[Congressional Record Volume 145, Number 29 (Wednesday, February 24, 1999)]
[Senate]
[Pages S1939-S1945]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH (for himself, Mrs. Feinstein, and Mr. McConnell):
  S. 461. A bill to assure that innocent users and businesses gain 
access to solutions to the year 2000 problem-related failures through 
fostering an incentive to settle year 2000 lawsuits that may disrupt 
significant sectors of the American economy; to the Committee on the 
Judiciary.


               year 2000 fairness and responsibility act

  Mr. HATCH. Mr. President, I am pleased to introduce the ``Year 2000 
Fairness and Responsibility Act.'' This bill addresses what is 
popularly known as the ``Y2K Problem'' or the ``Millennium Bug.'' It is 
supported by over 85 industry organizations and is important to the 
state of Utah, our nation's fastest growing high-tech state.
  Due to a simple decision years ago to save space on computer punch 
cards, many computers and electronic devices around the world still 
express years in only two digits. As a result, these computers will be 
incapable of making a smooth transition to the next millennium. 
Technicians and economists have predicted that this problem, if not 
corrected in time, could result in either a recession or at least 
serious economic dislocation.
  Over the last several years, the U.S. government and the private 
sector have made great strides in aggressively targeting the technology 
side of the Y2K problem. Although there remains much to do, many 
critical areas have already been addressed.
  Last year, a unanimous Congress passed a bipartisan Senate Judiciary 
Committee-reported bill that unleashed the genius of the American 
private sector by fostering the sharing of remedial information on the 
Y2K problem. Prior to the bill's passage, various businesses were 
fearful of being sued if they shared corrective and other information 
concerning the Y2K problem. In essence, the bill insulates statements 
about Y2K information and solutions from being used as admissions in a 
court of law. This legislation has spurred solutions to the Y2K problem 
by increasing the amount of information available to address the Y2K 
challenge.
  But while this first step was important, additional reforms are 
needed to aid innocent users and manufacturers and to nurture an 
environment where solutions to the Y2K problem will be forged. Last 
year's advances are threatened by frivolous Y2K lawsuits--which will 
disrupt and perhaps even cripple our courts, our high-tech industry, 
and thousands of businesses, large and small, around our nation. 
Indeed, one respected analyst recently estimated that the world-wide 
cost of Y2K-related litigation would be a staggering one trillion 
dollars.
  The anticipated flood of lawsuits from those affected by the Y2K 
crisis may very well impede the progress we have been making in solving 
the problem. Companies of every variety will be forced to devote 
precious resources to litigation rather than to repairing and 
preventing computer problems, and many of these companies may even go 
bankrupt as a result. Our courts could very well be deluged with 
lawsuits, clogging the arteries of justice. These consequences must be 
addressed.
  The legislation introduced today will ameliorate the Y2K dilemma in a 
fair and reasonable manner. One of the main features of this new Y2K 
bill is that it provides for a problem-solving, cooling off period 
before Y2K-related litigation may commence. The problem-solving period 
is designed to allow prospective plaintiffs an opportunity to describe 
the nature of the problem of which they seek legal remedy and give the 
prospective defendants an opportunity to respond and, if necessary, 
correct any material Y2K defect.
  The parties may be able to resolve their disputes during the 
mediation period, thus forestalling the need for costly and time-
consuming litigation. Correspondingly, the bill establishes an 
alternative dispute resolution mechanism to resolve private disputes 
and avoid litigation.
  Of particular significance is the bill's limitations on damages. The 
bill limits punitive damages in Y2K-related suits to three times 
economic damages or $250,000, whichever is greater, or, if a small 
business is a defendant, whichever is lesser. This and other provisions 
will prevent frivolous lawsuits while preserving the ability of the 
truly injured to recover damages and to deter future abuses.
  The bill also remediates potential problems arising out of Y2K-
related class suits. Class action cases are currently a source of 
abuse, and this bill seeks to limit such abuses by allowing class 
actions to proceed only if a majority of class members' claims involve 
material defects relating to Y2K problems. Thus, as a practical matter, 
specious class action suits are barred.
  The purpose of our bill is clear--to promote and increase the chances 
that innocent users and businesses gain access to solutions to the Y2K 
problem. And while the purpose is clear, we recognize that the solution 
is not simple, We have worked to produce a fair, reasoned bill that 
preserves the rights of all parties to settle disputes, but will help 
avert the potential disasters awaiting us if we choose not to act.
  This bill reflects the high levels of cooperation and broad consensus 
that large manufactures, small businesses, the telecommunications 
industry, the information technology industry, electric utilities, and 
professional associations have been able to achieve. They

[[Page S1940]]

are all to be commended for their efforts in supporting this vitally 
important legislation.
  Let me explain the bill in more detail.


                         I. purpose of the bill

  The bill's main purpose is to promote Y2K readiness and problem-
solving by discouraging a wasteful diversion of resources that would 
otherwise support readiness and problem-solving toward Y2K-related 
litigation. Such a costly diversion of resources could exacerbate the 
risk of nationwide economic dislocation that the Y2K problem poses. 
Accordingly, the bill aims to prohibit Y2K-related litigation but to 
impose a slight delay in its commencement so as to promote resolution 
of Y2K problems and disputes without resort to litigation. I believe 
this will benefit plaintiffs, defendants, consumers, businesses, and 
innocent users. We want to create an environment when people think, 
``Let's try to solve it'' before they say, ``Let's sue them.''


                  ii. summary of the bill's provisions

  Pre-litigation Remediation Period (Sec. 101):
  If a person aggrieved by a year-2000-related (Y2K-related) problem 
wants to file a lawsuit based on that problem, he must first provide 
the prospective defendant, at least 90 days before filing suit, with 
notice regarding how the Y2K defect manifests itself, what injury he 
suffered or risk he bore as a result, and what relief he seeks. The 
only exception to this mandatory 90-day remediation period is if the 
prospective plaintiff is party to a contract that provides for a period 
of delay before suit for breach of contract may commence. In that case, 
the contract's waiting period prevails over the bill's.
  If the prospective plaintiff fails to give notice to the prospective 
defendant, as outlined above, and sues anyway, the defendant can treat 
the plaintiff's lawsuit itself as a substitute notice, thus triggering 
the 90-day remediation period. If the 90-day remediation period is 
triggered by an actual lawsuit (instead of the notice) all discovery 
will be stayed and pleading deadlines will be tolled for the duration 
of the period.
  The bill imposes responsibilities on prospective defendants as well 
as plaintiffs. If a defendant has been given notice, as outlined above, 
he must respond to this notice within 30 days of receiving it. In this 
response, the prospective defendant must state in writing his 
acknowledgement of receipt of the notice and what actions he will take 
or has taken to address the Y2K problem identified in the plaintiff's 
notice. Even if the plaintiff has not given notice and the defendant 
treats his actual lawsuit as substitute notice, the defendant must 
still respond to that notice within 30 days with all required 
particulars.
  If the defendant fails to respond to the plaintiff's notice, then the 
remediation period terminates at the expiration of the defendant's 30-
day response deadline; the lawsuit can then proceed.
  Also of particular significance, the 90-day remediation period may be 
extended as part of mutual agreement of the parties to engage in 
alternative dispute resolution. See Sec. 102(a).
  Pleading Requirements (Sec. 103):
  The bill requires all Y2K plaintiffs seeking money damages to make a 
detailed statement in their lawsuits of the nature and amount of the 
damages they seek to recover, specific facts that form the basis for 
calculating those damages, and how material Y2K defects manifest 
themselves. In addition, if the claim being pursued requires proof that 
the defendant acted with a particular state of mind, the plaintiff must 
``state in detail the facts giving rise to a strong inference that the 
defendant acted with the required state of mind.''

  The bill allows the court to dismiss a Y2K lawsuit that fails to meet 
the above pleading requirements. However, the plaintiff can re-file his 
lawsuit with the required detailed statements and still get a chance to 
pursue his claim.
  Duty to Mitigate (Sec. 104):
  This provision codifies the common-law rule that bars recovery of 
damages for injuries that the plaintiff could reasonably have been 
avoided.
  Evidence of Reasonable Efforts and Contract Defenses (Sec. 202(a)):
  This provision allows a defendant, ``for the purpose of limiting or 
eliminating the defendant's liability,'' for breach of contract to 
offer evidence that his performance was ``reasonable in light of the 
circumstances.'' This would overcome any objection, based on Federal or 
State rules of evidence, that evidence of such reasonable-efforts 
performance is irrelevant to the issue of breach. Also, this provision 
expressly preserves the common-law and Uniform Commercial Code defenses 
of impossibility and impracticability.
  Contract Damages Limit (Sec. 203):
  Contract damages are limited either to those provided for in a 
liquidated damages clause or by operation of law that governed the 
contract's interpretation at the time of contract formation. This does 
not alter present-day contract law. Rather, it is designed to preempt 
any State's attempt to change its contract law relating to Y2K problems 
after the contract that is the subject of the lawsuit was entered into.
  Proportionate Liability in Tort Cases (Sec. 301(b)):
  This provision essentially codifies the tort doctrine of pure 
comparative negligence in that it requires the court to assign a 
percent share of liability to each person determined to have caused or 
contributed to the plaintiff's loss in proportion to the relative fault 
of each. Personal injury cases are exempt from this provision.
  State of Mind and Foreseeability Requirements in Tort Cases 
(Sec. 302):
  This provision establishes a heightened state-of-mind element for 
three types of lawsuits: For fraud and negligent misrepresentation 
cases, the plaintiff must, in addition to proving all other elements of 
the claim, prove by clear and convincing evidence that the defendant 
``actually knew, or recklessly disregarded a known and substantial 
risk, that [a Y2K] failure would occur.'' For cases that require proof 
of gross negligence or recklessness, the plaintiff must, in addition to 
proving all other elements of the claim, prove by clear and convincing 
evidence that the defendant ``actually knew, or recklessly disregarded 
a known and substantial risk, that plaintiff would suffer [actual or 
potential] harm. For ordinary negligence cases, the plaintiff must, in 
addition to proving all other elements of the claim, prove by clear and 
convincing evidence that the defendant ``knew or reasonably should have 
known that its actions would cause harm to the plaintiff.''

  Reasonable Efforts Defense in Tort Cases (Sec. 303):
  Under this provision, a plaintiff may not recover simply by showing 
that a Y2K failure occurred in something that was under the control of 
the defendant. This is intended to avoid a defendant being held 
strictly liable for harm caused by a Y2K failure. Also, the bill 
provides the defendant with a complete defense to liability if he can 
show that he took reasonable efforts under the circumstances to prevent 
the Y2K failure or its attendant damages. Breach of contract cases are 
exempt from this provision.
  Tort Punitive Damages Limit (Sec. 304):
  This provision limits punitive damages to either: (1) lesser of three 
times actual damages or $250,000 for individuals whose net worth is 
$500,000 or less and for small businesses; or (2) the greater of three 
times actual damages or $250,000 for all other defendants.
  Limit on Economic Loss Recovery in Tort Cases (Sec. 305):
  This provision essentially codifies the common-law economic loss 
doctrine found in section 766C of the Restatement of Torts. 
Accordingly, the provision allows recovery of economic losses only when 
permitted by statute or judicial decision and (1) where permitted under 
a contract to which the plaintiff is a party; (2) where permitted under 
applicable law that governed interpretation of the contract at the time 
of contract formation; (3) when they are incidental to a Y2K-related 
personal injury claim; or (4) when they are incidental to a Y2K-related 
property damage claim.
  Liability of Officers and Directors (Sec. 306):
  This provision limits the personal liability of corporate officers 
and directors to the greater of $100,000 or the amount of cash 
compensation such officer or director received in the year preceding 
the act or omission for which he was found liable. This limitation on 
personal liability does not apply where it is proven by clear and 
convincing evidence that the officer or director specifically intended 
to harm the plaintiff by (1) intentionally making materially misleading 
statements on

[[Page S1941]]

which the plaintiff relied or (2) intentionally withholding material 
information regarding a Y2K failure that he had a duty to disclose. 
This provision expressly does not pre-empt State law on liability of 
officers and directors.
  Class Action Requirements:
  Regarding Y2K-related class suits, the bill allows these actions to 
proceed only if a majority of class members' claims involve material 
Y2K defects. Also, only those individuals who have actual notice, as 
certified by the court, of the suit are entitled to join the class, 
unless they inform the court in writing prior to commencement of trial 
or entry of judgment of their desire to join the class.
  Finally, the bill changes the requirements of Federal jurisdiction 
for Y2K-related actions in three respects: (1) there is no amount in 
controversy requirement for Federal diversity jurisdiction; (2) 
diversity of citizenship can be established as to any member of the 
class, not just the named members; and (3) plaintiffs as well as 
defendants can remove Y2K-related actions from state court to Federal 
court.
  In conclusion, Mr. President, I want to emphasize that the Y2K 
problem is not a partisan issue. This is a bipartisan, fair bill. We 
must all work together--now--to ensure that a rush to the courts does 
not cripple the ability of American businesses to solve the Y2K problem 
swiftly, efficiently and without unnecessary distractions. The real 
beneficiaries of this bill will be individual consumers and businesses, 
the engine of the American economy. I ask my colleagues to support this 
worthwhile legislation.
  I ask unanimous consent that the bill in its entirety be printed in 
the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 461

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Year 2000 
     Fairness and Responsibility Act''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title and table of contents.
Sec. 2. Findings, purposes, and scope.
Sec. 3. Definitions.

     TITLE I--PRELITIGATION PROCEDURES FOR YEAR 2000 CIVIL ACTIONS

Sec. 101. Pre-trial notice.
Sec. 102. Alternative dispute resolution.
Sec. 103. Pleading requirements.
Sec. 104. Duty to mitigate.

         TITLE II--YEAR 2000 CIVIL ACTIONS INVOLVING CONTRACTS

Sec. 201. Contract preservation.
Sec. 202. Evidence of reasonable efforts and defenses.
Sec. 203. Damages limitation.

      TITLE III--YEAR 2000 CIVIL ACTIONS INVOLVING TORT AND OTHER 
                         NONCONTRACTUAL CLAIMS

Sec. 301. Proportionate liability.
Sec. 302. State of mind and foreseeability.
Sec. 303. Reasonable efforts defense.
Sec. 304. Damages limitation.
Sec. 305. Economic losses.
Sec. 306. Liability of officers and directors.

           TITLE IV--CLASS ACTIONS INVOLVING YEAR 2000 CLAIMS

Sec. 401. Minimum injury requirement.
Sec. 402. Notification.
Sec. 403. Dismissal prior to certification.
Sec. 404. Federal jurisdiction in class actions involving year 2000 
              claims.

                        TITLE V--EFFECTIVE DATE

Sec. 501. Effective date.

     SEC. 2. FINDINGS, PURPOSES, AND SCOPE.

       (a) Findings.--Congress finds the following:
       (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 those dates.
       (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.
       (v) 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.
       (b) Purposes.--Based upon the power contained in 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 year 2000 computer date-change problems 
     before they develop;
       (2) to encourage the resolution of year 2000 computer date-
     change disputes involving economic damages without recourse 
     to unnecessary, time consuming, and wasteful litigation; and
       (3) to lessen burdens on interstate commerce by 
     discouraging insubstantial lawsuits, while also preserving 
     the ability of individuals and businesses that have suffered 
     real injury to obtain complete relief.
       (c) Scope.--Nothing in this Act affects claims for personal 
     injury.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Actual damages.--The term ``actual damages''--
       (A) means damages for physical injury to any person or 
     property; and
       (B) includes the cost of repairing or replacing a product 
     that has a material defect.
       (2) Contract.--The term ``contract'' means a contract, 
     tariff, license, or warranty.
       (3) Defendant.--The term ``defendant'' means any person 
     against whom a year 2000 claim is asserted.
       (4) Economic loss.--The term ``economic loss''--
       (A) means any damages other than damages arising out of 
     personal injury or damage to tangible property; and
       (B) includes damages for--
       (i) lost profits or sales;
       (ii) business interruption;
       (iii) losses indirectly suffered as a result of the 
     defendant's wrongful act or omission;
       (iv) losses that arise because of the claims of third 
     parties;
       (v) losses that are required to be pleaded as special 
     damages; or
       (vi) items defined as consequential damages in the Uniform 
     Commercial Code or an analogous State commercial law.
       (5) Material defect.--
       (A) In general.--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 
     intended.
       (B) Exclusions.--The term does not include any defect 
     that--
       (i) has an insignificant or de minimis effect on the 
     operation or functioning of an item;
       (ii) affects only a component of an item that, as a whole, 
     substantially operates or functions as designed; or
       (iii) has an insignificant or de minimis effect on the 
     efficacy of the service provided.
       (6) Person.--The term ``person'' means any natural person 
     and any entity, organization, or enterprise, including any 
     corporation, company (including any joint stock company), 
     association, partnership, trust, or governmental entity.
       (7) Personal injury.--
       (A) In general.--The term ``personal injury'' means any 
     physical injury to a natural person, including death of the 
     person.
       (B) Exclusions.--The term does not include mental 
     suffering, emotional distress, or like elements of injury 
     that do not constitute physical harm to a natural person.
       (8) Plaintiff.--The term ``plaintiff'' means any person who 
     asserts a year 2000 claim.
       (9) Punitive damages.--The term ``punitive damages'' means 
     damages, other than compensatory damages, that, in whole or 
     in part, are awarded against any person--
       (A) to punish that person; or
       (B) to deter that person, or other persons, from engaging 
     in similar behavior.
       (10) State.--The term ``State'' means any State of the 
     United States, the District of Columbia, the Commonwealth of 
     Puerto

[[Page S1942]]

     Rico, the Northern Mariana Islands, the U.S. Virgin Islands, 
     Guam, American Samoa, and any other territory or possession 
     of the United States, and any political subdivision thereof.
       (11) Year 2000 civil action.--The term ``year 2000 civil 
     action'' means any civil action of any kind brought in any 
     court under Federal, State, or foreign law, in which--
       (A) a year 2000 claim is asserted; or
       (B) any claim or defense is related, directly or 
     indirectly, to an actual or potential year 2000 failure.
       (12) Year 2000 claim.--The term ``year 2000 claim'' means 
     any claim or cause of action of any kind, whether asserted by 
     way of claim, counterclaim, cross-claim, third-party claim, 
     or otherwise, in which the plaintiff's alleged loss or harm 
     resulted, directly or indirectly, from an actual or potential 
     year 2000 failure.
       (13) Year 2000 failure.--The term ``year 2000 failure'' 
     means any 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, however constructed, in processing, 
     calculating, comparing, sequencing, displaying, storing, 
     transmitting, or receiving date-related data, including--
       (A) the failure to accurately administer or account for 
     transitions or comparisons from, into, and between the 20th 
     and 21st centuries, and between 1999 and 2000; or
       (B) the failure to recognize or accurately process any 
     specific date, and the failure accurately to account for the 
     status of the year 2000 as a leap year.

     TITLE I--PRELITIGATION PROCEDURES FOR YEAR 2000 CIVIL ACTIONS

     SEC. 101. PRE-TRIAL NOTICE.

       (a) Notification Period.--
       (1) In general.--Before filing a year 2000 claim, except an 
     action for a claim that seeks only injunctive relief, a 
     prospective plaintiff shall be required to provide to each 
     prospective defendant a written notice that identifies and 
     describes with particularity--
       (A) any manifestation of a material defect alleged to have 
     caused injury;
       (B) the injury allegedly suffered or reasonably risked by 
     the prospective plaintiff; and
       (C) the relief or action sought by the prospective 
     plaintiff.
       (2) Commencement of action.--Except as provided in 
     subsections (c) and (e), a prospective plaintiff shall not 
     file a year 2000 claim in Federal or State court until the 
     expiration of the 90-day period beginning on the date on 
     which the prospective plaintiff provides notice under 
     paragraph (1).
       (b) Response to Notice.--Not later than 30 days after 
     receipt of the notice specified in subsection (a), each 
     prospective defendant shall provide each prospective 
     plaintiff a written statement that--
       (1) acknowledges receipt of the notice; and
       (2) describes any actions that the defendant will take, or 
     has taken, to address the defect or injury identified by the 
     prospective plaintiff in the notice.
       (c) Failure To Respond.--If a prospective defendant fails 
     to respond to a notice provided under subsection (a)(1) 
     during the 30-day period prescribed in subsection (b) or does 
     not include in the response a description of actions referred 
     to in subsection (b)(2)--
       (1) the 90-day waiting period identified in subsection (a) 
     shall terminate at the expiration of the 30-day period 
     specified in subsection (b) with respect to that prospective 
     defendant; and
       (2) the prospective plaintiff may commence a year 2000 
     civil action against such prospective defendant immediately 
     upon the termination of that waiting period.
       (d) Failure To Provide Notice.--
       (1) In general.--Subject to subsections (c) and (e), a 
     defendant may treat a complaint filed by the plaintiff as a 
     notice required under subsection (a) by so informing the 
     court and the plaintiff if the defendant determines that a 
     plaintiff has commenced a year 2000 civil action--
       (A) without providing the notice specified in subsection 
     (a); or
       (B) before the expiration of the 90-day waiting period 
     specified in subsection (a).
       (2) Stay.--If a defendant elects under paragraph (1) to 
     treat a complaint as a notice--
       (A) the court shall stay all discovery and other 
     proceedings in the action for a period of 90 days beginning 
     on the date of filing of the complaint; and
       (B) the time for filing answers and all other pleadings 
     shall be tolled during this 90-day period.
       (e) Effect of Contractual Waiting Periods.--In any case in 
     which a contract requires notice of nonperformance and 
     provides for a period of delay before the initiation of suit 
     for breach or repudiation of contract, the contractual period 
     of delay controls and shall apply in lieu of the waiting 
     period specified in subsections (a) and (d).
       (f) Sanction for Frivolous Invocation of the Stay 
     Provision.--If a defendant acts under subsection (d) to stay 
     an action, and the court subsequently finds that the 
     assertion by the defendant that the action is a year 2000 
     civil action was frivolous and made for the purpose of 
     causing unnecessary delay, the court may impose a sanction, 
     including an order to make payments to opposing parties in 
     accordance with Rule 11 of the Federal Rules of Civil 
     Procedure.
       (g) Computation of Time.--For purposes of this section, the 
     rules regarding computation of time shall be governed by the 
     applicable Federal or State rules of civil procedure.

     SEC. 102. ALTERNATIVE DISPUTE RESOLUTION.

       (a) Requests Made During Notification Period.--At any time 
     during the 90-day notification period under section 101(a), 
     either party may request the other party to use alternative 
     dispute resolution. If, based upon that request, the parties 
     enter into an agreement to use alternative dispute 
     resolution, the parties may also agree to an extension of 
     that 90-day period.
       (b) Request Made After Notification Period.--At any time 
     after expiration of the 90-day notification period under 
     section 101(a), whether before or after the filing of a 
     complaint, either party may request the other party to use 
     alternative dispute resolution.
       (c) Payment Date.--If a dispute that is the subject of the 
     complaint or responsive pleading is resolved through 
     alternative dispute resolution as provided in subsection (a) 
     or (b), the defendant shall pay any amount of funds that the 
     defendant is required to pay the plaintiff under the 
     settlement not later than 30 days after the date on which the 
     parties settle the dispute, and all other terms shall be 
     implemented as promptly as possible based upon the agreement 
     of the parties, unless another period of time is agreed to by 
     the parties or established by contract between the parties.

     SEC. 103. PLEADING REQUIREMENTS.

       (a) Nature and Amount of Damages.--In any year 2000 civil 
     action in which a plaintiff seeks an award of money damages, 
     the complaint shall state with particularity with regard to 
     each year 2000 claim--
       (1) the nature and amount of each element of damages; and
       (2) the factual basis for the calculation of the damages.
       (b) Material Defects.--In any year 2000 civil action in 
     which the plaintiff alleges that a product or service was 
     defective, the complaint shall, with respect to each year 
     2000 claim--
       (1) identify with particularity the manifestations of the 
     material defects; and
       (2) state with particularity the facts supporting the 
     conclusion that the defects were material.
       (c) Required State of Mind.--In any year 2000 civil action 
     in which a year 2000 claim is asserted with respect to which 
     the plaintiff may prevail only on proof that the defendant 
     acted with a particular state of mind, the complaint shall, 
     with respect to each element of the claim, state in detail 
     the facts giving rise to a strong inference that the 
     defendant acted with the required state of mind.
       (d) Motion To Dismiss; Stay of Discovery.--
       (1) Dismissal for failure to meet pleading requirements.--
     In any year 2000 civil action, the court shall, on the motion 
     of any defendant, dismiss without prejudice any year 2000 
     claim asserted in the complaint if any of the requirements 
     under subsection (a), (b), or (c) is not met with respect to 
     the claim.
       (2) Stay of discovery.--In any year 2000 civil action, all 
     discovery and other proceedings shall be stayed during the 
     pendency of any motion to dismiss, unless the court finds 
     upon the motion of any party that particularized discovery is 
     necessary to preserve evidence or prevent undue prejudice to 
     that party.
       (3) Preservation of evidence.--
       (A) In general.--
       (i) Treatment of evidence.--During the pendency of any stay 
     of discovery entered under this paragraph, unless otherwise 
     ordered by the court, any party to the action with actual 
     notice of the allegations contained in the complaint shall 
     treat the items described in clause (ii) as if they were a 
     subject of a continuing request for production of documents 
     from an opposing party under applicable Federal or State 
     rules of civil procedure.
       (ii) Items.--The items described in this clause are all 
     documents, data compilations (including electronically stored 
     or recorded data), and tangible objects that--

       (I) are in the custody or control of the party described in 
     clause (i); and
       (II) relevant to the allegations.

       (B) Sanction for willful violation.--A party aggrieved by 
     the willful failure of an opposing party to comply with 
     clause (A) may apply to the court for an order awarding 
     appropriate sanctions.

     SEC. 104. DUTY TO MITIGATE.

       (a) In General.--There shall be no recovery for any year 
     2000 claim on account of injury that the plaintiff could 
     reasonably have avoided in light of any disclosure or other 
     information with respect to which the plaintiff was, or 
     reasonably could have been, aware.
       (b) Damages.--The damages awarded for any claim described 
     in subsection (a) shall exclude any amount that the plaintiff 
     reasonably could have avoided in light of any disclosure or 
     information described in that subsection.

         TITLE II--YEAR 2000 CIVIL ACTIONS INVOLVING CONTRACTS

     SEC. 201. CONTRACT PRESERVATION.

       (a) In General.--Subject to subsections (b) and (c), 
     notwithstanding any other provision of Federal or State 
     statutory or case law, in any action in which a year 2000 
     claim is advanced, in resolving that claim all written 
     contractual terms, including limitations or exclusions of 
     liability or disclaimers of warranty, shall be fully 
     enforceable.

[[Page S1943]]

       (b) Interpretation of Contract.--In any case in which a 
     contract 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 that the 
     contract was entered into.
       (c) Unenforceable Contracts.--Subsection (a) does not apply 
     in any case in which a court determines that the contract as 
     a whole is unenforceable due to an infirmity in the formation 
     of the contract under applicable law in effect at the time 
     the contract was entered into.

     SEC. 202. EVIDENCE OF REASONABLE EFFORTS AND DEFENSES.

       (a) Reasonable Efforts.--In any action in which a year 2000 
     claim is advanced and in which a breach of contract or 
     related claim is alleged, in the resolution of that claim, in 
     addition to any other rights provided by applicable law, the 
     party against whom the claim of breach is asserted shall be 
     allowed, for the purpose of limiting or eliminating the 
     defendant's liability, to offer evidence that the 
     implementation of the contract by that party, or the efforts 
     made by that party to implement the contract, were reasonable 
     in light of the circumstances.
       (b) Impossibility or Commercial Impracticability.--
       (1) In general.--In any action in which a year 2000 claim 
     is advanced and in which a breach of contract or related 
     claim is alleged, in resolving that claim applicability of 
     the doctrines of impossibility and commercial 
     impracticability shall be determined by applicable law in 
     existence on January 1, 1999.
       (2) Rule of construction.--Nothing in this Act shall be 
     construed as limiting or impairing a party's right to assert 
     defenses based upon the doctrines referred to in paragraph 
     (1).

     SEC. 203. DAMAGES LIMITATION.

       In any action in which a year 2000 claim is advanced and 
     that involves a breach of contract, warranty, or related 
     claim, in resolving that claim the court shall not award any 
     damages--
       (1) unless those damages are provided for by the express 
     terms of the contract; or
       (2) if the contract is silent on those damages, by 
     operation of the applicable Federal or State law that 
     governed interpretation of the contract at the time the 
     contract was entered into.

      TITLE III--YEAR 2000 CIVIL ACTIONS INVOLVING TORT AND OTHER 
                         NONCONTRACTUAL CLAIMS

     SEC. 301. PROPORTIONATE LIABILITY.

       (a) In General.--Except in cases involving personal injury, 
     a person against whom a final judgment is entered on a year 
     2000 claim shall be liable solely for the portion of the 
     judgment that corresponds to the percentage of responsibility 
     of that person, as determined under subsection (b).
       (b) Determination of Responsibility.--
       (1) In general.--As to any year 2000 claim, the court shall 
     instruct the jury to answer special interrogatories, or if 
     there is no jury, make findings, with respect to each 
     defendant and plaintiff, and each of the other persons 
     claimed by any of the parties to have caused or contributed 
     to the loss incurred by the plaintiff, including persons who 
     have entered into settlements with the plaintiff or 
     plaintiffs, concerning the percentage of responsibility of 
     that person, measured as a percentage of the total fault of 
     all persons who caused or contributed to the total loss 
     incurred by the plaintiff.
       (2) Contents of special interrogatories or findings.--The 
     responses to interrogatories, or findings, as appropriate, 
     under paragraph (1) shall specify--
       (A) the total amount of damages that the plaintiff is 
     entitled to recover; and
       (B) the percentage of responsibility of each person found 
     to have caused or contributed to the loss incurred by the 
     plaintiff or plaintiffs.
       (3) Factors for consideration.--In determining the 
     percentage of responsibility under this paragraph, the trier 
     of fact shall consider--
       (A) the nature of the conduct of each person alleged 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 or plaintiffs.
       (4) Nondisclosure to jury.--The standard for allocation of 
     damages under paragraph (1) shall not be disclosed to members 
     of the jury.

     SEC. 302. STATE OF MIND AND FORESEEABILITY.

       (a) Defendant's State of Mind as to Year 2000 Failure.--
     With respect to any year 2000 claim for money damages in 
     which the defendant's actual or constructive awareness of an 
     actual or potential year 2000 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 clear and 
     convincing evidence that the defendant actually knew, or 
     recklessly disregarded a known and substantial risk, that the 
     failure would occur.
       (b) Injury to Plaintiff.--With respect to any year 2000 
     claim for money damages in which the defendant's actual or 
     constructive awareness of actual or potential harm to 
     plaintiff is greater than the standard for negligence in 
     subsection (c) and 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 clear and convincing 
     evidence that the defendant actually knew, or recklessly 
     disregarded a known and substantial risk, that plaintiff 
     would suffer that harm.
       (c) Negligence.--With respect to any year 2000 claim for 
     money damages, the defendant shall not be liable unless the 
     plaintiff establishes by clear and convincing evidence, in 
     addition to all other requisite elements of the claim, that 
     the defendant knew or should have known that the actions of 
     the defendant created an unreasonable risk of harm to the 
     plaintiff.
       (d) Preservation of Existing Law.--Nothing in subsection 
     (a), (b), or (c) shall be deemed to create any year 2000 
     claim or to relieve the plaintiff in any year 2000 civil 
     action of the obligation of that plaintiff to establish any 
     element of the cause of action of that plaintiff under 
     applicable law.

     SEC. 303. REASONABLE EFFORTS DEFENSE.

       Except for breach or repudiation of contract claims, as to 
     any year 2000 claim seeking money damages--
       (1) the fact that a year 2000 failure occurred in an 
     entity, facility, system, product, or component that was 
     within the control of the party against whom the claim is 
     asserted shall not constitute the sole basis for recovery; 
     and
       (2) the party against whom the claim is asserted shall be 
     entitled to establish, as a complete defense to the claim, 
     that the party took measures that were reasonable under the 
     circumstances to prevent the year 2000 failure from occurring 
     or from causing the damages upon which the claim is based.

     SEC. 304. DAMAGES LIMITATION.

       (a) In General.--As to any year 2000 claim in which 
     punitive damages may be awarded under applicable law and in 
     which a defendant is found liable for punitive damages, the 
     amount of punitive damages that may be awarded to a claimant 
     shall not exceed the greater of--
       (1) 3 times the amount awarded to the claimant for actual 
     damages; or
       (2) $250,000.
       (b) Special Rule.--
       (1) Rule.--
       (A) In general.--Notwithstanding subsection (a), as to any 
     year 2000 claim in which the defendant is found liable for 
     punitive damages and the defendant is an individual described 
     in subparagraph (B), the amount of punitive damages shall not 
     exceed the lesser of--
       (i) 3 times the amount awarded to the claimant for actual 
     damages; or
       (ii) $250,000.
       (B) Description of individual.--An individual described in 
     this clause is an individual whose net worth does not exceed 
     $500,000, is an owner of an unincorporated business that has 
     fewer than 25 full-time employees, or is any partnership, 
     corporation, association, unit of local government, or 
     organization that has fewer than 25 full-time employees.
       (2) Applicability.--For purposes of determining the 
     applicability of this subsection to a corporation, the number 
     of employees of a subsidiary of a wholly owned corporation 
     shall include all employees of a parent corporation or any 
     subsidiary of that parent corporation.
       (c) Application of Limitations by the Court.--The 
     limitations contained in subsection (a) or (b) shall be 
     applied by the court and shall not be disclosed to the jury.

     SEC. 305. ECONOMIC LOSSES.

       (a) In General.--Subject to subsection (b), a party to a 
     year 2000 civil action may not recover economic losses for a 
     year 2000 claim based on tort unless the party is able to 
     show that at least one of the following circumstances exists:
       (1) The recovery of these losses is provided for in the 
     contract to which the party seeking to recover such losses is 
     a party.
       (2) If the contract is silent on those losses, and the 
     application of the applicable Federal or State law that 
     governed interpretation of the contract at the time the 
     contract was entered into would allow recovery of such 
     losses.
       (3) These losses are incidental to a claim in the year 2000 
     civil action based on personal injury caused by a year 2000 
     failure.
       (4) These losses are incidental to a claim in the year 2000 
     civil action based on damage to tangible property caused by a 
     year 2000 failure.
       (b) Treatment of Economic Losses.--Economic losses shall be 
     recoverable in a year 2000 civil action only if applicable 
     Federal law, or applicable State law embodied in statute or 
     controlling judicial precedent as of January 1, 1999, permits 
     the recovery of such losses in the action.

     SEC. 306. LIABILITY OF OFFICERS AND DIRECTORS.

       (a) In General.--A director, officer, or trustee of a 
     business or other organization (including a corporation, 
     unincorporated association, partnership, or non-profit 
     organization) shall not be personally liable as to any year 
     2000 claim in the capacity of that individual as a director 
     or officer of the business or organization for an aggregate 
     amount greater than the greater of--
       (1) $100,000; or
       (2) the amount of cash compensation received by the 
     director or officer from the business or organization during 
     the 12-month period immediately preceding the act or omission 
     for which liability was imposed.
       (b) Exception.--The limitation in subsection (a) shall not 
     apply to any claim in which it is found by clear and 
     convincing evidence that the director or officer, with 
     specific intent to cause harm to the plaintiff--

[[Page S1944]]

       (1) intentionally made materially misleading statements 
     relied upon by the plaintiff regarding any actual or 
     potential year 2000 problem; or
       (2) intentionally withheld material information regarding 
     any actual or potential year 2000 problem of the business or 
     organization that the director or officer had a duty to 
     disclose.
       (c) Rule of Construction.--Nothing in this section shall be 
     deemed to impose, or to permit the imposition of, personal 
     liability on any director, officer, or trustee in excess of 
     the aggregate amount of liability to which such director, 
     officer, or trustee would be subject under applicable State 
     law in existence on January 1, 1999 (including any charter or 
     bylaw authorized by that State law).

           TITLE IV--CLASS ACTIONS INVOLVING YEAR 2000 CLAIMS

     SEC. 401. MINIMUM INJURY REQUIREMENT.

       (a) In General.--In any action involving a year 2000 claim 
     that a product or service is defective, the action may be 
     maintained as a class action in Federal or State court with 
     respect to that claim only if--
       (1) the claim satisfies all other prerequisites established 
     by applicable Federal or State law; and
       (2) the court finds that the alleged defect in the product 
     or service was a material defect with respect to a majority 
     of the members of the class.
       (b) Determination by Court.--
       (1) In general.--As soon as practicable after the 
     commencement of an action involving a year 2000 claim that a 
     product or service is defective and that is brought as a 
     class action, the court shall determine by order whether the 
     requirement stated in paragraph (1) is satisfied.
       (2) Orders.--An order under this subsection may be--
       (A) conditional; and
       (B) altered or amended before the decision on the merits.

     SEC. 402. NOTIFICATION.

       (a) Notice by Mail.--
       (1) In general.--In any year 2000 civil 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 
     by United States mail, return receipt requested.
       (2) Exclusion of certain persons.--Any person whose actual 
     receipt of the notice is not verified by the court or by 
     counsel for 1 of the parties shall be excluded from the class 
     unless that person informs the court in writing, on a date no 
     later than the commencement of trial or entry of judgment, 
     that the person wishes wish to join the class.
       (b) Contents of Notice.--In addition to any information 
     required by applicable Federal or State law, the notice 
     described in this subsection shall--
       (1) concisely and clearly describe the nature of the 
     action;
       (2) identify the jurisdiction whose law will govern the 
     action;
       (3) identify any potential claims that class counsel chose 
     not to pursue so that the action would satisfy class 
     certification requirements; and
       (4) describe the fee arrangement of class counsel.

     SEC. 403. DISMISSAL PRIOR TO CERTIFICATION.

       Before determining whether to certify a class in a year 
     2000 civil action, the court may decide a motion to dismiss 
     or for summary judgment made by any party if the court 
     concludes that decision will--
       (1) promote the fair and efficient adjudication of the 
     controversy; and
       (2) not cause undue delay.

     SEC. 404. FEDERAL JURISDICTION IN CLASS ACTIONS INVOLVING 
                   YEAR 2000 CLAIMS.

       (a) Diversity Jurisdiction.--Section 1332 of title 28, 
     United States Code, is amended--
       (1) by redesignating subsections (b), (c), and (d) as 
     subsections (c), (d), and (e), respectively; and
       (2) by inserting after subsection (a) the following:
       ``(b)(1)(A) The district courts shall, regardless of the 
     sum or value of the matter in controversy therein, have 
     original jurisdiction of any year 2000 civil action which is 
     brought as a class action and in which--
       ``(i) any member of a proposed plaintiff class is a citizen 
     of a State different from any defendant;
       ``(ii) any member of a proposed plaintiff class is a 
     foreign state or a citizen or subject of a foreign state and 
     any defendant is a citizen of a State; or
       ``(iii) any member of a proposed plaintiff class is a 
     citizen of a State and any defendant is a citizen or subject 
     of a foreign state.
       ``(B) As used in this paragraph, the term `foreign state' 
     has the meaning given that term in section 1603(a).
       ``(2)(A) The district court may, in its discretion, abstain 
     from hearing such action in a year 2000 civil action 
     described in paragraph (1) in which--
       ``(i) the substantial majority of the members of all 
     proposed plaintiff classes are citizens of a single State of 
     which the primary defendants are also citizens; and
       ``(ii) the claims asserted will be governed primarily by 
     the laws of that State, the district court should abstain 
     from hearing such action.
       ``(B) The district court may, in its discretion, abstain 
     from hearing such action in a year 2000 civil action 
     described in paragraph (1) in which--
       ``(i) all matters in controversy asserted by the individual 
     members of all proposed plaintiff classes in the aggregate do 
     not exceed the sum or value of $1,000,000, exclusive of 
     interest and costs;
       ``(ii) the number of members of all proposed plaintiff 
     classes in the aggregate is less than 100; or
       ``(iii) the primary defendants are States, State officials, 
     or other governmental entities against whom the district 
     court may be foreclosed from ordering relief, the district 
     court may, in its discretion, abstain from hearing such 
     action.
       ``(3)(A) Paragraph (1) and section 1453 shall not apply to 
     any class action that is brought under the Securities Act of 
     1933 (15 U.S.C. 77a et seq.).
       ``(B) Paragraph (1) and section 1453 shall not apply to a 
     class action described in subparagraph (C) that is based upon 
     the statutory or common law of the State in which the issuer 
     concerned is incorporated (in the case of a corporation) or 
     organized (in the case of any other entity).
       ``(C) A class action is described in this subparagraph if 
     it involves--
       ``(i) the purchase or sale of securities by an issuer or an 
     affiliate of an issuer exclusively from or to holders of 
     equity securities of the issuer; or
       ``(ii) any recommendation, position, or other communication 
     with respect to the sale of securities of an issuer that--
       ``(I) is made by or on behalf of the issuer or an affiliate 
     of the issuer to holders of equity securities of the issuer; 
     and
       ``(II) concerns decisions of those equity holders with 
     respect to voting their securities, acting in response to a 
     tender or exchange offer, or exercising dissenters' or 
     appraisal rights.
       ``(D) As used in this paragraph, the terms `issuer', 
     `security', and `equity security' have the meanings given 
     those terms in section 3 of the Securities Exchange Act of 
     1934 (15 U.S.C. 78c).''.
       (b) Conforming Amendment.--Section 1332(c) of title 281 
     United States Code, (as redesignated by this section) is 
     amended by inserting after ``pursuant to subsection (a)'' 
     after ``Federal courts''.
       (c) Determination of Diversity.--Section 1332, as amended 
     by this section, is further amended by adding at the end the 
     following:
       ``(f) For purposes of subsection (b), a member of a 
     proposed class shall be deemed to be a citizen of a State 
     different from a defendant corporation only if that member is 
     a citizen of a State different from all States of which the 
     defendant corporation is deemed a citizen.''.
       (d) Removal of Class Actions.--Chapter 89 of title 28, 
     United States Code is amended by adding at the end the 
     following:

     ``Sec. 1453. Removal of class actions

       ``(a) In General.--A year 2000 civil action that is brought 
     as a class action may be removed to a district court of the 
     United States in accordance with this chapter, except that 
     such action may be removed--
       ``(1) by any defendant without the consent of all 
     defendants; or
       ``(2) by any plaintiff class member who is not a named or 
     representative class member of the action for which removal 
     is sought, without the consent of all members of such class.
       ``(b) When Removable.--This section shall apply to any year 
     2000 civil action that is brought as a class action before or 
     after the entry of any order certifying a class.
       ``(c) Procedure for Removal.--
       ``(1) In general.--The provisions of section 1446(a) 
     relating to a defendant removing a case shall apply to a 
     plaintiff removing a case under this section.
       ``(2) Application.--With respect to the application of 
     section 1446(b), the requirement relating to the 30-day 
     filing period shall be met if a plaintiff class member who is 
     not a named or representative class member of the action for 
     which removal is sought files notice of removal within 30 
     days after receipt by such class member, through service or 
     otherwise, of the initial written notice of the class action 
     provided at the trial court's direction.''.
       (e) Removal Limitations.--Section 1446(b) is amended in the 
     second undesignated paragraph--
       (1) by inserting ``, by exercising due diligence,'' after 
     ``ascertained''; and
       (2) by striking ``section 1332'' and inserting ``section''.
       (f) Technical and Conforming Amendments.--The table of 
     sections for chapter 89 of title 28, United States Code, is 
     amended by adding after the item relating to section 1452 the 
     following:

``1453. Removal of class actions.''.

       (g) Procedure After Removal.--Section 1447 of title 28, 
     United States Code, is amended by adding at the end the 
     following:
       ``(f)(1) If, after removal, the court determines that no 
     aspect of an action that is subject to its jurisdiction 
     solely under the provisions of section 1332(b) may be 
     maintained as a class action under Rule 23 of the Federal 
     Rules of Civil Procedure, the court shall strike the class 
     allegations from the action and remand the action to the 
     State court.
       ``(2) Upon remand of the action, the period of limitations 
     for any claim that was asserted in the action on behalf of 
     any named or unnamed member of any proposed class shall be 
     deemed tolled to the full extent provided under Federal 
     law.''.
       (h) Application of Substantive State Law.--Nothing in the 
     amendments made by this section shall alter the substantive 
     law

[[Page S1945]]

     applicable to an action to which such amendments apply.

                        TITLE V--EFFECTIVE DATE

     SEC. 501. EFFECTIVE DATE.

       This Act and the amendments made by this Act shall take 
     effect on January 1, 1999.

  Mrs. FEINSTEIN. Mr. President, I rise along with my colleague from 
Utah, Senator Hatch, to introduce the Year 2000 Fairness and 
Responsibility Act. This bill, supported by more than 80 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, a bill has been 
drafted that is narrow in focus and moderate in application. In 
developing this legislation, we have sought 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.
  This bill is a bill that will prevent frivolous and baseless 
litigation, but will not restrict an individual's right to sue to 
mitigate real damages.
  Let me outline a few key provisions of the legislation.
  First, this bill provides 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 3 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.
  Second, the bill limits punitive damages to $250,000 or three times 
economic loss, whichever is greater. 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.
  Third, this bill provides for proportionate liability, so that a 
defendant would be limited to the percentage proportion of that 
defendant's fault in causing the alleged harm. In other words, ``no 
deep pockets.''

  Fourth, the bill establishes requirements that the plaintiffs must 
allege specific harm and damages when filing suit, including the 
factual basis for the calculation of damages.
  The bill also provides 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.
  Sixth, the bill provides that 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.
  The bill also sets 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.
  Additionally, the bill requires that all potential class members be 
notified of a Y2K class action by U.S. mail, return receipt requested. 
That notice must include information about the nature of the action, 
the jurisdiction, claims that are not being pursued, and the 
arrangement for attorneys fees.
  Ninth, the bill provides 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.
  Mr. President, we believe that this bill represents a fair and 
reasoned approach to what is surely a real problem. But as I have said, 
this bill also represents a starting point, not an ending point. I look 
forward to working with my colleagues on both sides of the aisle to 
continue developing a fair bill that can pass in the near future. We 
must give businesses the reasonable protections they require to solve 
Y2K problems efficiently, quickly and without unnecessary distractions. 
I thank Senator Hatch for working with me on this issue, I urge my 
colleagues to contact us and to work towards a bipartisan, reasonable 
solution to this problem.
                                 ______