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VOL. 113 | NO. 101 | Thursday, May 20, 1999

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By STACEY PETSCHAUER Legislating litigation Y2K Readiness and Responsibility Act is designed to reduce the amount and cost of Y2K litigation that could occur in 2000 By STACEY PETSCHAUER The Daily News The U.S. House of Representatives took a flying leap forward last week in Y2K legislation, passing the Y2K Readiness and Responsibility Act in an attempt to curb litigation costs many feel the millennium bug will induce. This week, a similar piece of legislation is weathering a political storm in the Senate, having been twice placed on the back burner while legislators battle over juvenile justice. The Senate has been trying to bring the bill to a vote, which would require the support of 60 senators, said Trey Hardin, spokesman for Rep. Tom Davis, chief sponsor of the House bill. "It passed the House, and the Senate has been moving with a strong interest and passion for this issue," Hardin said. "Theyre trying to put something together that everyone will agree on. If theyve got enough votes behind a certain bill, which is 60, that would prevent a filibuster. "So, theyve been working out compromises and negotiating so that they can have 60 people ready to move forward." But, failures to bring the bill to a vote have stalled discussion of the Senate bill. Pia Pialorsi, a spokesman for the office of Sen. John McCain, R-Ariz., a co-sponsor of the law, said the delay is being caused in part by objections to the law by the Association of Trial Lawyers of America. "The trial lawyers object to this bill," Pialorsi said. "Right now, were in limbo, because were waiting for the process to move forward on the Senate floor. In the meantime, weve worked out several compromises with Democrats." The Senate law, as it stands, is a bi-partisan bill supported by Sens. McCain, Chris Dodd (D-Conn.), Ron Wyden (D-Ore.), Orrin Hatch (R-Utah), Dianne Feinstein (D-Calif.) and Robert Bennett (R-Utah). Several versions of the legislation have been etched out in recent weeks. "The original bill that reached the Senate floor was a version from the Senate Commerce Committee," Pialorsi said. "Then there was a McCain/Wyden version that was substituted on the floor. That version is essentially what passed the House last week." The House bill includes several stipulations aimed at reducing the amount and cost of Y2K litigation that could incur at the turn of the year. The law includes establishing a $250,000 limit on punitive damages awarded in Y2K lawsuits or three times actual damages, whichever is greater. The bill mandates a 90-day waiting period before potential plaintiffs can file a Y2K claim to allow businesses to correct the problem. It creates a "loser-pays" mechanism that stipulates if either party to a Y2K lawsuit rejects a settlement offer made up to 10 days before trial and goes on to win a smaller award than was offered for settlement, the losing party must pay the winning partys attorneys fees and court costs from the date the last offer was made. In general, the House bill was written to encourage settlement outside of court in Y2K cases, to keep courts as free as possible from massive litigation, Hardin said. "Thats the intent of this bill to promote settlements and alternative dispute resolutions. The bottom line goal is to create an environment thats conducive to addressing this Y2K computing crisis. "We want companies, technology experts and other remediators to not be afraid to sign up to fix these problems. Right now, we have a situation where many of them are, because theyre worried that if they do and something goes wrong, theyre going to get sued," he said. He said proportional liability is a major part of the bill. "Probably in most of these (Y2K) cases, youre going to have more than one computer company or technology firm hired to fix various aspects of a computer problem," Hardin said. "Lets say one group is hired to just work on 5 percent of the overall project in a certain area. If something goes wrong with the Y2K problem in a totally different area of that project, right now, even though they had nothing to do with that particular part of the remediation, if theyve got deep pockets, they could have their pants sued off. "Right now, you have companies choosing not to jump in and help a project out." The proportional liability aspect of the law stipulates that if a firm works on only 5 percent of a Y2K project, that firm can only be held liable for its 5 percent of damages. The Senate bill, with its current set of revisions, carries similar goals. The law would retain punitive damage caps for small businesses, eliminate punitive damage caps for large businesses (over 50 employees), exempt municipalities and government entities from punitive damages, eliminate personal liability caps for officers and directors of businesses and corporations, and preserve state evidentiary standards for claims such as fraud. The bill also would require a 30-day notice from plaintiff to defendant on the plaintiffs intent to sue, including a written description of the Y2K problem. If defendants want to fix the problem, they would have 60 more days to remediate. It also would establish proportional liability, preserve contract rights, confirm the duty to mitigate and encourage alternative dispute resolution. Opinions vary about both the effectiveness and the necessity of a Y2K litigation bill. While the trial lawyers association calls the law "anti-consumer" and "anti-small business" and claims the bill would radically alter tort and contract law, House supporters say the bill has nothing to do with traditional court reform but rather is a means to address a national emergency. Paul Billings, attorney with Glankler Brown in Memphis, believes the bill is a congressional overreaction. "I dont think theres going to be a huge flood of litigation," Billings said. "I think its much ado about something thats not going to happen, to be honest." He said he believes there could be some abuse in the class action area, with people filing lawsuits over damages that arent real. But, he said its more of a general problem, not a problem with Y2K. "Im not sure that some kind of legislation addressing class-actions in general shouldnt be passed. But, I dont know that you need to do it through the context of Y2K," Billings said. Still, various legislators are working to push the Y2K bill through the Senate. If that happens, it could become law. "Its on the Senate floor. Then once, if ever, it passes, there will be a conference between the House and the Senate on the bill. Theyll work out any differences, then it has to pass again, and then it goes to the president," Pialorsi said.

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