Y2K compromise spurs mixed reactions

The compromise on legislation that will limit lawsuits arising from the Y2K problem leaves some feeling betrayed by the Clinton administration and others enjoying the fruits of victory.

4 min read
The compromise in the works between the White House and Congress on legislation that will limit lawsuits arising from the Year 2000 technology problem has left some feeling betrayed by the Clinton administration and others enjoying the fruits of victory.

The agreement is based, in spirit, on the Senate approved Y2K Act which would limit Y2K lawsuits by providing disputing parties with a 90-day "cooling-off" period to mitigate their grievances out of court; set some caps on punitive damages for small businesses; protect government entities including municipalities, school, fire, water, and sanitation districts from punitive damages; and protect those not directly involved in a Year 2000 bug failure.

The compromise on the measure means the White House is set to sign it into law.

Back to Year 2000 Index Page But those who encouraged the White House to threaten the Y2K Act and its sister bill, in the House, with a presidential veto are now crying foul in response to the White House's change of mind.

In a prepared statement, Joan Claybrook, president of Public Citizen, said "President Clinton's shocking about-face on Y2K liability sells out consumers and small businesses in favor of high-tech and other business special interests."

"Come January 1, Mom and Pop businesses and consumers all over the country will not forgive the White House for stripping their rights to hold reckless corporations accountable in this sweeping and unfair legislation," she stated.

"These corporations have contributed millions in campaign contributions to both political parties and have just purchased a strong legal shield for themselves for making and selling Y2K-defective products," Claybrook said.

When, initially, the White House was against the Y2K legislation, it received praise from the Association of Trial Lawyers of America, a lobbying group for trial lawyers.

In his own carefully worded statement, Mark Mandell, president of ATLA, stayed away from outright chastising the White House.

"The compromise on Y2K liability legislation eliminates or moderates several of the most onerous provisions that would have unnecessarily harmed consumers and small businesses injured by the Y2K defect," Mandell said.

He noted the positive portions of the action, including that the measure will be a law for only three years and that the legal rights of anyone who suffers a physical injury will be preserved.

Another legal expert said he was surprised at how few changes were required by the White House.

"The cap on the amount of damages for large companies is gone," said Dean Morehous, a partner with San Francisco law firm Thelen, Reid and Priest. "The bill is still a significant change for the liability landscape. And it will still discourage plaintiffs from bringing certain suits. Not all plaintiffs, but it will prevent some."

The original measure would have made it harder for consumers to bring and win suits stemming from the Y2K computer glitch, and would cap punitive damages in certain cases. To satisfy the White House, lawmakers agreed to several changes to ensure consumers would have recourse if computers crash on January 1.

The compromise would make it harder for firms to file class-action lawsuits. In addition, the two sides agreed to increase the monetary cap for class-action lawsuits from $1 million to $10 million before a case can be moved to federal court.

The new bill holds a defendant liable only for a portion of the damage he or she causes in a Year 2000 glitch scenario.

Agreement on the measure brings to an end a lengthy stalemate among senators over how to limit what some consider a potential flood of litigation that could arise from Y2K problems--which by some estimates could cost $1 trillion and cripple the economy.

Currently there are approximately 70 Y2K cases in the court system. Already this year, 35 have been filed compared to 30 filed in all of last year, according to the Boston law firm Goodwin Proctor and Hoar.

Legal experts expect the bill, once it becomes a law, to indeed slow Y2K lawsuits from being filed, but some parties may rush to file suits before the bill is signed into law.

"If it passes it is more likely to impact plaintiffs' claims, so one might expect more activity from plaintiffs," said Sheppard Remis, partner at Goodwin, Proctor and Hoar.

Other legal observers praise the White House decision.

In a statement, American Tort Reform Association President Sherman Joyce said the "White House and Congress should be commended for putting aside their differences to reach an agreement on a problem that could have been a disaster for America's courts."

It is important to note, Joyce added, that the legislation does not bar recovery for damages but does put in place a series of rules such as limiting punitive damages and requiring plaintiffs to give a company 90 days to devise a plan to fix any Y2K problems.

"President Clinton should be commended for resisting the pressure applied by personal injury lawyers to veto this essential bill. Clinton's support of this and many other tort reform measures, such as the General Aviation Revitalization Act and the Biomaterials Access Assurance Act, show that he has done more to restore common sense to our civil justice system than any other president," Joyce said.