Second bill aimed at limiting Y2K suits

The committee held a hearing today on S.461, the Year 2000 Fairness and Responsibility Act, that Senators Dianne Feinstein (D-California), Mitch McConnel (R-Kentucky), and Orrin Hatch (R-Utah), introduced just last week.

The Act is a follow-up bill to the Year 2000 Information and Readiness Disclosure Act passed by Congress and signed into law by President Clinton last year.

The new bill looks to encourage Y2K problem solving, rather than bring on a rush to the courthouse, Senator Hatch, chairman of the committee, said in his statement opening today's proceedings. "It is not our goal to prevent any and all Y2K litigation. It is to simply make Y2K problem solving a more attractive alternative to litigation."

The control of Y2K litigation has become a hot topic in Congress and in state legislatures across the nation, as a result of government officials' and corporate executives' fear that a wave of Y2K lawsuits could hamper the economy. Some observers estimate that Year 2000 problem litigation costs could reach $1 trillion.

Hatch said the new bill, S. 461, doesn't prevent injured parties from eventually filing legitimate Y2K suits. "The bill merely creates an opportunity for companies to correct problems and an incentive to settle cases. This will spur technology providers to spend resources in the repair room instead of diverting needed capital to the courtroom."

For example, the bill would establish a 90-day "problem solving" period, which would delay any litigation during that period of time. The mandatory cooling-off period is designed to allow a consumer to notify--in a simple communication--the technology provider about the supposed source of the Y2K problem, the exact nature of the problem, how the consumer has been injured as a result, and what remedy is sought. The technology provider then has the chance to fix the problem. If no agreement is forthcoming, the consumer has the full right to sue.

The bill also looks to prevent targeting so-called deep-pocketed defendants by limiting the liability to the percentage of the company's fault in causing harm.

The proposed legislation would also insure that if a contract does not limit liability for Y2K actions, or if there is not a true meeting of the minds in a contract which limits liability, recovery is available.

Where, however, the contract specifically limits liability for actions that include Y2K claims, the bill would limit recovery.

The new Y2K litigation bill, like others before it, drew criticism today from consumer representatives, Department of Justice officials, and some committee members who say it is too broad.

"Sweeping liability protection has the potential to do great harm," said Senator Patrick Leahy, (D-Vermont), and ranking Democrat on the Senate Judiciary Committee, in his opening remarks. "Such legislation may restrict the rights of consumers, small businesses, family farmers, state and local governments, and federal government from seeking redress for the harm caused by Y2K computer failures."

Leahy said the proposed bill as it stands seeks to restructure the laws of the 50 states through federal preemption. Moreover, it runs the risk of discouraging businesses from taking responsible steps to cure their Y2K problems now before it is too late.

Eleanor Acheson, assistant to the Attorney General, told the committee the Clinton Administration now has to quarrel with the objectives of the legislation insofar as it seeks to curtail frivolous Y2K actions and to encourage companies to focus their efforts on Y2K problems before they occur.

"In crafting legislation to serve these objectives, however, we must be careful not to bar small businesses and consumers who have legitimate Y2K claims from the courts and not to create disincentives to Y2K readiness," she said.

She also said Congress and the administration should be mindful that Congressional amendment of state laws, as well as state procedures and practices, is a step that should not be taken without real and compelling reasons.

The committee also heard testimony from a small businessman from Warren, Michigan, Mark Yarsike, who is coowner of Produce Palace International, a gourmet produce market in Detroit. Yarsike was the first business owner to file a Y2K lawsuit in 1997, after the computer system running his company's cash registers crashed when they failed to recognize credit cards with expiration dates on or beyond 2000.

"I imagine that if I were one of the big corporate grocery chains, I could have used my market power to compel the computer company to work out some sort of resolution. But being the owner of just one store, I did not have the option," Yarsike said in his testimony.

So, the Michigan businessman said he turned to the court system. The company that had sold him the registers settled with Yarsike 18 months later.

"I am just a businessman. I am no expert on the legislation before the committee today. But my lawyer tells me that had this bill--or others like it in Congress--been in effect when we had our problem, the computer company would not have settled. If we were lucky, we would still be in litigation. But more than likely, my store would be out of business."

Senator Leahy moved that another hearing be scheduled to take up the proposed legislation again. Committee staffers did not make that date available.