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Clinton backs Y2K bill without liability limit

The administration endorses Silicon Valley lawmaker Zoe Lofgren's proposal, which omits liability caps, as a bipartisan Senate bill with some caps stalls.

The Clinton administration has endorsed Silicon Valley lawmaker Zoe Lofgren's amendment to a Y2K liability bill, while the Senate remains deadlocked over proposed legislation to limit legal action for computer problems arising from the Year 2000 technology problem.

Lofgren (D-California) yesterday offered a substitute to Rep. Tom Davis's (R-Virginia) Y2K Readiness and Remediation Act during a House Judiciary Committee meeting. Unlike Davis's legislation, Lofgren's proposal doesn't set corporate and personal liability caps.

"We understand Back to Year 2000 Index Page that some members, led by Rep. Lofgren, are on the verge of introducing an amendment to HR 775 that is more modest in scope, and better tailored to achieving goals that Y2K litigation legislation should serve--encouraging parties to fix Y2K problems now, and weeding out frivolous Y2k claims," Jon Jennings, acting assistant attorney general with the Justice Department, stated in a contemporaneous letter to House Judiciary Committee dated April 29.

The White House threatened to veto HR 775 in its current form. "Because Titles II and III of the bill modify tort and contract so as to reduce the liability of potential Y2K defendants, these provisions reduce the incentive potential defendants have to become Y2K compliant," Jennings wrote.

The White House has also threatened to veto Sen. John McCain's (R-Arizona) bill, which remained stalled today.

Lofgren's bill also contains the 90-day "cooling off" period, and requires that pleadings contain specific proof about product defects so that it's easier to screen trivial complaints--except in the case of an emergency--and directs judges to base the percentage of liability based on a defendant's contribution to a plaintiff's losses, said John Flannery, special counsel to Lofgren.

"This addresses the high-tech community's concerns," he said.

"We don't have some of the things that are questionable, such as caps, because we want the market to determine these things," Flannery explained.

House debate will continue on Tuesday.

Congress has been tied up this week debating proposals meant to derail the threat of a litigious firestorm over computer systems that aren't Y2K-compliant and to encourage companies to work together to fix the problem. Progress has been slowed by partisan wrangling.

McCain's bill aims to curb Y2K-related lawsuits by allowing defendants the opportunity to correct the situation before facing a lawsuit, setting punitive damage caps for all suits, and creating 90-day grace periods for businesses to fix their Y2K problems.

Just yesterday, senators had announced that a bipartisan agreement had been reached by a group of key senators on the controversial McCain bill. The breakthrough turned on Democrat-backed amendments boosting consumer protection and eliminating most caps on punitive damages. McCain also agreed to drop a provision that would have protected individual corporate officers and directors.

But other Democrats wanted to introduce still more amendments, including one to increase the minimum wage. The Republican leadership refused, saying they were not relevant to the bill.

An alternative bill by Sens. John Kerry (D-Massachusetts) and Charles Robb (D-Virginia) also omits liability caps. The Justice Department's Jennings wrote that the administration "can support" this bill.

The decision to postpone debate in the Senate until next week came after a week of heated rhetoric that included the White House, which criticized the McCain bill yesterday and threatened a Clinton veto if it were approved without any protections for consumers and too much leeway for corporate board members.

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 or may not be able to function at all, causing widespread disruptions in services in the transportation, financial, utility, and public safety sectors, observers warn.

News.com's Erich Luening contributed to this report.