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First Year 2000 case goes to court

In the first of what could be a blizzard of cases, a produce supplier files suit because its cash registers can't handle credit cards expiring in 2000.

In the first of what could be a blizzard of related suits, a Detroit-area produce supplier has filed suit because its cash registers can't handle sales billed to credit cards expiring in the year 2000.

Mark Yarsike and Sam Katz, owners of Produce Palace International in Warren, Michigan, said they are tired of losing business due to the problem, and have filed a lawsuit against cash register maker Tec America and its local service vendor, All American Cash Register Incorporated, seeking $10,000, plus damages, interest, costs, and attorney's fees.

The problem, according to Yarsike and Katz, is that their cash registers cannot recognize the year 2000 as a valid credit card expiration date. They said that between April 30, 1996 and May 6, 1997 their registers crashed 105 times when they attempted to ring up sales billed to credit cards expiring in 2000.

"Ten registers would go down all at once," said Yarsike. Ever since they bought the registers back in 1995, they've made 150 service calls to Tec America and All American, he said.

Problems include tripped-up modems, crashed computers, and fouled-up records, according to the two store owners.

"They've been trying to fix it for months. But I said, 'why not just change the system.' They won't, so we filed the suit," said Yarsike.

"They don't respond to our requests," said Yarsike's business partner Katz. "I can't put up with it anymore. I can't afford shutting down the store every time our registers go down."

Tec American denied the charges of bad service.

"The Year 2000 problem affects the whole industry. Tec America is working to resolve the problem with all of its customers," said Susan Cole, a Tec America representative, who confirmed that the company has received a copy of the suit. She would not comment on the specifics of the suit filed by Yarsike and Katz.

The Year 2000 problem, or the millennium bug, boils down to this: Many computer systems use software which only uses the last two numbers of the year, such as 97, instead of 1997, to track dates. So when 00 comes up for the year 2000, computers will view it as 1900 instead, causing widespread problems.

Patches and upgrades to new systems are fine for businesses with packaged software, but for much of the older, custom software on mainframes and "hard-coded" software resident in cash registers and other systems, diagnoses and solutions will prove much more troublesome and costly.

That's why legal experts say additional Year 2000-related suits are sure to follow.

"There have been a lot of near misses over the past two years or so--you know, settled out of court by the vendor and the customer. But nothing has been filed in court," said San Francisco attorney Dean Morehous, of Thelan Marrin Johnson & Bridges. He is the chairman of the firm's technology legal department, as well as the leader of the firm's Year 2000 legal team. "This is the first lawsuit filed on the issue," he said of Produce Palace's suit.

Morehous said he does not represent either of the parties in the case. He has written articles about the Year 2000 issue in legal journals and has given speeches on the matter.

Although it is the first lawsuit, he said it won't be the last. "I would think there would be more. I wouldn't be surprised if there are a lot of people out there unhappy with their vendors."

He said computer makers, cash register vendors, and other companies are going to have to face the problem sooner rather than later before more suits are filed. "This is a deadline you can't put off. The year 2000 is coming whether you like it or not."

He said one of the most likely scenarios is that a company might not be able to afford to convert its system in time. "The alternative might be to sue the vendor."

He cited a Gartner Group estimate that it could cost between $300 and $600 billion for U.S. companies to convert whole systems to recognize the year 2000.

He likened the problem--and the litigation it might ensue--to the asbestos abatement problem.

"People might see it as a simple problem to fix. But the magnitude of the problem is the issue, the many steps involved in making a conversion. And once a company makes that conversion, it has to make sure that any company it deals with by computer has made the conversion as well. A lot of data is date dependent."

He said he expects to see litigation surrounding the 2000 issue come from investors suing CEOs for lack of good business management if a company runs into financial trouble after not converting its systems. The pension employee benefit arena could be a target as well, if unconverted systems fail and checks aren't sent out to beneficiaries.

While the Year 2000 issue could potentially be a huge headache for technology users, computer makers, software vendors, and industry consultants are cashing in on widespread fear of Year 2000 crashes.

A study released by International Data Corporation expects the market to benefit from a great deal of extra spending on these problems, which may continue throughout the year. Existing information technology budgets are being exhausted, and additional cash from other areas is being shifted, to deal with problems associated with the Year 2000 changeover.