves proprietary information received from a third party, the governmental body must try to notify the third party that the body seeks an attorney general decision.^[73] An agency may not request a redetermination of an attorney general's decision requiring disclosure of information.^[74]

   A governmental body may ignore a person's repeated requests for the same information if it certifies to the person when and what information the body already made available.^[75] Of course, the governmental body may decide to disclose the information repeatedly.

   The governmental body may release information it determines is public information while the information is subject to a pending attorney general decision;^[76] the attorney general may not.^[77]

   The bill shortens time for issuing an attorney general's decision from 60 working days to 45 working days, which may be extended for an additional 10 working days (rather than 20 working days).^[78]

   The bill clarifies venue for mandamus actions to compel disclosure of information.^[79] It also authorizes lawsuits for declaratory judgments and injunctive relief.^[80] A court must award attorney's fees and costs to a plaintiff who substantially prevails in an action to compel disclosure, unless the court finds that the governmental body reasonably relied on a written opinion or order of a court or the attorney general.^[81] The courts may award attorney's fees and costs to the plaintiff or defendant that substantially prevails in a criminal suit.^[82]

   A governmental body must bring a civil action challenging an attorney general decision ordering disclosure within 30 days of receiving the decision.^[83] The entity may assert only grounds: (1) raised in its request for an attorney general decision; (2) based on federal law; or (3) involving property or privacy interests of another person.^[84]

3. The Costs of Public Information.

   When a requestor asks for copies of public information to be mailed, the requestor must pay for postage, copies, and other accrued charges, including charges accrued from previous requests, before the governmental body must mail the material.^[85] Charges "accrue" when the governmental body informs the requestor the copies are available.^[86]

   If the governmental body thinks the charge for inspecting or copying information will exceed $40, it must send to the requestor an itemized list of the estimated charges and alert the requestor to any available, less costly alternatives for viewing the information.^[87] Later, if the charge will exceed the estimate by 20 percent or more, the governmental body must send an updated itemization.^[88] If the requestor does not respond to the itemized statement or the updated statement within 10 days, the request for information is deemed withdrawn.^[89]

   Current law allows governmental bodies to require deposits or payment bonds for copying charges greater than $100. Under the new law, the entity may not require a deposit or bond if it did not send timely an itemized list of charges.^[90] Agencies with fewer than 16 employees (hereinafter "microagencies") may require deposits or bonds for charge exceeding $50. All agencies may require deposits or bonds for past unpaid charges exceeding $100.^[91] Similarly, agencies may require bonds or deposits for personnel costs to make information available for inspection if it would take five hours to make the information available (two hours for microagencies) and the information: (1) is older than five years (two years for microagencies); or (2) fills six or more archival boxes (three or more boxes for microagencies).^[92]

4. Other Provisions.

   S.B. 1851 creates an Open Records Steering Committee comprising representatives of state agencies, local governments, and the general public.^[93] The committee advises the General Services Commission about its duties under the act and studies public information that could and should be available on the Internet or in electronic format.^[94]

   State agencies must report to the Legislative Budget Board information about the number and nature of public information requests and the costs of responding to the requests and of providing information over the Internet.^[95]

   The changes take effect September 1, 1999.^[96] The provisions regarding notice to a third party who provided proprietary information apply to requests for decision submitted to the attorney general after that date.^[97] Other changes might apply to pending requests and cases.^[98]

[Full Text of Bill] [Bill History]

Under the general rule of the current constitution, members of agency boards serve two-year terms.^[100] If the legislature wants them to serve longer terms, the terms must be six years and the number of members on the board must be evenly divisible by three.^[101]

The proposed constitutional amendment would allow the legislature to create boards composed of three members or more (but not necessarily evenly divisible by three) who serve terms of six years. The proposal will be on the November 2, 1999 ballot.

[Full Text Of Bill] [Bill History]

The new law affects permits, permit renewals, and permit amendments for wastewater discharges,^[102] injection wells,^[103] solid waste processing and disposal,^[104] and new sources of air contaminants.^[105] It declares itself to be procedural only — not expanding nor restricting the types of actions that may require public notice, public comments, or public hearings.^[106]

An applicant for an affected permit or permit amendment must publish notice of intent to obtain a permit within 30 days of the date the executive director determines the application is administratively complete.^[107] The notice generally describes the proposed activity, informs the public of its procedural rights and obligations, and identifies sources of additional information about the proposed permit.^[108] Following the notice of intent, the commission staff conducts a technical review of the application and issues a preliminary decision on the application.^[109]

The new law establishes a period during which the public may comment on the TNRCC's preliminary decision.^[110] For most permit applications to discharge new or additional pollutants or contaminants, the applicant then publishes a notice of preliminary decision, which initiates that comment period.^[111] For new source air permits and renewals, however, the applicant is not required to publish the notice of preliminary decision unless a person requested a public hearing before the TNRCC staff issued its preliminary decision and the applicant proposes to emit new or additional air contaminants.^[112]

The TNRCC may hold public meetings during the comment period in the area of the proposed facility.^[113] The agency must hold a public meeting if a legislator from the area requests one.^[114]

The TNRCC staff must respond to each relevant and material comment received during the comment period and file those responses with the agency's chief clerk.^[115] The clerk forwards the executive director's decision and responses to comments to the commissioners.^[116] A person may ask the commission to reconsider the executive director's decision or grant a public hearing.^[117]

The commission may only grant requests for contested hearing submitted by affected persons.^[118] If the commission refers the hearing to SOAH, the commission must limit the referral to relevant and material issues involving disputed questions of fact that were raised during the comment period.^[119] In general, therefore, SOAH may not hear the issue if it was not raised during the public comment period.^[120]

The bill allows the commission to renew, without a contested case hearing, a permit to store or to process hazardous waste generated on-site if the processing does not include thermal processing.^[121]

The bill defines the scope of permissible discovery to include "any matter reasonably calculated to lead to the discovery of admissible evidence" and to production of documents used in preparing the application or selecting the site.^[122] The commission by rule must provide for depositions.^[123]

The new law applies only to applications for new or amended permits declared to be administratively complete on or after September 1, 1999.^[124]

Comment

The legislation implements the maxim often raised with negotiated rulemaking and other consensus-based dispute resolution techniques: More means less. More discussion before a decision is made means less time finally implementing that decision.^[125]

The TNRCC proposed extensive rules to implement H.B. 801 and other legislation.^[126] The comment period was set to end August 16, 1999, the due date of this writing.

The new law is intended to simplify contested case hearings by reducing the number of requests and reducing the scope of the hearings.^[127] It also complicates application notice procedures by requiring additional notices for wastewater, injection well, and solid waste permit applications.^[128]

The statute is ambiguous about whether the executive director may change a preliminary decision in response to public comments before forwarding the decision to the commissioners. The public comments on the "preliminary decision."^[129] The chief clerk forwards, and the commission may consider, the "executive director's decision."^[130] The proposed rule answers the ambiguity by having the executive director make changes in the draft permit and to note those changes in the responses to comments.^[131]

The commissioners apparently may modify a decision in response to public comments, but the new law does not specify the commission's power or procedures upon granting a request for reconsideration.^[132]

[Full Text Of Bill] [Bill History]

1. Government Dispute Resolution Act

   H.B. 826 redesignates Government Code, Chapter 2008 (Alternative Dispute Resolution at State Agencies) as Chapter 2009. The bill expands the law to include all governmental bodies subject to the Public Information Act.^[133] Whereas the prior law applied only to the state executive branch, the revised law now covers legislative agencies, counties, cities, school boards, special districts, and private entities supported by public funds.^[134]

   State agencies — and, now, governmental bodies — may adopt alternative dispute resolution ("ADR") procedures that are consistent with Civil Practice and Remedies Code, Chapter 154.^[135] Governmental bodies may appoint an impartial third party to conduct the ADR procedure, who must comply with the qualifications of a court-appointed impartial third party.^[136] Communications and records of an ADR proceeding are excluded from public disclosure, except the final negotiated agreement, which is subject to disclosure under the Public Information Act.^[137]

2. Contract Claims Against the State

   Generally, when the state contracts with a private party, it waives immunity to liability on the contract, but does not waive immunity to suit.^[138] Although legislators have offered numerous proposals in recent sessions to enact a statute waiving immunity to suit on contract claims, none has passed until this session.^[139] H.B. 826 enacts Government Code, Chapter 2260 to authorize contested case hearings for contract claims involving state government.

   1. Scope of the Law

      The new law establishes mandatory procedures that must be followed as a prerequisite to any resolution granting permission to sue the state on a contract claim.^[140] The law applies to contracts with a "unit of state government," defined to include all three branches of state government and to exclude cities, counties, districts, and other political subdivisions.^[141] It applies to written contracts for goods, services, or projects with independent contractors, but not with subcontractors, state employees, or college students.^[142] The law also excludes claims for personal injury or death arising from a breach of contract.^[143]

      Chapter 2260 applies to all pending contract claims, including claims on contracts entered into before the effective date of the act.^[144] It does not, however, apply to claims for which the legislature has granted permission to sue the state.^[145]

   2. Contested Cases on Contract Claims

      The new law requires the chief administrative officer of a unit of state government (or a delegate) to review and negotiate a dispute with a contractor.^[146] If the claim is not fully resolved through the negotiation, the contractor may request a contested case hearing before an administrative law judge   from the State Office of Administrative Hearings.^[147] The ALJ conducts a hearing and awards damages based on the pleadings and evidence.^[148] The ALJ's decision is final, may not be appealed, and may not be changed by the state agency.^[149]

      If the ALJ finds damages on valid claims against the unit of state government in an amount less than $250,000, the governmental unit must pay the damages from funds appropriated to pay contract claims or to pay the underlying contract.^[150] For larger claims, the ALJ must issue a written report to the legislature, and may recommend paying the claim or denying permission to sue the state.^[151]

   3. Recoverable Damages

      The law limits the amount that may be awarded as damages. First, damages may not exceed the balance due on the contract price, after deducting for work not performed or not performed in substantial compliance with the contract.^[152] Awards may not include consequential damages, exemplary damages, attorney's fee, nor any damages based on a theory of unjust enrichment.^[153]

   4. Procedural Hoops and Traps

      A contractor must filed a notice of claim for breach of contract with the unit of state government within 180 days of the date the claim arose.^[154] The notice must state the nature of the alleged breach, the amount claimed as damages, and the theory of recovery.^[155] The unit of state government must assert any counterclaims within 90 days of receiving the notice or waive the right to assert the counterclaim.^[156]

      The chief administrative officer ("CAO") of the agency, or a delegate, must review the claims and counterclaims and negotiate with the contractor.^[157] The CAO must begin negotiations within 60 days of the date the contract ends or was completed, 60 days after the agency received the notice of claim, or 180 days after the claim arose, whichever is later.^[158]

      If the claim is not fully resolved within 270 days of the date the claim was filed, the contractor may request a contested case hearing.^[159] The parties may agree to extend that deadline^[160] and may request mediation of their dispute before the deadline expires.^[161]

   5. Rules

      Agencies with rulemaking authority must adopt rules governing negotiation and mediation of claims, based on model rules prepared jointly by SOAH and the Office of the Attorney General.^[162] The OAG must adopt the rules for agencies without rulemaking authority.^[163]

Comments

So much for the notion that government should be run like business. Government apparently is different and must have different rules to govern its promises and obligations.

No doubt the new law is welcome relief to aggrieved contractors denied permission to sue the state. A statute of this scope, however, is virtually certain to have unintended consequences and raise new issues that beg for a legislative or judicial interpretation.

For example, the statute seems to presume that the ALJ's decision will award damages against the unit of state government. What if the value of the state's counterclaims exceed the value of the contractor's claim? Can the ALJ award damages against the contractor? Did the legislature intend for that decision to be final and intend to bar the contractor from appealing the decision?

The statute requires the state to assert "any counterclaim" in the new administrative process or waive the counterclaims.^[164] Does "any counterclaim" include permissive counterclaims (any claim against the contractor) or only compulsory counterclaims (claims arising from the transaction)? If a contractor with multiple contracts with a unit of state government files a notice of claim on one contract, must the state assert all its claims against the contractor arising from the other contracts or waive those counterclaims? Must the state forego recovery of attorney's fees on disputes involving the other contracts?

The statue requires the state to assert "any counterclaims" within 90 days of notice of the claim.^[165] When, if ever, must the state assert counterclaims that arise after the deadline?

Notice that the deadline for resolving a dispute (270 days after the notice of claim) may pass before negotiations begin. Suppose the state refuses to make on a periodic payment to a general contractor at the beginning of a five-year construction project. The contractor must assert the claim within 180 days of the event giving rise to the claim. The state need not start negotiations until 60 days after the contract terminates or 60 days after the notice of claim, whichever is later.

Should contractors assert several claims, each less than $250,000, rather than one claim in excess of $250,000? The agency must pay the smaller award from existing appropriations. The contractor must pursue a specific appropriation or permission to sue for the larger award.

[Full Text Of Bill] [Bill History]

H.B. 1016 Reports to the Legislature

[Full Text Of Bill] [Bill History]

The sunset legislation for the Texas Board of Health and Texas Department of Health transfers contested case hearings to the State Office of Administrative Hearings,^[166] but only those hearings for which notice of hearing is given on or after September 1, 1999.^[167] The transfer affects only about one-fifth of the hearings conduct by TDH; the remaining hearings are "fair hearings" not governed by the APA.^[168] TDH is not required to transfer any employees to SOAH.^[169]

H.B. 2085 also adopted standard Sunset Advisory Commission language authorizing administrative penalties for seven of TDH's programs.^[170] The agency did not have express authority to impose administrative penalties under these programs.^[171]

[Full Text Of Bill] [Bill History]

[Full Text Of Bill] [Bill History]

S.B. 7 Electric Deregulation

Of interest here, the new law allows the governing bodies of public power utilities to discuss "competitive matters" in closed meetings^[172] and to exclude that information from public disclosure.^[173] The Attorney General may not order competitive information disclosed unless he determines that the governing board did not act in good faith or the information is not reasonably related to a competitive matter.^[174]

Another interesting feature establishes a leapfrog appeal of Public Utility Commission's competition rules. An appeal must be filed directly with the Third Court of Appeals^[175] within 15 days of the date that notice of adoption is published in the Texas Register.^[176] Judicial review is limited to the "rulemaking record" comprising: (1) the notice of proposed rulemaking; (2) comments of interested persons; (3) studies, memoranda, reports, and other documents on which the PUC relied to develop the rule; and (4) the order adopting the rule.^[177]

Comment

I noted (with relief) that other authors and presenters will address competition and regulation. For those interested in a general description of the bill, the House Research Organization's analysis of the House committee substitute provides a helpful overview.^[178]

[Full Text Of Bill] [Bill History]

[Full Text Of Bill] [Bill History]

It's the thought that counts. Prior law required prior approval of gifts valued at more than $500. The Office of House Bill Analysis noted the law may have frustrated groups trying to donate seasonable and perishable food items, because the governing body could not act timely.^[179]

[Full Text Of Bill] [Bill History]

S.B. 583 Deadbeat Contractors

[Full Text Of Bill] [Bill History]

SOAH was created to provide an independent forum for executive agency adjudicative hearings.^[180] SOAH administrative law judges are not subject to supervision, direction, or indirect influence by anyone outside of SOAH.^[181] The prohibition on ex parte communications applies to all matters pending at SOAH, except for certain types of ADR proceedings prescribed in rule by the chief administrative law judge.^[182] Once a state agency refers a matter to SOAH, the agency may not take any adjudicative action on the matter until SOAH is finished with it.^[183]

The chief administrative law judge may appoint senior administrative law judges and master administrative law judges to supervise SOAH judges.^[184] The chief may also appoint teams or divisions within SOAH based on the type or subject matter of the hearings it conducts.^[185]

SOAH may accept from state agencies voluntary referrals of administrative hearings and ADR proceedings not specifically authorized by law.^[186] SOAH and a referring agency must enter an interagency contract to pay for the costs of proceedings not otherwise covered by a direct appropriation to SOAH.^[187] The charge is based on an hourly rate set by SOAH and reviewed by the legislature during the biennial budget process.^[188] The PUC and TNRCC must pay SOAH at least as much as the legislature appropriates to those agencies for SOAH hearings.^[189]

Comment

The contract funding mechanism may enable the legislature to cut SOAH appropriations and force state agencies to make up the shortfall. It also may allow state agencies to rent a judge to handle excess caseload, rather than hiring a new agency staff judge.

The new provision barring agency adjudicative actions on matters pending at SOAH may deter agencies from acting to oust SOAH, but also might deter unintentionally settlement or voluntary dismissals of enforcement actions, permit applications, or rate cases.

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