Sen. McCain Introduces Y2K Liability Bill

(January 21, 1999)  Sen. John McCain introduced a bill in the U.S. Senate on January 19 that would change the rules governing lawsuits over Year 2000 problems.  McCain said that the bill's purpose "is to ensure that we look to solving the technology glitch known as Y2K rather than clog our courts with years of costly litigation," McCain said.  The bill would make it harder to win Y2K suits, and limit the size of some recoveries.

S. 96, named simply the "Y2K Act," is a long and carefully worded statute which would adjust various trial procedures regarding applicable legal standards, including burdens of proof, defenses, and available remedies.  In general, it would limit Plaintiffs' ability to win judgments in some situations, limit the size of judgments in some situations, and give Plaintiffs incentives to give notice to manufacturers about their Y2K problems, and allow them opportunities to try to fix the problems.

The key provisions of the bill include the following:

• All Y2K actions shall be treated as contract actions.
• Plaintiffs in Y2K actions must give the defendant notice of the problem, and an opportunity to fix it, including by allowing access to computers and software.
• There are several mechanisms for limiting the recovery of damages for non-economic loss.   There is a cap on recoveries of non-economic losses; a plaintiffs can recover punitive damages only if the defendant acted with "reckless disregard"; and plaintiffs cannot recover damages for non-economic loss if the defendant exercised due diligence and reasonable care to prevent or remedy the problem.
• There is no joint and several liability in Y2K actions.

However, the bill "does not apply to a civil action brought for personal injury to the extent that the action is based on personal injury."    Moreover, the limitations on remedies provided in the bill would not apply if contrary to "a contract to which the plaintiff and the defendant are parties."

"My goal is to provide incentives for fixing the potential Y2K failures before they happen, rather than create windfalls for those who litigate," McCain said in a press release (see, below).

A key clause gives prospective plaintiffs a strong incentive to give notice and an opportunity to remedy problems.  It reads:

"A Y2K action may not proceed to trial until---

(1) the plaintiff has notified the defendant in writing, describing the Y2K problem with particularity; and

(2) the plaintiff has afforded the defendant the opportunity, including reasonable access to computers and computer software affected by the Y2K problem described in the notice, to fix the problem."

Another key clauses would transform tort claims into contract claims.  It reads:

"A Y2K action shall be treated as a civil action for breach of contract, regardless of the form in which the action is brought."

The recovery of damages would be limited in several ways.  For example, the bill provides that "Damages in a Y2K action (including punitive damages) other than for economic loss may not exceed the greater of (A) 3 times the amount awarded for economic loss; or (B) $250,000."  Moreover, in the case of most individuals and small businesses, $50,000 would be substituted for $250,000.

The bill also limits further plaintiffs ability to recover from sellers who are not also manufacturers.  In their case, plaintiffs would have to show one of three things: (1) that the seller failed to exercise reasonable care, and that that was a proximate cause of the harm to the plaintiff, (2) that the seller breached an express warranty which caused harm to the plaintiff, or (3) that the seller engaged in intentional wrongdoing under state law.

Press Release of Sen. John McCain.
Re: Introduction of S 96, a Year 2000 liability bill.
Date: January 19, 1999.
Source: Senate Commerce Committee.

TUESDAY, JANUARY 19, 1999
FOR IMMEDIATE RELEASE
CONTACT:
NANCY IVES (202)224-7130
PIA PIALORSI (202)224-2670

McCAIN BILL ENCOURAGES BUSINESSES TO FIX Y2K

WASHINGTON, D.C. -- Senator John McCain (R-AZ), Chairman of the Committee on Commerce, Science, and Transportation, today introduced a bill to encourage technology producers to work with technology users and consumers to ensure a seamless transition from the year 1999 to 2000. While the Y2K Act would compensate actual losses, it would also assure that the courts do not unfairly punish defendants who have made good faith efforts to remedy the technology failure.

"The purpose of this legislation is to ensure that we look to solving the technology glitch known as Y2K rather than clog our courts with years of costly litigation," McCain said. "We are almost a year away from this potential problem and a number of lawsuits are already being contemplated. This is an unfortunate reflection on our overly litigious society."

The bill would encourage efficient resolution of Y2K failures by allowing defendants the opportunity to remedy the failure and correct the situation before facing a lawsuit.

"My goal is to provide incentives for fixing the potential Y2K failures before they happen, rather than create windfalls for those who litigate," McCain said.

The Y2K problem refers to the transition from 1999 to 2000 as computers are programmed to only recognize the last two digits of the year.