The Senate yesterday rejected a White House-backed plan after Republicans said it offered too little protection to high-tech companies, according to Senate staffers.
On a vote of 57-to-41, legislators tabled a measure sponsored by Sen. John Kerry (D-Massachusetts) and Minority Leader Tom Daschle (D-South Dakota). That cleared the way for the Republican-controlled Senate to take up a separate Y2K liability proposal by Sen. John McCain (R-Arizona), which is backed by a group of Democrats and favored by big business.
Like the McCain bill, the Kerry-Daschle measure would have given defendants up to 90 days to fix Y2K problems before a lawsuit could be filed. As previously reported, the Kerry-Daschle measure would make it harder to file certain class action lawsuits and would bar damages for economic losses, according to the senator's office.
The Kerry plan looked to safeguard consumer rights. For example, Democrats backing the measure said they would not cap any punitive damage awards.
By a vote of 65-to-32, the Senate also rejected a proposal by Sen. Patrick Leahy (D-Vermont) that would have protected consumers' rights to sue for millennium bug problems.
Sources in McCain's office said they expect a final vote on the measure early next week.
Yesterday's votes were just a first in what is expected to be a series of attempts by Senators to try and find common ground on a bill that would limit Y2K lawsuits and get approval from the White House, which has threatened to veto the McCain bill despite its bipartisan support.
The White House didn't comment on the latest actions in the Senate.
The compromise was hammered out mainly by Sens. McCain, Chris Dodd (D-Connecticut), Orrin Hatch (R-Utah), Bob Bennett (R-Utah), Ron Wyden (D-Oregon), and Dianne Feinstein (D-California), and would retain some, but not all, punitive damage caps for businesses, protect municipalities, and governmental entities from punitive damages, and preserve state court standards. This new compromise waters down some of the controversial points in the Y2K Act that have tied up the bill in political wrangling for weeks.
A compromise was reached after McCain agreed to eliminate caps on punitive damages for big businesses and dropped a provision that would have protected individual corporate officers and directors.
"It represents spirited discussion, hard fought compromise, and agreement with a number of my colleagues on both sides of the aisle," McCain said yesterday on the floor of the Senate.
The McCain bill provides a 90-day "cooling-off" period for plaintiffs and defendants to resolve Y2K disputes out of court. The bill would also 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 Y2K failure.
The House of Representatives passed a stronger bill that would include more caps and provide additional protections to businesses. It too, has been threatened with a White House veto.
Yesterday's vote on the measure marks the fourth time the Senate has voted since the bill was submitted by McCain back in January.
Experts warn that the ultimate outcome of the congressional debates--a single piece of legislation that will clearly define legal limits over Y2K settlements--is crucial to avoid clogging courts with years of costly litigation.
The Senate bill is designed to limit what supporters call a potential flood of litigation arising from Y2K problems, which by some estimates could cost $1 trillion and cripple the economy. Opponents claim the bill would protect businesses at the expense of consumers' interests. Despite the bipartisan compromise, the Clinton administration has threatened to veto the measure if approved by the Senate.
Should the Senate approve a Y2K litigation bill, both the House and Senate bills will be hammered into one measure to be approved or denied by President Clinton. Though Clinton has clearly signaled his opposition, the White House would join in the process to try to ensure presidential approval for the final legislation, Senate staffers said.
The Year 2000 problem, also known as the millennium bug, stems from an old programming shortcut that used only the last two digits of the year. Many computers now must be modified, or they may mistake the year 2000 for the year 1900 and may not be able to function at all, observers warn.