LRM #IMS 24 - OMB Request for Views on HR775 (as amended by the Senate) Ye
9:47 AM 21 Jun 1999
LRM ID: IMS24
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
Washington, D.C. 20503-0001
Monday, June 21, 1999
LEGISLATIVE REFERRAL MEMORANDUM
TO: Legislative Liaison Officer - See Distribution
below
FROM: Richard E. Green (for) Assistant Director for
Legislative Reference
OMB CONTACT: Ingrid M. Schroeder
PHONE: (202)395-3883 FAX: (202)395-3109
SUBJECT: OMB Request for Views on HR775 (as amended by the Senate)
Year 2000 Readiness and Responsiblity Act
DEADLINE: 3pm Wednesday, June 23, 1999
In accordance with OMB Circular A-19, OMB requests the views of your
agency on the above subject before advising on its relationship to the
program of the President. Please advise us if this item will affect
direct spending or receipts for purposes of the "pay-As-You-Go" provisions
of Title XIII of the Omnibus Budget Reconciliation Act of 1990.
COMMENTS: Attached is HR 775 as amended by the Senate on June 15, 1999.
Please provide comments ASAP so that the Administration can comment on the
bill in conference. The bill text can be found on the internet in THOMAS
as the engrossed senate amendment to
HR 775.
DISTRIBUTION LIST
AGENCIES:
6-AGRICULTURECONG AFFAIRS - Vince Ancell (Testimony) - (202) 720-7095
25-COMMERCE - Michael A. Levitt - (202) 482-3151
27-Consumer Product Safety Commission - Robert J. Wager - (301) 504-0515
29-DEFENSE - Samuel T. Brick Jr .. - (703) 697-1305
30-EDUCATION - Jack Kristy - (202) 401-8313
32-ENERGY - Bob Rabben - (202) 586-6721
33-Environmental Protection Agency - John Reeder - (202) 260-5414
37-Federal Deposit Insurance Corporation - Alice C. Goodman - (202)
898-8730
39-Federal Emergency Management Agency - Ernest B. Abbott - (202) 646-4105
51-General Services Administration - William R. Ratchford - (202) 501-0563
52-HEALTH & HUMAN SERVICES - Sondra S. Wallace - (202) 690-7760
54-HOUSING & URBAN DEVELOPMENT - Allen I. Polsby - (202) 708-1793
59-INTERIOR - Jane Lyder - (202) 208-4371
61-JUSTICE - Jon P. Jennings - (202) 514-2141
62-LABOR - Robert A. Shapiro - (202) 219-8201
69-National Aeronautics and Space Administration - Ed Heffernan - (202)
358-1948
108-Securities and Exchange Commission - Susan M. Ochs - (202) 942-0016
107-Small Business Administration - Mary Kristine Swedin - (202) 205-6700
114-STATE - Paul Rademacher - (202) 647-4463
117 & 340-TRANSPORTATION - Tom Herlihy - (202) 366-4687
lIB-TREASURY - Richard S. Carro - (202) 622-0650
129-VETERANS AFFAIRS - John H. Thompson - (202) 273-6666
EOP:
Sarah Rosen
John E. Thompson
Lisa M. Brown
David W. Beier
Daniel Marcus
Sally Katzen
Phyllis Kaiser-Dark
Shannon Mason
Sara Wilson
Caroline R. Fredrickson
Lisa M. Kountoupes
John A. Koskinen
Sonyia Matthews
Elena Kagan .
David J. Haun
Jasmeet K. Seehra
Timothy R. Fain
Ellen J. Balis
Linda B. Oliver
Mathew C. Blum
Steven D. Aitken
Robert G. Damus
Sandra Yamin
Dee Lee
Donald R. Arbuckle
Joshua Gotbaum
victoria A. Wachino
Janet B. Abrams
LRM ID: IMS24 SUBJECT: OMB Request for Views on HR775 (as amended
by the Senate) Year 2000 Readiness and Responsiblity Act
RESPONSE TO
LEGISLATIVE REFERRAL
MEMORANDUM
If your response to this request for views is short (e.g., concur/no
comment), we prefer that you respond bye-mail or by faxing us this
response sheet. If the response is short and you prefer to call, please
call the branch-wide line shown below (NOT the analyst's line) to leave a
message with a legislative assistant.
You may also respond by:
(1) calling the analyst/attorney's direct line (you will be
connected to voice mail if the analyst does not answer); or
(2) sending us a memo or letter .
Please include the LRM number shown above, and the subject shown below.
TO: Ingrid M. Schroeder Phone: 395-3883 Fax: 395-3109
Office of Management and Budget
Branch-Wide Line (to reach legislative assistant) :
395-3454
FROM: (Date)
(Name)
(Agency)
(Telephone)
The following is the response of our agency to your request for views on
the above-captioned subject:
Concur
No Objection
No Comment
See proposed edits on pages
Other:
FAX RETURN of _____ pages, attached to this response sheet
This file must be "launched" to view in the correct format.==================== ATTA
ATT CREATION TIME/DATE: 0 00:00:00.00
HR 775 EAS
In the Senate of the united States,
Ju"ne 15, 1999.
Resolved, That the bill from the House of Representatives (H.R.
775) entitled 'An Act to establish certain procedures for civil actions brought
for damages relating to the failure of any device or system to process or othe
rwise deal with the transition from the year 1999 to the year 2000, and for oth
er purposes.', do pass with the following
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE; TABLE OF SECTIONS.
- (a) SHORT TITLE- This Act may be cited as the 'Y2K Act' .
- (b) TABLE OF SECTIONS- The table of sections for this Act is as fo
llows:
- Sec. 1. Short title; table of sections.
- Sec. 2. Findings and purposes.
- Sec. 3. Definitions.
- Sec. 4. Application of Act.
- Sec. 5. Punitive damages limitations.
- Sec. 6. Proportionate liability.
- Sec. 7. Prelitigation notice.
- Sec. 8. Pleading requirements.
- Sec. 9. Duty to mitigate.
- Sec. 10. Application of existing impossibility or commercial imp
racticability doctrines.
- Sec. 11. Damages limitation by contract.
- Sec. 12. Damages in tort claims.
- Sec. 13. State of mind; bystander liability; control.
- Sec. 14. Appointment of special masters or magistrate judges for
Y2K actions.
- Sec. 15. Y2K actions as class actions.
- Sec. 16. Applicability of State law.
- Sec. 17. Admissible evidence ultimate issue in State courts.
- Sec. 18. Suspension of penalties for certain year 2000 failures
by small business concerns.
SEC. 2. FINDINGS AND PURPOSES.
- (a) FINDINGS- The Congress finds that:
- (1) (A) Many information technology systems, devices, and progr
ams are not capable of recognizing certain dates in 1999 and after December 31,
1999, and will read dates in the year 2000 and thereafter as if those dates re
present the year 1900 or thereafter or will fail to process dates after Decembe
r 31, 1999.
- (B) If not corrected, the problem described in subparagraph (
A) and resulting failures could incapacitate systems that are essential to the
functioning of markets, commerce, consumer products, utilities, Government, and
safety and defense systems, in the United States and throughout the world.
- (2) It is in the national interest that producers and users of
technology products concentrate their attention and resources in the time rema
ining before January 1, 2000, on assessing, fixing, testing, and developing con
tingency plans to address any and all outstanding year 2000 computer date-chang
e problems, so as to minimize possible disruptions associated with computer fai
lures.
- (3) (A) Because year 2000 computer date-change problems may aff
ect virtually all businesses and other users of technology products to some deg
ree, there is a substantial likelihood that actual or potential year 2000 failu
res will prompt a significant volume of litigation, much of it insubstantial.
- (B) The litigation described in subparagraph (A) would have a
range of undesirable effects, including the following:
- (i) It would threaten to waste technical and financial res
ources that are better devoted to curing year 2000 computer date-change problem
s and ensuring that systems remain or become operational.
- (ii) It could threaten the network of valued and trusted b
usiness and customer relationships that are important to the effective function
ing of the national economy.
- (iii) It would strain the Nation's legal system, causing p
articular problems for the small businesses and individuals who already find th
at system inaccessible because of its complexity and expense.
- (iv) The delays, expense, uncertainties, loss of control,
adverse publicity, and animosities that frequently accompany litigation of busi
ness disputes could exacerbate the difficulties associated with the date change
and work against the successful resolution of those difficulties.
- (4) It is appropriate for the Congress to enact legislation to
assure that Y2K problems do ~ot unnecessarily disrupt interstate commerce or c
reate unnecessary caseloads in Federal courts and to provide initiatives to hel
p businesses prepare and be in a position to withstand the potentially devastat
ing economic impact of Y2K.
- (5) Resorting to the legal system for resolution of Y2K proble
ms is not feasible for many businesses and individuals who already find the leg
al system inaccessible, particularly small businesses and individuals who alrea
dy find the legal system inaccessible, because of its complexity and expense.
- (6) The delays, expense, uncertainties, loss of control, adver
se publicity, and animosities that frequently accompany litigation of business
disputes can only exacerbate the difficulties associated with the Y2K date chan
ge, and work against the successful resolution of those difficulties.
- (7) Concern about the potential for liability--in particular,
concern about the substantial litigation expense associated with defending agai
nst even the most insubstantial lawsuits--is prompting many persons and busines
ses with technical expertise to avoid projects aimed at curing year 2000 comput
er date-change problems.
- (8) A proliferation of frivolous Y2K lawsuits by opportunistic
parties may further limit access to courts by straining the resources of the 1
egal system and depriving deserving parties of their legitimate rights to relie
f.
- (9) Congress encourages businesses to approach their Y2K dispu
tes responsibly, and to avoid unnecessary, time-consuming and costly litigation
about Y2K failures, particularly those that are not material. Congress support
s good faith negotiations between parties when there is a dispute over a Y2K pr
oblem, and, if necessary, urges the parties to enter into voluntary, nonbinding
mediation rather than litigation.
- (b) PURPOSES- Based upon the power of the Congress under Article I
, Section 8, Clause 3 of the Constitution of the United States, the purposes of
this Act are--
- (1) to establish uniform legal standards that give all busines
ses and users of technology products reasonable incentives to solve Y2K compute
r date-change problems before they develop;
- (2) to encourage continued Y2K remediation and testing efforts
by providers, suppliers, customers, and other contracting partners;
- (3) to encourage private and public parties alike to resolve Y
2K disputes by alternative dispute mechanisms in order to avoid costly and time
-consuming litigation, to initiate those mechanisms as early as possible, and t
o encourage the prompt identification and correction of Y2K problems; and<
/ul>
- (4) to lessen the burdens on interstate commerce by discouragi
ng insubstantial lawsuits while preserving the ability of individuals and busin
esses that have suffered real injury to obtain complete relief.
SEC. 3. DEFINITIONS.
- In this Act:
- (1) Y2K ACTION- The term 'Y2K action'--
- (A) means a civil action commenced in any Federal or State
court, or an agency board of contract appeal proceeding, in which the plaintif
f's alleged harm or injury resulted from a Y2K failure;
- (B) includes a civil action commenced in any Federal or St
ate court by a governmental entity when acting in a commercial or contracting c
apacity; but
- (C) does not include an action brought by a governmental e
ntity acting in a regulatory, supervisory, or enforcement capacity.
- (2) Y2K FAILURE- The term 'Y2K failure' means failure by any d
evice or system (including any computer system and any microchip or integrated
circuit embedded in another device or product), or any software, firmware, or 0
ther set or collection of processing instructions to process, to calculate, to
compare, to sequence, to display, to store, to transmit, or to receive year-200
o date-related data, including failures--
- (A) to deal with or account for transitions or comparisons
from, into, and between the years 1999 and 2000 accurately;
- (B).to recognize or accurately to process any specific dat
e in 1999, 2000, or 2001; or
- (C) accurately to account for the year 2000's status as a
leap year, including recognition and processing of the correct date on February
29, 2000.
- (3) GOVERNMENT ENTITY- The term 'government entity' means an a
gency, instrumentality, or other entity of Federal, State, or local government
(including multijurisdictional agencies, instrumentalities, and entities) .
- (4) MATERIAL DEFECT- The term 'material defect' means a defect
in any item, whether tangible or intangible, or in the provision of a service,
that substantially prevents the item or service from operating or functioning
as designed or according to its specifications. The term 'material defect' does
not include a defect that--
- (A) has an insignificant or de minimis effect on the opera
tion or functioning of an item or computer program;
- (B) affects only a component of an item or program that, a
s a whole, substantially operates or functions as designed; or
- (C) has an insignificant or de minimis effect on the effic
acy of the service provided.
- (5) PERSONAL INJURY- The term 'personal injury' means physical
injury to a natural person, including--
- (A) death as a result of a physical injury; and
- (B) mental suffering, emotional distress, or similar injur
ies suffered by that person in connection with a physical injury.
- (6) STATE- The term 'State' means any State of the United Stat
es, the District of Columbia, the Commonwealth of Puerto Rico, the Northern Mar
iana Islands, the United States Virgin Islands, Guam, American Samoa, and any 0
ther territory or possession of the United States, and any political subdivisio
n thereof.
- (7) CONTRACT- The term 'contract' means a contract, tariff, Ii
cense, or warranty.
- (8) ALTERNATIVE DISPUTE RESOLUTION- The term 'alternative disp
ute resolution' means any process or proceeding, other than adjudication by a c
ourt or in an administrative proceeding, to assist in the resolution of issues
in controversy, through processes such as early neutral evaluation, mediation,
minitrial, and arbitration.
SEC. 4. APPLICATION OF ACT.
- (a) GENERAL RULE- This Act applies to any Y2K action brought in a
State or Federal court after January 1, 1999, for a Y2K failure occurring be for
e January 1, 2003, including any appeal, remand, stay, or other judicial, admin
istrative, or alternative dispute resolution proceeding in such an action.
- (b) NO NEW CAUSE OF ACTION CREATED- Nothing in this Act creates a
new cause of action, and, except as otherwise explicitly provided in this Act,
nothing in this Act expands any liability otherwise imposed or limits any defen
se otherwise available under Federal or State law.
- (c) CLAIMS FOR PERSONAL INJURY OR WRONGFUL DEATH EXCLUDED- This Ac
t does not apply to a claim for personal injury or for wrongful death.
- (d) Contract Preservation-
- (1) IN GENERAL- Subject to paragraph (2), in any Y2K action an
y written contractual term, including a limitation or an exclusion of liability
, or a disclaimer of warranty, shall be strictly enforced unless the enforcemen
t of that term would manifestly and directly contravene applicable State law em
bodied in any statute in effect on January 1, 1999, specifically addressing tha
t term.
- (2) INTERPRETATION OF CONTRACT- In any Y2K action in which a c
ontract to which paragraph (1) applies is silent as to a particular issue, the
interpretation of the contract as to that issue shall be determined by applicab
Ie law in effect at the time the contract was executed.
- (e) PREEMPTION OF STATE LAW- This Act supersedes State law to the
extent that it establishes a rule of law applic,able to a Y2K action that is inc
onsistent with State law, but nothing in this Act implicates, alters, or dimini
shes the ability of a State to defend itself against any claim on the basis of
sovereign immunity.
- (f) APPLICATION WITH YEAR 2000 INFORMATION AND READINESS DISCLOSUR
E ACT- Nothing in this Act supersedes any provision of the Year 2000 Informatio
n and Readiness Disclosure Act.
- (g) APPLICATION TO ACTIONS BROUGHT BY A GOVERNMENTAL ENTITY-
- (1) IN GENERAL- To the extent provided in this subsection, thi
s Act shall apply to an action brought by a governmental entity described in se
ction 3 (1) (C).
- (2) DEFINITIONS- In this subsection:
- (A) DEFENDANT-
- (i) IN GENERAL- The term 'defendant' includes a State
or local government.
- (ii) STATE- The term 'State' means each of the several
States of the United States, the District of Columbia, the Commonwealth of Pue
rto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the
Northern Mariana Islands.
- (iii) 'LOCAL GOVERNMENT- The term 'local government' me
ans--
- (I) any county, city, town, township, parish, viII
age, or other general purpose political subdivision of a State; and
- (II) any combination of political subdivisions des
cribed in subclause (I) recognized by the Secretary of Housing and Urban Develo
pment.
- (B) Y2K UPSET- The term 'Y2K upset'--
- (i) means an exceptional incident involving temporary
noncompliance with applicable federally enforceable measurement or reporting re
quirements because of factors related to a Y2K failure that are beyond the reas
onable control of the defendant charged with compliance; and
- (ii) does not include--
- (I) noncompliance with applicable federally enforc
eable requirements that constitutes or would create an imminent threat to publi
c health, safety, or the environment;
- (II) noncompliance with applicable federally enfor
ceable requirements that provide for the safety and soundness of the banking or
monetary system, including the protection of depositors;
- (III) noncompliance to the extent caused by operat
ional error or negligence;
- (IV) lack of reasonable preventative maintenance;
or
- (V) lack of preparedness for Y2K.
- (3) CONDITIONS NECESSARY FOR A DEMONSTRATION OF A Y2K UPSET- A
defendant who wishes to establish the affirmative defense of Y2K upset shall d
emonstrate, through properly signed, contemporaneous operating logs, or other r
elevant evidence that--
- (A) the defendant previously made a good faith effort to e
ffectively remediate Y2K problems;
- (B) a Y2K upset occurred as a result of a Y2K system failu
re or other Y2K emergency;
- (C) noncompliance with the applicable federally enforceabl
e measurement or reporting requirement was unavoidable in the face of a Y2K erne
rgency or was intended to prevent the disruption of critical functions or servi
ces that could result in the harm of life or property;
- (D) upon identification of noncompliance the defendant inv
oking the defense began immediate actions to remediate any violation of federal
ly enforceable measurement or reporting requirements; and
- (E) the defendant submitted notice to the appropriate Fede
ral regulatory authority of a Y2K upset within 72 hours from the time that it b
ecame aware of the upset.
- (4) GRANT OF A Y2K UPSET DEFENSE- Subject to the other provisi
ons of this subsection, the Y2K upset defense shall be a complete defense to an
y action brought as a result of noncompliance with federally enforceable measur
ement or reporting requirements for any defendant who establishes by a preponde
rance of the evidence that the conditions set forth in paragraph (3) are met.
- (5) LENGTH OF Y2K UPSET- The maximum allowable length of the Y
2K upset shall be not more than 15 days beginning on the date of the upset unle
ss granted specific relief by the appropriate regulatory authority.
- (6) VIOLATION OF A Y2K UPSET- Fraudulent use of the Y2K upset
defense provided for in this subsection shall be subject to penalties provided
in section 1001 of title 18, United States Code.
- (7) EXPIRATION OF DEFENSE- The Y2K upset defense may not be as
serted for a Y2K upset occurring after June 30, 2000.
- (h) CREDIT PROTECTION FROM YEAR 2000 Failures-
- (1) IN GENERAL- No person who transacts business on matters di
rectly or indirectly affecting mortgages, credit accounts, banking, or other fi
nancial transactions shall cause or permit a foreclosure, default, or other adv
erse action against any other person as a result of the improper or incorrect t
ransmission or inability to cause transaction to occur, which is caused directl
y or indirectly by an actual or potential Y2K failure that results in an inabil
ity to accurately or timely process any information or data, including data reg
arding payments and transfers.
- (2) SCOPE- The prohibition of such adverse action to enforce 0
bligations referred to in paragraph (l) includes but is not limited to mortgage
s, contracts, landlord-tenant agreements, consumer credit obligations, utili tie
s, and banking transactions.
- (3) ADVERSE CREDIT INFORMATION- The prohibition on adverse act
ion in paragraph (l) includes the entry of any negative credit information to a
ny credit reporting agency, if the negative credit information is due directly
or indirectly by an actual or potential disruption of the proper processing of
financial responsibilities and information, or the inability of the consumer to
cause payments to be made to creditors where such inability is due directly or
indirectly to an actual or potential Y2K failure.
- (4) ACTIONS MAY RESUME AFTER PROBLEM IS FIXED- No enforcement
or other adverse action prohibited by paragraph (l) shall resume until the obli
gor has a reasonable time after the full restoration of the ability to regularl
y receive and dispense data necessary to perform the financial transaction requ
ired to fulfill the obligation.
- (5) SUBSECTION DOES NOT APPLY TO NON-Y2K-RELATED PROBLEMS- Thi
s subsection shall not affect transactions upon which a default has occurred pr
ior to a Y2K failure that disrupts financial or data transfer operations of eit
her party.
- (6) ENFORCEMENT OF OBLIGATIONS MERELY TOLLED- This subsection
delays but does not prevent the enforcement of financial obligations.
SEC. 5. PUNITIVE DAMAGES LIMITATIONS.
- (a) IN GENERAL- In any Y2K action in which punitive damages are pe
rmitted by applicable law, the defendant shall not be liable for punitive damag
es unless the plaintiff proves by clear and convincing evidence that the applic
able standard for awarding damages has been met.
- (b) Caps on Punitive Damages-
- (l) IN GENERAL- Subject to the evidentiary standard establishe
d by subsection (a), punitive damages permitted under applicable law against a
defendant described in paragraph (2) in a Y2K action may not exceed the lesser
of--
- (A) 3 times the amount awarded for compensatory damages; 0
r
- (B) $250,000.
- (2) DEFENDANT DESCRIBED- A defendant described in this paragra
ph is a defendant--
- (A) who--
- (i) is sued in his or her capacity as an individual; a
nd
- (ii) whose net worth does not exceed $500,000; or
- (B) that is an unincorporated business, a partnership, cor
poration, association, or organization with fewer than 50 full-time employees.<
/em>
- (3) NO CAP IF INJURY SPECIFICALLY INTENDED- Paragraph (l) does
not apply if the plaintiff establishes by clear and convincing evidence that t
he defendant acted with specific intent to injure the plaintiff.
- (c) GOVERNMENT ENTITIES- Punitive damages in a Y2K action may not
be awarded against a government entity.
SEC. 6. PROPORTIONATE LIABILITY.
- (a) IN GENERAL- Except as provided in subsections (b) and (c), a p
erson against whom a final judgment is entered in a Y2K action shall be liable
solely for the portion of the judgment that corresponds to the relative and pro
portional responsibility of that person. In determining the percentage of respo
nsibility of any defendant, the trier of fact shall determine that percentage a
s a percentage of the total fault of all persons, including the plaintiff, who
caused or contributed to the total loss incurred by the plaintiff.
- (b) Proportionate Liability-
- (l) DETERMINATION OF RESPONSIBILITY- In any Y2K action, the co
urt shall instruct the jury to answer special interrogatories, or, if there is
no jury, the court shall make findings with respect to each defendant, includin
g defendants who have entered into settlements with the plaintiff or plaintiffs
, concerning--
- (A) the percentage of responsibility, if any, of each defe
ndant, measured as a percentage of the total fault of all persons who caused or
contributed to the loss incurred by the plaintiff; and
- (B) if alleged by the plaintiff, whether the defendant (ot
her than a defendant who has entered into a settlement agreement with the plain
tiff}--
- (i) acted with specific intent to injure the plaintiff
; or
- (ii) knowingly committed fraud.
- (2) CONTENTS OF SPECIAL INTERROGATORIES OR FINDINGS- The respo
nses to interrogatories or findings under paragraph (l) shall specify the total
amount of damages that the plaintiff is entitled to recover and the percentage
of responsibility of each defendant found to have caused or contributed to the
loss incurred by the plaintiff.
- (3) FACTORS FOR CONSIDERATION- In determining the percentage 0
f responsibility under this subsection, the trier of fact shall consider--
- (A) the nature of the conduct of each person found to have
caused or contributed to the loss incurred by the plaintiff; and
- (B) the nature and extent of the causal relationship betwe
en the conduct of each such person and the damages incurred by the plaintiff.
- (c) Joint Liability for Specific Intent or Fraud-
- (l) IN GENERAL- Notwithstanding subsection (a), the liability
of a defendant in a Y2K action is joint and several if the trier of fact specif
ically determines that the defendant--
- (A) acted with specific intent to injure the plaintiff; or
- (B) knowingly committed fraud.
- (2) Fraud; recklessness-
- (A) KNOWING COMMISSION OF FRAUD DESCRIBED- For purposes of
subsection (b) (l) (B) (ii) and paragraph (l) (B) of this subsection, a defendant
knowingly committed fraud if the defendant--
- (i) made an untrue statement of a material fact, with
actual knowledge that the statement was false;
- (ii) omitted a fact necessary to make the statement no
t be misleading, with actual knowledge that, as a result of the omission, the s
tatement was false; and
- (iii) knew that the plaintiff was reasonably likely to
rely on the false statement.
- (B) RECKLESSNESS- For purposes of subsection (b) (l) (B) and
paragraph (l) of this subsection, reckless conduct by the defendant does not c
onstitute either a specific intent to injure, or the knowing commission of frau
d, by the defendant.
- (3) RIGHT TO CONTRIBUTION NOT AFFECTED- Nothing in this sectio
n affects the right,. under any other law, of a defendant to contribution with r
espect to another defendant found under subsection (b) (1) (B), or determined und
er paragraph (1) (B) of this subsection, to have acted with specific intent to i
njure the plaintiff or to have knowingly committed fraud.
- (d) Special Rules-
- (1) UNCOLLECTIBLE SHARE-
- (A) IN GENERAL- Notwithstanding subsection (a), if, upon m
otion made not later than 6 months after a final judgment is entered in any Y2K
action, the court determines that all or part of the share of the judgment aga
inst a defendant for compensatory damages is not collectible against that defen
dant, then each other defendant in the action is liable for the uncollectible s
hare as follows:
- (i) PERCENTAGE OF NET WORTH- The other defendants are
jointly and severally liable for the uncollectible share if the plaintiff estab
lishes that--
- (I) the plaintiff is an individual whose recoverab
Ie damages under the final judgment are equal to more than 10 percent of the n
et worth of the plaintiff; and
- (II) the net worth of the plaintiff is less than $
200,000.
- (ii) OTHER PLAINTIFFS- For a plaintiff not described i
n clause (i), each of the other defendants is liable for the uncollectible shar
e in proportion to the percentage of responsibility of that defendant, except t
hat the total liability of a defendant under this clause may not exceed 50 perc
ent of the proportionate share of that defendant, as determined under subsectio
n (b) (2) .
- (B) OVERALL LIMIT- The total payments required under subpa
ragraph (A) from all defendants may not exceed the amount of the uncollectible
share.
- (C) SUBJECT TO CONTRIBUTION- A defendant against whom judg
ment is not collectible is subject to contribution and to any continuing liabil
ity to the plaintiff on the judgment.
- (2) SPECIAL RIGHT OF CONTRIBUTION- To the extent that a defend
ant is required to make an additional payment under paragraph (1), that defenda
nt may recover contribution--
- (A) from the defendant originally liable to make the payme
nt;
- (B) from any other defendant that is jointly and severally
liable;
- (C) from any other defendant held proportionately liable w
ho is liable to make the same payment and has paid less than that other defenda
nt's proportionate share of that payment; or
- (D) from any other person responsible for the conduct givi
ng rise to the payment that would have been liable to make the same payment.
- (3) NONDISCLOSURE TO JURY- The standard for allocation of dama
ges under subsection (a) and subsection (b) (1), and the procedure for reallocat
ion of uncollectible shares under paragraph (1) of this SUbsection, shall not b
e disclosed to members of the jury.
- (e) Settlement Discharge-
- (1) IN GENERAL- A defendant who settles a Y2K action at any ti
me before final verdict or judgment shall be discharged from all claims for con
tribution brought by other persons. Upon entry of the settlement by the court,
the court shall enter a bar order constituting the final discharge of all obli
gations to the plaintiff of the settling defendant arising out of the action.
The order shall bar all future claims for contribution arising out of the actio
n--
- (A) by any person against the settling defendant; and
- (B) by the settling defendant against any person other tha
n a person whose liability has been extinguished by the settlement of the settl
ing defendant.
- (2) REDUCTION- If a defendant enters into a settlement with th
e plaintiff before the final verdict or judgment, the verdict or judgment shall
be reduced by the greater of-~
- (A) an amount that corresponds to the percentage of respon
sibility of that defendant; or
- (B) the amount paid to the plaintiff by that defendant.
- (f) General'Right of Contribution-
- (1) IN GENERAL- A defendant who is jointly and severally liabl
e for damages in any Y2K action may recover contribution from any other person
who, if joined in the original action, would have been liable for the same dama
ges. A claim for contribution shall be determined based on the percentage of r
espo.nsibility of the claimant and of each person against whom a claim for contr
ibution is made.
- (2) STATUTE OF LIMITATIONS FOR CONTRIBUTION- An action for con
tribution in connection with a Y2K action shall be brought not later than 6 mon
ths after the entry of a final, nonappealable judgment in the Y2K action, excep
t that an action for contribution brought by a defendant who was required to ma
ke an additional payment under subsection (d) (1) may be brought not later than
6 months after the date on which such payment was made.
- (g) MORE PROTECTIVE STATE LAW NOT PREEMPTED- Nothing in this secti
on preempts or supersedes any provision of State statutory law that--
- (1) limits the liability of a defendant in a Y2K action to a I
esser amount than the amount determined under this section; or
- (2) otherwise affords a greater degree of protection from join
t or several liability than is afforded by this section.
SEC. 7. PRELITIGATION NOTICE.
- (a) IN GENERAL- Before commencing a Y2K action, except an action t
hat seeks only injunctive relief, a prospective plaintiff with a Y2K claim shal
1 send a written notice by certified mail (with either return receipt requested
or other means of verification that the notice was sent) to each prospective d
efendant in that action. The notice shall provide specific and detailed informa
tion about--
- (1) the manifestations of any material defect alleged to have
caused harm or loss;
- (2) the harm or loss allegedly suffered by the prospective pIa
intiff;
- (3) how the prospective plaintiff would like the prospective d
efendant to remedy the problem;
- (4) the basis upon which the prospective plaintiff seeks that
remedy; and
- (5) the name, title, address, and telephone number of any indi
vidual who has authority to negotiate a resolution of the dispute on behalf of
the prospective plaintiff.
- (b) PERSON TO WHOM NOTICE TO BE SENT- The notice required by subse
ction (a) shall be se~t--
- (1) to the registered agent of the prospective defendant for s
ervice of legal process;
- (2) if the prospective defendant does not have a registered ag
ent, then to the chief executive officer of a corporation, the managing partner
of a partnership, the proprietor of a sole proprietorship, or to a similarly-s
ituated person for any ether enterprise; o.r
- (3) if the prospective defendant has designated a person to. re
ceive prelitigatio.n notices en a Year 2000 Internet Website (as defined in sect
ion 3(7) of the Year 2000 Info.rmatio.n and Readiness Disclo.sure Act), to the des
ignated perso.n, if the prospective plaintiff has reasonable access to. the Inter
net.
- (c) Response to No.tice-
- (1) IN GENERAL- Within 30 days after receipt of the notice spe
cified in subsection (a), each prospective defendant shall send by certified rna
il with return receiptrequested to each prospective plaintiff a written statem
ent acknowledging receipt of the notice, and describing the actions it has take
n or will take to address the problem identified by the prospective plaintiff.<
/em>
- (2) WILLINGNESS TO ENGAGE IN ADR- The written statement shall
state whether the prospective defendant is willing to engage in alternative dis
pute resolution.
- ~em> (3) INADMISSABILITY- A written statement required by this para
graph is not admissible in evidence, under Rule 408 of the Federal Rules of Evi
dence or any analogous rule of evidence in any State, in any proceeding to prov
e liability for, or the invalidity of, a claim or its amount, or otherwise as e
vidence of conduct or statements made in compromise negotiations.
- (4) PRESUMPTIVE TIME OF RECEIPT- For purposes of paragraph (1)
, a notice under subsection (a) is presumed to be received 7 days after it was
sent.
- (5) PRIORITY- A prospective defendant receiving more than 1 no
tice under this section may give priority to notices with respect to a product
or service that involves a health or safety related Y2K failure.
- (d) FAILURE TO RESPOND- If a prospective defendant--
- (1) fails to respond to a notice provided pursuant to subsecti
on (a) within the 30 days specified in subsection (c) (1); or
- (2) does not describe the action, if any, the prospective defe
ndant has taken, or will take, to address the problem identified by the prospec
tive plaintiff,
- the prospective plaintiff may immediately commence a legal action ag
ainst that prospective defendant.
- (e) Remediation Period-
- (1) IN GENERAL- If the prospective defendant responds and prop
oses remedial action it will take, or offers to engage in alternative dispute r
esolution, then the prospective plaintiff shall allow the prospective defendant
an additional GO days from the end of the 30-day notice period to complete the
proposed remedial action before commencing a legal action against that prospec
tive defendant.
- (2) EXTENSION BY AGREEMENT- The prospective plaintiff and pros
pective defendant may change the length of the GO-day remediation period by wri
tten agreement.
- (3) MULTIPLE EXTENSIONS NOT ALLOWED- Except as provided in par
agraph (2), a defendant in a Y2K action is entitled to no more than one 30-day
period and one GO-day remediation period under paragraph (1) .
- (4) STATUTES OF LIMITATION, ETC., TOLLED- Any applicable statu
te of limitations or doctrine of laches in a Y2K action to which paragraph (1)
applies shall be tolled during the notice and remediation period under that par
agraph.
- (f) FAILURE TO PROVIDE NOTICE- If a defendant determines that a pI
aintiff has filed a Y2K action without providing the notice specified in subsec
tion (a) or without awaiting the expiration of the appropriate waiting period s
pecified in subsection (c), the defendant may treat the plaintiff's complaint a
s such a notice by so informing the court and the plaintiff in its initial resp
onse to the plaintiff. If any defendant elects to treat the complaint as such a
notice--
- (1) the court shall stay all discovery and all other-proceedin
gs in the action for the appropriate period after filing of the complaint; and<
/em>
- (2) the time for filing answers and all other pleadings shall
be tolled during the appropriate period.
- (g) EFFECT OF CONTRACTUAL OR STATUTORY WAITING PERIODS- In cases i
n which a contract, or a statute enacted before January 1, 1999, requires notic
e of nonperformance and provides for a period of delay prior to the initiation
of suit for breach or repudiation of contract, the period of delay provided by
contract or the statute is controlling over the waiting period specified in sub
sections {c} and {d} .
- {h} STATE LAW CONTROLS ALTERNATIVE METHODS- Nothing in this sectio
n supersedes or otherwise preempts any State law or rule of civil procedure wit
h respect to the use of alternative dispute resolution for Y2K actions.
- {i} PROVISIONAL REMEDIES UNAFFECTED- Nothing in this section inter
feres with the right of a litigant to provisional remedies otherwise available
under Rule 65 of the Federal Rules of Civil Procedure or any State rule of civi
1 procedure providing extraordinary or provisional remedies in any civil action
in which the underlying complaint seeks both injunctive and monetary relief.
- {j} SPECIAL RULE FOR CLASS ACTIONS- For the purpose of applying th
is section to a Y2K action that is maintained as a class action in Federal or S
tate court, the requirements of the preceding subsections of this section apply
only to named plaintiffs in the class action.
SEC. 8. PLEADING REQUIREMENTS.
- {a} APPLICATION WITH RULES OF CIVIL PROCEDURE- This section applie
s exclusively to Y2K actions and, except to the extent that this section requir
es additional information to be contained in or attached to pleadings, nothing
in this section is intended to amend or otherwise supersede applicable rules of
Federal or State civil procedure.
- {b} NATURE AND AMOUNT OF DAMAGES- In all Y2K actions in which dama
ges are requested, there shall be filed with the complaint a statement of speci
fic information as to the nature and amount of each element of damages and the
factual basis for the damages calculation.
- {c} MATERIAL DEFECTS- In any Y2K action in which the plaintiff all
eges that there is a material defect in a product or service, there shall be fi
led with the complaint a statement of specific information regarding the manife
stations of the material defects and the facts supporting a conclusion that the
defects are material.
- {d} REQUIRED STATE OF MIND- In any Y2K action in which a claim is
asserted on which the plaintiff may prevail only on proof that the defendant ac
ted with a particular state of mind, there shall be filed with the complaint, w
ith respect to each element of that claim, a statement of the facts giving rise
to a strong inference that the defendant acted with the required state of mind
.
SEC. 9. DUTY TO MITIGATE.
- Damages awarded in any Y2K action shall exclude compensation for d
amages the plaintiff could reasonably have avoided in light of any disclosure 0
r other information of which the plaintiff was, or reasonably should have been,
aware, including information made available by the defendant to purchasers or
users of the defendant's product or services concerning means of remedying or a
voiding the Y2K failure.
SEC. 10. APPLICATION OF EXISTING IMPOSSIBILITY OR COMMERCIAL IMPRACT ICABILITY DOCTRINES.
- In any Y2K action for breach or repudiation of contract, the appli
cability of the doctrines of impossibility and commercial impracticability shal
1 be determined by the law in existence on January 1, 1999. Nothing in this Act
shall be construed as limiting or impairing a party's right to assert defenses
based upon such doctrines.
SEC. 11. DAMAGES LIMITATION BY CONTRACT.
- In any Y2K action for breach or repudiation of contract, no party
may claim, nor be awarded, any category of damages unless such damages are allo
wed--
- {1} by the express terms of the contract; or
- {2} if the contract is silent on such damages, by operation of
State law at the time the contract was effective or by operation of Federal la
w.
SEC. 12. DAMAGES IN TORT CLAIMS.
- (a) IN GENERAL- A party to a Y2K action making a tort claim may no
t recover damages for economic loss unless--
- (1) the recovery of such losses is provided for in a contract
to which the party seeking to recover such losses is a party; or
- (2) such losses result directly from damage to tangible person
al or real property caused by the Y2K failure (other than damage to property th
at is the subject of the contract between the parties to the Y2K action or, in
the event there is no contract between the parties, other than damage caused on
ly to the property that experienced the Y2K failure),
- and such damages are permitted under applicable Federal or State law
.
- (b) ECONOMIC LOSS- For purposes of this section only, and except a
s otherwise specifically provided in a valid and enforceable written contract b
etween the plaintiff and the defendant in a Y2K action, the term -economic loss
, --
- (1) means amounts awarded to compensate an injured party for a
ny loss other than losses described in subsection (a) (2); and
- (2) includes amounts awarded for damages such as--
- (A) lost profits or sales;
- (B) business interruption;
- (C) losses indirectly suffered as a result of the defendan
t's wrongful act or omission;
- (D) losses that arise because of the claims of third parti
es;
- (E) losses that must be plead as special damages; and
- (F) consequential damages (as defined in the Uniform Comme
rcial Code or analogous State commercial law) .
- (c) CERTAIN ACTIONS EXCLUDED- This section does not affect, abroga
te, amend, or alter any patent, copyright, trade-secret, trademark, or service-
mark action, or any claim for defamation or invasion of privacy under Federal 0
r State law.
- (d) CERTAIN OTHER ACTIONS- A person liable- for damages, whether by
settlement or judgment, in a civil action to which this Act does not apply bec
ause of section 4(c) whose liability, in whole or in part, is the result of a Y
2K failure may, notwithstanding any other provision of this Act, pursue any rem
edy otherwise available under Federal or State law against the person responsib
le for that Y2K failure to the extent of recovering the amount of those damages
.
SEC. 13. STATE OF MIND; BYSTANDER LIABILITY; CONTROL.
- (a) DEFENDANT'S STATE OF MIND- In a Y2K action other than a claim
for breach or repudiation of contract, and in which the defendant's actual or c
onstructive awareness of an actual or potential Y2K failure is an element of th
e claim, the defendant is not liable unless the plaintiff establishes that elem
ent of the claim by the standard of evidence under applicable State law in effe
ct before January 1, 1999.
- (b) Limitation on Bystander Liability for Y2K Failures-
- (1) IN GENERAL- With respect to any Y2K action for money damag
es in which--
- (A) the defendant is not the manufacturer, seller, or dist
ributor of a product, or the provider of a service, that suffers or causes the
Y2K failure at issue;
- (B) the plaintiff is not in substantial privity with the d
efendant; and
- (C) the defendant's actual or constructive awareness of an
actual or potential Y2K failure is a'n element of the claim under applicable la
w,
- the defendant shall not be liable unless the plaintiff, in addit
ion to establishing all other requisite elements of the claim, proves, by the s
tandard of evidence under applicable State law in effect before January 1, 1999
, that the defendant actually knew, or recklessly disregarded a known and subst
antial risk, that such failure would occur.
- (2) SUBSTANTIAL PRIVITY- For purposes of paragraph (1) (B), a p
laintiff and a defendant are in substantial privity when, in a Y2K action arisi
ng out of the performance of professional services, the plaintiff and the defen
dant either have contractual relations with one another or the plaintiff is a p
erson who, prior to the defendant's performance of such services, was specifica
lly identified to and acknowledged by the defendant as a person for whose speci
al benefit the services were being performed.
- (3) CERTAIN CLAIMS EXCLUDED- For purposes of paragraph (1) (C) ,
claims in which the defendant's actual or constructive awareness of an actual
or potential Y2K failure is an element of the claim under applicable law do not
include claims for negligence but do include claims such as fraud, constructiv
e fraud, breach of fiduciary duty, negligent misrepresentation, and interferenc
e with contract or economic advantage.
- (c) CONTROL NOT DETERMINATIVE OF LIABILITY- The fact that a Y2K fa
ilure occurred in an entity, facility, system, product, or component that was s
old, leased, rented, or otherwise within the control of the party against whom
a claim is asserted in a Y2K action shall not constitute the sole basis for rec
overy of damages in that action. A claim in a Y2K action for breach or repudiat
ion of contract for such a failure is governed by the terms of the contract.
- (d) PROTECTIONS OF THE YEAR 2000 INFORMATION AND READINESS DISCLOS
URE ACT APPLY- The protections for the exchanges of information provided by sec
tion 4 of the Year 2000 Information and Readiness Disclosure Act (Public Law 10
5-271) shall apply to this Act.
SEC. 14. APPOINTMENT OF SPECIAL MASTERS OR MAGISTRATE JUDGES FOR Y2K ACTIONS.
- Any District Court of the United States in which a Y2K action is p
ending may appoint a special master or a magistrate judge to hear the matter an
d to make findings of fact and conclusions of law in accordance with Rule 53 of
the Federal Rules of Civil Procedure.
SEC. 15. Y2K ACTIONS AS CLASS ACTIONS.
- (a) MATERIAL DEFECT REQUIREMENT- A Y2K action involving a claim th
at a product or service is defective may be maintained as a class action in Fed
eral or State court as to that claim only if--
- (1) it satisfies all other prerequisites established by applic
able Federal or State law, including applicable rules of civil procedure; and
- (2) the court finds that the defect in a product or service as
alleged would be a material defect for the majority of the members of the clas
s.
- (b) NOTIFICATION- In any Y2K action that is maintained as a class
action, the court, in addition to any other notice required by applicable Feder
al or State law, shall direct notice of the action to each member of the class,
which shall include--
- (1) a concise and clear description of the nature of the actio
n;
- (2) the jurisdiction where the case is pending; and
- (3) the fee arrangements with class counsel, including the hou
rly fee being charged, or, if it is a contingency fee, the percentage of the fi
nal award which will be paid, including an estimate of the total amount that wo
uld be paid if the requested damages were to be granted.
- (c) Forum for Y2K Class Actions-
- (1) JURISDICTION- Except as provided in paragraph (2), a Y2K a
ction may be brought as a class action in a United States District Court or rem
oved to a United States District Court if the amount in controversy is greater
than the sum or value of $1,000,000 (exclusive of interest and costs), computed
on the basis of all claims to be determined in the action.
- (2) EXCEPTION- A Y2K action may not be brought or removed as a
class action under this section if--
- (A) (i) a substantial maj ori ty of the members of the propos
ed plaintiff class are citizens of a single State;
- (ii) the primary defendants are citizens of that State; an
d
- (iii) the claims asserted will be governed primarily by th
e law of that State; or
- (B) the primary defendants are States, State officials, or
other governmental entities against whom the United States District Court may
be foreclosed from ordering relief.
- (d) EFFECT ON RULES OF CIVIL PROCEDURE- Except as otherwise provid
ed in this section, nothing in this section supersedes any rule of Federal or S
tate civil procedure applicable to class actions.
SEC. 16. APPLICABILITY OF STATE LAW.
- Nothing in this Act shall be construed to affect the applicability
of any State law that provides greater limits on damages and liabilities than
are provided in this Act.
SEC. 17. ADMISSIBLE EVIDENCE ULTIMATE ISSUE IN STATE COURTS.
- Any party to a Y2K action in a State court in a State that has not
adopted a rule of evidence substantially similar to Rule 704 of the Federal Ru
les of Evidence may introduce in such action evidence that would be admissible
if Rule 704 applied in that jurisdiction.
SEC. 18. SUSPENSION OF PENALTIES FOR CERTAIN YEAR 2000 FAILURES BY S MALL BUSINESS CONCERNS.
- (a) DEFINITIONS- In this section--
- (1) the term 'agency' means any executive agency, as defined i
n section 105 of title 5, United States Code, that has the authority to impose
civil penalties on small business concerns;
- (2) the term 'first-time violation' means a violation by a sma
11 business concern of a Federal rule or regulation (other than a Federal rule
or regulation that relates to the safety and soundness of the banking or moneta
ry system, including protection of depositors) resulting from a Y2K failure if
that Federal rule or regulation had not been violated by that small business co
ncern within the preceding 3 years; and
- (3) the term 'small business concern' has the same meaning as
a defendant described in section 5(b) (2) (B) .
- (b) ESTABLISHMENT OF LIAISONS- Not later than 30 days after the da
te of enactment of this section each agency shall--
- (1) establish a point of contact within the agency to act as a
liaison between the agency and small business concerns with respect to problem
s arising out of Y2K failures and compliance with Federal rules or regulations;
and
- (2) publish the name and phone number of the point of contact
for the agency in the Federal Register.
- (c) GENERAL RULE- Subject to subsections (d) and (e), no agency sh
all impose any civil money penalty on a small business concern for a first-time
violation.
- (d) STANDARDS FOR WAIVER- In order to receive a waiver of civil mo
ney penalties from an agency for a first-time violation, a small business conce
rn shall demonstrate that--
- (1) the small business concern previously made a good faith ef
fort to effectively remediate Y2K problems;
- (2) a first-time violation occurred as a result of the Y2K sys
tern failure of the small business concern or other entity, which affected the s
mall business concern's ability to comply with a federal rule or regulation;
- (3) the first-time violation was unavoidable in the face of a
Y2K system failure or occurred as a result of efforts to prevent the disruption
of critical functions or services that could result in harm to life or propert
y;
- (4) upon identification of a first-time violation, the small b
usiness concern initiated reasonable and timely measures to remediate the viola
tion; and
- (5) the small business concern submitted notice to the appropr
iate agency of the first-time violation within a reasonable time not to exceed
7 business days from the time that the small business concern became aware that
a first-time violation had occurred.
- (e) EXCEPTIONS- An agency may impose civil money penalties authori
zed under Federal law on a small business concern for a first-time violation if
--
- (1) the small business concern's failure to comply with Federa
I rules or regulations constitutes or creates an imminent threat to public hea
lth, safety, or the environment; or
- (2) the small business concern fails to correct the violation
not later than 1 month after initial notification to the agency.
Attest:
Secretary.
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