[House Report 106-131]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-131
1st Session HOUSE OF REPRESENTATIVES Part 1
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YEAR 2000 READINESS AND RESPONSIBILITY ACT
_______
May 7, 1999.--Ordered to be printed
_______
Mr. Hyde, from the Committee on the Judiciary, submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 775]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 775) to establish certain procedures for civil
actions brought for damages relating to the failure of any
device or system to process or otherwise deal with the
transition from the year 1999 to the year 2000, and for other
purposes, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 11
Background and Need for the Legislation.......................... 12
Hearings......................................................... 14
Committee Consideration.......................................... 15
Votes of the Committee........................................... 15
Committee Oversight Findings..................................... 18
Committee Jurisdiction Letter.................................... 19
Committee on Government Reform Findings.......................... 19
New Budget Authority and Tax Expenditures........................ 19
Congressional Budget Office Cost Estimate........................ 20
Constitutional Authority Statement............................... 24
Section-by-Section Analysis...................................... 24
Agency Views..................................................... 31
Dissenting Views................................................. 36
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Year 2000 Readiness and Responsibility
Act''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The Congress seeks to encourage businesses to concentrate
their attention and resources in the short time remaining
before January 1, 2000, on addressing, assessing, remediating,
and testing their year 2000 problems, and to minimize any
possible business disruptions associated with year 2000 issues.
(2) It is appropriate for the Congress to enact legislation
to assure that year 2000 problems do not unnecessarily disrupt
interstate commerce or create unnecessary case loads in Federal
and State courts and to provide initiatives to help businesses
prepare and be in a position to withstand the potentially
devastating economic impact of the year 2000 problem.
(3) Year 2000 issues will affect practically all business
enterprises to some degree, giving rise to a large number of
disputes.
(4) Resorting to the legal system for resolution of year 2000
problems is not feasible for many businesses, particularly
small businesses, because of its complexity and expense.
(5) The delays, expense, uncertainties, loss of control,
adverse publicity and animosities that frequently accompany
litigation of business disputes can only exacerbate the
difficulties associated with the year 2000 date change, and
work against the successful resolution of those difficulties.
(6) The Congress recognizes that every business in the United
States should be concerned that widespread and protracted year
2000 litigation may threaten the network of valued and trusted
business relationships that are so important to the effective
functioning of the world economy, and which may put unbearable
strains on an overburdened judicial system.
(7) A proliferation of frivolous year 2000 actions by
opportunistic parties may further limit access to courts by
straining the resources of the legal system and depriving
deserving parties of their legitimate rights to relief.
(8) The Congress encourages businesses to approach their year
2000 disputes responsibly, and to avoid unnecessary, time-
consuming and costly litigation based on year 2000 failures.
Congress supports good faith negotiations between parties when
there is a dispute over a year 2000 problem, and, if necessary,
urges the parties to enter into voluntary, non-binding
mediation rather than litigation.
SEC. 3. DEFINITIONS.
In this Act:
(1) Contract.--The term ``contract'' means a contract,
tariff, license, or warranty.
(2) Defendant.--The term ``defendant'' means any person
against whom a year 2000 claim has been asserted.
(3) Economic loss.--The term ``economic loss''--
(A) means any damages other than damages arising out
of personal injury or damage to tangible property; and
(B) includes, but is not limited to, damages for lost
profits or sales, for business interruption, for losses
indirectly suffered as a result of the defendant's
wrongful act or omission, for losses that arise because
of the claims of third parties, for losses that must be
pleaded as special damages, and consequential damages
(as defined in the Uniform Commercial Code or analogous
State commercial law).
(4) Governmental entity.--The term ``governmental entity''
means an agency, instrumentality, other entity, or official of
Federal, State, or local government (including
multijurisdictional agencies, instrumentalities, and entities).
(5) Material defect.--The term ``material defect'' means a
defect in any item, whether tangible or intangible, or in the
provision of a service, that substantially prevents the item or
service from operating or functioning as designed or intended.
The term ``material defect'' does not include a defect that has
an insignificant or de minimis effect on the operation or
functioning of an item, that affects only a component of an
item that, as a whole, substantially operates or functions as
designed, or that has an insignificant or de minimis effect on
the efficacy of the service provided.
(6) Person.--The term ``person'' means any natural person and
any entity, organization, or enterprise, including but not
limited to corporations, companies, joint stock companies,
associations, partnerships, trusts, and governmental entities.
(7) Personal injury.--The term ``personal injury'' means any
physical injury to a natural person, including death of the
person, and mental suffering, emotional distress, or like
elements of injury suffered by a natural person in connection
with a physical injury.
(8) Plaintiff.--The term ``plaintiff'' means any person who
asserts a year 2000 claim.
(9) Punitive damages.--The term ``punitive damages'' means
damages that are awarded against any person to punish such
person or to deter such person, or others, from engaging in
similar behavior in the future.
(10) State.--The term ``State'' means any State of the United
States, the District of Columbia, the Commonwealth of Puerto
Rico, the Northern Mariana Islands, the United States Virgin
Islands, Guam, American Samoa, and any other territory or
possession of the United States, and any political subdivision
thereof.
(11) Year 2000 action.--The term ``year 2000 action'' means
any civil action of any kind brought in any court under Federal
or State law, or an agency board of contract appeal proceeding,
in which a year 2000 claim is asserted.
(12) Year 2000 claim.--The term ``year 2000 claim''--
(A) means any claim or cause of action of any kind,
other than a claim based on personal injury, whether
asserted by way of claim, counterclaim, cross-claim,
third-party claim, defense, or otherwise, in which the
plaintiff's alleged loss or harm resulted, directly or
indirectly, from a year 2000 failure;
(B) includes a claim brought in any Federal or State
court by a governmental entity when acting in a
commercial or contracting capacity; and
(C) does not include a claim brought by such a
governmental entity acting in a regulatory,
supervisory, or enforcement capacity.
(13) Year 2000 failure.--The term ``year 2000 failure'' means
any failure by any device or system (including, without
limitation, any computer system and any microchip or integrated
circuit embedded in another device or product), or any
software, firmware, or other set or collection of processing
instructions, however constructed, in processing, calculating,
comparing, sequencing, displaying, storing, transmitting, or
receiving year 2000 date-related data.
SEC. 4. APPLICATION OF ACT.
(a) General Rule.--This Act applies to any year 2000 claim brought
after February 22, 1999, including any appeal, remand, stay, or other
judicial, administrative, or alternative dispute resolution proceeding
with respect to such claim.
(b) No New Cause of Action Created.--Nothing in this Act creates a
new cause of action, and, except as otherwise explicitly provided in
this Act, nothing in this Act expands any liability otherwise imposed
or limits any defense otherwise available under Federal or State law.
(c) Exclusion of Personal Injury Claims.--None of the provisions of
this Act shall apply to any claim based on personal injury.
(d) Preemption of State Law.--Except as otherwise provided in this
Act, this Act supersedes State law to the extent that it establishes a
rule of law applicable to a year 2000 claim that is inconsistent with
State law.
TITLE I--UNIFORM PRELITIGATION PROCEDURES FOR YEAR 2000 ACTIONS
SEC. 101. NOTICE PROCEDURES TO AVOID UNNECESSARY YEAR 2000 ACTIONS.
(a) Notification Period.--Before filing a year 2000 action, except an
action that seeks only injunctive relief, a prospective plaintiff shall
send by certified mail to each prospective defendant a written notice
that identifies, with particularity as to any year 2000 claim--
(1) any symptoms of any material defect alleged to have
caused harm or loss;
(2) the harm or loss allegedly suffered by the prospective
plaintiff;
(3) the facts that lead the prospective plaintiff to hold
such person responsible for both the defect and the injury;
(4) the relief or action sought by the prospective plaintiff;
and
(5) the name, title, address, and telephone numbers of any
individual who has authority to negotiate a resolution of the
dispute on behalf of the prospective plaintiff.
Except as provided in subsection (c), the prospective plaintiff shall
not commence an action in Federal or State court until the expiration
of 90 days after the date on which such notice is received. Such 90-day
period shall be excluded in the computation of any applicable statute
of limitations.
(b) Response to Notice.--
(1) In general.--Not later than 30 days after receipt of the
notice specified in subsection (a), each prospective defendant
shall send by certified mail with return receipt requested to
each prospective plaintiff a written statement acknowledging
receipt of the notice and describing any actions it has taken
or will take by not later than 60 days after the end of that
30-day period, to remedy the problem identified by the
prospective plaintiff.
(2) Inadmissibility.--A written statement required by this
subsection is not admissible in evidence, under Rule 408 of the
Federal Rules of Evidence or any analogous rule of evidence in
any State, in any proceeding to prove liability for, or the
invalidity of, a claim or its amount, or otherwise as evidence
of conduct or statements made in compromise negotiations.
(3) Presumptive time of receipt.--For purposes of paragraph
(1), a notice under subsection (a) is presumed to be received 7
days after it was sent.
(c) Failure To Respond.--If a prospective defendant fails to respond
to a notice provided pursuant to subsection (a) within the 30-day
period specified in subsection (b) or does not describe the action, if
any, that the prospective defendant has taken or will take to remedy
the problem identified by the prospective plaintiff within the
subsequent 60 days, the 90-day period specified in subsection (a) shall
terminate at the end of that 30-day period as to that prospective
defendant and the prospective plaintiff may thereafter commence its
action against that prospective defendant.
(d) Failure To Provide Notice.--If a defendant determines that a
plaintiff has filed a year 2000 action without providing the notice
specified in subsection (a) and without awaiting the expiration of the
90-day period specified in subsection (a), the defendant may treat the
plaintiff's complaint as such a notice by so informing the court and
the plaintiff in its initial response to the complaint. If any
defendant elects to treat the complaint as such a notice--
(1) the court shall stay all discovery in the action
involving that defendant for the applicable time period
provided in subsection (a) or (c), as the case may be, after
filing of the complaint; and
(2) the time for filing answers and all other pleadings shall
be tolled during such applicable period.
(e) Effect of Contractual Waiting Periods.--In cases in which a
contract or a statute enacted before January 1, 1999, requires notice
of nonperformance and provides for a period of delay prior to the
initiation of suit for breach or repudiation of contract, the period of
delay provided in the contract or the statute is controlling over the
waiting period specified in subsections (a) and (d).
(f) Sanction for Frivolous Invocation of the Stay Provision.--In any
action in which a defendant acts pursuant to subsection (d) to stay the
action, and the court subsequently finds that the defendant's assertion
that the suit is a year 2000 action was frivolous and made for the
purpose of causing unnecessary delay, the court may award sanctions to
opposing parties in accordance with the provisions of Rule 11 of the
Federal Rules of Civil Procedure or the equivalent applicable State
rule.
(g) Computation of Time.--For purposes of this section, the rules
regarding computation of time shall be governed by the applicable
Federal or State rules of civil procedure.
(h) Special Rule for Class Actions.--For the purpose of applying this
section to a year 2000 action that is maintained as a class action in
Federal or State court, the requirements of the preceding subsections
of this section apply only to named plaintiffs in the class action.
SEC. 102. ALTERNATIVE DISPUTE RESOLUTION TO AVOID UNNECESSARY YEAR 2000
ACTIONS.
(a) In General.--(1) At any time during the 90-day period specified
in section 101(a), either party may request the other to use
alternative dispute resolution. If, based upon that request, the
parties enter into an agreement to use alternative dispute resolution,
they may also agree to an extension of the 90-day period.
(2) At any time after expiration of the 90-day period specified in
section 101(a), whether before or after the filing of a complaint,
either party may request the other to use alternative dispute
resolution.
(b) Payment of Moneys Due.--If the parties resolve their dispute
through alternative dispute resolution as provided in subsection (a),
the defendant shall pay all moneys due within 30 days, unless another
period of time is agreed to by the parties or established by contract
between the parties.
(c) Foreclosure of Further Proceedings on Resolved Issues.--
Resolution of the issues by the parties prior to litigation through
negotiation or alternative dispute resolution shall foreclose any
further proceedings with respect to those issues.
SEC. 103. PLEADING REQUIREMENTS.
(a) Application With Rules of Civil Procedure.--This section applies
exclusively to year 2000 claims and, except to the extent that this
section requires additional information to be contained in or attached
to pleadings, nothing in this section is intended to amend or otherwise
supersede applicable rules of Federal or State civil procedure.
(b) Nature and Amount of Damages.--With respect to any year 2000
claim that seeks the award of money damages, the complaint shall state
with particularity the nature and amount of each element of damages,
and the factual basis for the damages calculation.
(c) Material Defects.--With respect to any year 2000 claim in which
the plaintiff alleges that a product or service was defective, the
complaint shall identify with particularity the symptoms of the
material defects and shall state with particularity the facts
supporting the conclusion that the defects are material.
(d) Required State of Mind.--With respect to any year 2000 claim as
to which the plaintiff may prevail only on proof that the defendant
acted with a particular state of mind, the complaint shall, with
respect to each element of the year 2000 claim, state with
particularity the facts giving rise to a strong inference that the
defendant acted with the required state of mind.
(e) Motion To Dismiss; Stay of Discovery.--
(1) Dismissal for failure to meet pleading requirements.--In
any year 2000 action, the court shall, on the motion of any
defendant, dismiss the complaint without prejudice if the
requirements of subsection (a), (b), or (c) are not met with
respect to any year 2000 claim asserted therein.
(2) Stay of discovery.--In any year 2000 action, all
discovery shall be stayed during the pendency of any motion to
dismiss, unless the court finds upon the motion of any party
that particularized discovery is necessary to preserve evidence
or prevent undue prejudice to that party.
(3) Preservation of evidence.--
(A) In general.--During the pendency of any stay of
discovery entered pursuant to this subsection, unless
otherwise ordered by the court, any party to the action
with actual notice of the allegations contained in the
complaint shall treat all documents, data compilations
(including electronically stored or recorded data), and
tangible objects that are in the custody or control of
such person and that are relevant to the allegations,
as if they were a subject of a continuing request for
production of documents from an opposing party under
applicable Federal or State rules of civil procedure.
(B) Sanction for willful violation.--A party
aggrieved by the willful failure of an opposing party
to comply with subparagraph (A) may apply to the court
for an order awarding appropriate sanctions.
SEC. 104. DUTY OF ALL PERSONS TO MITIGATE YEAR 2000 COMPUTER FAILURES
AND RESULTING DAMAGES.
Damages awarded for any year 2000 claim shall exclude compensation
for damages the plaintiff could reasonably have avoided in light of any
disclosure or other information of which the plaintiff was, or
reasonably should have been, aware, including information made
available by the defendant to purchasers or users of the defendant's
product or services concerning means of remedying or avoiding the year
2000 failure.
TITLE II--YEAR 2000 ACTIONS INVOLVING CONTRACTS
SEC. 201. CERTAINTY OF CONTRACT TERMS FOR PREVENTION OF YEAR 2000
DAMAGES.
(a) In General.--Subject to subsection (b), in resolving any year
2000 claim, any written contractual term, including a limitation or an
exclusion of liability, or a disclaimer of warranty, shall be fully
enforced unless the enforcement of that term would manifestly and
directly contravene applicable State law embodied in any statute in
effect on January 1, 1999, specifically addressing that term.
(b) Interpretation of Contract.--In resolving any year 2000 claim as
to which a contract to which subsection (a) applies is silent with
respect to a particular issue, the interpretation of the contract with
respect to that issue shall be determined by applicable law in effect
at the time the contract was executed.
SEC. 202. APPLICATION OF EXISTING IMPOSSIBILITY OR COMMERCIAL
IMPRACTICABILITY DOCTRINES.
(a) Doctrine of Impossibility and Commercial Impracticability.--With
respect to any year 2000 claim for breach or repudiation of contract,
the applicability of the doctrines of impossibility and commercial
impracticability shall be determined by the law in existence on January
1, 1999. Nothing in this Act shall be construed as limiting or
impairing a party's right to assert defenses based upon such doctrines.
(b) Reasonable Efforts.--To the extent that impossibility or
commercial impracticability is raised as a defense against a claim for
breach or repudiation of contract, the party asserting the defense
shall be allowed to offer evidence that its implementation of the
contract, or its efforts to implement the contract, were reasonable in
light of the circumstances.
SEC. 203. PROTECTION OF PERSONS FROM LIABILITY NOT ANTICIPATED IN YEAR
2000 CONTRACTS.
With respect to any year 2000 claim involving a breach of contract or
a claim related to the contract, no party may claim or be awarded any
category of damages unless such damages are allowed by the express
terms of the contract or, if the contract is silent on such damages, by
operation of the applicable Federal or State law that governed
interpretation of the contract at the time the contract was entered
into.
TITLE III--YEAR 2000 ACTIONS INVOLVING TORT AND OTHER NONCONTRACTUAL
CLAIMS
SEC. 301. PROPORTIONATE LIABILITY.
(a) In General.--A person against whom a final judgment is entered
with respect to a year 2000 claim, other than a claim for breach or
repudiation of contract, shall be liable solely for the portion of the
judgment that corresponds to the percentage of responsibility of that
person, as determined under subsection (b).
(b) Determination of Responsibility.--
(1) In general.--With respect to any year 2000 claim, the
court shall instruct the jury to answer special
interrogatories, or if there is no jury, shall make findings,
with respect to each defendant and plaintiff, and each of the
other persons claimed by any of the parties to have caused or
contributed to the loss incurred by the plaintiff, including
(but not limited to) persons who have entered into settlements
with the plaintiff or plaintiffs, concerning the percentage of
responsibility of the defendant, the plaintiff, and each such
person, measured as a percentage of the total fault of all
persons who caused or contributed to the total loss incurred by
the plaintiff.
(2) Contents of special interrogatories or findings.--The
responses to interrogatories, or findings, as appropriate,
under paragraph (1) shall specify the total amount of damages
that the plaintiff is entitled to recover and the percentage of
responsibility of each person found to have caused or
contributed to the loss incurred by the plaintiff or
plaintiffs.
(3) Factors for consideration.--In determining the percentage
of responsibility under this subsection, the trier of fact
shall consider--
(A) the nature of the conduct of each person alleged
to have caused or contributed to the loss incurred by
the plaintiff; and
(B) the nature and extent of the causal relationship
between the conduct of each such person and the damages
incurred by the plaintiff or plaintiffs.
(4) Nondisclosure to jury.--The standard for allocation of
damages under paragraph (1) shall not be disclosed to members
of the jury.
SEC. 302. LIMITATION ON BYSTANDER LIABILITY FOR YEAR 2000 FAILURES.
(a) In General.--With respect to any year 2000 claim for money
damages in which--
(1) the defendant is not the manufacturer, seller, or
distributor of a product, or the provider of a service, that
suffers or causes the year 2000 failure at issue,
(2) the plaintiff is not in substantial privity with the
defendant, and
(3) the defendant's actual or constructive awareness of an
actual or potential year 2000 failure is an element of the
claim under applicable law,
the defendant shall not be liable unless the plaintiff, in addition to
establishing all other requisite elements of the claim, proves by clear
and convincing evidence that the defendant actually knew, or recklessly
disregarded a known and substantial risk, that such failure would
occur.
(b) Substantial Privity.--For purposes of subsection (a)(2), a
plaintiff and a defendant are in substantial privity when, in a year
2000 claim arising out of the performance of professional services, the
plaintiff and the defendant either have contractual relations with one
another or the plaintiff is a person who, prior to the defendant's
performance of such services, was specifically identified to and
acknowledged by the defendant as a person for whose special benefit the
services were being performed.
(c) Certain Claims Excluded.--For purposes of subsection (a)(3),
claims in which the defendant's actual or constructive awareness of an
actual or potential year 2000 failure is an element of the claim under
applicable law do not include claims for negligence but do include
claims such as fraud, constructive fraud, breach of fiduciary duty,
negligent misrepresentation, and interference with contract or economic
advantage.
SEC. 303. REASONABLE EFFORTS DEFENSE.
With respect to any year 2000 claim seeking money damages, except
with respect to claims asserting breach or repudiation of contract--
(1) the fact that a year 2000 failure occurred in an entity,
facility, system, product, or component that was within the
control of the party against whom the claim is asserted shall
not constitute the sole basis for recovery; and
(2) the party against whom the claim is asserted shall be
entitled to establish, as a complete defense to the claim, that
it took measures that were reasonable under the circumstances
to prevent the year 2000 failure from occurring or from causing
the damages upon which the claim is based.
SEC. 304. DAMAGES LIMITATION.
(a) Year 2000 Recovery Fund.--There is established in the Treasury a
Year 2000 Recovery Fund. In any year 2000 action in which punitive
damages are awarded under applicable law, including this Act, the
entire amount of such damages shall be paid into the Year 2000 Recovery
Fund. Amounts in the Fund shall be used for the assistance of small
businesses, State and local governments, and nonprofit organizations,
that are affected by year 2000 failures.
(b) Standard for Awards.--With respect to any year 2000 claim for
which punitive damages may be awarded under applicable law, the
defendant shall not be liable for punitive damages unless the plaintiff
proves by clear and convincing evidence that conduct carried out by the
defendant showed a conscious, flagrant indifference to the rights or
safety of others and was the proximate cause of the harm or loss that
is the subject of the year 2000 claim. This requirement is in addition
to any other requirement in applicable law for the award of such
damages.
(c) Caps on Punitive Damages.--
(1) In general.--With respect to any year 2000 claim, if a
defendant is found liable for punitive damages, the amount of
punitive damages that may be awarded to a plaintiff shall not
exceed the greater of--
(A) 3 times the amount awarded to the plaintiff for
compensatory damages; or
(B) $250,000.
(2) Special rule.--
(A) In general.--Notwithstanding paragraph (1), with
respect to any year 2000 claim, if the defendant is
found liable for punitive damages and the defendant--
(i) is an individual whose net worth does not
exceed $500,000,
(ii) is an owner of an unincorporated
business that has fewer than 25 full-time
employees, or
(iii) is--
(I) a partnership,
(II) corporation,
(III) association,
(IV) unit of local government, or
(V) organization,
that has fewer than 25 full-time employees,
the amount of punitive damages shall not exceed the
lesser of 3 times the amount awarded to the plaintiff
for compensatory damages, or $250,000.
(B) Applicability.--For purposes of determining the
applicability of this paragraph to a corporation, the
number of employees of a subsidiary of a wholly owned
corporation shall include all employees of a parent
corporation or any subsidiary of that parent
corporation.
(3) Application of limitations by the court.--The limitations
contained in paragraphs (1) and (2) shall be applied by the
court and shall not be disclosed to the jury.
SEC. 305. RECOVERY OF ECONOMIC DAMAGES FOR YEAR 2000 CLAIMS.
(a) Limitation on Recovery of Economic Losses.--Subject to subsection
(b), a plaintiff making a year 2000 claim alleging a nonintentional
tort may recover economic losses only upon establishing, in addition to
all other elements of the claim under applicable law, that any one of
the following circumstances exists:
(1) The recovery of such losses is provided for in a contract
to which the plaintiff is a party.
(2) Such losses are incidental to a year 2000 claim based on
damage to tangible personal or real property caused by a year
2000 failure (other than damage to property that is the subject
of a contract between the parties involved in the year 2000
claim).
(b) Recovery Must Be Permitted Under Applicable Law.--Economic losses
shall be recoverable under this section only if applicable Federal law,
or applicable State law embodied in statute or controlling judicial
precedent as of January 1, 1999, permits the recovery of such losses.
SEC. 306. LIABILITY OF OFFICERS AND DIRECTORS.
(a) In General.--A director, officer, or trustee of a business or
other organization (including a corporation, unincorporated
association, partnership, or nonprofit organization) shall not be
personally liable with respect to any year 2000 claim in his or her
capacity as a director or officer of the business or organization for
an aggregate amount that exceeds the greater of--
(1) $100,000; or
(2) the amount of cash compensation received by the director
or officer from the business or organization during the 12-
month period immediately preceding the act or omission for
which liability was imposed.
(b) Rule of Construction.--Nothing in this section shall be deemed to
impose, or to permit the imposition of, personal liability on any
director, officer, or trustee in excess of the aggregate amount of
liability to which such director, officer, or trustee would be subject
under applicable State law in existence on January 1, 1999 (including
any charter or bylaw authorized by such State law).
TITLE IV--YEAR 2000 CLASS ACTIONS
SEC. 401. MINIMUM INJURY REQUIREMENT.
(a) In General.--In any year 2000 action involving a year 2000 claim
that a product or service is defective, the action may be maintained as
a class action in Federal or State court as to that claim only if it
satisfies all other prerequisites established by applicable Federal or
State law and the court also finds that the alleged defect in the
product or service was a material defect as to a majority of the
members of the class.
(b) Determination by Court.--As soon as practicable after the
commencement of a year 2000 action involving a year 2000 claim that a
product or service is defective and that is brought as a class action,
the court shall determine by order whether the requirement set forth in
subsection (a) is satisfied. An order under this subsection may be
conditional, and may be altered or amended before the decision on the
merits.
SEC. 402. NOTIFICATION.
(a) Notice by Mail.--In any year 2000 action that is maintained as a
class action, the court, in addition to any other notice required by
applicable Federal or State law, shall direct notice of the action to
each member of the class by United States mail, return receipt
requested. Persons whose actual receipt of the notice is not verified
by the court or by counsel for one of the parties shall be excluded
from the class unless those persons inform the court in writing, on a
date no later than the commencement of trial or entry of judgment, that
they wish to join the class.
(b) Contents of Notice.--In addition to any information required by
applicable Federal or State law, the notice described in this
subsection shall--
(1) concisely and clearly describe the nature of the action;
(2) identify the jurisdiction whose law will govern the
action and where the action is pending;
(3) identify any potential claims that class counsel chose
not to pursue so that the action would satisfy class
certification requirements;
(4) describe the fee arrangements with class counsel,
including the hourly fee being charged, or, if it is a
contingency fee, the percentage of the final award which will
be paid, including an estimate of the total amount that would
be paid if the requested damages were to be granted; and
(5) describe the procedure for opting out of the class.
(c) Settlement.--The parties to a year 2000 action that is brought as
a class action may not enter into, nor request court approval of, any
settlement or compromise before the class has been certified.
SEC. 403. DISMISSAL PRIOR TO CERTIFICATION.
Before determining whether to certify a class in a year 2000 action,
the court may decide a motion to dismiss or for summary judgment made
by any party if the court concludes that decision will promote the fair
and efficient adjudication of the controversy and will not cause undue
delay.
SEC. 404. FEDERAL JURISDICTION IN YEAR 2000 CLASS ACTIONS.
(a) Jurisdiction.--Except as provided in subsection (b), a year 2000
action may be brought as a class action in the United States district
court or removed to the appropriate United States district court if the
amount in controversy is greater than the sum or value of $1,000,000
(exclusive of interest and costs), computed on the basis of all claims
to be determined in the action.
(b) Exception.--A year 2000 action shall not be brought or removed as
a class action under this section if--
(1)(A) the substantial majority of the members of the
proposed plaintiff class are citizens of a single State of
which the primary defendants are also citizens; and
(B) the claims asserted will be governed primarily by the
laws of that State; or
(2) the primary defendants are States, State officials, or
other governmental entities against whom the United States
district court may be foreclosed from ordering relief.
TITLE V--CLIENT PROTECTION IN CONNECTION WITH YEAR 2000 ACTIONS
SEC. 501. SCOPE.
This title applies to any year 2000 action asserted or brought in
Federal or State court.
SEC. 502. DEFINITIONS.
In this title:
(1) Attorney.--the term ``attorney'' means any natural
person, professional law association, corporation, or
partnership authorized under applicable State law to practice
law.
(2) Attorney's services.--The term ``attorney's services''
means the professional advice or counseling of or
representation by an attorney, but such term shall not include
other assistance incurred, directly or indirectly, in
connection with an attorney's services, such as administrative
or secretarial assistance, overhead, travel expenses, witness
fees, or preparation by a person other than the attorney of any
study, analysis, report, or test.
(3) Contingent fee.--The term ``contingent fee'' means the
cost or price of an attorney's services determined by applying
a specified percentage, which may be a firm fixed percentage, a
graduated or sliding percentage, or any combination thereof, to
the amount of the settlement or judgment obtained.
(4) Hourly fee.--The term ``hourly fee'' means the cost or
price per hour of an attorney's services.
(5) Retain.--The term ``retain'' means the act of a client in
engaging an attorney's services, whether by express or implied
agreement, by seeking and obtaining the attorney's services.
SEC. 503. CONSUMER'S RIGHT TO UP-FRONT DISCLOSURE OF INFORMATION
REGARDING FEES AND SETTLEMENT PROPOSALS.
Before being retained by a client with respect to a year 2000 claim
or a year 2000 action, an attorney shall disclose to the client the
client's rights under this title and the client's right to receive a
written statement of the information described under sections 504 and
505.
SEC. 504. INFORMATION AFTER INITIAL MEETING.
(a) Written Disclosure of Fees.--Within 30 days after the disclosure
described under section 503, an attorney retained by a client with
respect to a year 2000 claim or a year 2000 action shall provide a
written statement to the client setting forth--
(1) in the case of an attorney retained on an hourly basis,
the attorney's hourly fee for services in pursuing the year
2000 claim or year 2000 action and any conditions, limitations,
restrictions, or other qualifications on the fee, including
likely expenses and the client's obligation for those expenses;
and
(2) in the case of an attorney retained on a contingent fee
basis, the attorney's contingent fee for services in pursuing
the year 2000 claim or year 2000 action and any conditions,
limitations, restrictions, or other qualifications on the fee,
including likely expenses and the client's obligation for those
expenses.
(b) Consumer's Right to Timely Updated Information About Fees.--In
addition to the requirements contained in subsection (a), in the case
of an attorney retained on an hourly basis, the attorney shall also
render regular statements (at least once each 90 days) to the client
containing a description of hourly charges and expenses incurred in the
pursuit of the client's year 2000 claim or year 2000 action by each
attorney assigned to the client's matter.
SEC. 505. CONSUMER'S RIGHT TO TIMELY UPDATED INFORMATION ABOUT
SETTLEMENT PROPOSALS AND DETAILED STATEMENT OF
HOURS AND FEES.
An attorney retained by a client with respect to a year 2000 claim or
a year 2000 action shall advise the client of all written settlement
offers to the client and of the attorney's estimate of the likelihood
of achieving a more or less favorable resolution to the year 2000 claim
or year 2000 action, the likely timing of such resolution, and the
likely attorney's fees and expenses required to obtain such a
resolution. An attorney retained by a client with respect to a year
2000 claim or a year 2000 action shall, within a reasonable time not
later than 60 days after the date on which the year 2000 claim or year
2000 action is finally settled or adjudicated, provide a written
statement to the client containing--
(1) in the case of an attorney retained on an hourly basis,
the actual number of hours expended by each attorney on behalf
of the client in connection with the year 2000 claim or year
2000 action, the attorney's hourly rate, and the total amount
of hourly fees; and
(2) in the case of an attorney retained on a contingent fee
basis, the total contingent fee for the attorney's services in
connection with the year 2000 claim or year 2000 action.
SEC. 506. CLASS ACTIONS.
An attorney representing a class or a defendant in a year 2000 action
maintained as a class action shall make the disclosures required under
this title to the presiding judge, in addition to making such
disclosures to each named representative of the class. The presiding
judge shall, at the outset of the year 2000 action, determine a
reasonable attorney's fee by determining the appropriate hourly rate
and the maximum percentage of the recovery to be paid in attorney's
fees. Notwithstanding any other provision of law or agreement to the
contrary, the presiding judge shall award attorney's fees only pursuant
to this title.
SEC. 507. AWARD OF REASONABLE COSTS AND ATTORNEY'S FEES AFTER AN OFFER
OF SETTLEMENT.
(a) Offer of Settlement.--With respect to any year 2000 claim, any
party may, at any time not less than 10 days before trial, serve upon
any adverse party a written offer to settle the year 2000 claim for
money or property, including a motion to dismiss the claim, and to
enter into a stipulation dismissing the claim orallowing judgment to be
entered according to the terms of the offer. Any such offer, together
with proof of service thereof, shall be filed with the clerk of the
court.
(b) Acceptance of Offer.--If the party receiving an offer under
subsection (a) serves written notice on the offeror that the offer is
accepted, either party may then file with the clerk of the court the
notice of acceptance, together with proof of service thereof.
(c) Further Offers Not Precluded.--The fact that an offer under
subsection (a) is made but not accepted does not preclude a subsequent
offer under subsection (a). Evidence of an offer is not admissible for
any purpose except in proceedings to enforce a settlement, or to
determine costs and expenses under this section.
(d) Exemption of Claims.--At any time before judgment is entered, the
court, upon its own motion or upon the motion of any party, may exempt
from this section any year 2000 claim that the court finds presents a
question of law or fact that is novel and important and that
substantially affects nonparties. If a claim is exempted from this
section, all offers made by any party under subsection (a) with respect
to that claim shall be void and have no effect.
(e) Petition for Payment of Costs, Etc.--If all offers made by a
party under subsection (a) with respect to a year 2000 claim, including
any motion to dismiss the claim, are not accepted and the dollar amount
of the judgment, verdict, or order that is finally issued (exclusive of
costs, expenses, and attorneys' fees incurred after judgment or trial)
with respect to the year 2000 claim is not more favorable to the
offeree with respect to the year 2000 claim than the last such offer,
the offeror may file with the court, within 10 days after the final
judgment, verdict, or order is issued, a petition for payment of costs
and expenses, including attorneys' fees, incurred with respect to the
year 2000 claim from the date the last such offer was made or, if the
offeree made an offer under this section, from the date the last such
offer by the offeree was made.
(f) Order To Pay Costs, Etc.--If the court finds, pursuant to a
petition filed under subsection (e) with respect to a year 2000 claim,
that the dollar amount of the judgment, verdict, or order that is
finally issued is not more favorable to the offeree with respect to the
year 2000 claim than the last such offer, the court shall order the
offeree to pay the offeror's costs and expenses, including attorneys'
fees, incurred with respect to the year 2000 claim from the date the
last offer was made or, if the offeree made an offer under this
section, from the date the last such offer by the offeree was made,
unless the court finds that requiring the payment of such costs and
expenses would be manifestly unjust.
(g) Amount of Attorney's Fees.--Attorney's fees under subsection (f)
shall be a reasonable attorney's fee attributable to the year 2000
claim involved, calculated on the basis of an hourly rate which may not
exceed that which the court considers acceptable in the community in
which the attorney practices law, taking into account the attorney's
qualifications and experience and the complexity of the case, except
that the attorney's fees under subsection (f) may not exceed--
(A) the actual cost incurred by the offeree for an attorney's
fee payable to an attorney for services in connection with the
year 2000 claim; or
(B) if no such cost was incurred by the offeree due to a
contingency fee agreement, a reasonable cost that would have
been incurred by the offeree for an attorney's noncontingent
fee payable to an attorney for services in connection with the
year 2000 claim.
(h) Inapplicability to Equitable Remedies.--This section does not
apply to any claim seeking an equitable remedy.
(i) Inapplicability to Class Actions.--This section does not apply
with respect to a year 2000 action brought as a class action.
SEC. 508. ENFORCEMENT OF CONSUMER PROTECTION RULES IN YEAR 2000 CLAIMS
AND ACTIONS.
A client whose attorney fails to comply with this title may file a
civil action for damages in the court in which the year 2000 claim or
year 2000 action was filed or could have been filed or other court of
competent jurisdiction. The remedy provided by this section is in
addition to any other available remedy or penalty.
Purpose and Summary
H.R. 775, the ``Year 2000 Readiness and Responsibility
Act,'' was introduced on February 23, 1999 by Congressmen Tom
Davis, David Dreier, Chris Cox, Jim Moran, Bud Cramer and
Calvin Dooley. Its purpose is twofold: to encourage remediation
activities and thus prevent Year 2000 computer failures; and to
create a dispute resolution regime which will limit transaction
costs in resolving disputes when Year 2000 computer failures
occur, without prejudicing the rights of injured parties to
seek damages from the responsible party.
As amended by the Goodlatte amendment in the nature of a
substitute, H.R. 775 creates a legal framework by which Y2K-
related disputes will be resolved. It is specifically designed
to help con-
sumers by creating incentives for businesses to address the Y2K
computing crisis, thereby avoiding Y2K problems and eliminating
the need for litigation. It also establishes clear, uniform
rules for determining the rights and responsibilities of
contracting parties in Y2K disputes. Another important feature
is that it provides for a waiting period before Y2K-related
litigation may commence. This is designed to allow parties to
discuss the problem and hopefully resolve their dispute without
resorting to litigation.
As distinguished from legislation considered by the
Committee in recent Congresses which dealt with specific types
of claims, such as products liability, this bill applies
equally to any type of claim raised in state or federal court,
as long as a Y2K failure is legally relevant. It is a
significant departure from products liability reform in that it
does not govern claims for personal injury caused by a
malfunctioning product, which are clearly exempted from the
bill. In fact, it is triggered not by the movement of a
defective product in commerce, but by the malfunction of
stationary computer software. In essence, H.R. 775 is about
defining rights and remedies in court to address problems
presented by a particular technological problem, regardless of
the type of claim that results.
Background and Need for the Legislation
As the millennium nears, the Year 2000 (Y2K) computer
problem poses a critical challenge to our economy. Tremendous
investments are being made to fix Y2K problems, with United
States companies expected to spend more than $50 billion.
However, these efforts could be hampered by a barrage of
potential litigation, and fear of liability may keep some
businesses from effectively engaging in Y2K remediation
efforts. Also, many businesses are likely to have Y2K-related
failures, despite diligent efforts to remediate. Since our
economic sectors are inextricably intertwined, one company's
inability to fulfill its business contracts opens it and all
the companies that depend on it to liability. The result is a
litigation domino effect, which allows the Y2K failure of one
company to topple all its business partners. A broad range of
businesses and individuals will suffer some kind of economic
injury, and many will undoubtedly seek recourse by filing suit.
The Year 2000 Computer Technology Problem \1\
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\1\ The information in this section draws heavily on the February
24, 1999 report by the United States Senate Special Committee on the
Year 2000 Technology Problem, ``Investigating the Impact of the Year
2000 Problem.'' (S. Prt. 106-10)
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The Y2K technology problem started as an innocuous short
term solution to the oppressively high cost of computer memory
in the 1950's and 1960's. Programmers represented four-digit
years with only two digits. For instance, 1968 would be
represented as 68, with the number 19 (indicating years in the
1900s) being implicitly understood. This worked smoothly until
users started to input dates occurring after December 31, 1999.
Computers started running into problems when required to
calculate a number based on the difference in two dates, such
as the interest due on a mortgage loan. Computers continued to
assume that the prefix 19 was implied in any date, so they
would incorrectly read 00 (input for 2000) or 01 (input for
2001) as 1900 or 1901. Consequently, computers could not
correctly calculate the difference between years in the 20th
and 21st centuries.
Another Y2K problem occurs in the storage of data. Many
kinds of data are organized and processed by date, such as
driver's license records and credit card accounts. Computers
have had problems processing credit cards that have expiration
dates after December 31, 1999, because computers read the cards
as having expired almost a century ago.
Although programmers and managers knew in the 1950's and
1960's that they had built software with latent defects in it,
no one thought that software written then would survive to the
year 2000. Compounding that problem, newer software had to
interface and share data with older software. Although the new
software could have handled dates internally in four-digit
formats and swapped data in two-digit formats with the older
software, to do so added complexity and hence added cost to new
software. The net result was that the two-digit standard for
representing years continued much longer than anyone would have
guessed.
Technical experts tell us that there is no easy fix for Y2K
problems. Software programs and computer hardware vary too
greatly to be fixed by one solution. Currently, there are over
500 programming languages in use. A universal or broadly
applicable Y2K solution would have to be compatible with many
or most of these languages. Additionally, finding all the dates
and date processing in an estimated 36,000,000 programs is an
enormous task difficult to automate. Embedded processors pose
another problem. Although the percentage of embedded chips with
a Y2K problem is estimated to be relatively small, potentially
millions of chips exist that may have to be replaced.
Unfortunately, most of them are not readily accessible or
easily modified.
The Effect on the Economy
The massiveness of the problem, and the corrections
required to prevent or remedy the potential computer errors,
have resulted in concern as to whether our society will be
faced with a crisis situation on January 1, 2000. The cost of
fixing the problem in all affected systems, both public and
private, is astronomical. Chase Manhattan Bank alone was quoted
as spending $250 million to fix the problem within its 2000
million lines of computer code.
The actual impact of the problem remains unclear.
Unfortunately, the ways that a Y2K failure can cause a problem
are almost unimaginable, because date sensitive data is used in
so many different types of products. Two general classes of
equipment are at risk. The first are business systems or
mainframe systems. These computers perform a variety of data-
intensive calculations such as balancing accounts, making
payments, tracking inventory, and ordering goods. The second
class includes products which run on instructions contained on
embedded chips, embedded processors, and embedded control
systems. The problems that need to be fixed involving embedded
devices have already been detected in medical treatment
devices, water and electricity distribution and control
systems, airport runway lighting and building security systems.
Other suspect areas are pipeline control systems and chemical
and pharmaceutical manufacturing processes.
Some technical analysts predict that widespread failures in
systems across the country, including power outages, stalled
assembly lines, and halted international transactions could
result in a major nationwide or even worldwide, recession.
Others contend that theefforts already underway or completed
will ensure a nearly disruption-free transition into 2000. But this is
difficult to predict, because even a company who has made its own
business Y2K compliant is still susceptible to Y2K problems if it
depends on other businesses which might not be.
Litigation Related Y2K Issues
Although it is eight months before the year 2000 begins,
over 50 Y2K lawsuits have already been filed. The threat of
litigation has resulted in a climate of fear and reluctance by
many companies to acknowledge the potential problems which may
be caused by their products. This atmosphere is
counterproductive to the cooperative efforts necessary to
ensure a seamless transition from 1999 to 2000, and is
disruptive to the stability of the nation's interstate
commerce. The potential for litigation to overwhelm the
nation's judicial system, and to cause severe damage to the
nation's economy require incentives for proactive solutions to
the problems before they occur, and prompt resolution of those
failures which do occur. Assuming that current law remains
unchanged, the projected cost of Y2K litigation is as high as
$1 trillion. The transaction costs associated with these
potential lawsuits are also projected to be unprecedented: last
August, at the American Bar Association annual convention, a
panel of experts predicted that the legal costs associated with
Y2K will exceed that of asbestos, breast implants, tobacco, and
Superfund litigation combined. That is more that three times
the total annual estimated cost of all civil litigation in the
United States.
The magnitude of this problem demands solutions which will
reduce litigation whenever possible without limiting the rights
of aggrieved parties. One way is to provide clear legal rules
and then encourage parties to find solutions to fix the problem
without resorting to the courts. If potential litigants know
how the courts will allocate responsibility for Y2K compliance,
many disputes will settle rather than being litigated to an
inevitable conclusion. Clear rules also reduce the potential
for frivolous lawsuits which might be filed when non-avoidable
Y2K problems occur, thereby clearing the courts for the
legitimate cases which deserve adjudication. Clear rules will
also increase the likelihood that the entity who bears
responsibility for Y2K compliance will work quickly to fix the
problem and reduce damages.
Hearings
The Full Committee held a hearing on H.R. 775 on April 13,
1999. Testimony was received from three panels of witnesses.
Panel I consisted of Congressman Tom Davis (R-Va.), Congressman
David Dreier (R-Ca.), Congressman Jim Moran (D-Va.),
Congressman Bud Cramer (D-Al.), Congressman Calvin Dooley (D-
Ca.), and Congressman Max Sandlin (D-Tx.). Panel II included
four small business persons: Lisa Bender (on behalf of the
National Association of Manufacturers), Bill Lewis, Janet
Wylie, and Mark Yarsike; Mayor William Greenup of
Fredericksburg, Virginia (on behalf of the National League of
Cities); Joan Mulhern of Public Citizen Congress Watch; Sally
Greenberg of the Consumer's Union; and Charles Rothfeld, Esq.
On Panel III the Committee heard fromMichael Harden, President
and CEO of Century Technology Services, Inc., Walter Andrews, Esq.,
Leon Kappelman, Co-chair of the Society for Information Management Year
2000 Working Group, Howard Nations, Esq., Marc Pearl, Esq., Judge
Walter Stapleton of the Third Circuit Court of Appeals (on behalf of
the Judicial Conference), and Dean Mark Grady of the George Mason
University School of Law.
Committee Consideration
On April 29 and May 4, 1999, the Committee met in open
session and on May 4, 1999 ordered favorably reported the bill
H.R. 775 with amendment by a recorded vote of 15 ayes to 14
nays, a quorum being present.
Votes of the Committee
There were seven amendments resolved by voice vote. Mr.
Goodlatte offered an amendment in the nature of a substitute
which by unanimous consent was treated as the base text for
purposes of the markup. Mr. Hutchinson offered an amendment to
the Goodlatte amendment in the nature of a substitute which
revised Title V to eliminate caps on attorneys' fees. Mr. Watt
offered a substitute amendment to the Hutchinson amendment
which made further modifications to Title V. Mr. Watt's
substitute amendment was adopted by voice vote, and Mr.
Hutchinson's amendment, as amended, was then also adopted by
voice vote.
Mr. Nadler offered an amendment to the Goodlatte amendment
in the nature of a substitute to strike sections 401, 402, 403,
and 404 (dealing with class actions). The amendment was
defeated by voice vote. Mr. Scott offered an amendment to the
Goodlatte amendment in the nature of a substitute to clarify
that only discovery involving a defendant who is entitled to
the benefits of the Act's waiting period would be stayed during
the waiting period. The amendment was agreed to by voice vote.
Mr. Scott offered an amendment to the Goodlatte amendment in
the nature of a substitute to eliminate a court's ability to
dismiss a complaint with prejudice for failure to comply with
the Act's pleading standards. The amendment was agreed to by
voice vote. Mr. Scott offered an amendment to the Goodlatte
amendment in the nature of a substitute to strike section 306
(dealing with directors' and officers' liability). The
amendment was defeated by voice vote. Mr. Scott offered an
amendment to the Goodlatte amendment in the nature of a
substitute to make it discretionary, rather than mandatory,
that a court determine by order that the Act's materiality
standard is met in a class action. The amendment was defeated
by voice vote.
In addition, there were eight recorded votes during the
Committee's consideration of H.R. 775, as follows:
1. A substitute amendment offered by Mr. Watt to the
Hutchinson amendment to the Goodlatte amendment in the nature
of a substitute, to strike Title V of the Goodlatte amendment
in the nature of a substitute. Defeated 14 to 17.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Frank Mr. McCollum
Mr. Berman Mr. Coble
Mr. Boucher Mr. Smith (TX)
Mr. Nadler Mr. Gallegly
Mr. Scott Mr. Canady
Mr. Watt Mr. Goodlatte
Ms. Lofgren Mr. Bryant
Ms. Jackson Lee Mr. Chabot
Ms. Waters Mr. Barr
Mr. Delahunt Mr. Jenkins
Mr. Wexler Mr. Hutchinson
Ms. Baldwin Mr. Pease
Mr. Weiner Mr. Cannon
Mr. Rogan
Ms. Bono
Mr. Bachus
2. An amendment offered by Mr. Nadler to the Goodlatte
amendment in the nature of a substitute to strike section 402.
Defeated 4 to 13.
AYES NAYS
Mr. Nadler Mr. Hyde
Mr. Scott Mr. Smith (TX)
Mr. Watt Mr. Gallegly
Ms. Lofgren Mr. Canady
Mr. Goodlatte
Mr. Bryant
Mr. Chabot
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Ms. Bono
3. An amendment offered by Mr. Scott to the Goodlatte
amendment in the nature of a substitute to strike section 203
and insert in lieu thereof a provision establishing rules of
recovery in breach of contract actions. Defeated 5 to 11.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Nadler Mr. Smith (TX)
Mr. Scott Mr. Gallegly
Mr. Watt Mr. Canady
Mr. Weiner Mr. Goodlatte
Mr. Bryant
Mr. Chabot
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Rogan
4. An amendment offered by Mr. Scott to the Goodlatte
amendment in the nature of a substitute to require that a
defendant bear theburden of proof as to its relative share of
responsibility for the plaintiff's injury. Defeated 5 to 10.
AYES NAYS
Mr. Frank Mr. Hyde
Mr. Scott Mr. Smith (TX)
Mr. Watt Mr. Gallegly
Mr. Meehan Mr. Canady
Mr. Weiner Mr. Goodlatte
Mr. Chabot
Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
5. An amendment offered by Mr. Watt to the Goodlatte
amendment in the nature of a substitute to amend the definition
of ``material defect.'' Defeated 5 to 13.
AYES NAYS
Mr. Frank Mr. Hyde
Mr. Scott Mr. Gekas
Mr. Watt Mr. Coble
Mr. Meehan Mr. Smith (TX)
Mr. Weiner Mr. Gallegly
Mr. Canady
Mr. Goodlatte
Mr. Chabot
Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Ms. Bono
6. A substitute offered by Ms. Lofgren, Mr. Conyers and Mr.
Boucher to the Goodlatte amendment in the nature of a
substitute. Defeated 9 to 15.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Frank Mr. Sensenbrenner
Mr. Boucher Mr. McCollum
Mr. Scott Mr. Gekas
Mr. Watt Mr. Coble
Ms. Lofgren Mr. Gallegly
Mr. Meehan Mr. Canady
Mr. Delahunt Mr. Goodlatte
Mr. Rothman Mr. Bryant
Mr. Chabot
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Graham
Ms. Bono
7. An amendment in the nature of a substitute offered by
Mr. Goodlatte, as amended. Agreed to by vote of 15 to 13, with
one Member voting present.
AYES NAYS PRESENT
Mr. Hyde Mr. Graham Mr. Frank
Mr. Mr. Conyers
Sensenbren
ner
Mr. Mr. Boucher
McCollum
Mr. Gekas Mr. Scott
Mr. Coble Mr. Watt
Mr. Smith Ms. Lofgren
(TX)
Mr. Ms. Jackson Lee
Gallegly
Mr. Canady Ms. Waters
Mr. Mr. Meehan
Goodlatte
Mr. Bryant Mr. Delahunt
Mr. Chabot Mr. Wexler
Mr. Jenkins Ms. Rothman
Mr. Mr. Weiner
Hutchinson
Mr. Pease
Ms. Bono
8. Motion to report favorably H.R. 775, as amended. Passed
15 to 14.
AYES NAYS
Mr. Hyde Mr. Graham
Mr. Sensenbrenner Mr. Conyers
Mr. McCollum Mr. Frank
Mr. Gekas Mr. Boucher
Mr. Coble Mr. Scott
Mr. Smith (TX) Mr. Watt
Mr. Gallegly Ms. Lofgren
Mr. Canady Ms. Jackson Lee
Mr. Goodlatte Ms. Waters
Mr. Bryant Mr. Meehan
Mr. Chabot Mr. Delahunt
Mr. Jenkins Mr. Wexler
Mr. Hutchinson Mr. Rothman
Mr. Pease Mr. Weiner
Ms. Bono
Committee Oversight Findings
In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the Committee reports
that the findings and recommendations of the Committee, based
on oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee Jurisdiction Letter
Congress of the United States,
Committee on Small Business,
Washington, DC, May 6, 1999.
Hon. Henry J. Hyde,
Chairman Committee on the Judiciary,
U.S. House of Representatives,
Washington, DC.
Dear Chairman Hyde, As you know, H.R. 775, the ``Year 2000
Readiness and Responsibility Act,'' was referred to the
Committee on Small Business for consideration of Title VI of
the legislation. It is my understanding that an amendment in
the nature of a substitute was offered by Representative Bob
Goodlatte at the mark-up of this legislation. I understand that
substitute eliminates Title VI, ``Assistance to Small
Businesses for Preventing Year 2000 Computer Failures,'' of
H.R. 775. After careful consideration of the portions of H.R.
775 referred to the Committee on Small Business, our Committee
has no opposition to the absence of Title VI in the measure
that the Committee on the Judiciary actually reports.
Title VI of H.R. 775 contains many provisions that have
already been considered by the Committee on Small Business and
that have been passed into law. As you know, S. 314, the
``Small Business Year 2000 Readiness Act,'' which was recently
signed by the President (Public Law 106-8), establishes a loan
program that is similar to the pilot program contained in
Sections 603 and 604 of H.R. 775. Additionally, Section 605,
``Suspension of Penalties for Certain Year 2000 Failures by
Small Business Concerns,'' contains provisions that are very
similar to those codified in Sections 222 and 223 of Public Law
104-121, the Small Business Regulatory Enforcement Fairness
Act.
In light of this, the Committee on Small Business waives
further consideration of the provisions of H.R. 775 within its
jurisdiction. Our waiver of jurisdiction in this matter is
limited to the circumstances surrounding this specific
legislation.
The Committee on Small Business thanks you for your
consideration regarding this matter. Please contact me if I can
be of further assistance to you or the Committee on the
Judiciary regarding this very important legislation.
Sincerely,
James M. Talent, Chairman.
Committee on Government Reform Findings
No findings or recommendations of the Committee on
Government Reform were received as referred to in clause
2(l)(3)(D) of rule XI of the Rules of the House of
Representatives.
New Budget Authority and Tax Expenditures
Clause 2(l)(3)(B) of House Rule XI is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 2(l)(3)(C) of rule XI of the
Rules of the House of Representatives, the Committee sets
forth, with respect to the bill H.R. 775, the following
estimate and comparison prepared by the Director of the
Congressional Budget Office under section 403 of the
Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 7, 1999.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 775, the Year 2000
Readiness and Responsibility Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Susanne S.
Mehlman (for federal costs), Lisa Cash Driskill (for the state
and local impact), and John Harris (for the private-sector
impact).
Sincerely,
Dan L. Crippen, Director.
Enclosure.
H.R. 775--Year 2000 Readiness and Responsibility Act
Summary
Enacting H.R. 775 would provide some liability protection
for businesses that fail to repair their year 2000 (Y2K)
computer problems. CBO estimates that the net effect of H.R.
775 would most likely be a savings to the federal court system
but we cannot estimate the extent of any such savings because
we cannot predict the number of lawsuits that would arise--
under either H.R. 775 or current law--from computer failures
associated with the year 2000.
The cost of addressing the Y2K problem in the United States
is estimated by some to total hundreds of billions of dollars.
The extent to which such problems will be resolved prior to
next January (or shortly thereafter) remains highly uncertain.
Even more uncertain is the extent to which companies and
individuals might file lawsuits against businesses because of
problems encountered next year. CBO expects that enacting H.R.
775 could deter some potential plaintiffs from filing such
lawsuits.
Some class action lawsuits may be shifted from state courts
to federal courts under this bill, so the federal courts could
incur an increase in costs because class action lawsuits tend
to be very timely and costly. However, CBO expects that any
such increase would be more than offset by savings attributable
to having fewer Y2K cases, overall, under the bill than under
current law. Any net change in costs to the federal court
system would affect appropriated spending.
H.R. 775 also would require that any punitive damages
awarded to plaintiffs be paid into a Year 2000 Recovery Fund in
the U.S. Treasury instead of to the plaintiffs. Amounts in the
fund would be used for assistance to small businesses, state
and local governments, and nonprofit organizations. CBO
estimates that the money collected by and spent from the fund
would net to zero over the long run. But the government's
collection of the payments for damages would not extinguish the
plaintiffs' right to such awards. As a result, we expect that
the federal government would ultimately be responsible for the
payment of punitive damages awarded to individuals. Any such
additional payments would be considered direct spending, as would the
spending of the new fund. Thus, H.R. 775 would be subject to pay-as-
you-go procedures. While CBO cannot estimate the amounts of net direct
spending under the bill, the amounts paid to plaintiffs could be
significant.
H.R. 775 contains intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA) but, overall, CBO
expects that enacting this bill would lead to a savings for
state and local governments. The threshold established in UMRA
($50 million in 1996, adjusted annually for inflation) would
thus not be exceeded. The bill also would impose new private-
sector mandates but CBO cannot estimate the cost of the
mandates.
Description of the bill's major provisions
H.R. 775 would provide various liability protections for
businesses and state and local governments facing possible
litigation arising from Y2K computer problems. In particular,
the bill would:
Limit punitive damages to $250,000 or three times the
actual damages that a plaintiff suffered, whichever is
larger, and cap punitive damages at $250,000 for
companies with fewer than 25 employees;
Require potential plaintiffs to give a prospective
defendant 90 days to propose a plan to resolve the Y2K
problem before any legal action could be taken under a
lawsuit;
Assess any liability on a proportional basis, whereby
a person against whom a judgment is made would be
liable for only the portion of damages corresponding to
that person's percentage of responsibility as
determined by the judge;
Ease restrictions for filing class action lawsuits in
federal court;
Require a plaintiff to pay the defendant's attorneys
fees if the defendant made an offer of settlement prior
to trial that was rejected and later proved to be
larger than the damages actually awarded in the
subsequent trial; and
Establish, within the U.S. Treasury, a Year 2000
Recovery Fund, and direct that the punitive damages
awarded in any year 2000 action be paid into that fund.
Amounts would be used to provide assistance to small
business, state and local governments, and nonprofit
organizations that are affected by Y2K problems.
Estimated cost to the Federal Government
Spending subject to appropriation
CBO estimates that enacting H.R. 775 would probably result
in a net reduction in the workload of the federal court system
as compared to what would occur under current law. Thus far,
about 60 complaints associated with Y2K problems have been
filed; the majority of cases based on those complaints are
class action lawsuits that have been filed in state courts.
Several of the larger cases have been settled, but there is
little basis for predicting the number or outcome of Y2K
lawsuits that would be filed under H.R. 775 or under current
law. Therefore, CBO cannot estimate the magnitude of any net
savings to the federal government under the bill.
To the extent that a significant number of lawsuits related
to Y2K problems are filed under current law, the Judiciary will
either need to seek legislation authorizing additional
judgeships and support personnel to address the increased
workload or experience a severe backlog in cases. Because H.R.
775 would limit punitive damages associated with Y2K cases,
give businesses 90 days to respond to Y2K problems before any
legal action could be taken against such businesses, and make
other changes affecting liability laws, CBO expects that
parties to lawsuits would be encouraged to reach a settlement.
Thus, we anticipate that many lawsuits would not result in a
trial, which can be timely and expensive. However, some class
action lawsuits could be shifted from state to federal
jurisdiction under H.R. 775 because the bill would ease
restrictions for filing such actions in federal court. On
balance, CBO estimates that the savings from eliminating trials
for many lawsuits would more than offset any increased costs
that might be incurred from trying additional class action
lawsuits in federal court.
Direct spending and receipts
By creating the Year 2000 Recovery Fund to collect and
disburse punitive damages that are awarded by courts in year
2000 lawsuits, H.R. 775 would affect direct spending and
receipts. Although cash flows of the fund would have no net
budgetary impact, the collection by the federal government of
damages awarded to plaintiffs would likely necessitate
additional payments by the government to compensate the
affected plaintiffs. While we cannot estimate the amount of
punitive damages that could be awarded to plaintiffs and the
resulting amounts of federal payments, we expect that the
amounts could be significant. These additional payments would
be considered direct spending.
Pay-as-you-go considerations
The Balanced Budget and Emergency Deficit Control Act sets
up pay-as-you-go procedures for legislation affecting direct
spending or receipts. Establishing the Year 2000 Recovery Fund
would affect direct spending and receipts, and would probably
lead to significant net costs to the federal government.
However, CBO cannot estimate the extent of such costs.
Estimated impact on State, local, and tribal governments
Mandates
H.R. 775 contains intergovernmental mandates as defined in
UMRA but, overall, CBO expects that enacting this bill would
result in savings for state, local, and tribal governments. The
bill would preempt state law by applying certain federal
requirements to Y2K civil and class action lawsuits filed in
state courts and by subjecting state and local governments to
those requirements as potential plaintiffs. As potential
plaintiffs, they would see a small increase in costs due to
notice and filing requirements. Overall, CBO expects that these
same requirements would deter some potential plaintiffs from
filing and pursuing lawsuits, thus reducing the resources state
courts would expend on this type of litigation.
The bill would set forth specific limits on punitive
damages in Y2K civil lawsuits that would supersede inconsistent
state laws. While, to date, only one state has established Y2K
liability protection for the private sector, several states
currently are considering that issue in their legislative
bodies. Any future state laws covering situations subject to
H.R. 775 would be preempted by this bill.
Other Impacts
In cases where state and local governments have no
sovereign immunity law in place, H.R. 775 would provide them
the same protection from liability as provided to the private
sector. Only a handful of states and the District of Columbia
have already enacted legislation specifically protecting
themselves and their localities from Y2K liability. To the
extent that state and local governments could become defendants
in Y2K litigation and have not protected themselves from
liability, this bill would provide some protection and could
result in a savings.
The bill also would establish a Year 2000 Recovery Fund,
derived from punitive damages awarded in Y2K cases. Amounts
paid into the fund would be distributed to state and local
governments, small businesses, and nonprofit organizations
affected by Y2K failures. State and local governments could
benefit from these funds, but CBO has no basis for predicting
how much state and local governments might receive.
Finally, by making it easier to file Y2K class action
lawsuits in federal court, the bill could diminish some of the
burden on state courts, where most of the current lawsuits have
been filed. On the other hand, more individual cases might be
filed in state courts to complement class action suits in
federal courts. Overall, CBO anticipates that the net effect of
this bill would be a savings to state courts. This bill would
not affect a suit filed by a public entity acting in a
regulatory, supervisory, or enforcement capacity.
Estimated impact on the private sector
H.R. 775 would create new private-sector mandates on
prospective plaintiffs in disputes related to year 2000
computer problems and on attorneys who represent clients
involved in such disputes. Title I would require prospective
plaintiffs to notify prospective defendants of their intent to
file suit and wait up to ninety days after such notification
before filing. The notice must identify the source and size of
the prospective plaintiff's injury, the remedy sought, and any
person with the authority to negotiate a settlement on the
plaintiff's behalf. Title V would require attorneys to provide
clients with summaries of fees and expenses, notify clients of
any written settlement offers, and provide clients with a
notice describing these requirements. In class action suits,
attorneys representing the injured class would make these
disclosures to the presiding judge as well as to members of the
class, and the presiding judge would set attorneys' fees. Title
V would also limit contingent fees in all year 2000 computer
problem suits to one-third of any damages recovered. Because
CBO has no basis for predicting the number of lawsuits related
to year 2000 computer problems, we cannot estimate the costs of
these mandates.
H.R. 775 would also create additional burdens for private-
sector plaintiffs awarded punitive damages by the courts.
Section 304 would require punitive damages awarded in judgments
related to year 2000 computer problems to be paid into the Year
2000 Recovery Fund in the Treasury. This provision would
redirect funds from some private-sector plaintiffs, including
members of an injured class in class action suits, medium-sized
businesses, and large businesses, to the federal government. To
recover these damages, plaintiffs might have to take legal
action against the government. CBO cannot estimate the losses
that would be incurred by such plaintiffs.
Previous CBO estimates
On April 15, 1999, CBO transmitted a cost estimate for S.
461, the Year 2000 Fairness and Responsibility Act, as reported
by the Senate Committee on the Judiciary on March 26, 1999. On
March 19, 1999, CBO transmitted a cost estimate for S. 96, the
Y2K Act, as reported by the Senate Committee on Commerce,
Science, and Transportation on March 10, 1999. Both S. 96 and
S. 461 are similar to H.R. 775 and the effects on state and
local governments and the private-sector would be similar for
all three bills. However, unlike the other bills, H.R. 775
would affect direct spending and receipts because of the
collections and spending associated with the Year 2000 Recovery
Fund.
Estimate prepared by
Federal Costs: Susanne Mehlman; Impact on State, local, and
tribal governments: Lisa Cash Driskill; Impact on the private
sector: John Harris.
Estimate approved by
Robert A. Sunshine, Deputy Assistant Director for Budget
Analysis.
Constitutional Authority Statement
Pursuant to Rule XI, clause 2(l)(4) of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in Article I, section 8, clause 3 of the
United States Constitution, and the fourteenth amendment to the
United States Constitution.
Section-By-Section Analysis
Section 1--Short Title
The short title of the bill is the ``Year 2000 Readiness
and Responsibility Act.''
Section 2--Findings
Section 2 sets forth the findings of the Congress with
regard to the need for legislation to encourage Year 2000
computer remediation efforts and to streamline the resolution
of disputes over Year 2000 computer failures. First, Congress
finds the need to encourage businesses to concentrate their
attention on addressing potential Y2K problems so as to
minimize any possible business disruptions associated with Y2K
failures. Doing so will ensure that Y2K problems do not
unnecessarily disrupt interstate commerce or create unnecessary
case loads in the courts. Second, the Congress finds that
resorting to the legal system for resolution of Y2K problems is
not feasible for many businesses, and the costs associated with
litigation only exacerbate the difficulties associated with Y2K
problems. Congress also finds that a proliferation of frivolous
Y2K lawsuits could strain the resources of the courts and
deprive deserving parties of their rights to relief.
Section 3--Definitions
The bill is limited to ``Year 2000 Actions,'' which are
defined to exclude any claims for personal injury. Personal
injury is defined to include both physical injury and non-
economic damages suffered in connection with the personal
injury. Claims by or against governmental entities would be
covered by the Act if the government was acting in a commercial
or contracting capacity, but not if it was acting in a
regulatory, supervisory, or enforcement capacity.
A ``Year 2000 claim'' is a claim or cause of action,
whether raised by a plaintiff or by a defendant, where the
plaintiff's alleged loss or harm resulted directly or
indirectly from a Year 2000 Failure. A ``Year 2000 Failure''
means any failure by any device or system, or any software,
firmware, or other set or collection of processing
instructions, however constructed, in processing, calculating,
comparing, sequencing, displaying, storing, transmitting, or
receiving year 2000 date-related data. The Goodlatte amendment
in the nature of a substitute modified the original definition
of ``Year 2000 Failure'' by removing reference to three
examples of Year 2000 Failures and clarifying that the date-
related data at issue is limited to year 2000 date-related
data. This change was made in response to critics of the
original definition who suggested that under the previous
formulation, Y2K date-related failures were simply one species
within a larger universe of date-related failures covered by
the Act. That was not the intent of the sponsors, nor is it the
intent of the Committee.
Section 4--Application of the Act
The Act would apply to any claim brought after February 22,
1999. It does not create any new cause of action, and it
supercedes state law where that law is inconsistent with the
Act. The Act would not apply to any claim based on personal
injury.
TITLE I--UNIFORM PRELITIGATION PROCEDURES
Section 101--Notice
A potential plaintiff would be required to give 30 days
notice to a potential defendant before commencing a Y2K action
against that defendant (except when seeking only injunctive
relief). If the defendant does not respond to the notice within
30 days and describe what action it will take in response to
the problem identified by the prospective plaintiff, the
plaintiff may commence suit at the end of that 30 days. If the
defendant responds by describing the action that it has taken
or will take within the subsequent 60 days to remedy the
problem identified by the prospective plaintiff, then there is
an addition 60 day remediation period before the plaintiff can
file a suit. If the plaintiff files suit without giving notice,
the defendant may treat the filing as a notice and the court
shall stay discovery involving that defendant until the
appropriate notice and response period has elapsed. In a class
action, the obligations imposed on a prospective plaintiff for
providing notice are applicable only to the named plaintiffs.
Section 101(b)(1) requires any entity receiving a notice
pursuant to Section 101(a) to respond to the actual sender of
the notice, whether a prospective plaintiff or an agent of a
prospective plaintiff, not later than 30 days after receipt of
the notice. In the event that an agent for one or more
prospective plaintiffs is the sender of the notice, the
prospective defendant is required to respond only to the agent,
and not to each of the agent's principals.
The response of the prospective defendant contains two
sections. First, the prospective defendant must acknowledge
receipt of the notice. Second, the prospective defendant must
either describe the actions it has taken, or will take, not
later than 60 days after the end of the 30-day period, to
commence addressing the problem described in the notice. A
prospective defendant who accepts responsibility for the
problem described in the notice is not required to complete
repair or remediation of the problem within the 60-day period,
but is expected to act in good faith to repair or to remediate
the identified problem within a reasonable time under the
circumstances.
Section 102--Alternative Dispute Resolution
This provision encourages parties to engage in alternative
dispute resolution. If the parties resolve their differences in
this manner, a defendant must pay all moneys due within 30
days, unless otherwise agreed to. Any issue that is resolved
through alternative dispute resolution could not be reopened in
a subsequent proceeding.
Section 103--Pleading Requirements
A complaint containing a Y2K claim must plead with
particularity the nature and amount of damages, the nature of
any alleged ``material defect,'' and any state of mind of the
defendant that is a necessary element of the alleged claim. The
court shall dismiss without prejudice a complaint which fails
to satisfy these requirements. During the pendency of any
motion to dismiss, discovery is stayed unless the court
determines that particularized discovery is necessary to
preserve evidence or prevent undue prejudice.
Section 104--Duty to Mitigate
Damages may not include compensation for damages the
plaintiff could reasonably have avoided in light of any
disclosure or information of which the plaintiff was, or
reasonably could have been, aware.
TITLE II--YEAR 2000 ACTIONS INVOLVING CONTRACTS
Section 201--Certainty of Contract Terms
Any written term or condition of a contract between a
plaintiff and defendant, including limitations or exclusions of
liability and disclaimers of warranty, is fully enforceable,
unless it is in direct conflict with state statute in effect on
January 1, 1999 addressing that term of the contract. This
would include, among others, the Uniform Commercial Code and
state consumer fraud statutes. If the contract is silent on a
matter, the interpretation of the contract with respect to that
matter shall be determined by applicable law at the time the
contract was executed.
Section 201 is intended to enhance business certainty and
discourage frivolous lawsuits that seek to circumvent
established contractual relationships. The section is based on
the Committee's strong belief in the importance of holding
parties to their contractual agreements. Contracts are the
backbone of American business relations and permit parties to
anticipate and allocate risk. The Committee is concerned that
courts may react to year 2000 problems by promoting new or
expanded theories of liability that attempt to circumvent
contractual agreements. Section 201 makes clear that
contractual terms are to be enforced in year 2000 claims unless
such terms directly conflict with State statutory law, such as
State UCC provisions.
Section 202--Doctrines of Impossibility and Impracticability
If breach of contract is alleged, the doctrines of
impossibility and commercial impracticability in force under
applicable law on January 1, 1999 shall apply. A party raising
such a defense is entitled to offer evidence as to the
reasonableness of its conduct for purposes of proving the
defense.
Section 203--Limitation of Damages to Contract Terms
A contract between the parties controls the nature of the
remedies available for its breach or repudiation. If the
contract contains no express provisions regarding remedies,
then Federal or state law in existence at the time the contract
was entered into controls.
TITLE III--TORT AND OTHER NONCONTRACTUAL CLAIMS
Section 301--Proportionate Liability
Liability in a Y2K action is several and not joint, and
defendants are liable only for their share of responsibility as
a percentage of the responsibility of all persons (whether
parties or not) at fault. The trier of fact must determine the
responsibility of all such persons.
Section 302--Bystander Liability Rules
This provision covers potential defendants in claims other
than negligence who have not manufactured, sold, produced, or
provided the product or service that suffers a Y2K failure.
Where that person is also not in privity with the defendant by
contract or by relationship, then any requisite element which
includes a showing of the defendant's state of mind must be
proven by clear and convincing evidence that the defendant
actually knew, or recklessly disregarded a substantial risk
that the Y2K failure would occur. This rule would apply, for
example, in claims for fraud, constructive fraud, breach of
fiduciary duty, negligent representation, and interference with
contract or economic advantage. It would not apply to claims
for negligence.
Section 303--Reasonable Effort Defense
In a noncontractual claim, the fact that a Y2K failure
occurred in an entity, facility, system, product, or component
that was within a person's control shall not be the sole basis
for recovering damages against that person. A defendant to a
noncontractual claim is entitled to establish, as a complete
defense, that it took measures that were reasonable under the
circumstances to prevent the Y2K failure from occurring or from
causing the damages upon which the claim is based.
Section 304--Damages Limitation
Punitive damage awards for Y2K claims may not be awarded
unless the plaintiff establishes by clear and convincing
evidence that the conduct carried out by the defendant showed a
conscious, flagrant indifference to the rights or safety of
others and was the proximate cause or the harm or loss that is
the subject of the claim. The bill does not establish a right
to punitive damages where none is provided by applicable State
law. Punitive awards may not exceed the greater of $250,000 or
three times compensatory damages for big businesses, or the
lesser of these figures for small businesses. Any punitive
damages awarded will be paid intoa Year 2000 Recovery Fund,
which shall be used for the assistance of small businesses, State and
local governments, and nonprofit organizations that are affected by Y2K
failures.
Section 305--Recovery of Economic Losses
A party making a nonintentional tort claim cannot recover
``economic loss'' unless recovery for the economic loss is
provided for in a contract to which the party is a party or
such losses result directly from damage to tangible property
other than the property that is the subject of the contract.
``Economic loss'' is defined as losses such as damages for lost
profits or sales, for business interruption, and consequential
damages.
Section 305 is intended to codify the ``Economic Loss
Rule'' so as to provide a uniform, national standard for
determining liability for economic losses caused by year 2000
failures. The ``Economic Loss Rule'' has been widely recognized
in the vast majority of states and has been endorsed by the
U.S. Supreme Court. The purpose of the Rule is to ensure that
tort actions are not used to circumvent, nullify, or enlarge
contract rights or obligations and to avoid limitless liability
for purely economic loss. Tort law should apply when a party
has suffered personal injury or damage to property other than
property that is in dispute. Contract law should apply when a
party has suffered only economic damages, such as lost value,
cost of repair or replacement, or business interruption.
The Committee's inclusion of the Rule in this section is
consistent with Sec. 201 and reinforces the notion that when
two parties have agreed to their respective rights and
responsibilities in a valid contract, that contract should be
honored and enforced. If a party can simply circumvent a
contract and sue in tort for any economic losses that occur,
every existing contract that allocates risk between parties is,
in essence, worthless.
The Committee recognizes that state law interpretation of
the Economic Loss Rule varies and believes that in the year
2000 context, the Rule must be codified to set out a uniform,
consistent standard. Thus, Sec. 305 applies the Economic Loss
Rule even in the absence of contracts, which is consistent with
the law in the majority of states which have considered the
issue. Also, Sec. 305 applies the Economic Loss Rule to all
economic losses under year 2000 claims, whether resulting from
the provision of services or the sale of goods. Because many
business relationships include both provision of goods and
services, it is important to ensure consistent treatment for
both.
Section 306--Liability of Directors and Officers
Subject to lower monetary caps in state law, charter, or
bylaw authorized by state law, the liability of directors,
trustees, or officers is capped at $100,000 or the amount of
cash compensation received by that person from the business in
the year preceding the act or omission.
TITLE IV--YEAR 2000 CLASS ACTIONS
Section 401--Minimum Injury Requirement
In any Y2K action involving a claim that a product or
service is defective, the action can be maintained as a class
action as to that claim only if the court finds that the
alleged defect was material as to a majority of the class
members.
Section 402--Notice
In addition to any other notice required by law, the court
shall direct notice of a Y2K action to each prospective member
of the class. The notice must describe the nature of the
action, identify the jurisdiction whose law will govern the
action and where the action is pending, identify any potential
claims that class counsel chose not to pursue so that the
action would satisfy class certification requirements, describe
the fee arrangement with class counsel, and describe the
procedure for opting out of the class. A person may not be a
member of the class if that person did not receive the
requisite notice, unless that person informs the court in
writing that he wishes to join the class. No settlement may be
entered in to, or can be approved by the court, before the
class has been certified.
Section 403--Dismissal Prior to Certification
The court may decide a motion to dismiss or for summary
judgment prior to determining whether to certify the class.
Section 404--Federal Jurisdiction in Year 2000 Class Actions
Grants original and removal jurisdiction in the United
States district court for class actions where the amount in
controversy exceeds $1 million, unless the substantial majority
of the members of the proposed plaintiff class are citizens of
a single state of which the primary defendants are also
citizens and the claims will be governed primarily by that
state's laws, or where the primary defendants are states or
other governmental entities against whom the United States
district court may be foreclosed from ordering relief.
TITLE V--CLIENT PROTECTION RULES
Section 501--Scope
The title applies to any Year 2000 action, whether brought
in Federal or State court.
Section 502--Definitions
Defines the terms attorney, attorney's services, contingent
fee, hourly fee and retain.
Section 503--Disclosure of Fee Information
Before being retained by a client, an attorney in a Y2K
action must disclose to the client his rights under this title.
Section 504--Information After Initial Meeting
An attorney retained in a Y2K action must within 30 days of
the notice required under section 503 disclose to the client
his hourlyfee for providing services (if being retained on an
hourly basis), or his contingent fee for providing services (if being
retained on a contingent fee basis). An attorney retained on an hourly
basis must render regular statements as to hourly charges and expenses,
not less than each 90 days.
Section 505--Information About Settlement Proposals
An attorney must advise the client of all written
settlement offers and the attorney's estimate of the likelihood
of achieving a more or less favorable resolution to the case.
Within 60 days after a Y2K claim is settled or adjudicated, the
attorney must provide a written statement to the client of the
total number of hours expended, the hourly rate, and the total
hourly fees (if retained on an hourly fee basis), or the total
contingency fee (if retained on a contingent fee basis).
Section 506--Class Actions
In a class action, the disclosures required by this title
shall be made to the presiding judge as well as to the client.
For purposes of this section, the clients for a class are the
named representatives of the class. The presiding judge in a
class action shall at the outset of the case set a reasonable
fee rate for the class attorney. Attorney fees for a class may
only be awarded under this title.
Section 507--Award of Fees After an Offer of Settlement
In the event that a party rejects an offer of settlement of
a Year 2000 claim, and the dollar amount of the judgment or
verdict as to that claim is ultimately not more favorable to
the offeree than the offer, the rejecting party shall be
ordered to pay the costs and expenses of the offeror. This
section does not apply to claims brought in class actions.
Section 508--Enforcement
A client may bring a civil action to enforce the terms of
this title.
Agency Views
U.S. Department of Justice,
Office of Legislative Affairs,
Washington, DC, April 29, 1999.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
U.S. House of Representatives,
Washington, DC.
Dear Mr. Chairman: I am writing to convey the Department's
strong opposition to the ``Year 2000 Readiness and
Responsibility Act'' (H.R. 775) currently before the Committee.
If H.R. 775 were presented to the President, the Attorney
General would recommend a veto. The Administration, however,
understands that Representatives Lofgren, Conyers and Boucher
are working on an amendment in the nature of a substitute that
will be substantially similar to an amendment offered in the
Senate by Senators Kerry and Robb, which satisfactorily
addresses many of our concerns and which we can support. In
addition, we understand that another substitute may be offered
to the base bill that makes some modest changes. We look
forward to reviewing it.
The Administration's overriding concern is that H.R. 775
will not enhance readiness and may, in fact, decrease the
incentive organizations have to be ready and assist customers
and business partners to be ready for the transition to the
next century. The Department agrees however, with the three
stated goals of H.R. 775: (i) giving companies every incentive
to become Y2K compliant; (ii) encouraging resolution of Y2K
problems without resort to litigation; and (iii) deterring
frivolous Y2K lawsuits without deterring legitimate Y2K
claims.\1\ We are nevertheless very concerned that H.R. 775
does not achieve these goals. In fact, H.R. 775 may
significantly undermine two of them. Because Titles II and III
of the bill modify tort and contract law so as to reduce the
liability of potential Y2K defendants, these provisions reduce
the incentive potential defendants have to become Y2K
compliant. In a similar fashion, we are not sure how modifying
the rules of liability that apply to meritorious tort and
contract actions (as Titles II and III do) will necessarily
deter frivolous Y2K claims, which by definition will be filed
regardless of the rules of liability. Instead, modifying
substantive law seems more likely to curtail legitimate Y2K
lawsuits.
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\1\ See Sec. 2(b) (listing purposes of the Act).
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Our preliminary analysis indicates that H.R. 775 is the
most sweeping of any of the Y2K-litigation bills yet proposed
in either Chamber--and would be by far the most sweeping
litigation reform measure ever enacted if it were approved in
its current form. Although the Department's major concerns with
the Act are explained at length in the Statement I submitted to
this Committee for its April 13, 1999 hearing (and which I have
attached for your convenience), I will summarize them briefly.
Modification of Pre-Existing Y2K Contracts (Title II)
Title II of the Year 2000 Readiness and Responsibility Act
amends federal and state contract law as it applies to ``year
2000 actions'' and, in so doing, effectively modifies the terms
of already-negotiated contracts and existing contractual
relationships. Section 202 of the Act appears to create a
``reasonable efforts'' defense in Y2K contract actions that
would allow a defendant who had otherwise breached the terms of
a contract to show that the efforts it took to implement the
contract were reasonable ``for the purpose of limiting the
award of damages.'' This effectively sets up a complete defense
to a contract action, even though a party to a contract is
generally obligated to fulfill all its promises completely.
Creating a post hoc ``reasonable efforts'' defense that
absolves parties to Y2K-related contracts seems to be unfair to
the contracting plaintiffs who bargained--and paid--for
contract compliance by the other party. It may also raise
issues under the Takings Clause of the Fifth Amendment.
Moreover, this defense appears to undercut incentives for Y2K
contractees to discharge their obligations--instead of being
required to fulfill their contracts, potential defendants need
only make reasonable efforts to do so.
In a similar fashion, Sec. 201 of the Act requires a court
to enforce all of a contract's written terms, even if those
terms, in violationof state law, disclaim certain kinds of
warranties or are unconscionable. As a result, the Act would appear to
validate contract terms that were ineffective or illegal at the time
they were made.
Modification of Substantive Tort and Other Civil Law (Titles III, V,
and VI)
Title III of the Act modifies federal and state substantive
tort law as applied to ``year 2000 actions'' for money damages
and not involving personal injury. This Title, and the rest of
the Act, do not exclude enforcement actions brought by federal,
state, and local governments. Applying the Act's substantive
and procedural limitations to these sovereigns is likely to
interfere with their ability to enforce their own laws. More to
the point, Title III's modifications to substantive law in
civil suits may affect government-initiated actions (and
citizen suits) brought under a number of federal and state
statutes that rely upon traditional mechanisms of tort law for
their proper operation, including CERCLA, Securities Acts, and
federal banking laws.
We also have many concerns with the application of Title
III to private actions. Sections 302 and 303 significantly
alter the rules of tort liability for Y2K actions involving
money damages. Section 302, for example, appears to foreclose
some Y2K actions premised on a theory of negligence. Even if it
does not, Sec. 302 does clearly require plaintiffs to satisfy a
greater burden of proof in their tort actions. Y2K tort
plaintiffs would be required to establish the critical elements
of their tort actions--the defendant's knowledge and
foreseeability--by ``clear and convincing evidence,'' even
though this standard is usually reserved for use in quasi-
criminal proceedings.
Title III both expands existing defenses and creates new
defenses for Y2K defendants. Section 303 erects a reasonable
efforts defense similar to, but more extreme than, the one
contained in Title II. This provision would establish a
complete defense to liability--no matter how much the defendant
was initially at fault or how much damage the plaintiff
actually suffers. Indeed, even a defendant who recklessly
disregarded a known risk of Y2K failure could escape liability
by taking advantage of this new defense, and making reasonable,
albeit unsuccessful, efforts to fix the defect. Similarly,
Sec. 104, while titled ``Duty to Mitigate,'' acts as a complete
bar to recovery if a defendant can show that the plaintiff
should have known of information that ``could reasonably'' have
aided the plaintiff in avoiding the injury upon which his Y2K
claim is based--even if that information had been provided by
someone other than the defendant. Thus, Sec. 104 imposes an
affirmative duty on plaintiffs to find information--but no duty
on defendants to provide it--or else face dismissal of their
lawsuits. Section 104's duty to mitigate sweeps far beyond the
common law doctrine of the same name, which more reasonably
prohibits plaintiffs only from recovering damages they could
have reasonably avoided.
Title III would also curtail significantly the types and
amount of damages Y2K plaintiffs may collect should they
prevail in establishing liability. Most dramatically, Sec. 305
would appear to bar the recovery of ``economic losses'' in all
tort cases unless they are incidental to personal injury or
property damage claims. Thus, Sec. 305 would appear to grant
defendants full immunity from civil suits involving fraud and
misrepresentation (including securities fraud), not just in
tort suits involving defective products or services. Section
304 caps the punitive damages that may be awarded on Y2K
claims, and more strongly bars the award of any punitive
damages unless the plaintiff proves by clear and convincing
evidence that the defendant ``specifically intended to cause
injury to the plaintiff.'' Because this standard of proof is
unlikely, if ever, to be met, the caps would be largely
irrelevant because punitive damages would almost never be
awarded. Section 306 caps the potential liability of directors
and officers, creating a windfall to insurance companies who
have been paid for unlimited coverage but will only have to pay
out under the caps.
Title III may also significantly impact whether a
prevailing Y2K plaintiff will actually be able to recover his
damages. Section 301 abolishes all species of ``joint and
several liability,'' which in varying forms permits tort
plaintiffs to hold any one defendant responsible for more than
its share of damages. Section 301's rule of absolute
proportionate liability applies whether or not a defendant
makes efforts to identify and fix Y2K problems now, and will
accordingly reduce the incentives defendants have to prepare
for Y2K.
Modification of Other State and Federal Law
Section 605 of the Act would preclude federal and state
agencies from imposing civil penalties on small businesses for
first-time violations of federal information collection
requirements if those violations result from a Y2K failure. We
are concerned that granting small businesses one ``free pass''
with respect to Y2K-related failures could seriously undercut
the incentives those businesses have to become Y2K compliant.
Risking these consequences might be acceptable if there was a
genuine need for this protection--that is, if there was some
danger that federal and state agencies would otherwise
``penalize'' small businesses out-of-business for failing to
comply with information reporting requirements. But this is
clearly not the case because current law and Administration
policy already require agencies to issue policies to provide
for the reduction or waiver of civil penalties for small
businesses under appropriate circumstances. We also question
whether it is wise as a matter of federal policy to preempt the
regulatory authority of state agencies.
Several other provisions of the Act appear to modify state
procedural law without modifying any state substantive law. For
example, Sec. 402 imposes procedural requirements concerning
the specificity of notice to class members in State court class
actions. Although it is possible to draft similar modifications
to State law without raising constitutional concerns, as they
appear in H.R. 775, these procedural requirements arguably have
no direct connection to the vindication of substantive Federal
rights and would accordingly be vulnerable to constitutional
challenge on federalism grounds. Although the Supreme Court has
stated that Congress, in enacting legislation under the
Commerce Clause, possesses broader power to require action by
State courts than to require action by State legislatures or
executives, see Printz v. United States, 117 S. Ct. 2365, 2371
(1997), the Court also has endorsed the ``general rule,bottomed
deeply in belief in the importance of state control of statue judicial
procedure, * * * that federal law takes the state courts as it finds
them,'' Johnson v. Frankell, 520 U.S. 911, 919 (1997) (internal
quotation marks omitted). There is a serious risk that courts would
view H.R. 775's procedural instructions to State courts as
constitutionally impermissible intrusions on State governmental
autonomy.
Federalizing Y2K Class Actions
Title IV essentially federalizes class action standards in
class actions involving Y2K claims, even when the Y2K claim is
only a small part of the overall action. Title IV permits
removal of state class actions to federal court when any class
plaintiff is diverse from any defendant, and further provides
that cases so removed but not certified under federal class
action standards be remanded to state courts stripped of their
class allegations. This mechanism effectively prevents states
from setting their own policies concerning class actions
involving Y2K claims, and, in cases where individual claims are
too small to justify litigation, may leave large numbers of
plaintiffs without redress. Title IV also imposes onerous
notice and opt-in requirements that may have the practical
effect of making many class actions impossible.
Coverage
As a final matter, the Department would like to point out a
few of its other concerns regarding the scope of the Act, aside
from its inclusion of government-initiated lawsuits.
As currently drafted, the Act would seem to apply to claims
having nothing to do with Y2K failures. Titles II III, and V of
the Act, which extensively modify state tort, contract, and
attorney-ethics law, apply to any ``year 2000 action,'' which
includes non-Y2K claims if they are joined with a single Y2K
claim (or countered by a single Y2K defense). The definition of
``year 2000 claim'' would also seem to cover date failures
having nothing to do with the change-over to the year 2000.
Even if these defects were corrected, it seems very likely
that there will be considerable dispute over whether or not
certain lawsuits are subject to the Act. Plaintiffs' lawyers
are likely to avoid styling their claims as ``year 2000
claims,'' and defense lawyers will probably assert Y2K-related
defenses in order to bring the claims under the terms of the
Act. State and federal courts will then be forced to determine
whether the Act, or normal state tort and contract law,
controls. In light of the fact that the Act works great changes
in state law, which may have a great impact on the outcome of
any given Y2K lawsuit, substantial disputes about the Act's
coverage are likely to be common and will occupy much judicial
time, complicating what would otherwise be rather straight-
forward contract or tort actions.
New Alternatives
We understand that some Members, led by Representative
Lofgren, are on the verge of introducing an amendment to HR 775
that is more modest in scope, and better tailored to achieving
the goals that Y2K litigation legislation should serve--
encouraging parties to fix Y2K problems now, and weeding out
frivolous Y2K claims while allowing the meritorious ones to go
forward.
While the Department has not yet had the opportunity to
review the precise language of this new amendment, we
understand that its modifications of State and Federal law
affecting Y2K claims addresses the majority of our concerns. We
are told this amendment will be substantially similar to the
amendment offered in the Senate by Senators Kerry and Robb,
which we support (although we are working to resolve certain
drafting issues raised by the Department of Justice).
Please do not hesitate to call upon us if we may be of
additional assistance. The Office of Management and Budget had
advised us that from the perspective of the Administration's
program, there is no objection to submission of this letter.
Thank you for the opportunity to express the Department's
views.
Sincerely,
Jon P. Jennings,
Acting Assistant Attorney General.
DISSENTING VIEWS
We strongly oppose H.R. 775, the ``Year 2000 Readiness and
Responsibility Act.'' H.R. 775 dangerously discourages
corporate responsibility, robs consumers of their ability to
obtain relief, and disadvantages small businesses seeking
proper remediation. Although the legislation is described by
its proponents as a specifically designed fix to the so-called
Y2K litigation crisis, it will actually be the broadest and
most overreaching tort reform package to ever reach the floor
of the House of Representatives. It is significant to note that
the bill was reported out of the Judiciary Committee by only a
narrow margin of 15 to 14 (13 Democratic Members, joined by 1
Republican Member).
H.R. 775 would supersede most state law claims founded on
tort, contract, or other legal theories. With regard to Y2K
actions, in addition to providing for a litigation ``cooling
off period'' and clarifying the application of pleadings
requirements and state contract law, the legislation (1)
completely eliminates joint and several liability; (2) alters
state tort liability rules by limiting damage recovery where
the defendant's actions were ``reasonable;'' (3) places various
limits on the categories or amount of punitive money damages
that could be awarded in Y2K cases; (4) caps the liability of
officers and directors; (5) federalizes most class actions; and
(6) mandates a ``loser pays'' mechanism.
H.R. 775 is strongly opposed by the Administration and the
Justice Department, and it will surely be vetoed in its current
form. 1 The legislation is also opposed by consumer
and public interest groups, including Public Citizen
2 and Consumer's Union, 3 as well as
small business concerns. Finally, the class action and pleading
requirements in the bill are opposed by the Judicial Conference
of the United States. 4
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\1\ See White House Statement of Administrative Policy: S.96--Y2K
Act (April 27, 1999). The Year 2000 Readiness and Responsibility Act:
Hearing on H.R. 775 Before the House Comm. on the Judiciary, 106th
Cong. (1999) (Statement of John A. Koskinen, Chairman, President's
Council on Year 2000 Conversion and Statement of Eleanor D. Acheson,
Assistant Attorney General, Office of Policy Development) [hereinafter
House Judiciary Hearing on H.R. 775].
\2\ See House Judiciary Hearing on H.R. 775, 106th Cong. (1999)
(Statement of Joan Mulhern).
\3\ See House Judiciary Hearing on H.R. 775, 106th Cong. (1999)
(Statement of Sally Greenberg).
\4\ See House Judiciary Hearing on H.R. 775, 106th Cong. (1999)
(Statement of The Honorable Walter K. Stapleton, U.S. Court of Appeals
for the Third Circuit).
---------------------------------------------------------------------------
This is not to say, however, that the information
technology community does not have legitimate concerns due to
the unique nature of the Y2K problem that should be addressed
through legislation. They have advocated consistently for more
narrow legislative goals, rather than for the broad tort reform
provisions in the bill. Representative Zoe Lofgren, joined by
Representatives John Conyers, Jr. and Rick Boucher offered a
reasonable substitute to H.R. 775 during the House Judiciary
Committee markup that would have, in large part, addressed the
specific concerns of the information technology community: (1)
to encourage remediation; (2) to encourage mitigation; and (3)
to deter frivolous lawsuits. The substitute, however, was
defeated on a party line vote. H.R. 775 does a disservice to
the information technology community by neglecting their narrow
concerns, as addressed by the Democratic Substitute, and
instead, pushing for broad-ranging tort reform.
In this regard, we have concerns that H.R. 775 is being
used more as a ``political football'' to obtain partisan
advantage, than as a serious means of legislating public
policy. The press has raised a number of these issues. For
example, the February 11, 1999 issue of Roll Call notes that
``the bill was written for GOP leadership by two prominent
leadership groups [the Chamber of Commerce and the National
Association of Manufacturers]'' and that the bill ``could
provide a windfall of contributions to the NRCC [National
Republican Campaign Committee].'' Republicans were quoted as
saying ``[t]here are millions of dollars at stake here over the
long run'' and ``[t]he fundraising potential is enormous.''
5
---------------------------------------------------------------------------
\5\ Jim VandeHei, GOP Readies Campaign on Y2K Davis, Cox, Dreier to
Push Plan That Caps Legal Fees, Roll Call, February 11, 1999.
---------------------------------------------------------------------------
A subsequent article of Salon Magazine described how the
bill actually represented an effort by the Chamber of Commerce
as establishing a precedent for broad ranging tort reform:
[F]rom the beginning, the U.S. Chamber had a much
more audacious goal for the Y2K litigation reform bill
than the narrow legislative issues that matter to the
high tech companies. The Chamber's number one priority
is far-reaching tort reform. The group has always
wanted to legally limit the amount plaintiffs can be
awarded, and it saw Y2K litigation reform as a first
step * * *.6
---------------------------------------------------------------------------
\6\ Jake Tapper, The Millennium Bug Bill Battle, Salon, April 30,
1999.
A high tech lobbyist was quoted as acknowledging ``they
[the Chamber of Commerce] want reform and they're using us.''
The article went on to describe the displeasure that the
business community had expressed when it became apparent that
the high tech community was willing to consider supporting more
narrow and responsibly drawn legislation. For example, a
business lobbyist was quoted as complaining that the high tech
community ``tried to cut their own deals. When this is over
you'll see Republicans are going to try to scalp ``em.''
7
---------------------------------------------------------------------------
\7\ Id.
---------------------------------------------------------------------------
I. Extreme Y2K Legislation is Premature and Based on Unsubstantiated
Assumptions
The Majority offers numerous rationales for the pending
legislation. They claim that it is necessary for Congress to
assist in (1) providing the necessary incentives to encourage
the development of Y2K solutions before failures occur; (2)
encouraging fair and efficient resolution of Y2K problems when
they do occur; (3) avoiding massive quantities of frivolous
litigation which could overwhelm our court systems; (4) making
the law governing Y2K liability more uniform and clear than it
is under the patchwork of state laws; and (5) imposing
reasonable limits on liability. They assert that legislation is
necessary to prevent an explosion of litigation, the cost of
which they expect to exceed $1 trillion--approximately the same
amount that would be available to fix the problem if companies
were not keeping Y2K litigation reserves. 8
---------------------------------------------------------------------------
\8\ See U.S. Chamber of Commerce National Business Agenda for the
106th Congress (1999).
---------------------------------------------------------------------------
Although many of us believe there is a possibility of
confusion and uncertainty regarding Y2K litigation which
warrants a federal legislative response, we believe there is no
compelling need for legislation as broad-ranging and
counterproductive as H.R. 775. For example, there is no factual
proof offered that there will actually be a litigation
explosion or that it will include significant amounts of
frivolous lawsuits. In fact, the $1 trillion figure for Y2K
litigation costs cited by the U.S. Chamber of Commerce was
specifically rebutted during the House Judiciary Committee
hearing on H.R. 775 by Howard Nations, a trial lawyer from
Houston with an expertise in Y2K liability:
One of the myths surrounding the Y2K litigation is
the often cited Lloyds of London estimate of one-
trillion-dollars in litigation costs. The one-trillion-
dollar figure emanated from the testimony of Ann
Coffou, Managing Director of Giga Information Group
before the U.S. House of Representatives Science
Committee on March 20, 1997, during which Ms. Coffou
estimated that the Year 2000 litigation costs could
perhaps top one-trillion-dollars. Ms. Coffou's estimate
was later cited at a Year 2000 conference hosted by
Lloyds of London and immediately became attributable to
the Lloyds organization rather than the Giga Group * *
* There has been no scientific study and there is no
basis other than guesswork as to the cost of
litigation. 9
---------------------------------------------------------------------------
\9\ House Judiciary Hearing on H.R. 775, 106th Cong. (1999)
(Statement of Howard Nations at 9).
A recent New York Times article has also cast further
skepticism regarding the predictions of a year 2000 litigation
explosion, noting ``so far the cases offer little support for
the dire predictions that courts will be choked by litigation
over Y2K.'' 10 Many lawyers involved in these issues
have also questioned the magnitude of the litigation threat.
For example, Wynne Carvill, a partner at Thelen, Reid & Preist,
a prominent San Francisco firm with high tech clients noted
that ``[t]here was more reason to be alarmed a year ago * * *
[p]eople are finding things to fix but not many that would shut
them down.'' 11
---------------------------------------------------------------------------
\10\ Barnaby J. Feder, A Trickle of Year 2000 Lawsuits, New York
Times, April 12, 1999, at C4.
\11\ Id.
---------------------------------------------------------------------------
The bill's provisions are drastic overkill--according to
the Justice Department, if adopted, the legislation would
represent, ``by far the most sweeping litigation reform measure
ever enacted. The bill makes extraordinarily dramatic changes
in both federal procedural and substantive law and in state
procedural and substantive law * * *'' 12 This means
that in addition to cutting off possible frivolous litigation,
it would also adversely impact many compelling and merit-based
claims. Instead of encouraging remediation, these provisions
will limit incentives to cure defects and result in greater Y2K
losses than would otherwise be the case. Further, since the
class action provisions will prevent most class actions, the
legislation could result in more individual actions--a result
which could lead to more, not less, litigation. The bill is so
broad that it would protect defendants who continued to produce
software with Y2K defects well after the problem was known and
well after the technology was available to eliminate the
problem.
---------------------------------------------------------------------------
\12\ House Judiciary Hearing on H.R. 775, 106th Cong. (1999)
(Statement of Attorney General Eleanor D. Acheson, U.S. Department of
Justice, Office of Policy Development at 2).
---------------------------------------------------------------------------
These concerns were highlighted in recent editorials by the
New York Times and the Washington Post. The New York Times has
written, ``the legislation is misguided and potentially unfair.
It could even lessen the incentive for corrective action.''
13 The Washington Post has written that the
legislation ``removes a key incentive for companies to fix
problems before the turn of the year, and it also responds to a
problem whose scope is at this stage unknown.'' 14
---------------------------------------------------------------------------
\13\ Liability for the Millennium Bug, New York Times, April 26,
1999.
\14\ Y2K Liability, Washington Post, April 29, 1999.
---------------------------------------------------------------------------
Rather than being neutrally designed to promote
``uniformity,'' the bill is principally designed to benefit
defendants. Thus, for example, rather than superseding state
laws which are both more and less favorable than the bill, it
only supersedes laws which are less beneficial to defendants.
Many of the provisions of the bill raise serious constitutional
problems. Some of these are highlighted in the Justice
Department's testimony. For example, the provisions
federalizing state class actions may be an unconstitutional
attack on federalism since it limits state procedural
prerogatives (discussed in Section II, infra).
The legislation also carries many grave risks for large and
small businesses who are users of information technology, and
may be left harmed and without any credible recourse by virtue
of this legislation. This is why a comparable Senate bill (S.
96) has been strongly opposed by Kaiser Permanente, one of the
nation's largest health care providers. Kaiser has written that
the legislation ``[s]everely limits the rights of small
businesses, consumers, and non-profit organizations like ours
to recover the often excessive costs of Y2K fixes, purchases,
and upgrades, [and] * * * unfairly prejudices (or completely
bars) the ability of the health care community to recover costs
associated with any potential personal injury or wrongful death
award from the entity primarily at fault for the defect that
caused the injury.'' 15 Similar concerns have been
expressed by Donald J. Palmisano, a Board Member of the
American Medical Association, who has stated, ``we strongly
caution against providing liability caps to manufacturers in
exchange for the Y2K information they may provide.'' Those
businesses who have also had the foresight to cure their own
Y2K problems will also be negatively impacted. They have spent
the money and time necessary to avoid liability, yet this bill
will allow their competitors to obtain the same benefits
without the costs.
---------------------------------------------------------------------------
\15\ See Letter from Mary Ann Thode, Senior Vice President, Chief
Operating Officer, Kaiser Permanente, to the Honorable Barbara Boxer,
United States Senate (April 27, 1999) (on file with the minority staff
of the House Judiciary Committee).
---------------------------------------------------------------------------
H.R. 775 goes well beyond reasonable reform. It fails to
protect consumers and shields grossly negligent defendants and
harms innocent plaintiffs. Worst of all, instead of creating
positive incentives to fix problems, it creates new reasons to
avoid remediation.
I. H.R. 775 Will Discourage Corporate Responsibility
Title III of the legislation would effectuate a wide range
of alterations in the state law of tort and other non-
contractual law. A summary of our concerns follows:
A. ``Elimination of Joint and Several Liability'' (Section 301)
H.R. 775 eliminates joint and several liability entirely.
Therefore, a defendant in a Y2K action will only be liable for
the portion of the judgment that corresponds to its percentage
of responsibility. This provision diverges from the common law
rule of joint and several liability, found in many states, that
if more than one defendant is found liable for a tort, each
defendant is liable for the total damages; and if a defendant
pays for more than its share, it may seek contribution from the
other liable defendants. Instead of placing the burden of
financial loss on the identifiable defendant, consumers who
prevail on a liability claim may not be able to recover all of
their damages. The principle behind joint and several liability
is that as between an innocent plaintiff and a culpable co-
defendant, it is preferable for the co-defendant to assume
liability where other defendants are unable to assume liability
rather than the victim of the tort.
Although some of us are willing to support the development
of reasonable guidelines concerning joint and several
liability, the provisions in H.R. 775 are far too extreme.
Under this provision it will be necessary for all plaintiffs in
all cases to find all potential defendants in order to ensure
full recovery, inevitably increasing the number of lawsuits
filed. Under the bill, if one or more potential defendants has
gone out of business or cannot be reached because of
jurisdictional difficulties, the injured consumer or small
business is forced to bear the brunt of this unrecoverable
liability, even if the defendant being sued has committed the
bulk of the negligence or has failed to take any remedial or
corrective action. The provision also will allow defendants to
avoid liability by pointing the blame at other parties who are
not part of the suit (the so-called ``empty chair defense'').
The limitation will also be problematic in cases where there
exist foreign defendants who cannot be reached because of
jurisdictional problems, a particular concern for computer
products which include a wide array of foreign component parts,
such as memory chips.
B. ``Limitation on Bystander Liability'' (Section 302)
H.R. 775 also provides that ``with respect to a Y2K claim
for money damages in which (A) the defendant is not the
manufacturer, seller, or distributor of a product, or the
provider of a service, that suffers or causes the Y2K failure,
(B) the plaintiff is not in substantial privity with the
defendant, and (C) the defendants' actual or constructive
awareness of an actual or potential Y2K failure is an element
of the claim under applicable law,'' the plaintiff must prove
``by clear and convincing evidence that the defendant actually
knew, or recklessly disregarded a substantial risk, that such
failure would occur.'' The plaintiff and defendant are in
substantial privity when, in a Y2K claim for professional
services, they have contractual relations with one another, or
if the plaintiff was specifically acknowledged by the defendant
as a beneficiary of its services, prior to the defendants
performance of such services.
Raising the common law standard of proof in most civil
cases from ``by preponderance of the evidence'' to ``by clear
and convincing evidence,'' would make it more difficult to
bring actions based on recklessness or fraud. Negligence claims
are excluded from this provision. It is unclear who the
drafters intend to benefit from this broad liability
protection, although one possible beneficiary is professional
service and accounting firms. In any event, we are not aware of
any testimony or other evidence which justifies such a
departure from ordinary liability principles.
C. Reasonable Efforts Defense for Defendants (Section 303)
Perhaps the most sweeping and unjustified liability relief
provision in the bill is set forth in section 303, providing a
``reasonable efforts defense''. Under this defense, the fact
that a defendant took reasonable measures to prevent the Y2K-
related failure is a complete defense to liability. Thus,
despite the defendant's level of fault, if it made reasonable
efforts to fix the problem--even if those efforts did not
result in a cure--it would have no responsibility for damages
suffered by the plaintiff. Even if a defendant takes minimal
steps to remedy a Y2Kproblem, it will serve as a complete
defense against a tort action, thereby undercutting incentives to
prepare for and prevent Y2K errors. Moreover, state courts will have
little precedent in determining what is a ``reasonable effort.''
The breadth of this liability protection is truly
breathtaking. The Justice Department has pointed out that the
``section provides a complete defense to liability--no matter
how much the defendant was at fault--for example the defendant
could have recklessly disregarded a known risk of Y2K
failure.'' 16 The defense is so broad it would even
cover intentional wrongdoing or fraud, so long as the
misconduct was eventually papered over by some sort of post-hoc
reasonable effort. This hardly conforms with the personal
responsibility theme the Majority repeats so often. The
provision could also serve to completely insulate entities
which sold Y2K defective products well after they knew of the
problem and knew how to avoid it. We have received testimony
establishing that the Y2K problem was identified in the 1950's
and widely publicized in the late 1970's and early 1980's. Yet
this bill would protect vendors who sell defective hardware and
software up through and beyond the year 2000, as long as they
try to remediate after the sale. It is difficult to ascertain
any legitimate policy rationale for such broad protection.
---------------------------------------------------------------------------
\16\ House Judiciary Hearing on H.R. 775, 106th Cong. (1999)
(Statement of Attorney General Eleanor D. Acheson, U.S. Department of
Justice, Office of Policy Development at 5).
---------------------------------------------------------------------------
D. Caps on Punitive Damages (Section 304)
H.R. 775 caps punitive damages in Y2K actions at the
greater of three times the amount of actual damages or $250,000
and the lesser of the two amounts for small businesses. Under
the bill, a plaintiff would have to prove by ``clear and
convincing evidence that conduct carried out by the defendant
showed a conscious, flagrant indifference to the rights or
safety of others and was the proximate cause of the harm or
loss that is the subject of the Y2K claim.'' The legislation
also funnels any punitive damages that may be recovered into a
special Treasury fund.
Punitive damages impose punishment for outrageous and
deliberate misconduct and they deter others from engaging in
similar behavior. Collectively, these restrictions on punitive
damages are likely to completely eliminate not only the
incentive for seeking punitive damages, but any realistic
possibility of obtaining them. Such restrictions are
counterproductive in that they provide the greatest amount of
liability protection to the worst offenders, those who have
done the least to solve their Y2K problems. In addition,
absolute caps send a message to wrongdoers that it doesn't
matter how harmful or malicious their behavior, they will never
be liable for more than a set limit. These restrictions allow
companies to ignore Y2K problems, knowing they can never be hit
with punitive damages for completely reckless and irresponsible
behavior. This is not the signal that we need to send during
this crucial time for Y2K remediation efforts.
Mark Yarsike, a small business owner in Warren, MI, who
testified at the Judiciary Committee hearing on H.R. 775, is an
excellent example of how current law effectively functions in
the Y2K context. Mr. Yarsike purchased a $100,000 computer cash
register and inventory system for his new store. On the day of
the grand opening, the cash register would not accept credit
cards with a Y2K expiration date. After calling the
manufacturer over 200 times to no avail, the owner sued the
manufacturer and the case was settled.17 Mr. Yarsike
commented on the unfairness of the punitive damages cap and
other provisions in his testimony before the House Judiciary
Committee: ``The very people who caused this problem in the
first place get all the breaks in this bill * * * They [also]
get limitations on damages, limitations on joint and several
liability * * * what do I get, besides a more difficult
standard of proof if I finally manage to jump through the
procedural hoops and get to court?'' 18 In this
case, the manufacturer's action was so outrageous that the
threat of punitive damages very well could have been a factor
in encouraging a settlement. Thus, the current civil justice
system appears to have worked.
---------------------------------------------------------------------------
\17\ House Judiciary Hearing on H.R. 775, 106th Cong. (1999)
(Statement of Mark Yarsike, Co-owner, Produce Palace, Intl.).
\18\ Id. at 4.
---------------------------------------------------------------------------
E. Limits the Liability of Corporate Officers and Directors (Sec. 305)
H.R. 775 caps the personal liability of corporate directors
and officers at the greater of $100,000 or their past 12-
months' compensation. This provision is not only unnecessary,
it is affirmatively dangerous. It is unnecessary for any
director or officer acting reasonably because under current law
the ``business judgment rule'' already insulates officers and
directors from liability for their business decisions as long
as they acted reasonably in governing the affairs of the
corporation.
It is dangerous because it will protect irresponsible and
reckless behavior. One widely respected commentator on year
2000 problems has written, ``[t]he duty of care is of critical
importance in the Year 2000 context because it establishes the
standards that corporate officers and directors will need to
meet in overseeing and making decisions regarding the
corporation's Year 2000 efforts.'' 19 A Raytheon
Corporation spokesman has written that ``[p]erhaps the most
compelling motivation for a company ``opening its eyes'' to the
Y2K problem is the threat of direct, personal, pecuniary
liability of officers and directors.'' 20 The
liability cap would also interfere with the private enforcement
of the securities laws with regard to misconduct by corporate
directors and officers. Finally, the provision could serve as a
windfall for insurance companies--while they have been paid to
provide unlimited coverage, the amount that they actually have
to pay to claimants would be capped.
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\19\ Robert J. Kenney, et al., ``The Year 2000 Challenge: Legal
Problems and Solutions'' at 34, Perspectives on Legislation,
Regulation, and Litigation, National Legal Center for the Public
Interest (1999).
\20\ Raytheon Corporation, ``Y2K and Director Officer Liability:
The Writing's on the Wall.''
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II. H.R. 775 Also Creates an Undue Burden on Plaintiffs and Attorneys
In addition to the sweeping restrictions on liability in
tort and other non-contractual actions set forth in Title III,
the legislation also contains a number of more general sections
which will make it more difficult for harmed parties to obtain
compensation for their damages:
A. Y2K Class Actions (Title IV)
Class action procedures offer a valuable mechanism for
aggregating small claims that otherwise might not warrant
individual litigation--they provide plaintiffs access to the
courts in cases where a defendant may have gained a substantial
benefit through small injuries to a large number of persons.
H.R. 775 creates an undue burden on class action plaintiffs
through a number of provisions. First, it requires that
plaintiffs send direct notice to every class member with a
return receipt requested, by first class mail. Plaintiffs would
be automatically excluded from the class unless they
affirmatively ``opt in'' to the class action in the event that
receipt of the notice cannot be verified. Under current law,
plaintiffs are considered members of the class unless they
affirmatively ``opt out.'' This provision would impede the
ability of private parties to bring legitimate class actions in
certain fraud on the market actions, for example, where it is
impossible to identify, and hence notify, the victims in
advance. In addition, it imposes significant costs on Y2K class
action plaintiffs.
This procedural instruction to state courts could be a
constitutionally impermissible intrusion on State Governmental
autonomy. The Department of Justice addressed this
constitutional argument in its letter of opposition to H.R.
775:
[T]hese procedural requirements arguably have no
direct connection to the vindication of substantive
Federal rights and would accordingly be vulnerable to
constitutional challenge on federalism grounds.''
Although the Supreme Court has stated that Congress, in
enacting legislation under the Commerce Clause, possess
broader power to require action by State courts than to
require action by State legislatures or executives, see
Printz v. United States, 117 S.Ct. 2365, 2371 (1997),
the Court also has endorsed the ``general rule,
bottomed deeply in belief in the importance of state
control of statue judicial procedure, * * * that
federal law takes the state court as it finds them,''
Johnson v. Frankell, 520 U.S. 911, 919 (1997) (internal
quotation marks omitted).21
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\21\ See Letter from Jon P. Jennings, Acting Assistant Attorney
General, U.S. Department of Justice Office of Legislative Affairs, to
the Honorable Henry Hyde, Chairman, House Judiciary Committee 4 (April
29, 1999) (on file with the minority staff of the House Judiciary
Committee).
H.R. 775 also eliminates the complete diversity requirement
for Y2K class action plaintiffs. Under current law, the federal
diversity statute mandates, inter alia, that U.S. district
courts shall have original jurisdiction of all civil actions in
which the matter in controversy exceeds $75,000 and is between
citizens of different states.22 This bill, however,
provides federal court jurisdiction over any Y2K-related class
action as long as the amount in controversy is greater than the
sum or value of $1,000,000 (exclusive of interest and costs),
computed on the basis of all claims to be determined in the
action. The only exception is for classes where the substantial
majority of the members are citizens of a single state of which
the primary defendants are also citizens, and the claims
asserted will be governed primarily by laws of that state, or
the primary defendants are governmental entities against whom
the U.S. district court may be foreclosed from ordering relief.
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\22\ 28 U.S.C. Sec. 1332 (a)(1).
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Under this provision, nearly all class actions will be
federalized, resulting in the dismissal of meritorious claims
that could have been resolved in state courts. In effect, this
provision will remove class actions involving state law issues
from state courts--the forum most convenient for victims of
wrongdoing to litigate and most familiar with the substantive
law involved--to the federal courts--where the class is less
likely to be certified and the case will take longer to
resolve. There is also the overall concern that large numbers
of plaintiffs will not have redress for their Y2K claims if the
class action is not certified--it may be too costly for many
plaintiffs to bring individual actions. Many of these
unsubstantiated concerns were used by supporters of H.R. 3789
of the 105th Congress. This class action bill was reported out
by the Committee during the 105th Congress over the objection
of most Committee Democrats.
B. Fee Disclosure and Loser Pays (Title V)
The bill includes a number of procedural restrictions that
govern the attorney-client relationship, such as the
requirement that attorneys disclose to their clients the fee
arrangement up-front, and the requirement that attorneys
provide a monthly statement to clients regarding the hours and
fees spent on the case. These procedural requirements could
prove to be burdensome in practice, and there is no
demonstrated need in Y2K cases for this form of federal
regulation. In written testimony submitted to the House
Judiciary Committee, Assistant Attorney General Eleanor D.
Acheson of the Department of Justice Office of Policy
Development noted, ``We are skeptical that there is a need for
federal micro-management of the attorney-client relationship in
Y2K cases, particularly when there are already state laws in
place that require attorneys to disclose fees up front and to
keep their clients informed.'' 23
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\23\ House Judiciary Hearing on H.R. 775, 106th Cong. (1999)
(Statement of Attorney General Eleanor D. Acheson, U.S. Department of
Justice, Office of Policy Development at 10).
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We also strongly oppose the ``loser pays'' (or ``English
Rule'') provisions set forth in section 507of the bill. Under
this section, a litigant would be liable to pay the other side's
attorneys fees if they rejected a pre-trial settlement offer and
ultimately secured a less favorable verdict. Although styled as an
effort to reduce litigation, the provision will operate at a tremendous
disincentive to small businesses and poor and middle class victims of
Y2K failures. This is because such small businesses and individuals
have far less financial resources than large defendant corporations and
cannot afford the risk of paying a large corporation's legal fees based
on the outcome of a trial.
In effect, the possibility of an adverse verdict will deter
small businesses from pursuing even the most egregious claims
to court. The provision is so onerous that it would even apply
to a harmed party that prevails in a Y2K action so long as they
obtain less than a pre-trial settlement--in this respect it
could actually operate as a ``winner pays'' provision. This
would have the perverse effect of rewarding a negligent or
reckless defendant and punishing an innocent victim. In
addition, like other proposed federal procedural mandates on
state courts, this provision raises serious federalism and
constitutional concerns. 24
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\24\ See note 22 supra.
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This section represents a failed vestige of the infamous
``Contract with America'' that was summarily rejected by the
104th Congress. 25 At that time we noted the irony
of the fact that a Republican Majority was so eager to embrace
the so-called ``English rule'' at the same time prominent
voices in England were calling for the abandonment of the rule.
For example, the conservative British magazine, The Economist,
wrote ``only the very wealthy can afford the costs and risks of
litigation [under the English Rule] which offends one of the
most basic principles of a free society: equality before the
law.'' 26 It is also notable that the States have
not in any significant numbers sought to incorporate the
English Rule into their own systems.
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\25\ See H.R. 988, 104th Cong., 1st Sess., Sec. 2.
\26\ The Economist, February 6, 1995.
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C. Consumers are Not Excluded
Another concern we have with the bill is its failure to
exclude individual consumers from its restriction. Although the
legislation carves out ``personal injury'' actions from its
scope (e.g., for physical injury or pain and suffering), the
legislation fails to exclude actions by individuals for
pecuniary losses, such as any harm to their financial affairs
or loss of their personal computer information resulting from a
Y2K computer glitch.
In our view the heart of the Y2K problem is principally an
issue of business to business litigation. Individual consumers
do not have the same knowledge or bargaining power in the
marketplace as businesses that have well established
relationships with their suppliers to protect themselves by
individualized contract. This legislation will greatly
disadvantage consumers who are oftentimes unaware of potential
Y2K problems and whose only recourse for fair treatment is the
current civil justice system, particularly the tort system. In
this regard it is useful to note that the 105th Congress passed
S. 2392, the ``Year 2000 Information and Readiness Disclosure
Act.'' 27 That law limits the liability of
individuals and businesses who act responsibly to share
information designed to fix Y2K problems. But unlike H.R. 775,
the new law included a consumer carve-out.
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\27\ Pub. Law. 105-271 (October 19, 1998).
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III. A Reasonable Y2K Substitute
Representative Lofgren lead the effort, with
Representatives Conyers and Boucher, to craft a substitute that
incorporates the legitimate needs of the information technology
community. This narrow substitute, which is substantially
similar to an amendment offered in the Senate by Senators Kerry
and Robb, ensures that the Y2K remediation effort goes forward,
without overreaching. In a recent letter by the Department of
Justice to Chairman Henry Hyde, the Administration wrote,
``while the Department has not yet had the opportunity to
review the precise language of this new amendment, we
understand that its modifications of State and Federal law
affecting Y2K claims addresses the majority of our concerns. We
are told this amendment will be substantially similar to the
amendment in the Senate by Senators Kerry and Robb, which we
support.'' 28
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\28\ See Letter from Jon P. Jennings, Acting Assistant Attorney
General, U.S. Department of Justice Office of Legislative Affairs, to
the Honorable Henry Hyde, Chairman, House Judiciary Committee 5 (April
29, 1999) (on file with the minority staff of the House Judiciary
Committee).
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The substitute specifically addresses the concerns of the
information technology community by retaining the provisions
that encourage remediation and mitigation and deter frivolous
lawsuit, and properly deals with the problems raised by H.R.
775. The substitute includes provisions concerning a 90 day
pre-litigation cooling off period, specifies pleading and
mitigation requirements in Y2K cases and clarifies applicable
state contract law. However, it excludes a number of the most
extreme provisions of H.R. 775. First, and foremost, the
substitute eliminates entirely the cap on punitive damages and
the reasonable efforts defense. The substitute also eliminates
entirely the attorneys fee disclosure requirements and the
limitation on the liability of directors and officers. And, it
eliminates the class action section, except for the minimal
injury requirement that the court must find that the alleged
defect in the product or service must be a material defect as
to a majority of the members of the class, which should serve
to deter frivolous lawsuits.
In addition, instead of eliminating joint and several
liability altogether, the substitute provides that the court
will have equitable discretion to determine whether a
defendant, that isminimally liable, will be held jointly and
severally liable. And, in cases where the defendant knowingly intended
to cause harm, the liability of the defendant is joint and several.
Under common law, tort feasors who are responsible for an injury are
jointly and severally liable for all of the claimant's damages. While
acknowledging that the defendants, not the victims, should bear the
financial burden if one or more defendants is judgment-proof, this
provision alleviates the unfairness claimed by some defendants who are
minimally at fault but are nonetheless included in lawsuits.
Finally, the substitute only applies to claims for
commercial loss. Therefore, suits by consumers are not affected
by this bill. A consumer carve-out will protect consumers in
these situations by preserving tort and contract remedies
available under state law for consumers harmed by product or
system failures.
Conclusion
The high tech community has made it clear that they are
interested in a bill that specifically addresses liability
issues that are unique to the Y2K problem. As we understand it,
they are not interested in a far-reaching tort reform proposal,
but a narrowly tailored bill, that will address the problem of,
among other things, frivolous lawsuits. H.R. 775, on the other
hand, goes well beyond reasonable reform by failing to protect
consumers, shielding grossly negligent defendants and harming
innocent plaintiffs. Instead of creating positive incentives to
fix problems, it creates new reasons to avoid remediation. H.R.
775 will unnecessary gut the protections of tort law while
simultaneously failing to address the true concerns of the
information technology community. For the above reasons, we
dissent.
John Conyers, Jr.
Howard L. Berman.
Jerrold Nadler.
Melvin L. Watt.
Sheila Jackson Lee.
Maxine Waters.
Marty Meehan.
William D. Delahunt.
Steven R. Rothman.
Tammy Baldwin.
Anthony D. Weiner.
DISSENTING VIEWS OF HON. ROBERT C. ``BOBBY'' SCOTT
I concur with the dissenting views of the Minority except
for the indication that the Substitute offered by
Representatives Boucher, Conyers, and Lofgren is needed.
Although the Substitute is better than the base bill, neither
is better than the existing law. The remedies for breaches of
contracts, fraud, and tort liability under current laws are
adequate. Responding to the special interest of powerful groups
through legislation to meet particular developments only
invites the politically powerful to seek special dispensation
through the legislature rather than fight their position out
through the court processes provided for that purpose.
Unfortunately, Congress has intervened as a legislative
alternative to the court of appeals on several occasions in
recent years. The Morgan case and the airline industry case are
examples of such intervention where we changed the law after
events arose.
I specifically object to the Substitute and the bill with
regard to the suggestion that the section of the Act pertaining
to ``joint and several liability'' need to be amended. In the
normal course of business, businesses have the ability to
insure against and provide for indemnification against losses
not properly attributable to them. Consumers are generally not
able to track down and apportion liability among joint tort
feasors, particularly when some may no longer be in existence.
The current law on ``joint and several liability'' properly
presumes that defendants are in a better position to know their
level of responsibility and to apportion that responsibility
among themselves.
Bobby Scott.