Statement by U.S. Senator Dianne Feinstein
“The Year 2000 Fairness and Responsibility Act”
February 24, 1999

Today, I am joining my colleague from Utah, Senator Orrin Hatch, chairman of the Judiciary Committee, to introduce the Year 2000 Fairness and Responsibility Act. This bill, supported by 85 industry organizations, is especially important to California, where over 20 percent of the nation’s high-tech jobs are located.

The genesis of the bill was a request by several industry groups -- including the Semiconductor Industry Association (SIA), the National Association of Manufacturers (NAM), the Chamber of Commerce and the Information Technology Association of America -- to develop legislation to prevent frivolous and baseless lawsuits that could jeopardize companies actually solving Y2K problems.

In concert with Senator Hatch and industry groups, this specific and moderate bill has been drafted. In developing this legislation, we have been seeking to solve an important problem and feel we have worked to develop a fair bill. We remain willing to address concerns with this legislation. It is a starting point, not a final piece of legislation.

It is a bill that could prevent frivolous and baseless litigation, but would not restrict an individual’s right to sue to mitigate real damages.

This is accomplished by:

1. Providing a 90-day “cooling off period,” during which no Y2K lawsuit may be filed and a three-step process must be followed:

A. Anyone alleging harm due to a Y2K failure must first provide written notice to the potential defendant of the problem.

B. The defendant then has 30 days to respond in writing.

C. The defendant also has 60 additional days to fix the problem.

This cooling off period is important because it allows companies to concentrate on solving the problem before suits are filed and hopefully, it will eliminate the rush to litigation that many anticipate.

Obviously, the hope is that if a company is given an opportunity to solve a Y2K problem, that company will proceed to do so with dispatch. Therefore, there will be fewer injured parties, ergo, fewer will need to file suit.

2. Limiting Punitive Damages to $250,000 or three times economic damages, whichever is greater, for most larger businesses.

• However, for individuals whose net worth does not exceed $500,000 or for small businesses, of fewer that 25 full-time employees, punitive damages would be limited to the lesser of $250,000 or three times economic damages.

3. Providing for proportionate liability in which the liability of a defendant would be limited to the percentage proportion of the company’s fault in causing the alleged harm, in other words, “no deep pockets.”

• The legislation requires that the judge or jury must make special findings in any Y2K case, to determine who is at fault and by what percent.

4. Establishing Requirements that the plaintiffs must allege specific harm and damages when filing suit, including the factual basis for the calculation of damages.

5. Providing either party the opportunity to request Alternative Dispute Resolution at any time during the 90-day cooling off period provided for in this bill.

• If the parties agree to use Alternative Dispute Resolution and the dispute is settled, the defendant must pay the settlement in 30 days unless other arrangements are agreed to.

6. Providing for Contract Preservation so if a contract specifically limits liability for actions that would include a Y2K action, no recovery is available beyond the contract terms.

• Recovery, however, is available if the contract does not mention liability limitations.

• Recovery is also available for any contract entered into without a true “meeting of the minds.” This would include contracts, for instance, between large companies and ordinary consumers. Even if the terms of use within a product box state a limit on liability, courts can award Y2K damages.

7. Setting Minimum Injury Requirements for Class Action Lawsuits to prevent attorneys from gathering large numbers of plaintiffs that have not really even been harmed by a given Y2K defect.

8. Requiring Notification to all potential members of a Y2K class action by U.S. mail, return receipt requested.

• Notice must include information about the nature of the action, the jurisdiction, claims that are not being pursued, and the arrangement for attorneys fees.

9. Providing federal courts with jurisdiction over Y2K lawsuits so long as any member of the class is a citizen of a State different from the defendant (or is a citizen of a foreign country).

• Current law states that if any class representative of the class action is a citizen of the State in which the business is located, the federal courts have no diversity jurisdiction.
This makes it easy for the attorneys filing a class action to have it heard in state court.

• However, the bill does allow a federal court to abstain from exerting jurisdiction in cases where most class members are in the same State as the defendant and the case will be governed primarily by that State’s law, or if the class is small or the amount in controversy is less than $1 million.

In summary, it is clear that there are consumers and businesses that have been and will be harmed by Y2K defects.

For these companies and individuals impacted by Y2K problems, the Hatch-Feinstein bill preserves the right to sue and to recover damages, and actually increases their chances of finding a quick solution to their problems.

But the bill also prevents the kind of litigation nightmares that would distract from Y2K solutions and drain resources from already burdened companies throughout the country.

Click here to view more information about theYear 2000 Fairness and Responsibility Act.