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                                      February 21,199l




Honorable John Whitmire                        Opinion No. DM-3
Chairman
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 64 of the 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 or reputation, shall have remedy by due course of law.”

       Chapter 64 was adopted in 1989. Acts 1989. 71st Leg., ch. 604, $ 1. at 1996-98.
Section 64.002(a) states:

               When a purchaser of vegetable seed designed for planting claims to
          have been damaged by the failure of the 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 (4 TAC Sec. 19.9).
          or any other seller of the vegetable seed.

See also Agric. Code $ 64.003 (seed container label to give notice of chapter 64 arbitration
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 sixty days of the referral or at a later date agreed to by the
parties. & 0 64.006(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 of the 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 as it deems advisable.

         The “open courts” provision of article I, section 13, of the state constitutionhas been
considered by the Texas Supreme Court in numerous recent opinions. See. e.g.. Moreno v.
&rlina DN~. Inc., 787 S.W.2d 348 (Tex. 1990) two year statute of limitations on wrongful
death action not in violation of open 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 of two-year statute of limitations on health care liability which cut
off cause of action before injured party had reasonable opportunity to discover injury
violated provision); Nelson v. Krusen, 678 S.W.2d 918 (Tex. 1984) (application of statute 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, Why Bother with State Bilk of Rights? 68 TEX. L. REV. 1573, 1592-97
(1990). The Sax majority set out the test for an open courts violation as follows:

          First, it must be shown that the litigant has a cognizable common law
          cause of action that is being restricted. Second, the litigant must show
          that the restriction is unre’asonable or arbitrary when balanced against
          the purpose and basis of the statute.

&   at 666.

        The majority opinions in Moreno 1990, m          in 1988,. and a       in    1986 have
utilized the & test in determining the validity of statutes under the open courts    provision,
at 355,690, and 341 respectively. 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 is affected,’ with an almost total disregard of ‘the general purpose
of the statute.‘“); see also Moreno at 357; &f&y at 343 (dissenting opinions).

        We do not believe that the supreme court would find the provisions of chapter 64 on
their face .violative of the provision. Although the first prong of the ti test for an open
courts violation - that the challenged statute restricts a well-recognized common law cause
of action - would appear to be met in the case of the chapter 64 arbitration requirements,’
we do not believe that the court would find, under the second prong of the test, that the
chapter 64 requirements are “unreasonable or arbitrary when balanced against the purpose
and basis of the 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, 12 Tex. Jur. 3d s                       0 40, and authorities
cited therein The Committee on &riculture and Livestock Bill Analysis to Senate Bill 64,
the 1989 bill adding the provisions of chapter 64, set out the “background” and “purpose” of
the bill. Those portions of the 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 .of the seed and the
              purchaser, with litigation resulting when the complaints cannot
              otherwise be settled.      However, farmers and seedmen agree that
              litigation is not 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 of its member states
              that they work to pass measures similar to Florida’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. $9 578.26, 578.27 (provisions
of which were first adopted by Laws 1951, chapter 26814, section 1). The only Florida case
we find that has addressed the provisions of the Florida seed dispute Statute is Ferrv-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 his cause of action against the seller for seed defects (but did notbar his plea of lack
of consideration 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 to protect the rights of the 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 of meeting 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’1 Bank 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, 70 P.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 of disputed 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 to the 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 as a condition to being allowed their right of access 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 is to 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 of Fort Worth v. Gulf Refining Co., 83 S.W.Zd 610,619 (Tex.
1935) (because a charge goes into general revenue funds does not in itself resolve whether
the charge is a tax or a fee).

       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 of the filing fee the I=&&y court found ran afoul of article I, section 13.

       Irrlight of the foregoing, it is our opinion that the arbitration requirements of
chapter 64 do not on their face violate the open courts provision of the 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 of section 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 $6665,165in 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 of Texas

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 by William Walker
Assistant Attorney General




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