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Tech Industry

Bill would curb Year 2000 suits

A California bill that would limit legal action over the Year 2000 computer bug takes the first step in its legislative journey.

A California bill that would limit lawsuits over the Year 2000 computer bug in that state begins the first leg of its legislative journey next week.

On Tuesday, the California Assembly Judiciary Committee will begin hearings on the measure, AB 1710, which would prohibit awarding damages for pain and suffering and limit them to reflect costs "reasonably incurred to reprogram or replace and internally test the relevant," computer system, according to the draft language of the proposed bill.

As reported earlier, proponents of the bill, which was submitted by State Assemblyman Brooks Firestone, say they're looking to control the liability costs of an expected blizzard of lawsuits triggered by the millennium bug. They also see the bill as a welcome call to software companies looking to do business in the Golden State.

Because manufacturers used only the last two digits to mark the year, at the turn of the century computers may mistakenly read the year 2000 as 1900. That could cause computers to malfunction or shut down.

"We don't want to limit consumer recourse from Y2K failure," Matthew Brooks, an aid from Firestone's office, said. "We just want do something that doesn't let lawyers file suits for everyone who has ever touched software."

Firestone's staff also contends that it is essential that the legislature create conditions that will enable the high-tech industry to prosper in California.

The bill's supporters have reportedly garnered backing from industry heavy-weight Intel and the California Chamber of Commerce.

However, the bill is not without critics. Attorney Dean Morehous, a partner with the California firm Thelen, Marrin, Johnson & Bridges, will be testifying against the measure next week before the Assembly Judiciary Committee.

"The bill is flawed," he said. "It is based on the premise that the Year 2000 problem will jeopardize the growth of the high-tech industry. It won't. There's evidence showing that Year 2000 conversion tools and efforts have spawned a healthy submarket within the high technology sector."

Beyond that core fault, Moorehous said the bill will spark confusion about the appropriate measure of damages in Year 2000 failure cases. "Even though the authors say their goal is to improve predictability in litigation, it will do the opposite."

The one-size-fits-all limitation on damages is a simplistic view of the kinds of claims Y2K failures will generate. One example of a possible Y2K suit would be one filed by shareholders against a CEO or board of directors for neglecting to properly prepare for the Year 2000 problem. Such cases are usually brought against executives of a company on "breach of fiduciary duty or securities fraud theories." Under the Firestone bill, Moorehous said it does not make sense to limit damages from such suits to contract recovery.

Next week's hearing before the Assembly Judiciary Committee is just the first stop for the bill. Brooks said if the bill passes the Judiciary, it goes to the Information Technology Committee, then from there to the Appropriations Committee. If it is approved in that committee, it then goes before the whole Assembly, then on to the California Senate.