InformationWeek

June 7, 1999

Y2K: Who Pays?

Compromises may eliminate limits on year 2000 liability

By Bruce Caldwell

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federal law that would limit year 2000 liability, which could exceed $1 trillion by some estimates, could be signed by President Clinton as early as next week, according to some Capitol Hill sources. But compromise amendments made to obtain the necessary votes for passage in the Senate and to overcome the threat of a presidential veto may leave some less than satisfied.

Everyone could potentially sue or be sued over year 2000 computer issues, so everyone stands to benefit from a law that limits liability for Y2K problems, says Walter Andrews, co-chair of the year 2000 practice at Wiley, Rein, and Fielding, a Washington law firm. But the proposed compromises, particularly those that seek to throw out proposals to limit how much money in damages a lawsuit can seek, could result in a federal law that offers scarcely more protection for companies being sued than existing laws provide. In that case, Andrews says, lawyers may benefit the most because another layer of law will have been added to fight over in court.

Proponents of a federal Y2K liability bill include 250 industry associations such as the Information Technology Association of America, the National Association of Manufacturers, and the National Retail Federation. These groups support year 2000 liability laws that encourage companies to fix their systems and give others a chance to make fixes before suing them, says Cathy Hotka, VP of IS at the retailers' federation, which fears that a flood of Y2K lawsuits could hurt the economy and, by extension, retailers. One class-action suit has already been brought against electronic-goods retailers to force them to disclose Y2K problems with merchandise.

In the legislative arena, those goals quickly attracted controversy, causing the White House to pledge to veto any bill that restricts consumer rights and reduces incentives to fix year 2000 problems by limiting or eliminating legal liability for damages.

Still, there's optimism that a fair law will eventually be instituted. Says Marc Pearl, general counsel of the ITAA, "We believe it's possible to get a bill that encourages remediation and discourages litigation."