Unsigned Statement from the Executive Office of the President.
Re: threat of veto of S 96, the Y2K Act.
Date: April 27, 1999.
Source: Senate Commerce Committee, Minority Staff. This document was created by scanning a fax copy and converting into HTML.

EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503

April 27,1999
(Senate)

STATEMENT OF ADMINISTRATION POLICY

(THIS STATEMENT HAS BEEN COORDINATED BY OMB WITH THE CONCERNED AGENCIES.)

S. 96 - Y2K Act
(McCain (R-AZ) and Frist (R-TN))

The Administration strongly opposes S. 96 as reported by the Commerce Committee, as well as the amendment intended to be proposed by Senators McCain and Wyden as a substitute. If S. 96 were presented to the President, either as reported or in the form of the proposed McCain-Wyden amendment, the Attorney General would recommend a veto. The Administration, however, understands that Senators Kerry and Robb and others are working on an amendment in the nature of a substitute that would address its primary concerns and which the Administration can support.

The Administration's main goal is to ensure that all organizations - private, public, and governmental - do everything they can between now and the end of this year to ensure that their systems and those of their customers and suppliers are made Year 2000 compliant. The Administration also recognizes both the importance of discouraging frivolous litigation and the need to keep the courts open for legitimate claims, especially those brought by small businesses and consumers with limited resources to press their cause.

The Administrations overriding concern is that S. 96, as amended by the McCain-Wyden amendment, will not enhance readiness and may, in fact, decrease the incentives organizations have to be ready and assist customers and business partners to be ready for the transition to the next century. This measure would protect defendants in Y2K actions by capping punitive damages and by limiting the extent of their liability to their proportional share of damages, but would not link these benefits to those defendants' efforts to solve their customers' Y2K problems now. As a result, S. 96 would reduce the liability these defendants may face, even if they do nothing and accordingly undermine their incentives to act now - when the damage due to Y2K failures, can still be averted or minimized.

S. 96 also would substantially modify the procedural law of the 50 States by imposing new pleading requirements and by effectively requiring nearly all Y2K class actions to use Federal certification standards. While the Administration could support the adoption of certain federal rules that would, in some meaningful way, help identify and bar frivolous Y2K lawsuits, the broad and intrusive provisions of S. 96 sweep far beyond this purpose and accordingly raise federalism concerns.

The Administration has been working with the Senate on alternatives that would more closely achieve the goals S. 96 purports to serve - creating incentives for organizations to be Y2K compliant, weeding out frivolous Y2K lawsuits, and encouraging alternatives to litigation. In that regard, the Administration would support provisions encouraging alternative dispute resolution, and carefully drawn modifications to pleading rules and substantive law that encourage Y2K readiness. The Administration would support Senators Kerry and Robb's amendment because it satisfactorily addresses many of the previously mentioned concerns (although we are working with the Senators to address drafting issues raised by the Department of Justice).