Congress and many state legislatures are considering legislation to address various aspects of the Year 2000 (Y2K) problem. At the same time, the Senate Special Committee on the Year 2000 Technology Problem has issued an extensive report entitled “Investigating the Impart of the Year 2000 Problem.” The report concludes that the Y2K problem poses “numerous and daunting” challenges which will lead to disruptions that may in some cases be significant. It urges individuals to take reasonable steps to anticipate and plan for such disruptions. The highlights of the report are summarized in the list that follows this article. The purpose of this article is to provide an overview of the pending legislation. A detailed summary of any of the bills at this time would serve little purpose since there are many bills pending and it is impossible to predict what will emerge.
A number of the bills pending before Congress address liability for Y2K failures and provide additional hurdles for parties who choose to litigate such failures. The bills include the following:
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Year 2000 Readiness and Responsibility Act (H.R. 775)
Year 2000 Fairness and Responsibility Act (S. 461)
Y22K Act (S. 96)
Year 2000 Consurner Protection Plan Act of 1999 (H.R. 192)
There are many similarities among these bills. For example, most of the bills require that a party with a claim against another party for a Y2K failure provide notice (up to 90 days) prior to filing suit with details about the failure and about the resulting loss or damage- The prospective defendant is then permitted to remedy the problem or engage in mediation or arbitration with the claimant. The bills generally require a claimant to mitigate its damages (take reasonable steps to reduce the magnitude of the damages by correcting or replacing the faulty component.) The bills also provide various defenses to actions and provide limitations on damages, especially punitive damages. Finally, some of the proposals would severely restrict the availability of class actions on behalf of parties who suffer Y2K failures.
A second category of federal legislation would provide assistance to parties that might be affected by the Year 2000 problem. The Small Business Year 2000 Readiness Act (S- 314) would provide a loan guarantee program for the remediation of Y2K problems by small businesses. (Title VI of the Year 2000 Readiness and Responsibility Act, discussed above, includes a similar provision) The Businesses Undergoing the Glitch (BUG) Act (H.R. 179) would authorize businesses to deduct as an expense, up to a maximum of $40,000, the cost of “business Y2K assets” placed in service during 1997, 1998 or 1999. The Year 2000 State and Local GAP (Government Assistance Programs) Act of 1999 (S. 174 and H.R. 909) would authorize the Secretary of Commerce to award grants to states to assist state and local government in making programs administered by such governments Y2K compliant. Finally, House Joint Resolution 14 would make January 3, 2000 a holiday instead of December 31, 1999. This would presumably give all of us a long weekend to resolve any unsolved Y2K problems.
Legislation has also been introduced in many state legislatures to address various aspects of the Year 2000 issue. Generally the bills pending before the state legislatures would provide either immunity or some limitation of liability for state and local governments and others. A second category of bills would impose new duties on certain industries. As an example, there are bills pending before the Rhode Island General Assembly that would provide immunity for state and local government for Year 2000 claims and another bill which would provide reimbursement by the state for the Year 2000 remediation costs incurred by cities and towns. There are bills pending before the Massachusetts legislature that would provide immunity to governmental bodies and certain health care providers for Year 2000 failures. Finally, bills pending before the Connecticut legislature would impose duties on hospitals to report on their Year 2000 preparedness and on insurance companies to provide coverage for certain Year 2000 losses.
The Year 2000 Information and Readiness Disclosure Act which was enacted by Congress last fall represented a compromise of a number of conflicting positions. It is too early in the year to predict whether legislation will emerge from Congress or the state legislatures and, if so, what form it will take.
The prudent business owner or manager will not rely on prospective legislative action to protect the business from Y2K failures but will take prompt action now to ensure that its products and services are made Y2K compliant.
Senate Y2K Committee Issues Report
The Senate Special Committee made the following findings:
Many organizations critical to Americans’ safety and well-being are still not fully engaged in finding a solution.
Most affected industries and organizations started Y2K remediation too late.
Self reporting has yielded unreliable assessments for most industry sectors. With a few exceptions, disclosure of Y2K compliance is poor
Fear of litigation and loss of competitive advantage are the most commonly cited reasons for bare-bones disclosure.
National emergency and security planning for Y2K related system failures is just beginning.
Leadership at the highest levels is lacking.
The Committee’s assessments of seven critical economic sectors are as follows:
Utilities – The utility industry as a whole is prepared for “interruptions, blackouts and natural disasters.” While a prolonged nationwide blackout is not likely, avoidance of local and regional outages depend upon the overall preparedness of the individual utility serving the area.
Health Care – “The health care industry lags significantly in its Y2K preparations compared to other sectors.”
Telecommunications – The industry is in the process of assessing its preparedness and it appears that there will not be significant problems.
Transportation – “The transportation sector is the linchpin for just-in-time inventory management across most every sector, from health care supplies to food—- Planes will not fall out of the sky, but disruption of flights and global trade between some areas and countries may occur.”
Finance – “ATMs are expected to function correctly and banks should have adequate cash to meet consumer demand. . . .” The Committee expressed concern about “the implication of corporate Y2K vulnerability on investment decisions.”
Government – Wholesale failure of federal government services is not likely to occur although some mission critical systems will not be compliant before the end of the year. “Several state and many local governments lag in Y2K remediation, raising the risk of service disruption.”
General Business – Large businesses appear generally prepared to deal with Y2K, although small and medium size businesses are extremely unprepared. The smallest businesses may survive using manual processes until problems are remediated. The Committee suggests that 40 percent of small businesses “do not plan to take any action” to remediate Y2K problems.
Peter V. Lacouture is a partner in the law firm of Peabody & Brown and co-chair of its Year 2000 Group.
