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   Mr. REED. Mr. President, I would like to take this opportunity to discuss S. 96, the McCain bill concerning Y2K litigation. It is unfortunate that this bill has, to some extent, been utilized by those on both extremes of the tort reform debate: with proponents arguing that opposition to the bill reflects contempt for our economy and a few opponents accusing the bill's supporters of contempt for consumers' rights. The truth, as usual, is somewhere in between these two poles.

   As our economy evolves, becoming national and international in scope, situations will arise that demand procedural and substantive changes to our legal system. Moderate, balanced tort reform is an issue on which I have worked for some years. I approach each issue with the same question: can our legal system be made more efficient while continuing to provide adequate, just protections to consumers? This approach has led me to support reforms which have been validated by the test of time.

   Mr. President, in 1994, I supported one of the first tort reform measures to pass Congress, the Aviation Revitalization Act of 1994. At that time small plane manufacturers had been almost extinguished by costly litigation. This narrowly-tailored legislation limited the period, to eighteen years, in which manufactures could be sued for design or manufacturing defects. In the six

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   In 1995, I sought to apply this same principle to all durable goods, some of which remain in the workplace for forty, fifty, sixty years or more. Tool and machine manufacturers in Rhode Island and the nation were saddled with costs stemming from litigation over products they made a half century ago, some of which had been modified by others. As a result, I supported tort reform for durable goods which limited the statute of repose, reasonably capped punitive damages, and implemented proportionate liability to de minimis tortfeasors. In an effort to further the reform effort, I voted for this bill even though I was concerned that its punitive damage caps and proportionate liability sections were too broad. My support for the bill included a vote to override President Clinton's veto.

   My concerns about this bill were borne out by the fact that the veto override was not successful. Proponents of tort reform allowed their view of perfection to become an enemy of good, sensible reform. Indeed, their stubbornness continues to frustrate progress to this day.

   Just last year, a compromise tort reform bill negotiated by Senator ROCKEFELLER between the Clinton Administration and members of the business community was rejected by some who wanted only sweeping changes to current tort law. I am afraid that some have brought this same sentiment to the Y2K issue.

   In addition to addressing the products liability reform issue in 1995, I was also approached by members of the securities industry seeking to amend litigation rules pertaining to securities law. The industry wished to combat frivolous litigation. Indeed, it was obvious that some class action suits were being filed after a precipitous drop in the value of a corporation's stock, without evidence of fraud. Such lawsuits frequently inflict substantial legal costs upon corporations, harming both the business and its shareholders. This sort of activity benefitted no one but the attorneys who brought the cases.

   As a result, I supported both procedural changes and requirements that specific examples of fraud be listed in a lawsuit as embodied in the Private Securities Litigation Reform Act of 1995. Again, my support for this legislation required my vote to override a veto. This time, that override was successful. In my view, that success was due to the moderate, balanced approach of the bill.

   In practice, the legislation successfully ended frivolous lawsuits in federal courts such that I worked with colleagues and the Chairman of the Securities and Exchange Commission to implement the same rules at the state level. This effort resulted in the Securities Litigation Uniform Standards Act of 1998. Again, this bill only received Presidential support after an attempt to inject overly broad provisions into the bill were defeated. Courts are now applying this standard in a manner that balances the interest we all have in ensuring consumer protection, while also deterring nonmeritorious law suits.

   I think the record is clear. When Congress addresses identifiable inequalities or inefficiencies in our legal system, progress can be made. However, when legislation focuses on broader, philosophical debates, directly pitting the interests of consumers against manufactures, consensus cannot be reached. It is my hope that the Senate will keep this lesson in mind when the Y2K legislation goes to conference.

   As the work of the Senate's Y2K Committee and the President's Council on the Year 2000 Conversion have shown, the millennium bug will cause disruptions. These disruptions will inflict costs on individuals and businesses. The question is: how will we adjudicate who will bear the burden of these costs?

   Thus far, as demonstrated by a recent report by the Congressional Research Service, there have been only 48 Y2K related lawsuits filed. Recently, the Gartner Group, a consulting firm specializing in Y2K redress, reported that a quarter of all Y2K failures have already occurred. Given the paucity of Y2K lawsuits today, one could question whether the dire predictions of billions of dollars in Y2K litigation is overestimated. At the very least, it is

   certain that the current 48 suits have not provided much in the way of proof concerning the inequities in our legal system that will allow attorneys to compound and exacerbate the costs associated with the Y2K problem.

   Some of these 48 lawsuits are class actions against inexpensive software manufactured several years ago. The merit of such suits is dubious, given that no harm has yet occurred and the ``reasonableness'' of a consumer's expectation that $30 software would last several years and withstand the millennium bug.

   These 48 lawsuits also contain examples, however, of companies attempting to improperly profit from their own Y2K unpreparedness. For example, one software company sold a product to small business men and women for $13,000 in 1996 with implied warrantees for proper use for a decade. A year later the company sent its customers notice that the software was not Y2K compatible. The software, would, therefore, not work in two years. The company offered its customers a $25,000 ``upgrade'' which would ensure that the software would work properly for half the time it was warranted. Needless to say, a free fix was quickly offered by this software manufacturer once a class action lawsuit was filed.

   The question the Senate must address in this legislation is what changes in our legal system will encourage everyone to address Y2K problems before they strike while allowing defrauded consumers continued opportunity to obtain redress. Indeed, the greatest danger would seem to be that this legislation unintentionally rewards bad faith companies that fail to address Y2K problems. Again, according to the Gartner Group, some $600 billion will be spent by the end of the year in trying to find, patch, and test computer systems at risk of fault. Bad faith companies that have not taken these responsible steps should not be rewarded.

   I supported legislation put forward by Senators KERRY, ROBB, BREAUX, REID and Leader DASCHLE which encourages redress not litigation, deters frivolous lawsuits, provides good-faith actors with additional protections if they are sued, and allows individual consumers the protections they are afforded under current law. Specifically, the amendment requires that plaintiffs provide defendants with notice of a lawsuit and time for the defendant to respond with proposed redress to the problem. Additionally, plaintiffs would have to cite with specificity the material defect of their product as well as the damages incurred. Class action lawsuits are limited to those involving material harm. Current redress of Y2K problems is encouraged by the provision of the amendment which requires immediate mitigation and limits damages for those who fail in this regard. The amendment provides commercial transactions with the benefit of their express contract, while omitting consumers, who do not have the economic bargaining power or legal departments of large corporations, from the scope of the legislation. The amendment also discourages plaintiffs from simply suing the defendant with the ``deepest pockets'' by providing proportionate liability for companies that have acted responsibly in addressing Y2K problems in their products.

   On balance, the Kerry/Daschle amendment is a fair method of addressing identifiable problems in our litigation system as they relate to potential Y2K litigation.

   I must also acknowledge that the McCain legislation has markedly improved from its original form due in no small part to the efforts of Senator DODD. As first introduced, the bill appeared to be a wish-list for those who have attempted over the past decades, without success, to completely overhaul our litigation system. S. 96, however, continues to contain provisions that simply appear to transfer Y2K costs from defendants to plaintiffs without equitable cause. The bill provides protections to plaintiffs not afforded defendants, caps punitive damages for bad faith actors, limits joint and several liability for bad faith businesses, prohibits states like Rhode Island from awarding non-economic damages even in instances of fraud, federalizes all class action lawsuits, and fails

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   Perhaps just as importantly as its substantive problems, the Clinton Administration has threatened a veto of S. 96. With six months until the end of the year, we do not have two, three, or four months to negotiate compromises.

   It is my hope that those of us who are truly in support of reforming the current system will prevail in softening some of S. 96's provisions to arrive at legislation that the Administration can and will support. While this will not result in legislation that organizations can use to fuel their drive to overhaul the entire tort system, it will allow us to mitigate Y2K litigation costs while protecting those who have been wronged.

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