The Texas Legislature is set to end the session on May 31, 2021.  The following are three bills which could be of interest to contractors and construction companies.

1.    Protections from Pandemic Liability

Several bills have been filed in both the house and Senate related shielding business from liability associated with the COVID-19 pandemic. HB 3 is currently pending in the House Committee and would provide liability protections for businesses operating during a pandemic so long as the business “knew of the risk of exposure or potential exposure, … made a reasonable effort to comply with applicable federal, state, and local laws, rules, ordinances, declarations, and proclamations related to the pandemic disaster … and [if] the act or omission giving rise to the exposure or potential exposure was not willful, reckless or grossly negligent.”

HB 3 would also require that actions taken during a pandemic disaster satisfy the religious freedom protections under State and Federal law. Further, the Bill would allow the Governor to suspend the sale, dispensing, or transportation of alcoholic beverages, explosives, and combustibles during a pandemic disaster, but not to suspend or limit the sale or transportation of firearms and ammunition. HB 3 would also require local jurisdictions to receive approval from the Secretary of State before altering voting procedures during a pandemic.

2.    Contractors are not Liable for Negligent Designs

SB 219 would amend the Texas Business & Commerce Code to address long-standing complaints about Texas’s Lonergan doctrine.  It would establish that a contractor is not responsible for the consequences of defects in, and may not warrant the accuracy, adequacy, sufficiency, or suitability of, plans, specifications, or other design or bid documents for the construction or repair of any improvement to real property, provided that the design documents were given to the contractor by the person with whom the contractor entered into the contract or another on that person’s behalf.  The bill has passed the Senate and has been referred to a committee in the house.

SB 219 also would require a contractor to make a written disclosure to the other contracting party of the existence of any known defect in the plans, specifications, or other design or bid documents discovered by the contractor before or during construction. The bill would also establish that a contractor who fails to disclose such a condition may be liable for defects that result from the failure to disclose. Further, SB 219 would prohibit these protections from being waived by contract.

In committee and on the Senate floor, SB 219 was amended to include provisions stating that the Bill would not apply to the construction, repair, alteration, or remodeling of an improvement to real property if: (1) the construction, repair, alteration, or remodeling is performed under an “involved contractor” contract; and (2) the part of the plans, specifications, or other design or bid documents for which the contractor is responsible under the contract is the part alleged to be defective. The amended version of SB 219 would also provide that design services provided under an “involved contractor” contract would be subject to the same standard of care requirements provided in section 130.0021 of the Texas Civil Practice & Remedies Code.

As amended, SB 219 would not apply to a contract between a person and a contractor under which the contractor agrees only to review plans, specifications, or other design or bid documents, but is not responsible for any portion of the construction, repair, alteration, or remodeling of the improvement to the real property.

SB 219 would also amend the Government Code to prohibit an applicable governmental entity from requiring in a contract for engineering or architectural services related to the construction or repair of an improvement to real property that such services be performed to a level of professional skill and care beyond that which would be provided by an ordinarily prudent engineer or architect with the same professional license under the same or similar circumstances. The bill would not prevent a party to a contract for engineering or architectural services from enforcing specific obligations in the contract that are separate from the standard of care.

The companion bill in the House (HB 1418) was filed by Rep. Jeff Leach (R – Plano).

3.    Special Courts for Large Business Disputes

HB 1875 would create a statewide specialized civil trial courts and appellate courts to hear derivative actions on behalf of an organization and certain business-related litigation cases, such as actions against businesses, accusations of wrongdoing by businesses or their members, and disputes between businesses in which the amount in controversy exceeds $10 million. The proposed “business court” would not have jurisdiction over governmental entities (absent the government entity invoking or consenting to jurisdiction), personal injury cases, or cases brought under the Estates Code, Family Code, the DTPA, and Title 9 (Trusts) of the Property Code, unless agreed to by the parties and the court.

Some of the other notable components of the bill are:

• • The business court would be composed of seven (7) judges who are appointed by the governor for two (2) year terms. The judges would have to have at least 10 years of experience in complex business law;
  • Parties would have the right to a jury trial when required by the constitution;
  • The court clerk would be located in Travis County, but individual judges would be based in the county seat of their respective counties;
  • Current venue rules would apply, but cases could be heard in an agreed-upon county or where the court may decide to be more convenient or necessary;
  • There would be a removal procedure for cases filed in a district court;
  • The business court would be required to provide rates for fees associated with filings and actions in the business court, and such fees must be set at a sufficient amount to cover the costs of administering the business court system; and
  • The Court of Business Appeals, which would handle appeals from the business trial court, would be composed of seven (7) justices who are appointed by the governor. Justices would serve two (2) year terms and would hear cases in panels of three (3) randomly-selected justices. Appeals from the Business CA would go to the Supreme Court.

HB 1875 is similar (but not identical) to versions of the 2015 chancery court bill (HB 1603) that was voted out of committee (but failed to pass in the House), as well as the 2017 chancery court bill (HB 2594) and the 2019 business courts bill (HB 4149) that were filed, but never voted out of committee.

The attorneys in our Austin and Dallas offices are available to answer any questions you may have regarding these three bills or how they may affect your business.

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