[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 775 Engrossed Amendment Senate (EAS)]
In the Senate of the United States,
June 15, 1999.
Resolved, That the bill from the House of Representatives (H.R.
775) entitled ``An Act to establish certain procedures for civil
actions brought for damages relating to the failure of any device or
system to process or otherwise deal with the transition from the year
1999 to the year 2000, and for other purposes.'', do pass with the
following
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE; TABLE OF SECTIONS.
(a) Short Title.--This Act may be cited as the ``Y2K Act''.
(b) Table of Sections.--The table of sections for this Act is as
follows:
Sec. 1. Short title; table of sections.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.
Sec. 4. Application of Act.
Sec. 5. Punitive damages limitations.
Sec. 6. Proportionate liability.
Sec. 7. Prelitigation notice.
Sec. 8. Pleading requirements.
Sec. 9. Duty to mitigate.
Sec. 10. Application of existing impossibility or commercial
impracticability doctrines.
Sec. 11. Damages limitation by contract.
Sec. 12. Damages in tort claims.
Sec. 13. State of mind; bystander liability; control.
Sec. 14. Appointment of special masters or magistrate judges for Y2K
actions.
Sec. 15. Y2K actions as class actions.
Sec. 16. Applicability of State law.
Sec. 17. Admissible evidence ultimate issue in State courts.
Sec. 18. Suspension of penalties for certain year 2000 failures by
small business concerns.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds that:
(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 dates after December 31,
1999.
(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.
(4) It is appropriate for the Congress to enact legislation
to assure that Y2K problems do not unnecessarily disrupt
interstate commerce or create unnecessary caseloads in Federal
courts and to provide initiatives to help businesses prepare
and be in a position to withstand the potentially devastating
economic impact of Y2K.
(5) Resorting to the legal system for resolution of Y2K
problems is not feasible for many businesses and individuals
who already find the legal system inaccessible, particularly
small businesses and individuals who already find the legal
system inaccessible, because of its complexity and expense.
(6) The delays, expense, uncertainties, loss of control,
adverse publicity, and animosities that frequently accompany
litigation of business disputes can only exacerbate the
difficulties associated with the Y2K date change, and work
against the successful resolution of those difficulties.
(7) 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.
(8) A proliferation of frivolous Y2K lawsuits by
opportunistic parties may further limit access to courts by
straining the resources of the legal system and depriving
deserving parties of their legitimate rights to relief.
(9) Congress encourages businesses to approach their Y2K
disputes responsibly, and to avoid unnecessary, time-consuming
and costly litigation about Y2K failures, particularly those
that are not material. Congress supports good faith
negotiations between parties when there is a dispute over a Y2K
problem, and, if necessary, urges the parties to enter into
voluntary, nonbinding mediation rather than litigation.
(b) Purposes.--Based upon the power of the Congress under 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 Y2K computer date-change problems before
they develop;
(2) to encourage continued Y2K remediation and testing
efforts by providers, suppliers, customers, and other
contracting partners;
(3) to encourage private and public parties alike to
resolve Y2K disputes by alternative dispute mechanisms in order
to avoid costly and time-consuming litigation, to initiate
those mechanisms as early as possible, and to encourage the
prompt identification and correction of Y2K problems; and
(4) to lessen the burdens on interstate commerce by
discouraging insubstantial lawsuits while preserving the
ability of individuals and businesses that have suffered real
injury to obtain complete relief.
SEC. 3. DEFINITIONS.
In this Act:
(1) Y2K action.--The term ``Y2K action''--
(A) means a civil action commenced in any Federal
or State court, or an agency board of contract appeal
proceeding, in which the plaintiff's alleged harm or
injury resulted from a Y2K failure;
(B) includes a civil action commenced in any
Federal or State court by a governmental entity when
acting in a commercial or contracting capacity; but
(C) does not include an action brought by a
governmental entity acting in a regulatory,
supervisory, or enforcement capacity.
(2) Y2K failure.--The term ``Y2K failure'' means 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 to process, to calculate, to
compare, to sequence, to display, to store, to transmit, or to
receive year-2000 date-related data, including failures--
(A) to deal with or account for transitions or
comparisons from, into, and between the years 1999 and
2000 accurately;
(B) to recognize or accurately to process any
specific date in 1999, 2000, or 2001; or
(C) accurately to account for the year 2000's
status as a leap year, including recognition and
processing of the correct date on February 29, 2000.
(3) Government entity.--The term ``government entity''
means an agency, instrumentality, or other entity of Federal,
State, or local government (including multijurisdictional
agencies, instrumentalities, and entities).
(4) Material defect.--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 according
to its specifications. The term ``material defect'' does not
include a defect that--
(A) has an insignificant or de minimis effect on
the operation or functioning of an item or computer
program;
(B) affects only a component of an item or program
that, as a whole, substantially operates or functions
as designed; or
(C) has an insignificant or de minimis effect on
the efficacy of the service provided.
(5) Personal injury.--The term ``personal injury'' means
physical injury to a natural person, including--
(A) death as a result of a physical injury; and
(B) mental suffering, emotional distress, or
similar injuries suffered by that person in connection
with a physical injury.
(6) 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 United States
Virgin Islands, Guam, American Samoa, and any other territory
or possession of the United States, and any political
subdivision thereof.
(7) Contract.--The term ``contract'' means a contract,
tariff, license, or warranty.
(8) Alternative dispute resolution.--The term ``alternative
dispute resolution'' means any process or proceeding, other
than adjudication by a court or in an administrative
proceeding, to assist in the resolution of issues in
controversy, through processes such as early neutral
evaluation, mediation, minitrial, and arbitration.
SEC. 4. APPLICATION OF ACT.
(a) General Rule.--This Act applies to any Y2K action brought in a
State or Federal court after January 1, 1999, for a Y2K failure
occurring before January 1, 2003, including any appeal, remand, stay,
or other judicial, administrative, or alternative dispute resolution
proceeding in such an action.
(b) No New Cause of Action Created.--Nothing in this Act creates a
new cause of action, and, except as otherwise explicitly provided in
this Act, nothing in this Act expands any liability otherwise imposed
or limits any defense otherwise available under Federal or State law.
(c) Claims for Personal Injury or Wrongful Death Excluded.--This
Act does not apply to a claim for personal injury or for wrongful
death.
(d) Contract Preservation.--
(1) In general.--Subject to paragraph (2), in any Y2K
action any written contractual term, including a limitation or
an exclusion of liability, or a disclaimer of warranty, shall
be strictly enforced unless the enforcement of that term would
manifestly and directly contravene applicable State law
embodied in any statute in effect on January 1, 1999,
specifically addressing that term.
(2) Interpretation of contract.--In any Y2K action in which
a contract to which paragraph (1) applies 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 the contract was executed.
(e) Preemption of State Law.--This Act supersedes State law to the
extent that it establishes a rule of law applicable to a Y2K action
that is inconsistent with State law, but nothing in this Act
implicates, alters, or diminishes the ability of a State to defend
itself against any claim on the basis of sovereign immunity.
(f) Application with Year 2000 Information and Readiness Disclosure
Act.--Nothing in this Act supersedes any provision of the Year 2000
Information and Readiness Disclosure Act.
(g) Application to Actions Brought by a Governmental Entity.--
(1) In general.--To the extent provided in this subsection,
this Act shall apply to an action brought by a governmental
entity described in section 3(1)(C).
(2) Definitions.--In this subsection:
(A) Defendant.--
(i) In general.--The term ``defendant''
includes a State or local government.
(ii) State.--The term ``State'' means each
of the several States of the United States, the
District of Columbia, the Commonwealth of
Puerto Rico, the Virgin Islands, Guam, American
Samoa, and the Commonwealth of the Northern
Mariana Islands.
(iii) Local government.--The term ``local
government'' means--
(I) any county, city, town,
township, parish, village, or other
general purpose political subdivision
of a State; and
(II) any combination of political
subdivisions described in subclause (I)
recognized by the Secretary of Housing
and Urban Development.
(B) Y2K upset.--The term ``Y2K upset''--
(i) means an exceptional incident involving
temporary noncompliance with applicable
federally enforceable measurement or reporting
requirements because of factors related to a
Y2K failure that are beyond the reasonable
control of the defendant charged with
compliance; and
(ii) does not include--
(I) noncompliance with applicable
federally enforceable requirements that
constitutes or would create an imminent
threat to public health, safety, or the
environment;
(II) noncompliance with applicable
federally enforceable requirements that
provide for the safety and soundness of
the banking or monetary system,
including the protection of depositors;
(III) noncompliance to the extent
caused by operational error or
negligence;
(IV) lack of reasonable
preventative maintenance; or
(V) lack of preparedness for Y2K.
(3) Conditions necessary for a demonstration of a y2k
upset.--A defendant who wishes to establish the affirmative
defense of Y2K upset shall demonstrate, through properly
signed, contemporaneous operating logs, or other relevant
evidence that--
(A) the defendant previously made a good faith
effort to effectively remediate Y2K problems;
(B) a Y2K upset occurred as a result of a Y2K
system failure or other Y2K emergency;
(C) noncompliance with the applicable federally
enforceable measurement or reporting requirement was
unavoidable in the face of a Y2K emergency or was
intended to prevent the disruption of critical
functions or services that could result in the harm of
life or property;
(D) upon identification of noncompliance the
defendant invoking the defense began immediate actions
to remediate any violation of federally enforceable
measurement or reporting requirements; and
(E) the defendant submitted notice to the
appropriate Federal regulatory authority of a Y2K upset
within 72 hours from the time that it became aware of
the upset.
(4) Grant of a y2k upset defense.--Subject to the other
provisions of this subsection, the Y2K upset defense shall be a
complete defense to any action brought as a result of
noncompliance with federally enforceable measurement or
reporting requirements for any defendant who establishes by a
preponderance of the evidence that the conditions set forth in
paragraph (3) are met.
(5) Length of y2k upset.--The maximum allowable length of
the Y2K upset shall be not more than 15 days beginning on the
date of the upset unless granted specific relief by the
appropriate regulatory authority.
(6) Violation of a y2k upset.--Fraudulent use of the Y2K
upset defense provided for in this subsection shall be subject
to penalties provided in section 1001 of title 18, United
States Code.
(7) Expiration of Defense.--The Y2K upset defense may not
be asserted for a Y2K upset occurring after June 30, 2000.
(h) Credit Protection from Year 2000 Failures.--
(1) In general.--No person who transacts business on
matters directly or indirectly affecting mortgages, credit
accounts, banking, or other financial transactions shall cause
or permit a foreclosure, default, or other adverse action
against any other person as a result of the improper or
incorrect transmission or inability to cause transaction to
occur, which is caused directly or indirectly by an actual or
potential Y2K failure that results in an inability to
accurately or timely process any information or data, including
data regarding payments and transfers.
(2) Scope.--The prohibition of such adverse action to
enforce obligations referred to in paragraph (1) includes but
is not limited to mortgages, contracts, landlord-tenant
agreements, consumer credit obligations, utilities, and banking
transactions.
(3) Adverse credit information.--The prohibition on adverse
action in paragraph (1) includes the entry of any negative
credit information to any credit reporting agency, if the
negative credit information is due directly or indirectly by an
actual or potential disruption of the proper processing of
financial responsibilities and information, or the inability of
the consumer to cause payments to be made to creditors where
such inability is due directly or indirectly to an actual or
potential Y2K failure.
(4) Actions may resume after problem is fixed.--No
enforcement or other adverse action prohibited by paragraph (1)
shall resume until the obligor has a reasonable time after the
full restoration of the ability to regularly receive and
dispense data necessary to perform the financial transaction
required to fulfill the obligation.
(5) Subsection does not apply to non-y2k-related
problems.--This subsection shall not affect transactions upon
which a default has occurred prior to a Y2K failure that
disrupts financial or data transfer operations of either party.
(6) Enforcement of obligations merely tolled.--This
subsection delays but does not prevent the enforcement of
financial obligations.
SEC. 5. PUNITIVE DAMAGES LIMITATIONS.
(a) In General.--In any Y2K action in which punitive damages are
permitted by applicable law, the defendant shall not be liable for
punitive damages unless the plaintiff proves by clear and convincing
evidence that the applicable standard for awarding damages has been
met.
(b) Caps on Punitive Damages.--
(1) In general.--Subject to the evidentiary standard
established by subsection (a), punitive damages permitted under
applicable law against a defendant described in paragraph (2)
in a Y2K action may not exceed the lesser of--
(A) 3 times the amount awarded for compensatory
damages; or
(B) $250,000.
(2) Defendant described.--A defendant described in this
paragraph is a defendant--
(A) who--
(i) is sued in his or her capacity as an
individual; and
(ii) whose net worth does not exceed
$500,000; or
(B) that is an unincorporated business, a
partnership, corporation, association, or organization
with fewer than 50 full-time employees.
(3) No cap if injury specifically intended.--Paragraph (1)
does not apply if the plaintiff establishes by clear and
convincing evidence that the defendant acted with specific
intent to injure the plaintiff.
(c) Government Entities.--Punitive damages in a Y2K action may not
be awarded against a government entity.
SEC. 6. PROPORTIONATE LIABILITY.
(a) In General.--Except as provided in subsections (b) and (c), a
person against whom a final judgment is entered in a Y2K action shall
be liable solely for the portion of the judgment that corresponds to
the relative and proportional responsibility of that person. In
determining the percentage of responsibility of any defendant, the
trier of fact shall determine that percentage as a percentage of the
total fault of all persons, including the plaintiff, who caused or
contributed to the total loss incurred by the plaintiff.
(b) Proportionate Liability.--
(1) Determination of responsibility.--In any Y2K action,
the court shall instruct the jury to answer special
interrogatories, or, if there is no jury, the court shall make
findings with respect to each defendant, including defendants
who have entered into settlements with the plaintiff or
plaintiffs, concerning--
(A) the percentage of responsibility, if any, of
each defendant, measured as a percentage of the total
fault of all persons who caused or contributed to the
loss incurred by the plaintiff; and
(B) if alleged by the plaintiff, whether the
defendant (other than a defendant who has entered into
a settlement agreement with the plaintiff)--
(i) acted with specific intent to injure
the plaintiff; or
(ii) knowingly committed fraud.
(2) Contents of special interrogatories or findings.--The
responses to interrogatories or findings under paragraph (1)
shall specify the total amount of damages that the plaintiff is
entitled to recover and the percentage of responsibility of
each defendant found to have caused or contributed to the loss
incurred by the plaintiff.
(3) Factors for consideration.--In determining the
percentage of responsibility under this subsection, the trier
of fact shall consider--
(A) the nature of the conduct of each person found
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.
(c) Joint Liability for Specific Intent or Fraud.--
(1) In general.--Notwithstanding subsection (a), the
liability of a defendant in a Y2K action is joint and several
if the trier of fact specifically determines that the
defendant--
(A) acted with specific intent to injure the
plaintiff; or
(B) knowingly committed fraud.
(2) Fraud; recklessness.--
(A) Knowing commission of fraud described.--For
purposes of subsection (b)(1)(B)(ii) and paragraph
(1)(B) of this subsection, a defendant knowingly
committed fraud if the defendant--
(i) made an untrue statement of a material
fact, with actual knowledge that the statement
was false;
(ii) omitted a fact necessary to make the
statement not be misleading, with actual
knowledge that, as a result of the omission,
the statement was false; and
(iii) knew that the plaintiff was
reasonably likely to rely on the false
statement.
(B) Recklessness.--For purposes of subsection
(b)(1)(B) and paragraph (1) of this subsection,
reckless conduct by the defendant does not constitute
either a specific intent to injure, or the knowing
commission of fraud, by the defendant.
(3) Right to contribution not affected.--Nothing in this
section affects the right, under any other law, of a defendant
to contribution with respect to another defendant found under
subsection (b)(1)(B), or determined under paragraph (1)(B) of
this subsection, to have acted with specific intent to injure
the plaintiff or to have knowingly committed fraud.
(d) Special Rules.--
(1) Uncollectible share.--
(A) In general.--Notwithstanding subsection (a),
if, upon motion made not later than 6 months after a
final judgment is entered in any Y2K action, the court
determines that all or part of the share of the
judgment against a defendant for compensatory damages
is not collectible against that defendant, then each
other defendant in the action is liable for the
uncollectible share as follows:
(i) Percentage of net worth.--The other
defendants are jointly and severally liable for
the uncollectible share if the plaintiff
establishes that--
(I) the plaintiff is an individual
whose recoverable damages under the
final judgment are equal to more than
10 percent of the net worth of the
plaintiff; and
(II) the net worth of the plaintiff
is less than $200,000.
(ii) Other plaintiffs.--For a plaintiff not
described in clause (i), each of the other
defendants is liable for the uncollectible
share in proportion to the percentage of
responsibility of that defendant, except that
the total liability of a defendant under this
clause may not exceed 50 percent of the
proportionate share of that defendant, as
determined under subsection (b)(2).
(B) Overall limit.--The total payments required
under subparagraph (A) from all defendants may not
exceed the amount of the uncollectible share.
(C) Subject to contribution.--A defendant against
whom judgment is not collectible is subject to
contribution and to any continuing liability to the
plaintiff on the judgment.
(2) Special right of contribution.--To the extent that a
defendant is required to make an additional payment under
paragraph (1), that defendant may recover contribution--
(A) from the defendant originally liable to make
the payment;
(B) from any other defendant that is jointly and
severally liable;
(C) from any other defendant held proportionately
liable who is liable to make the same payment and has
paid less than that other defendant's proportionate
share of that payment; or
(D) from any other person responsible for the
conduct giving rise to the payment that would have been
liable to make the same payment.
(3) Nondisclosure to jury.--The standard for allocation of
damages under subsection (a) and subsection (b)(1), and the
procedure for reallocation of uncollectible shares under
paragraph (1) of this subsection, shall not be disclosed to
members of the jury.
(e) Settlement Discharge.--
(1) In general.--A defendant who settles a Y2K action at
any time before final verdict or judgment shall be discharged
from all claims for contribution brought by other persons. Upon
entry of the settlement by the court, the court shall enter a
bar order constituting the final discharge of all obligations
to the plaintiff of the settling defendant arising out of the
action. The order shall bar all future claims for contribution
arising out of the action--
(A) by any person against the settling defendant;
and
(B) by the settling defendant against any person
other than a person whose liability has been
extinguished by the settlement of the settling
defendant.
(2) Reduction.--If a defendant enters into a settlement
with the plaintiff before the final verdict or judgment, the
verdict or judgment shall be reduced by the greater of--
(A) an amount that corresponds to the percentage of
responsibility of that defendant; or
(B) the amount paid to the plaintiff by that
defendant.
(f) General Right of Contribution.--
(1) In general.--A defendant who is jointly and severally
liable for damages in any Y2K action may recover contribution
from any other person who, if joined in the original action,
would have been liable for the same damages. A claim for
contribution shall be determined based on the percentage of
responsibility of the claimant and of each person against whom
a claim for contribution is made.
(2) Statute of limitations for contribution.--An action for
contribution in connection with a Y2K action shall be brought
not later than 6 months after the entry of a final,
nonappealable judgment in the Y2K action, except that an action
for contribution brought by a defendant who was required to
make an additional payment under subsection (d)(1) may be
brought not later than 6 months after the date on which such
payment was made.
(g) More Protective State Law Not Preempted.--Nothing in this
section preempts or supersedes any provision of State statutory law
that--
(1) limits the liability of a defendant in a Y2K action to
a lesser amount than the amount determined under this section;
or
(2) otherwise affords a greater degree of protection from
joint or several liability than is afforded by this section.
SEC. 7. PRELITIGATION NOTICE.
(a) In General.--Before commencing a Y2K action, except an action
that seeks only injunctive relief, a prospective plaintiff with a Y2K
claim shall send a written notice by certified mail (with either return
receipt requested or other means of verification that the notice was
sent) to each prospective defendant in that action. The notice shall
provide specific and detailed information about--
(1) the manifestations of any material defect alleged to
have caused harm or loss;
(2) the harm or loss allegedly suffered by the prospective
plaintiff;
(3) how the prospective plaintiff would like the
prospective defendant to remedy the problem;
(4) the basis upon which the prospective plaintiff seeks
that remedy; and
(5) the name, title, address, and telephone number of any
individual who has authority to negotiate a resolution of the
dispute on behalf of the prospective plaintiff.
(b) Person to Whom Notice To Be Sent.--The notice required by
subsection (a) shall be sent--
(1) to the registered agent of the prospective defendant
for service of legal process;
(2) if the prospective defendant does not have a registered
agent, then to the chief executive officer of a corporation,
the managing partner of a partnership, the proprietor of a sole
proprietorship, or to a similarly-situated person for any other
enterprise; or
(3) if the prospective defendant has designated a person to
receive prelitigation notices on a Year 2000 Internet Website
(as defined in section 3(7) of the Year 2000 Information and
Readiness Disclosure Act), to the designated person, if the
prospective plaintiff has reasonable access to the Internet.
(c) Response to Notice.--
(1) In general.--Within 30 days after receipt of the notice
specified in subsection (a), each prospective defendant shall
send by certified mail with return receipt requested to each
prospective plaintiff a written statement acknowledging receipt
of the notice, and describing the actions it has taken or will
take to address the problem identified by the prospective
plaintiff.
(2) Willingness to engage in adr.--The written statement
shall state whether the prospective defendant is willing to
engage in alternative dispute resolution.
(3) Inadmissability.--A written statement required by this
paragraph is not admissible in evidence, under Rule 408 of the
Federal Rules of Evidence or any analogous rule of evidence in
any State, in any proceeding to prove liability for, or the
invalidity of, a claim or its amount, or otherwise as evidence
of conduct or statements made in compromise negotiations.
(4) Presumptive time of receipt.--For purposes of paragraph
(1), a notice under subsection (a) is presumed to be received 7
days after it was sent.
(5) Priority.--A prospective defendant receiving more than
1 notice under this section may give priority to notices with
respect to a product or service that involves a health or
safety related Y2K failure.
(d) Failure to Respond.--If a prospective defendant--
(1) fails to respond to a notice provided pursuant to
subsection (a) within the 30 days specified in subsection
(c)(1); or
(2) does not describe the action, if any, the prospective
defendant has taken, or will take, to address the problem
identified by the prospective plaintiff,
the prospective plaintiff may immediately commence a legal action
against that prospective defendant.
(e) Remediation Period.--
(1) In general.--If the prospective defendant responds and
proposes remedial action it will take, or offers to engage in
alternative dispute resolution, then the prospective plaintiff
shall allow the prospective defendant an additional 60 days
from the end of the 30-day notice period to complete the
proposed remedial action before commencing a legal action
against that prospective defendant.
(2) Extension by agreement.--The prospective plaintiff and
prospective defendant may change the length of the 60-day
remediation period by written agreement.
(3) Multiple extensions not allowed.--Except as provided in
paragraph (2), a defendant in a Y2K action is entitled to no
more than one 30-day period and one 60-day remediation period
under paragraph (1).
(4) Statutes of limitation, etc., tolled.--Any applicable
statute of limitations or doctrine of laches in a Y2K action to
which paragraph (1) applies shall be tolled during the notice
and remediation period under that paragraph.
(f) Failure to Provide Notice.--If a defendant determines that a
plaintiff has filed a Y2K action without providing the notice specified
in subsection (a) or without awaiting the expiration of the appropriate
waiting period specified in subsection (c), the defendant may treat the
plaintiff's complaint as such a notice by so informing the court and
the plaintiff in its initial response to the plaintiff. If any
defendant elects to treat the complaint as such a notice--
(1) the court shall stay all discovery and all other
proceedings in the action for the appropriate period after
filing of the complaint; and
(2) the time for filing answers and all other pleadings
shall be tolled during the appropriate period.
(g) Effect of Contractual or Statutory Waiting Periods.--In cases
in which a contract, or a statute enacted before January 1, 1999,
requires notice of nonperformance and provides for a period of delay
prior to the initiation of suit for breach or repudiation of contract,
the period of delay provided by contract or the statute is controlling
over the waiting period specified in subsections (c) and (d).
(h) State Law Controls Alternative Methods.--Nothing in this
section supersedes or otherwise preempts any State law or rule of civil
procedure with respect to the use of alternative dispute resolution for
Y2K actions.
(i) Provisional Remedies Unaffected.--Nothing in this section
interferes with the right of a litigant to provisional remedies
otherwise available under Rule 65 of the Federal Rules of Civil
Procedure or any State rule of civil procedure providing extraordinary
or provisional remedies in any civil action in which the underlying
complaint seeks both injunctive and monetary relief.
(j) Special Rule for Class Actions.--For the purpose of applying
this section to a Y2K action that is maintained as a class action in
Federal or State court, the requirements of the preceding subsections
of this section apply only to named plaintiffs in the class action.
SEC. 8. PLEADING REQUIREMENTS.
(a) Application with Rules of Civil Procedure.--This section
applies exclusively to Y2K actions and, except to the extent that this
section requires additional information to be contained in or attached
to pleadings, nothing in this section is intended to amend or otherwise
supersede applicable rules of Federal or State civil procedure.
(b) Nature and Amount of Damages.--In all Y2K actions in which
damages are requested, there shall be filed with the complaint a
statement of specific information as to the nature and amount of each
element of damages and the factual basis for the damages calculation.
(c) Material Defects.--In any Y2K action in which the plaintiff
alleges that there is a material defect in a product or service, there
shall be filed with the complaint a statement of specific information
regarding the manifestations of the material defects and the facts
supporting a conclusion that the defects are material.
(d) Required State of Mind.--In any Y2K action in which a claim is
asserted on which the plaintiff may prevail only on proof that the
defendant acted with a particular state of mind, there shall be filed
with the complaint, with respect to each element of that claim, a
statement of the facts giving rise to a strong inference that the
defendant acted with the required state of mind.
SEC. 9. DUTY TO MITIGATE.
Damages awarded in any Y2K action shall exclude compensation for
damages the plaintiff could reasonably have avoided in light of any
disclosure or other information of which the plaintiff was, or
reasonably should have been, aware, including information made
available by the defendant to purchasers or users of the defendant's
product or services concerning means of remedying or avoiding the Y2K
failure.
SEC. 10. APPLICATION OF EXISTING IMPOSSIBILITY OR COMMERCIAL
IMPRACTICABILITY DOCTRINES.
In any Y2K action for breach or repudiation of contract, the
applicability of the doctrines of impossibility and commercial
impracticability shall be determined by the law in existence on January
1, 1999. Nothing in this Act shall be construed as limiting or
impairing a party's right to assert defenses based upon such doctrines.
SEC. 11. DAMAGES LIMITATION BY CONTRACT.
In any Y2K action for breach or repudiation of contract, no party
may claim, nor be awarded, any category of damages unless such damages
are allowed--
(1) by the express terms of the contract; or
(2) if the contract is silent on such damages, by operation
of State law at the time the contract was effective or by
operation of Federal law.
SEC. 12. DAMAGES IN TORT CLAIMS.
(a) In General.--A party to a Y2K action making a tort claim may
not recover damages for economic loss unless--
(1) the recovery of such losses is provided for in a
contract to which the party seeking to recover such losses is a
party; or
(2) such losses result directly from damage to tangible
personal or real property caused by the Y2K failure (other than
damage to property that is the subject of the contract between
the parties to the Y2K action or, in the event there is no
contract between the parties, other than damage caused only to
the property that experienced the Y2K failure),
and such damages are permitted under applicable Federal or State law.
(b) Economic Loss.--For purposes of this section only, and except
as otherwise specifically provided in a valid and enforceable written
contract between the plaintiff and the defendant in a Y2K action, the
term ``economic loss''--
(1) means amounts awarded to compensate an injured party
for any loss other than losses described in subsection (a)(2);
and
(2) includes amounts awarded for damages such as--
(A) lost profits or sales;
(B) business interruption;
(C) losses indirectly suffered as a result of the
defendant's wrongful act or omission;
(D) losses that arise because of the claims of
third parties;
(E) losses that must be plead as special damages;
and
(F) consequential damages (as defined in the
Uniform Commercial Code or analogous State commercial
law).
(c) Certain Actions Excluded.--This section does not affect,
abrogate, amend, or alter any patent, copyright, trade-secret,
trademark, or service-mark action, or any claim for defamation or
invasion of privacy under Federal or State law.
(d) Certain Other Actions.--A person liable for damages, whether by
settlement or judgment, in a civil action to which this Act does not
apply because of section 4(c) whose liability, in whole or in part, is
the result of a Y2K failure may, notwithstanding any other provision of
this Act, pursue any remedy otherwise available under Federal or State
law against the person responsible for that Y2K failure to the extent
of recovering the amount of those damages.
SEC. 13. STATE OF MIND; BYSTANDER LIABILITY; CONTROL.
(a) Defendant's State of Mind.--In a Y2K action other than a claim
for breach or repudiation of contract, and in which the defendant's
actual or constructive awareness of an actual or potential Y2K failure
is an element of the claim, the defendant is not liable unless the
plaintiff establishes that element of the claim by the standard of
evidence under applicable State law in effect before January 1, 1999.
(b) Limitation on Bystander Liability for Y2K Failures.--
(1) In general.--With respect to any Y2K action for money
damages in which--
(A) the defendant is not the manufacturer, seller,
or distributor of a product, or the provider of a
service, that suffers or causes the Y2K failure at
issue;
(B) the plaintiff is not in substantial privity
with the defendant; and
(C) the defendant's actual or constructive
awareness of an actual or potential Y2K failure is an
element of the claim under applicable law,
the defendant shall not be liable unless the plaintiff, in
addition to establishing all other requisite elements of the
claim, proves, by the standard of evidence under applicable
State law in effect before January 1, 1999, that the defendant
actually knew, or recklessly disregarded a known and
substantial risk, that such failure would occur.
(2) Substantial privity.--For purposes of paragraph (1)(B),
a plaintiff and a defendant are in substantial privity when, in
a Y2K action arising out of the performance of professional
services, the plaintiff and the defendant either have
contractual relations with one another or the plaintiff is a
person who, prior to the defendant's performance of such
services, was specifically identified to and acknowledged by
the defendant as a person for whose special benefit the
services were being performed.
(3) Certain claims excluded.--For purposes of paragraph
(1)(C), claims in which the defendant's actual or constructive
awareness of an actual or potential Y2K failure is an element
of the claim under applicable law do not include claims for
negligence but do include claims such as fraud, constructive
fraud, breach of fiduciary duty, negligent misrepresentation,
and interference with contract or economic advantage.
(c) Control Not Determinative of Liability.--The fact that a Y2K
failure occurred in an entity, facility, system, product, or component
that was sold, leased, rented, or otherwise within the control of the
party against whom a claim is asserted in a Y2K action shall not
constitute the sole basis for recovery of damages in that action. A
claim in a Y2K action for breach or repudiation of contract for such a
failure is governed by the terms of the contract.
(d) Protections of the Year 2000 Information and Readiness
Disclosure Act Apply.--The protections for the exchanges of information
provided by section 4 of the Year 2000 Information and Readiness
Disclosure Act (Public Law 105-271) shall apply to this Act.
SEC. 14. APPOINTMENT OF SPECIAL MASTERS OR MAGISTRATE JUDGES FOR Y2K
ACTIONS.
Any District Court of the United States in which a Y2K action is
pending may appoint a special master or a magistrate judge to hear the
matter and to make findings of fact and conclusions of law in
accordance with Rule 53 of the Federal Rules of Civil Procedure.
SEC. 15. Y2K ACTIONS AS CLASS ACTIONS.
(a) Material Defect Requirement.--A Y2K action involving a claim
that a product or service is defective may be maintained as a class
action in Federal or State court as to that claim only if--
(1) it satisfies all other prerequisites established by
applicable Federal or State law, including applicable rules of
civil procedure; and
(2) the court finds that the defect in a product or service
as alleged would be a material defect for the majority of the
members of the class.
(b) Notification.--In any Y2K action that is maintained as a class
action, the court, in addition to any other notice required by
applicable Federal or State law, shall direct notice of the action to
each member of the class, which shall include--
(1) a concise and clear description of the nature of the
action;
(2) the jurisdiction where the case is pending; and
(3) the fee arrangements with class counsel, including the
hourly fee being charged, or, if it is a contingency fee, the
percentage of the final award which will be paid, including an
estimate of the total amount that would be paid if the
requested damages were to be granted.
(c) Forum for Y2K Class Actions.--
(1) Jurisdiction.--Except as provided in paragraph (2), a
Y2K action may be brought as a class action in a United States
District Court or removed to a United States District Court if
the amount in controversy is greater than the sum or value of
$1,000,000 (exclusive of interest and costs), computed on the
basis of all claims to be determined in the action.
(2) Exception.--A Y2K action may not be brought or removed
as a class action under this section if--
(A)(i) a substantial majority of the members of the
proposed plaintiff class are citizens of a single
State;
(ii) the primary defendants are citizens of that
State; and
(iii) the claims asserted will be governed
primarily by the law of that State; or
(B) the primary defendants are States, State
officials, or other governmental entities against whom
the United States District Court may be foreclosed from
ordering relief.
(d) Effect on Rules of Civil Procedure.--Except as otherwise
provided in this section, nothing in this section supersedes any rule
of Federal or State civil procedure applicable to class actions.
SEC. 16. APPLICABILITY OF STATE LAW.
Nothing in this Act shall be construed to affect the applicability
of any State law that provides greater limits on damages and
liabilities than are provided in this Act.
SEC. 17. ADMISSIBLE EVIDENCE ULTIMATE ISSUE IN STATE COURTS.
Any party to a Y2K action in a State court in a State that has not
adopted a rule of evidence substantially similar to Rule 704 of the
Federal Rules of Evidence may introduce in such action evidence that
would be admissible if Rule 704 applied in that jurisdiction.
SEC. 18. SUSPENSION OF PENALTIES FOR CERTAIN YEAR 2000 FAILURES BY
SMALL BUSINESS CONCERNS.
(a) Definitions.--In this section--
(1) the term ``agency'' means any executive agency, as
defined in section 105 of title 5, United States Code, that has
the authority to impose civil penalties on small business
concerns;
(2) the term ``first-time violation'' means a violation by
a small business concern of a Federal rule or regulation (other
than a Federal rule or regulation that relates to the safety
and soundness of the banking or monetary system, including
protection of depositors) resulting from a Y2K failure if that
Federal rule or regulation had not been violated by that small
business concern within the preceding 3 years; and
(3) the term ``small business concern'' has the same
meaning as a defendant described in section 5(b)(2)(B).
(b) Establishment of Liaisons.--Not later than 30 days after the
date of enactment of this section each agency shall--
(1) establish a point of contact within the agency to act
as a liaison between the agency and small business concerns
with respect to problems arising out of Y2K failures and
compliance with Federal rules or regulations; and
(2) publish the name and phone number of the point of
contact for the agency in the Federal Register.
(c) General Rule.--Subject to subsections (d) and (e), no agency
shall impose any civil money penalty on a small business concern for a
first-time violation.
(d) Standards for Waiver.--In order to receive a waiver of civil
money penalties from an agency for a first-time violation, a small
business concern shall demonstrate that--
(1) the small business concern previously made a good faith
effort to effectively remediate Y2K problems;
(2) a first-time violation occurred as a result of the Y2K
system failure of the small business concern or other entity,
which affected the small business concern's ability to comply
with a federal rule or regulation;
(3) the first-time violation was unavoidable in the face of
a Y2K system failure or occurred as a result of efforts to
prevent the disruption of critical functions or services that
could result in harm to life or property;
(4) upon identification of a first-time violation, the
small business concern initiated reasonable and timely measures
to remediate the violation; and
(5) the small business concern submitted notice to the
appropriate agency of the first-time violation within a
reasonable time not to exceed 7 business days from the time
that the small business concern became aware that a first-time
violation had occurred.
(e) Exceptions.--An agency may impose civil money penalties
authorized under Federal law on a small business concern for a first-
time violation if--
(1) the small business concern's failure to comply with
Federal rules or regulations constitutes or creates an imminent
threat to public health, safety, or the environment; or
(2) the small business concern fails to correct the
violation not later than 1 month after initial notification to
the agency.
Attest:
Secretary.
106th CONGRESS
1st Session
H. R. 775
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AMENDMENT
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