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February 21,199l

Honorable John Whitmire Chairman Opinion No. DM-3 Intergovernmental Relations Committee Re: Constitutionality of chapter 64 of the TexaseState Senate Agriculture Code, which requires arbitration P.0. Box 12068 in vegetable seed performance disputes Austin, Texas 78711 (RQ-2130) Dear Senator Whitmire: Your predecessor asked whether the requirements for arbitration of seed performance disputes found in chapter 64ofthe Agriculture Code violate the “open courts” provision of article I, section 13,of the Texas Constitution. Article I, section 13,provides that “ali courts shall be open, and every person for an injury done him, in his lands, goods, person orreputation, shall have remedy by due course oflaw.” Chapter 64 was adopted in 1989. Acts 1989. 71st Leg., ch. 604, $ 1. at 1996-98. Section 64.002(a) states:

When apurchaser ofvegetable seed designed for planting claims to have been damaged by the failure ofthe vegetable seed’to produce or perform as represented by warranty or by the label required to be attached to the vegetable seed under this subtitle or as a result’of negligence, the purchaser must submit the claim to arbitration as provided by this chapter as a prerequisite to the exercise of the purchaser’s right to maintain a legal .action’ against the labeler, .as defined by Section 19.9,Texas Administrative Code (4TAC Sec. 19.9). or any other seller ofthe vegetable seed. See also Agric. Code $64.003 (seed container label to give notice ofchapter 64arbitration requirement). Chapter 64 arbitration is instituted by filing a complaint and a ten dollar filing fee with the commissioner of agriculture, who refers complaints and answers thereto to the State Seed and Plant Board, which serves as the “arbitration board” in chapter 64 arbitrations. u @64.005, 64.006(a)-(c). The arbitration board investigates complaints

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referred to it and reports findings of fact, conclusions of law, and recommendations as to costs to the commissioner within sixtydays ofthe referral or at alater date agreed to bythe parties. & 064.006(d). Chapter 64 does not purport to abolish the right of seed performance disputants to obtain redress in court. Section 64.002(a) rather establishes arbitration as a “prerequisite to the exercise ofthe purchaser’s right to maintain a legal action.” Applicable limitation periods are tolled until 11 days after the arbitration board’s report is filed with the commissioner of agriculture. Id. 5 64.002(b), (d). Section 64.004 permits the arbitration report to be introduced at subsequent litigation and allows the court to give such weight to the matters in the report asitdeems advisable. The “open courts” provision ofarticle I, section 13,ofthe state constitutionhas been considered bythe Texas Supreme Court in numerous recent opinions. See. e.g..Moreno v. &rlina DN~.Inc., 787 S.W.2d 348 (Tex. 1990)twoyear statute of limitations on wrongful death action not in violation ofopen courts provision); Lucas v.United States, 757 S.W.2d 687(Tex. 1988) (statutory cap on medical malpractice damages violated provision)* LeCrov v.Hanlorl, 713 S.W.2d 335 (Tex. 1986) (statutory provision for portion of court c&filing fee going to state general revenues violated provision); NeaFle v. Nelson, 685 S.W.2d 11 (Tex. 1985) (application oftwo-year statute oflimitations on health care liability which cut off cause of action before injured party had reasonable opportunity to discover injury violated provision); Nelson v.Krusen, 678S.W.2d 918 (Tex. 1984) (application ofstatute of limitations to cut off wrongful birth action before parents could have known son had disease violated provision); Sax v. Votteler, 648 S.W.2d 661 (Tex 1983) (statute removing tolling of statute of limitations on medical malpractice actions for minors violated provision); 

### s Linaer, 

### WhyBotherwith StateBilk of

### Rights?68TEX.L. REV.1573, 1592-97 (1990). The Saxmajority set out the test for an open courts violation asfollows:

First, it must be shown that the litigant has a cognizable common law cause ofaction that isbeing restricted. Second, the litigant must show that the restriction isunre’asonable or arbitrary when balanced against the purpose and basis ofthe statute. & at 666. The majority opinions in Moreno 1990, m in 1988,.and a in 1986 have utilized the & test in determining the validity ofstatutes under the open courts provision, at 355,690, and 341respectively. But see Lucas at 716-17 (Chief Justice Phillips’ dissenting opinion) (a test “has resulted in an almost exclusive focus on ‘the extent to which the

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litigant’s right to redress isaffected,’ with an almost total disregard of ‘the general purpose ofthe statute.‘“); see also Moreno at 357;&f&y at 343 (dissenting opinions). We do not believe that the supreme court would find the provisions ofchapter 64on their face .violative ofthe provision. Although the first prong of the ti test for an open courts violation - that the challenged statute restricts awell-recognized common law cause ofaction - would appear to be met in the case ofthe chapter 64 arbitration requirements,’ we do not believe that the court would find, under the second prong of the test, that the chapter 64requirements are “unreasonable or arbitrary when balanced against the purpose and basis ofthe statute.” It is to be presumed that the legislature has acted with knowledge of the factual circumstances relating to an enactment, and has not acted unreasonably or arbitrarily. See 67 Tex. Jur. 3d Statutes $ 134, 12Tex. Jur. 3d s 040, and authorities cited therein The Committee on &riculture and Livestock Bill Analysis to Senate Bill 64, the 1989bill adding the provisions ofchapter 64,set out the “background” and “purpose” of the bill. Those portions ofthe bill analysis read:



### BACKGROUND In the past, some farmers have experienced dissatisfaction with various crop seeds not germinating and emerging at the percentage labeled. Usually the complaint is settled between the.seller .ofthe seed and the purchaser, with litigation resulting when the complaints cannot otherwise be settled. However, farmers and seedmen agree that litigation isnot the most desirable way to settle a complaint about seed, and the farmers are often reluctant to litigate. For many years the state of Florida has used a method of arbitration with an unbiased third party investigation and opinion. The American Seed Trade Association has recommended to each ofits member states that they work to pass measures similar toFlorida’s[.]

1. As was noted in Lucas. which invalidated a cap on medical malpractice damages, a statute need not totally abolish a cause of action to run afoul of the open courts provision. u at 691,692. Chapter 64, by establishing arbitration as a prerequisite to maintaining a legal action in a seed performance dispute, would appear, by delaying a disputant’s access to the courts and by requiring a ten dollar tiling fee, to “restrict” such a cause of action under the first part of the-test.

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PURPOSE The bill provides for an unbiased third party investigation by the State Seed and Plant Board of the Texas Department of Agriculture of complaints concerning seed performance. Bill Analysis, S.B.64,71st Leg. (1989). As the bill analysis indicates, Florida has had a similar statutory seed dispute arbitration requirement in effect for some years. & F.S.A. $9578.26, 578.27 (provisions ofwhich were first adopted byLaws 1951,chapter 26814, section 1). The only Florida case wefind that has addressed the provisions ofthe Florida seed dispute Statute isFerrv-Morse Seed Co. v. Hit&cock, 426 So2d 958 (Ha. 1983). The Ferry-Morse opinion responded to certified questions from the United States Court of Appeals, Eleventh Circuit. It found that a farmer’s failure to first follow the requirements of the Florida seed dispute statute barred hiscause ofaction against the seller for seed defects (but did notbar hisplea oflack ofconsideration as a defense to the seller’s action). Though it did not specifically address the issue of an open courts provision violation, we think the Fens-Morse holding certainly suggests that the court did not think the Florida statute violative of that provision of the Florida constitution. The Florida constitution’s “open courts” provision is .sirnilar to the Texas provision, and Florida courts have adopted a similar test for violations of the provision. & Khmer v. White, 281 So2d 1, 4 (Fla. 1973) (statute must provide “a reasonable alternative toprotect the rights ofthe people of,the State to redress for injuries, unless the Legislature can show an overpowering public necessity for the abolishment of such right, and no alternative method ofmeeting such public necessity can be shown”). We note too that constitutional attacks on statutory arbitration requirements have generally been upheld by courts only where such statutes close the courts to litigants and make the decisions of arbitrators the final determinant of the rights of the parties. See Annotation, 55 kLR.2d 432,441; New England Merchants Nat’1Bank v. Hughes, 556 F. Supp. 712,714 (E.D. Penn. 1983); Attorney General of Marvland v.Johnson, 385 k2d 57, 65(Ct. App. Md. 1978); Collier &Wallis v.Astor, 70P.2d 171, 173(Cal. 1937). Among Texas authorities, we find no cases which invalidate under the open courts provision requirements comparable to the non-binding arbitration requirements in chapter 64. See. e.g, Middleton v. Texas Power & Light Co,, 185 S.W. 556 (Tex. 1916) (workers compensation law, in providing for determination ofdisputed claims by Industrial Accident Board, with right of appeal to the courts, does not violate article I, section 13, or other constitutional provisions).

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It has been suggested that the non-refundable ten dollar filing fee is impermissible under &Qoy. In I.&&y the statute required a portion of the filing fee filed with the district clerk when instituting a court action to go tothe state comptroller for deposit in the general revenue fund. The a majority opined that “the major defect with the filing fee is that it is a general revenue tax on the right to litigate: the money goes to other statewide programs besides the judiciary.” I.&&y at 341. “[Llitigants must pay a tax for general welfare programs asacondition to being allowed their right ofaccess to the courts. This the open courts provision prohibits.” !& at 342. Texas courts have uniformly followed the rule that if, from a consideration of the statute as a whole, the primary purpose of a charge is the raising of revenue, then the charge is to be considered a tax. If, on the other hand, the primary.purpose is that of regulation, then the charge isto be considered a fee rather than a tax. & Hurt v.Coooer, 110 S.W.2d 896 (Tex. 1937) (and other authorities cited in Attorney General Opinion JM-963 (1988)); see also City ofFort Worth v.Gulf Refining Co., 83S.W.Zd 610,619 (Tex. 1935) (because a charge goes into general revenue funds does not in itself resolve whether the charge isatax or afee). Nothing has been brought to our attention that would suggest the ten dollar filing fee was not intended to offset the Agriculture Department’s administrative c0sts.z Thus, we do not believe the fee is in the nature of a “tax on the right to litigate,” such as the portion ofthe filing fee the I=&&y court found ran afoul ofarticle I,section 13. Irrlight of the foregoing, it is our opinion that the arbitration requirements of chapter 64do not on their face violate the open courts provision ofthe Texas Constitution. We caution, finally, that application of the chapter 64 requirements in particular cases might raise questions under the open courts provision. For example, application of the requirement ofsection 64.006(a), that the arbitration complaint must be filed in time to permit inspection of plants under field conditions, might in particular cases be limited by the open courts provision. See. e.g.. Neazle at 12(“the open courts provision.

..protects a citizen

. . .from legislative acts that abridge his right to sue before he has a reasonable opportunity to discover the wrong and bring suit”).

2. See the Legislative Budget Board’s May 16, 1989, Fiscal Note to S.B. 64 (the bill adding the provision of chapter 64) anticipating revenues from the tiling fee as $500 for each of the tint five years after the bill’s passage, but costs of the program as $6665,165 in the first year and $55,165 in each of the succeeding years.

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SUMMARY The requirements of chapter 64 of the Agriculture Code for non-binding arbitration of seed performance disputes do not on their face violate the open courts provision of article I, section 13, of the Texas Constitution.

DAN MORALES Attorney General ofTexas WILL PRYOR First Assistant Attorney General MARY KELLER Executive Assistant Attorney General JUDGE ZOLLIE STEAKLEY (Ret) Special Assistant Attorney General RENEA HICKS Special Assistant Attorney General SUSAN GARRISON Acting Chairman, Opinion Committee Prepared byWilliam Walker Assistant Attorney General

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