S 738 IS

To assure that innocent users and businesses gain access to solutions to the year 2000 problem-related failures through fostering an incentive to settle year 2000 lawsuits that may disrupt significant sectors of the American economy.

March 25, 1999

Mr. DODD introduced the following bill; which was read twice and referred to the Committee on the Judiciary

To assure that innocent users and businesses gain access to solutions to the year 2000 problem-related failures through fostering an incentive to settle year 2000 lawsuits that may disrupt significant sectors of the American economy.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Y2K Fairness in Litigation Act'.

(b) TABLE OF CONTENTS- The table of contents for this Act is as follows:

Sec. 1. Short title and table of contents.

Sec. 2. Findings, purposes, and scope.

Sec. 3. Definitions.

TITLE I--PRELITIGATION PROCEDURES FOR YEAR 2000 CIVIL ACTIONS

Sec. 101. Pre-trial notice.

Sec. 102. Alternative dispute resolution.

Sec. 103. Pleading requirements.

Sec. 104. Duty to mitigate.

TITLE II--YEAR 2000 CIVIL ACTIONS INVOLVING CONTRACTS

Sec. 201. Contract preservation.

Sec. 202. Evidence of reasonable efforts.

TITLE III--YEAR 2000 CIVIL ACTIONS INVOLVING TORT AND OTHER NONCONTRACTUAL CLAIMS

Sec. 301. Proportionate liability.

Sec. 302. State of mind and foreseeability.

Sec. 303. Reasonable efforts defense.

Sec. 304. Economic losses.

TITLE IV--CLASS ACTIONS INVOLVING YEAR 2000 CLAIMS

Sec. 401. Minimum injury requirement.

TITLE V--EFFECTIVE DATE

Sec. 501. Effective date.

SEC. 2. FINDINGS, PURPOSES, AND SCOPE.

(a) FINDINGS- Congress finds the following:

(1)(A) Many information technology systems, devices, and programs 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 represent the year 1900 or thereafter or will fail to process those dates.

(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 remaining before January 1, 2000, on assessing, fixing, testing, and developing contingency plans to address any and all outstanding year 2000 computer date-change problems, so as to minimize possible disruptions associated with computer failures.

(3)(A) Because year 2000 computer date-change problems may affect virtually all businesses and other users of technology products to some degree, there is a substantial likelihood that actual or potential year 2000 failures 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 resources that are better devoted to curing year 2000 computer date-change problems and ensuring that systems remain or become operational.

(ii) It could threaten the network of valued and trusted business and customer relationships that are important to the effective functioning of the national economy.

(iii) It would strain the Nation's legal system, causing particular problems for the small businesses and individuals who already find that 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 business disputes could exacerbate the difficulties associated with the date change and work against the successful resolution of those difficulties.

(v) Concern about the potential for liability--in particular, concern about the substantial litigation expense associated with defending against even the most insubstantial lawsuits--is prompting many persons and businesses with technical expertise to avoid projects aimed at curing year 2000 computer date-change problems.

(b) PURPOSES- Based upon the power contained in 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 businesses and users of technology products reasonable incentives to solve year 2000 computer date-change problems before they develop;

(2) to encourage the resolution of year 2000 computer date-change disputes involving economic damages without recourse to unnecessary, time consuming, and wasteful litigation; and

(3) to lessen burdens on interstate commerce by discouraging insubstantial lawsuits, while also preserving the ability of individuals and businesses that have suffered real injury to obtain complete relief.

(c) SCOPE- Nothing in this Act affects claims for personal injury.

SEC. 3. DEFINITIONS.

In this Act:

(1) ACTUAL DAMAGES- The term `actual damages'--

(A) means damages for physical injury to any person or property; and

(B) includes the cost of repairing or replacing a product that has a material defect.

(2) CONTRACT- The term `contract' means a contract, tariff, license, or warranty.

(3) DEFENDANT- The term `defendant' means any person against whom a year 2000 claim is asserted.

(4) ECONOMIC LOSS- The term `economic loss'--

(A) means any damages other than damages arising out of personal injury or damage to tangible property; and

(B) includes damages for--

(i) lost profits or sales;

(ii) business interruption;

(iii) losses indirectly suffered as a result of the defendant's wrongful act or omission;

(iv) losses that arise because of the claims of third parties;

(v) losses that are required to be pleaded as special damages; or

(vi) items defined as consequential damages in the Uniform Commercial Code or an analogous State commercial law.

(5) MATERIAL DEFECT-

(A) IN GENERAL- 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 intended.

(B) EXCLUSIONS- The term does not include any defects that--

(i) has an insignificant or de minimis effect on the operation or functioning of an item;

(ii) affects only a component of an item that, as a whole, substantially operates or functions as designed; or

(ii) has an insignificant or de minimis effect on the efficacy of the service provided.

(6) PERSON- The term `person' means any natural person and any entity, organization, or enterprise, including any corporation, company (including any joint stock company), association, partnership, trust, or government entity.

(7) PLAINTIFF- The term `plaintiff' means any person who asserts a year 2000 claim.

(8) STATE- The Term `State' means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Northern Mariana Islands, the U.S. Virgin Islands, Guam, American Samoa, and any other territory or possession of the United States, and any political subdivision thereof.

(9) YEAR 2000 CIVIL ACTION- The term `year 2000 civil action'--

(A) means any civil action of any kind brought in any court under Federal, State, or foreign law, in which--

(i) a year 2000 claim is asserted; and

(ii) any claim or defense is related, directly or indirectly, to an actual or potential year 2000 failure; and

(B) does not include any action brought by a Federal, State, or other public entity, agency, or authority acting in a regulatory, supervisory, or enforcement capacity.

(10) YEAR 2000 CLAIM- The term `year 2000 claim' means any claim or cause of action of any kind, whether asserted by way of claim, counterclaim, cross-claim, third-party claim, or otherwise, in which the plaintiff's alleged loss or harm resulted, directly or indirectly, from an actual or potential year 2000 failure.

(11) YEAR 2000 FAILURE- The term `year 2000 failure' means any failure by any device or system (including any computer system and any microchip or integrated circuit embedded in another device or product), or any software, firmware, or other set or collection of processing instructions, however constructed, in processing, calculating, comparing, sequencing, displaying, storing, transmitting, or receiving date-related data, including--

(A) the failure to accurately administer or account for transitions or comparisons from, into, and between the 20th and 21st centuries, and between 1999 and 2000; or

(B) the failure to recognize or accurately process any specific date, and the failure accurately to account for the status of the year 2000 as a leap year.

TITLE I--PRELITIGATION PROCEDURES FOR YEAR 2000 CIVIL ACTIONS

SEC. 101. PRE-TRIAL NOTICE.

(a) NOTIFICATION PERIOD-

(1) IN GENERAL- Before filing a year 2000 claim, except an action for a claim that seeks only injunctive relief, a prospective plaintiff shall be required to provide to each prospective defendant a written notice that identifies and describes with particularity--

(A) any manifestation of a material defect alleged to have caused injury;

(B) the injury allegedly suffered or reasonably risked by the prospective plaintiff; and

(C) the relief or action sought by the prospective plaintiff.

(2) COMMENCEMENT OF ACTION- Except as provided in subsections (c) and (e), a prospective plaintiff shall not file a year 2000 claim in Federal or State court until the expiration of the 90-day period beginning on the date on which the prospective plaintiff provides notice under paragraph (1).

(b) RESPONSE TO NOTICE- Not later than 30 days after receipt of the notice specified in subsection (a), each prospective defendant shall provide each prospective plaintiff a written statement that--

(1) acknowledges receipt of the notice; and

(2) describes any actions that the defendant will take, or has taken, to address the defect or injury identified by the prospective plaintiff in the notice.

(c) FAILURE TO RESPOND- If a prospective defendant fails to respond to a notice provided under subsection (a)(1) during the 30-day period prescribed in subsection (b) or does not include in the response a description of actions referred to in subsection (b)(2)--

(1) the 90-day waiting period identified in subsection (a) shall terminate at the expiration of the 30-day period specified in subsection (b) with respect to that prospective defendant; and

(2) the prospective plaintiff may commence a year 2000 civil action against such prospective defendant immediately upon the termination of that waiting period.

(d) FAILURE TO PROVIDE NOTICE-

(1) IN GENERAL- Subject to subsections (c) and (e), a defendant may treat a complaint filed by the plaintiff as a notice required under subsection (a) by so informing the court and the plaintiff if the defendant determines that a plaintiff has commenced a year 2000 civil action--

(A) without providing the notice specified in subsection (a); or

(B) before the expiration of the waiting period specified in subsection (a).

(2) STAY- If a defendant elects under paragraph (1) to treat a complaint as a notice--

(A) the court shall stay all discovery and other proceedings in the action for the period specified in subsection (a) beginning on the date of filing of the complaint; and

(B) the time for filing answers and all other pleadings shall be tolled during this 90-day period.

(e) EFFECT OF CONTRACTUAL WAITING PERIODS- In any case in which a contract requires notice of nonperformance and provides for a period of delay before the initiation of suit for breach or repudiation of contract, the contractual period of delay controls and shall apply in lieu of the waiting period specified in subsections (a) and (d).

(f) SANCTION FOR FRIVOLOUS INVOCATION OF THE STAY PROVISION- If a defendant acts under subsection (d) to stay an action, and the court subsequently finds that the assertion by the defendant that the action is a year 2000 civil action was frivolous and made for the purpose of causing unnecessary delay, the court may impose a sanction, including an order to make payments to opposing parties in accordance with Rule 11 of the Federal Rules of Civil Procedure.

(g) COMPUTATION OF TIME- For purposes of this section, the rules regarding computation of time shall be governed by the applicable Federal or State rules of civil procedure.

SEC. 102. ALTERNATIVE DISPUTE RESOLUTION.

(a) REQUESTS MADE DURING NOTIFICATION PERIOD- At any time during the 90-day notification period under section 101(a), either party may request the other party to use alternative dispute resolution. If, based upon that request, the parties enter into an agreement to use alternative dispute resolution, the parties may also agree to an extension of that 90-day period.

(b) REQUEST MADE AFTER NOTIFICATION PERIOD- At any time after expiration of the 90-day notification period under section 101(a), whether before or after the filing of a complaint, either party may request the other party to use alternative dispute resolution.

(c) PAYMENT DATE- If a dispute that is the subject of the complaint or responsive pleading is resolved through alternative dispute resolution as provided in subsection (a) or (b), the defendant shall pay any amount of funds that the defendant is required to pay the plaintiff under the settlement not later than 30 days after the date on which the parties settle the dispute, and all other terms shall be implemented as promptly as possible based upon the agreement of the parties, unless another period of time is agreed to by the parties or established by contract between the parties.

SEC. 103. PLEADING REQUIREMENTS.

(a) NATURE AND AMOUNT OF DAMAGES- In any year 2000 civil action in which a plaintiff seeks an award of money damages, the complaint shall state with particularity with regard to each year 2000 claim--

(1) the nature and amount of each element of damages; and

(2) the factual basis for the calculation of the damages.

(b) MATERIAL DEFECTS- In any year 2000 civil action in which the plaintiff alleges that a product or service was defective, the complaint shall, with respect to each year 2000 claim--

(1) identify with particularity the manifestations of the material defects; and

(2) state with particularity the facts supporting the conclusion that the defects were material.

(c) REQUIRED STATE OF MIND- In any year 2000 civil action in which a year 2000 claim is asserted with respect to which the plaintiff may prevail only on proof

that the defendant acted with a particular state of mind, the complaint shall, with respect to each element of the claim, state in detail the facts giving rise to a strong inference that the defendant acted with the required state of mind.

(d) MOTION TO DISMISS; STAY OF DISCOVERY-

(1) DISMISSAL FOR FAILURE TO MEET PLEADING REQUIREMENTS- In any year 2000 civil action, the court shall, on the motion of any defendant, dismiss without prejudice any year 2000 claim asserted in the complaint if any of the requirements under subsection (a), (b), or (c) is not met with respect to the claim.

(2) STAY OF DISCOVERY- In any year 2000 civil action, all discovery and other proceedings shall be stayed during the pendency of any motion pursuant to this subsection to dismiss, unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or prevent undue prejudice to that party.

(3) PRESERVATION OF EVIDENCE-

(A) IN GENERAL-

(i) TREATMENT OF EVIDENCE- During the pendency of any stay of discovery entered under this paragraph, unless otherwise ordered by the court, any party to the action shall treat the items described in clause (ii) as if they were a subject of a continuing request for production of documents from an opposing party under applicable Federal or State rules of civil procedure.

(ii) ITEMS- The items described in this clause are all documents, data compilations (including electronically stored or recorded data), and tangible objects that--

(I) are in the custody or control of the party described in clause (i); and

(II) relevant to the allegations.

(B) SANCTION FOR WILLFUL VIOLATION- A party aggrieved by the willful failure of an opposing party to comply with clause (A) may apply to the court for an order awarding appropriate sanctions.

SEC. 104. DUTY TO MITIGATE DAMAGES.

Damages awarded for any year 2000 claim shall exclude any amount that the plaintiff reasonably should have avoided in light of any disclosure or information with respect to which the plaintiff was, or reasonably should have been, aware.

TITLE II--YEAR 2000 CIVIL ACTIONS INVOLVING CONTRACTS

SEC. 201. CONTRACT PRESERVATION.

(a) IN GENERAL- Subject to subsections (b) and (c), notwithstanding any other provision of Federal or State statutory or case law, in any action in which a year 2000 claim is advanced, in resolving that claim all written contractual terms, including limitations or exclusions of liability or disclaimers of warranty, shall be fully enforceable.

(b) INTERPRETATION OF CONTRACT- In any case in which a contract is silent as to a particular issue, the interpretation of the contract as to that issue shall be determined by applicable law in effect at the time that the contract was entered into.

(c) UNENFORCEABLE CONTRACTS- Subsection (a) does not apply in any case in which a court determines that the contract as a whole is unenforceable due to an infirmity in the formation of the contract under applicable law in effect at the time the contract was entered into.

SEC. 202. EVIDENCE OF REASONABLE EFFORTS.

(a) REASONABLE EFFORTS- In any action in which a year 2000 claim is advanced and in which a breach of contract or related claim is alleged, in the resolution of that claim, in addition to any other rights provided by applicable law, the party against whom the claim of breach is asserted shall be allowed, for the purpose of limiting the award of damages, to offer evidence that the implementation of the contract by that party, or the efforts made by that party to implement the contract, were reasonable in light of the circumstances.

(b) IMPOSSIBILITY OR COMMERCIAL IMPRACTICABILITY-

(1) IN GENERAL- In any action in which a year 2000 claim is advanced and in which a breach of contract or related claim is alleged, in resolving that claim applicability of the doctrines of impossibility and commercial impracticability shall be determined by applicable law in existence on January 1, 1999.

(2) RULE OF CONSTRUCTION- Nothing in this Act shall be construed as limiting or impairing a party's right to assert defenses based upon the doctrines referred to in paragraph (1).

TITLE III--YEAR 2000 CIVIL ACTIONS INVOLVING TORT AND OTHER NONCONTRACTUAL CLAIMS

SEC. 301. PROPORTIONATE LIABILITY.

(a) IN GENERAL-

(1) IN GENERAL- Except as provided in paragraph (2), a person against whom a final judgment is entered on a year 2000 claim shall be liable solely for the portion of the judgment that corresponds to the percentage of responsibility of that person, as determined under subsection (b).

(2) EXCEPTION- Paragraph (1) does not apply--

(A) if the plaintiff is an individual whose net worth is less than $200,000 and the plaintiffs damages were more than 10 percent of his or her net worth, the proportionately liable defendants are jointly and severally liable for any uncollectable amount; or

(B) if the defendant acted knowlingly.

(b) Determination of Responsibility-

(1) IN GENERAL- As to any year 2000 claim, the court shall instruct the jury to answer special interrogatories, or if there is no jury, make findings,

with respect to each defendant and plaintiff, and each of the other persons claimed by any of the parties to have caused or contributed to the loss incurred by the plaintiff, including persons who have entered into settlements with the plaintiff or plaintiffs, concerning the percentage of responsibility of that person, measured as a percentage of the total fault of all persons who caused or contributed to the total loss incurred by the plaintiff.

(2) CONTENTS OF SPECIAL INTERROGATORIES OR FINDINGS- The responses to interrogatories, or findings, as appropriate, under paragraph (1) shall specify--

(A) the total amount of damages that the plaintiff is entitled to recover; and

(B) the percentage of responsibility of each person found to have caused or contributed to the loss incurred by the plaintiff or plaintiffs.

(3) FACTORS FOR CONSIDERATION- In determining the percentage of responsibility under this paragraph, the trier of fact shall consider--

(A) the nature of the conduct of each person alleged to have caused or contributed to the loss incurred by the plaintiff; and

(B) the nature and extent of the causal relationship between the conduct of each such person and the damages incurred by the plaintiff or plaintiffs.

(4) NONDISCLOSURE TO JURY- The standard for allocation of damages under paragraph (1) shall not be disclosed to members of the jury.

SEC. 302. STATE OF MIND AND FORESEEABILITY.

(a) NEGLIGENCE- With respect to any year 2000 claim for money damages, the defendant shall not be liable unless the plaintiff establishes, in addition to all other requisite elements of the claim, that the actions of the defendant created an unreasonable risk of harm to the plaintiff.

(b) PRESERVATION OF EXISTING LAW- Nothing in subsection (a) shall be deemed to create any year 2000 claim or to relieve the plaintiff in any year 2000 civil action of the obligation of that plaintiff to establish any element of the cause of action of that plaintiff under applicable law.

SEC. 303. REASONABLE EFFORTS DEFENSE.

Except for breach or repudiation of contract claims, as to any year 2000 claim seeking money damages--

(1) the fact that a year 2000 failure occurred in an entity, facility, system, product, or component that was within the control of the party against whom the claim is asserted shall not constitute the sole basis for recovery; and

(2) the party against whom the claim is asserted shall be entitled to establish, as a complete defense to the claim, that the party took measures that were reasonable under the circumstances to prevent the year 2000 failure from occurring or from causing the damages upon which the claim is based.

SEC. 304. ECONOMIC LOSSES.

(a) IN GENERAL- Subject to subsection (b), a party to a year 2000 civil action may not recover economic losses for a year 2000 claim based on tort unless the party is able to show that at least one of the following circumstances exists:

(1) The recovery of these losses is provided for in the contract to which the party seeking to recover such losses is a party.

(2) If the contract is silent on those losses, and the application of the applicable Federal or State law that governed interpretation of the contract at the time the contract was entered into would allow recovery of such losses.

(3) These losses are incidental to a claim in the year 2000 civil action based on personal injury caused by a year 2000 failure.

(4) These losses are incidental to a claim in the year 2000 civil action based on damage to tangible property caused by a year 2000 failure.

(b) TREATMENT OF ECONOMIC LOSSES- Economic losses shall be recoverable in a year 2000 civil action only if applicable Federal law, or applicable State law embodied in statute or controlling judicial precedent as of January 1, 1999, permits the recovery of such losses in the action.

TITLE IV--CLASS ACTIONS INVOLVING YEAR 2000 CLAIMS

SEC. 401. MINIMUM INJURY REQUIREMENT.

(a) IN GENERAL- In any action involving a year 2000 claim that a product or service is defective, the action may be maintained as a class action in Federal or State court with respect to that claim only if--

(1) the claim satisfies all other prerequisites established by applicable Federal or State law; and

(2) the court finds that the alleged defect in the product or service was a material defect with respect to a majority of the members of the class.

(b) DETERMINATION BY COURT-

(1) IN GENERAL- As soon as practicable after the commencement of an action involving a year 2000 claim that a product or service is defective and that is brought as a class action, the court shall determine by order whether the requirement stated in paragraph (1) is satisfied.

(2) ORDERS- An order under this subsection may be--

(A) conditional; and

(B) altered or amended before the decision on the merits.

TITLE V--EFFECTIVE DATE

SEC. 501. EFFECTIVE DATE.

This Act and the amendments made by this Act shall take effect on January 1, 1999.

END