On Monday, October 19, 1998, President Clinton signed the “Year 2000
Information and Readiness Disclosure Act,” which, as explained in more
detail below, offers significant protections from some forms of Year
2000 (“Y2K”) liability. The purpose of this article is to alert readers
to the need for immediate action to obtain the full benefits of the Act.
Specifically, the Act protects certain Year 2000 statements that were
made between January 1, 1996 and the date of enactment of the Act if the
maker of the statement takes action as required by the Act within forty-
five (45) days of enactment (by December 3, 1998.) Any Year 2000
statement made after enactment (including a response to a customer
questionnaire) should be marked as a “Year 2000 Readiness Disclosure.”
Clients should understand that the failure to act promptly may result in
the loss of protection under the Act.
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The Act is intended to encourage the disclosure of information to help
companies deal with Year 2000 problems. As part of its objective, the
Act “immunizes” certain kinds of Y2K related statements from negligence,
contract or warranty claims arising out of a Year 2000-related problem.
The Act offers the following specific protections:
- It protects designated “Year 2000 Readiness Disclosures” from use in
litigation; - It provides that Year 2000 statements do not modify warranties or
contracts; and - It provides an exemption from antitrust laws for certain Y2K-related
activities.
The Act begins with a set of critical terms. The Act defines a “Year
2000 statement” as a communication concerning or related to an entity’s
Year 2000 processing capabilities or those of its products or services.
A “Year 2000 Readiness Disclosure” (“Y2KRD”) is a written Year 2000
statement which is so identified on its face.
Protection for Year 2000 Statements
Section 4 of the Act protects certain Year 2000 statements from use in
litigation. First, a Y2KRD is not admissible against the maker to prove
the accuracy or truth of any Year 2000 statement made in that disclosure
except as a basis for a claim for anticipatory breach or repudiation of
a contract. Second, the maker of a false, misleading or inaccurate Year
2000 statement is not liable with respect to that statement unless the
claimant establishes that the Year 2000 statement was material and that
it was made:
- with actual knowledge that it was false, inaccurate or misleading;
- with intent to deceive or mislead; or with, a reckless disregard as
to the accuracy of the statement.
Limitation on Effect of Statements
Section 4(e) of the Act provides that with certain exceptions “a Year
2000 statement shall not be interpreted or construed as an amendment to
or alteration of a contract or a warranty.”
Retroactive Protection
As noted in the introduction, the Act provides for the retroactive
designation of Year 2000 statements made prior to the enactment of the
Act as Year 2000 Readiness Disclosures. The maker of such a statement
has forty-five (45) days from the enactment of the Act (until December
3, 1998) to provide either individual notice to recipients of the Year
2000–statement or general notice by a prominent posting on the maker’s
Year 2000 Internet web site which must remain on the web site for at
least forty-five (45) days.
In either case, the notice must explain
that the Year 2000 statement is being designated as a Year 2000
Readiness Disclosure, and it must include a copy of the statement with
the legend “Year 2000 Readiness Disclosure” on it. The recipient of the
notice has forty-five (45) days from receipt of an individual notice or
one-hundred-eighty (180) days after the enactment of the Act, in the
case of notice provided through a web site, to provide a written
objection to the designation. Thereafter, in order
to assert a claim for liability arising from a Y2K statement, the
objecting party must demonstrate that it relied on the Year 2000
statement prior to the receipt of notice and would be prejudiced by the
retroactive designation of the statement as a Y2KRD.
Antitrust Exemption
Section 5 of the Act provides a temporary antitrust exemption for
certain conduct between the date of the enactment of the Act and July
14, 2001. The conduct must be for the sole purpose of (1) facilitating
responses intended to correct or avoid failure of Year 2000 processing
or (2) communicating or disclosing information to help correct or avoid
the effects of Year 2000 processing failure. The exemption does not
apply to conduct that “involves or results in an agreement to boycott
any person, to allocate a market, or to fix prices or output.” This
exemption allows competitors to share information that, for antitrust
reasons, they might otherwise have been constrained to share.
Exclusions for Statements
The Act does not apply to a Year 2000 statement which is expressly made
in a solicitation (including an advertisement) to a consumer with
respect to a consumer product. In addition, the Act does not apply to a
Year 2000 statement concerning a “Year 2000 remediation product or
service” which is made in an offer to sell or solicitation for such
product or service unless the soliciting party provides the following
notice:
“Statements made to you in the course of this sale are subject to the
Year 2000 Information and Readiness Disclosure Act (–U.S.C.–). In the
case of a dispute, this Act may reduce your legal rights regarding the
use of any such statements, unless otherwise specified by your contract
or tariff.”
Conclusion
The Year 2000 Information and Readiness Disclosure Act should make it
easier for companies to share information regarding their Year 2000
processing capabilities and preparations. It will also allow companies
to spend more time solving the problem and less time worrying about the
legal consequences of their statements.
It is important that any entity which has made Y2K statements prior to
October 19, 1998, take prompt action to review those statements and provide the appropriate
notice to the recipients of such statements in order to gain the
designation and protection provided to a Y2KRD under the Act.
The Act contains a number of important definitions and specific
requirements. This memorandum summarizes the highlights of the Act, but
is not intended as a full technical explanation, nor is it intended as
legal advice. Anyone with a specific Year 2000 legal issue or question
should seek legal counsel.
Peter V. Lacouture is a lawyer with Peabody & Brown.
