President To Sign Y2K Liability Bill

Congressional leaders and the White House reached compromises on year 2000 liability during negotiations yesterday, and President Clinton appears ready to sign the bill into law.

The Clinton administration had previously promised to veto the legislation because, in its view, it reduced the rights of consumers to obtain compensation in the courts, removed incentives for companies to make year 2000 repairs, and infringed on procedural laws in the 50 states.

Some observers, however, believe the administration was more concerned about balancing the interests of two important constituencies: the high-tech industry and trial lawyers.

The compromise legislation, which will expire in 2003, still requires a 90-day cooling-off period before a lawsuit can be filed, during which time a 30-day notice of a year 2000 problem has to be provided to the potential defendant, who then has 60 days to attempt to provide a remedy. Also remaining are provisions exempting municipalities and government entities from punitive damages, and limiting punitive damages to $250,000 for companies with fewer than 50 employees.

Key elements of the compromise make it more difficult to file year 2000 class-action lawsuits in federal courts by raising the minimum damages sought to $10 million from $1 million and the minimum number of class members to 100 from 50, while exempting individual consumer lawsuits from these thresholds. The compromise bill also amends the proportionate responsibility rule to require other defendants to pay twice the share of insolvent defendants, and a defendant found to be a "bad actor," an irresponsible party, is required to pay three times the share of an insolvent defendant; leaving intact state laws on fraud and negligence.

The compromises create an imperfect bill from the perspective of the high-tech industry because of the proportionate liability rules and punitive damage caps for small businesses only, says Harris Miller, president of the Information Technology Association of America. But the ITAA is in favor of the compromise legislation as a whole, he says.

The Senate will vote on the compromise bill Thursday before it goes to the president for signing.

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