[Congressional Record Volume 145, Number 56 (Thursday, April 22, 1999)]
[Senate]
[Pages S4092-S4099]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
Y2K ACT--MOTION TO PROCEED
Mr. LOTT. I now move to proceed to S. 96, and send a cloture motion
to the desk.
The PRESIDING OFFICER. The cloture motion having been presented under
rule XXII, the Chair directs the clerk to read the motion.
The legislative clerk read as follows:
Cloture Motion
We, the undersigned Senators, in accordance with the
provisions of Rule XXII of the Standing Rules of the Senate,
hereby move to bring to a close debate on the motion to
proceed to Calendar No. 34, S. 96, the Y2K legislation:
Trent Lott, John McCain, Rick Santorum, Spencer Abraham,
Judd Gregg, Pat Roberts, Wayne Allard, Rod Grams, Jon
Kyl, Larry Craig, Bob Smith, Craig Thomas, Paul
Coverdell, Pete Domenici, Don Nickles, and Phil Gramm.
Mr. LOTT addressed the Chair.
The PRESIDING OFFICER. The majority leader.
Mr. LOTT. Mr. President, I regret having to file a cloture motion on
this important piece of legislation. However, we need to have a vote on
Monday afternoon so that Members will be here. We can have committee
meetings hopefully Monday and Tuesday.
We have a number of very important issues that need to be considered
by committees. We need to move forward on the now two supplemental
appropriations requests that we have. So we are going to have a vote on
Monday in any case.
But also I think this is very important legislation in and of itself.
It is important that we get up and get started on the discussion. I had
hoped we could actually work on it today and tomorrow. But because of
the NATO meeting and the congestion and the concerns about access to
and from the Capitol, we will not be in session on tomorrow. That gives
the Members who are working together--Senator McCain I know is working
with others, Senator Biden, Senator Dodd--time to try to work out some
of the remaining problems on this legislation.
We can go forward with this cloture vote on Monday afternoon. Or, if
something is worked out where it is not necessary, we could still
vitiate the cloture vote.
We need to get this done. This is urgent. The clock is ticking. We
are moving towards 2000. This liability, this problem, is hanging over
us like a sword. I think it is important that we go forward. I hope
that next week--Tuesday or Wednesday, certainly--we will be in the
substance of the bill and we can get to a final conclusion on the
substance.
I encourage Members on both sides of the aisle to work together to
see if we can't resolve this issue and move it on into conference.
I thank Senator McCain, Senator Hatch, and Senators from both sides
who have been working on it.
Having said that, I ask unanimous consent that Friday be considered
the intervening day under the provisions of rule XXII.
The PRESIDING OFFICER. Is there objection?
Mr. KERRY addressed the Chair.
Mr. LOTT. Mr. President, if I could, if there was not an objection, I
would be glad to yield to the Senator from Massachusetts for a
question.
May I confirm that there is not an objection to that request?
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LOTT. Mr. President, I would be glad to yield to the Senator from
Massachusetts.
Mr. KERRY. Mr. President, I thank the majority leader for yielding. I
simply wanted to inform him, I wasn't on the floor at the moment the
objection was raised to the Senate proceeding as Senator McCain hoped
to do.
I want to say that I had a discussion with Senator McCain, Senator
Dodd,
[[Page S4093]]
Senator Hollings, and others. A bona fide effort is being made right
now to work with the technology community as well as with the legal
community. I think there is the capacity to come together around some
form of compromise.
I thank Senator McCain for his leadership on this. I think it may be
possible within hours to come together around something.
Mr. LOTT. That is certainly my hope. It is encouraging that the
Senator from Massachusetts would say that.
Mr. HOLLINGS. Will the distinguished Senator yield?
Mr. LOTT. Yes. I am happy to yield to the Senator from South
Carolina.
Mr. HOLLINGS. We are trying to work out the matter of the quorum call
that is required with, of course, the vote on Monday. I would have to
object to dispensing with that call for a quorum on Monday, and maybe
we can change it by the end of the afternoon. I am trying to check
around right now.
The Senator from Arizona doesn't mind, does he?
Mr. McCAIN. No. I will always do what the Senator from South Carolina
says.
(Laughter.)
Mr. LOTT. Did the Senator from South Carolina have anything further
he wanted to say?
Mr. HOLLINGS. No. That is all.
Mr. LOTT. Then I will go ahead and ask unanimous consent that the
cloture vote occur at 5 p.m. on Monday, and that the mandatory quorum
under rule XXII be waived.
Mr. HOLLINGS. I object to the mandatory waiver of the quorum call.
The PRESIDING OFFICER. Objection is heard.
Mr. LOTT. Of course under the request that has already been agreed to
and under the rules of the Senate, we will have a vote on Monday
afternoon. It is just a question of time. I know there is an effort
here to try to set the schedule at a later time.
I remind Senators that I wrestle with this all the time. For every
two Senators you are trying to protect who won't get here until 6, you
are hurting a couple of Senators who may have to leave at 5:30. This is
a very delicate dance.
Mr. HOLLINGS. I understand. That is why we are calling around now
trying to work it out with the leader. He just hasn't gotten it worked
out yet.
Mr. LOTT. I hope the Senator would keep in mind that we are going to
be squeezed on both ends. We will try to work out a time that benefits
the maximum number of Senators. But if you go into the night beyond 6
o'clock, you have all kinds of problems on the other side of the issue.
With that, I yield the floor. Mr. President, we are ready to proceed
with the debate on the issue.
Mr. McCAIN addressed the Chair.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. McCAIN. Mr. President, obviously I am disappointed that we did
not proceed to S. 96. I am encouraged by the comments of the Senator
from Massachusetts and others. The Senator from Oregon and I are
continuing to have a dialog also with the Senator from Connecticut, Mr.
Dodd, and, of course, with the distinguished Democrat on the committee,
Senator Hollings.
So I hope we can come to some agreement. I am given occasionally to
flights of rhetoric, but the fact is, this is a very, very serious
issue and one that we really cannot delay too much longer. The clock is
ticking. We need to move forward. There may be some differences. I
don't think anybody believes that we need to do something destructive.
This problem is critically important. The potential for litigation to
overwhelm the judicial system for the most egregious cases involving
Y2K problems is very real. Litigation costs have been estimated as high
as $1 trillion. Certainly the burden of paying for litigation will be
distributed to the public in the form of increased costs in
technological goods and services.
The potential drain on the Nation's economy and the world's economy
from fixing computer systems and responding to litigation is
staggering. While the estimates being circulated are speculative, the
costs of making the corrections in all the computer systems in the
country are astronomical. Chase Manhattan Bank has been quoted as
spending $250 million to fix problems with its 200 million lines of
affected computer codes. The estimated costs of fixing the problem in
the United States ranges from $200 billion to $1 trillion. The
resources which would be directed to litigation are resources that
would not be available for continued improvements in technology-
producing new products and maintaining the economy that supports the
United States position as a world leader.
Time is of the essence. If the bill is going to have the intended
effect of encouraging proactive prevention and remediation of Y2K
problems, it has to be passed quickly. This bill will have limited
value if it is to be passed after the August recess. I urge my
colleagues to vote for cloture on Monday when we move forward with
that.
I have a number of letters, studies, and a lot of information I will
present when we move to the bill. I will be very clear. From the
technology network, we have letters of support from Cisco Systems,
Intel, Microsoft, American Online, Merrill Lynch, Novell, Adobe
Systems, Alexander Ogilvy Public Relations Worldwide, Platinum
Software, American Electronics Association, Marimba, Inc., NVCA,
Kleiner Perkins Caulfield & Byers, LSI Logic--the list goes on and on.
This is an important issue to the high-tech industry in America. It
is very important. It is of critical importance as to how these
corporations that are leading the American economy are able to proceed
with the business of business rather than the business of litigation.
I hope all of my colleagues will support this legislation and that we
can move forward. As the Senator from Connecticut will state, we still
have differences but we are working hard on working those out with the
Senator from Oregon, the Senator from Massachusetts, and of course, the
much esteemed Senator from South Carolina, Mr. Hollings.
I see my other colleagues would like to make comments on this very
important issue. I yield the floor.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Mr. President, I'll be brief because I know my colleagues
from Oregon and South Carolina and others may want to speak on this. I
think there is a need to try to come up with some legislation to
minimize what could be runaway litigation in this Nation. There have
already been some 80 lawsuits, many of them class action lawsuits,
filed on the Y2K issue.
I think all of my colleagues are aware that the leaders asked Senator
Bennett of Utah and myself to chair this Special Committee of the
Senate to examine the Y2K problem. We have been working for well over a
year. We have had some 17 hearings in which we have invited various
sectors of our economy --both private and public--to give their
assessment of how the remediation efforts are progressing and the
condition of our institutions. Both of us, I think, feel confident that
things are progressing well, that we are not going to have as much of a
problem as we thought a few months ago, but that there still could be
difficulties. Y2K issues internationally may be a much greater problem
than those here at home.
There is a report out which has been sent to each and every Senate
office, which I encourage our colleagues to take a look at to get a
sense of how the issue is progressing. It is an open-ended question
whether we are going to have a whole new area of litigation here--
unwarranted litigation--which could destroy some small companies that
lack the capacity to take on the kind of predatory lawsuits that too
often do more damage than good.
Simultaneously, I adamantly oppose any legislation to try to use this
issue as a way of rewriting the tort laws of the country. This ought
not to be that kind of vehicle. There is a legitimacy to the Y2K
problem, but no one should think it possible to take advantage of the
Y2K problem to achieve tort reform beyond the scope of the actual
problem. I don't think our colleagues would support it--at least not a
majority, and the legislation, if it managed to get through Congress,
would be vetoed. As the Senator from Arizona pointed out, we would have
failed in our obligation to try to do something in an intelligent,
thoughtful, common-sense way
[[Page S4094]]
that legitimately deals with the issue presented by the Y2K problem
without going overboard and doing, as some have suggested, a lot more
damage than good.
I am hopeful we can work something out here. Senator Wyden has been
working on it. I know the Senator from South Carolina has strong
interests in this issue, as he has on so many other issues. We can find
some common language here. My hope is that we will enjoy broad-based
support in the Congress, achieve the desired effects, and provide some
real assistance in the face of this potential problem that lurks 253
days from today, which begins the new millennium.
Senator Bennett and I have spent the last year serving on a Senate
committee totally devoted to the Y2K issue. We've held 18 hearings
exploring every sector of our economy that might be affected by the Y2K
problem, including financial institutions, utilities, healthcare,
telecommunications, and business. Throughout this year one thing has
been made abundantly clear. Wherever the Y2K problem exists next year,
litigation will follow.
Americans have become accustomed to living in a litigious society.
The occasional abuses of the legal system that come along arise from
problems that are limited in scope. As a result, the numbers of
lawsuits related to those problems are limited, and our legal system
and economy continue to function notwithstanding these occasional
abuses. But the Y2K problem is not limited in scope. Potentially, any
business in the country might be swept into the Y2K problem, either
because it is itself not prepared or because a firm it depends upon is
not prepared. Just six weeks ago the committee reported that as many as
15 percent of the businesses in this country will suffer Y2K-related
failures of some kind. Even now we read that small and medium-sized
businesses across the globe are not taking the necessary steps to
become Y2K-compliant, and many think they don't have a Y2K problem.
Since businesses are interconnected these days, just one failure in one
business may generate cascading failures that may then generate
numerous lawsuits.
It has been suggested that as a result of Y2K, the United States
could easily find itself witnessing a huge surge in litigation. This
potential litigious bloodletting could have long-term consequences on
the economic well-being of our country. Various experts, including the
Gartner Group from my own state of Connecticut, have estimated that the
costs of litigation may rise to $1 trillion, a phenomenal figure. Such
a massive amount of litigation has the potential to overwhelm the court
system, disrupting already-crowded dockets for years into the next
millennium. We must be careful that an avalanche of lawsuits does not
smother American corporations and bury their competitive edge. A
maelstrom of class action lawsuits could have long-term consequences on
the American economy and the American people. The rush to file lawsuits
might curb the future economic development in a number of different
sectors. Moreover, all of the money that would be set aside this year
by businesses for legal expenses associated with the Y2K problem, both
as defendants and as plaintiffs, cannot be spent on fixing the Y2K
problem. As we heard in our hearing on this issue, both large and small
businesses are concerned that the fear of litigation later is
preventing them from solving problems now.
For this reason, I have long believed that the Congress could perform
an essential service to the nation's economy by developing legislation
that would encourage companies, in the first instance, to solve their
own Y2K problems instead of going to court right away, and to curtail
the inevitable frivolous litigation that accompanies any national
problem. We should not force businesses to choose between spending
money on remediation or spending money on preparing for litigation. An
alternative to this choice is reasonable litigation reform.
Within the Banking Committee, I am on record for supporting
significant securities litigation reform. Our 1995 bill, which was
passed, despite veto by the White House, spoke to definitive and
repetitive litigation abuse. At that time the legal system was no
longer an avenue for aggrieved investors seeking justice and
restitution. Instead, it had become a pathway for a few enterprising
attorneys to manipulate legal procedures for their own profit. This
profit came at the expense and the detriment of legitimate companies
and investors across the nation. The crucial factor driving securities
reform legislation was a specific, clear-cut pattern of abusive
litigation. In the case of Y2K, however, we don't yet know what abuses
might arise.
In other words, I have strongly supported litigation reform efforts
in the past. But clearly we need a bipartisan, narrowly crafted, well-
structured, and easily understandable bill. As with securities
litigation reform, the need for Y2K litigation reform arises from a
national problem amenable to a narrow, tailored solution, such as the
bill I introduced.
I have great concerns that the bill before us today does not
represent the narrow, tailored solution to the Y2K problem that I
believe is necessary. It contains broad provisions tantamount to
massive tort reform, which should be saved for another day. The Y2K
problem should not be used as an excuse to pile on these broad
measures. I think we can all agree on what we'd like a bill to do;
indeed, the bill before us today and the Hatch-Feinstein bill contain
many of the same provisions as are in my bill. I take issue, however,
with a few provisions in both of these bills that I veiw as unnecessary
window dressing for interests unrelated to the Y2K problem.
First, the bill before us places caps on punitive damages except
where the defendant acted intentionally. Nothing inherent in the Y2K
problem requires that this be done. No state allows for the award of
punitive damages unless the defendant has acted in some egregious
manner. Defendants who have behaved responsibly will not be assessed
punitive damages, and defendants who have behaved egregiously should
not be rewarded by limiting the amount of punitive damages which they
might be required to pay. My bill does not cap punitive damages because
it is not necessary to do so.
Second, the bill before us places caps on the personal liability of
officers and directors, those individuals with the ultimate
responsibility for the management of their firms. For years now Senator
Bennett and I have done everything possible to get upper management,
including officers and directors, not only to pay attention to the Y2K
efforts of their firms but to become directly involved and responsible
for those efforts. After a lot of hard work in this area, our efforts
have finally paid off and most upper management of major firms have
appropriately shouldered these responsibilities. To come in now and
place caps on the personal liability of officers and directors would
set back our efforts to get management's attention on this issue.
Passing such caps gives these ultimate decision-makers less incentive
to maintain their active involvement in Y2K remediation efforts. A
related provision in the bill that raises the standard of proof for
such individuals for many tort actions gives them the same excuse. My
bill does not contain such provisions because I believe they are an
excessive solution to an uncertain problem.
What my bill does do is provide the narrow, tailored provisions I
think necessary to address the problem presented by the spectre of Y2K
litigation. Just as the other two Y2K liability bills introduced in the
Senate do, my bill provides for a 90-day cooling off period to allow
businesses to work out their Y2K problems together before they are
forced to go to court. Just as the other bills do, my bill places a
duty to mitigate damages on all parties which gives them an incentive
to seek out solutions to their own Y2K problems. Just as the other
bills do, my bill discourages frivolous litigation by including
specific pleading requirements and a requirement that defects alleged
in class action lawsuits by material. Just as the other bills do, my
bill rewards companies that have taken steps to become Y2K compliant by
allowing for a reasonable balance between proportionate liability and
joint and several liability.
While I strongly believe that a Y2K liability bill is necessary, I
have great concerns about this Y2K liability bill in its present form.
No one wants to see a solution to this problem more
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than I do, but I am not willing to compromise efforts to solve the Y2K
problem to satisfy unrelated interests, nor am I willing to trade in
the Y2K problem only to get a litigation problem down the road. While
we are rushing to solve the Y2K problem and the policy issues therein,
we should above all strive to enter the next century with a sense of
vision, and this vision should include a prudent analysis of the
looming challenges of potential Y2K litigation. I assure you that no
one wants to begin the next millennium by trading a vision of the
future for a subpoena.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. WYDEN. Mr. President, I will be very brief. I know the Senator
from South Carolina has important remarks to make this morning.
I have joined with Senator McCain in cosponsoring this legislation
that comes before the Senate, after voting against the bill that came
out of the Senate Commerce Committee. I have done so because there have
been at least seven major changes made in the legislation after it came
out of committee so that now when it comes before the Senate it is a
balanced bill. It is a bill, in my view, that will ensure that innocent
consumers are fully protected while at the same time helping to prevent
the kind of chaos we could have in our economy if we have scores and
scores of unwarranted lawsuits as a result of the Y2K problem.
As we all know, the Y2K issue is not a partisan issue. It affects
every computer system that uses date information, every piece of
hardware, every piece of an operating support system and all software
that uses date-related information. Our goal ought to be to try to
bring about Y2K compliance. That is our principal focus. The Senate is
already on record in that regard. At the same time, we ought to put in
place a safety net to ensure that innocent consumers, particularly
small businesses, will have a remedy and will not see their businesses
devastated.
I wrap up my brief remarks this morning by outlining a few of the
changes that Senator McCain and I worked on with Senator Dodd, Senator
Feinstein, Senator Lieberman, and others, so that the Senate has a
sense of the many changes that have been made to ensure consumers get a
fair shake and that are in the bill before the Senate today.
The first that I think is particularly important is we will make sure
there is a sunset provision in this legislation. The original bill
contained no sunset provision. There were some who said this is just
opening up brand new areas of tort law that are going to exist forever,
this is just a backdoor effort to hot wire the legal system and ensure
that we are restricting liability suits in the future. That is not the
future. There is a sunset date to ensure that we are addressing just
legitimate problems that have come about as a result of the Y2K
failures.
Second, and another area I feel so strongly about, is we ensure, when
there are really egregious, outrageous offensive instances of conduct
in the private marketplace, fraudulent conduct, that punitive damages
will still be available. It is important to us that there not be new
preemptive Federal standards in that area. That has been done.
Next, we have made changes with respect to the principle of joint
liability. This is especially important where you have defendants who
are involved, again, in committing these outrageous acts, essentially
fraudulent acts. That is kept in place as well.
So I do believe this is a bill that is targeted specifically at the
kinds of problems that are going to be seen if we do not pass a
balanced, responsible piece of legislation. This involves business-to-
business activity. I suggest to some of our colleagues this has nothing
to do with personal injury issues. If someone is injured, for example,
as a result of an elevator accident because computers have broken down,
and is maimed or killed, all of those personal remedies will lie.
So those are briefly some of the changes since the bill came from
committee. We have seen, again, the Senate wants to work in a collegial
way on this. My good friend from South Carolina and I have had several
spirited discussions on this issue in recent days. He feels very
strongly about it. My part of the country has looked at technology as a
big part of our economic future. We want to come up with a responsible,
balanced bill.
The Senator from Connecticut and I have put on the desks of all
Democratic Members of the Senate today a letter which outlines a number
of the changes that have been made. We heard earlier Senator Kerry is
pursuing some discussions as well. So I am hopeful between now and next
week we can have a bipartisan bill that is balanced, that comes before
the Senate and builds on the work Senator McCain and I have tried to do
since the partisan vote in committee. I look forward to working with my
colleagues towards that end, and I yield the floor.
The PRESIDING OFFICER. The Senator from South Carolina.
Mr. HOLLINGS. Mr. President, with respect to the Y2K problem, it is
very interesting to note, the problem has been prepared for
technologically, by the very groups they say the bill is to protect,
for 30 years. They have the technology. There is no hocus-pocus about
that.
I wish everyone would look back about 4 weeks ago and pull out of an
edition of Business Week an extensive article to the effect that the
market force is working. Large businesses, the GEs, the Ford Motors,
the Xeroxes, the IBMs and everybody else, working with their suppliers
down the line, have long since put them on notice. I do not have my
file with me, but the drop dead date is the end of this particular
month, April 1999, where you still have several more months to comply.
But the market, knowing the technology is there, knowing of course you
are going to be facing this, is trying to, like a Paul Revere, wake the
town and tell the people. And they have been doing it. We did it last
year, on a bipartisan basis, when we said: ``Wait a minute, if we
cannot work these problems out, we will be slammed with antitrust.'' We
got together quickly, the Senator from Connecticut and others, and on a
bipartisan basis we passed that measure. Everything has been working
fine.
I spoke earlier this year--I do not want to mislead--I spoke with my
friend, Mr. Andy Grove of Intel, who is very much concerned about
proportionality. But other than that, we spent a good hour in my office
talking about large computerization and everything else. That community
knows. They are way ahead of lawyers and lawsuits, I can tell you that,
as the business leaders.
William Gates--Bill Gates, out at Davos, Switzerland, at the
conference, said there was no problem. And this past week the New York
Times wrote a summary article on the Y2K problem.
Mind you me, this is the middle of April 1999, months ahead, of
course, of January 2000. They said people are moving along and
everything else. You see, it is a practical problem. There is a bunch
of old equipment on hand. Every automobile dealer faces this every year
because they are going to bring out another model. So they all know
about bringing out new models and everything else like that. Of course
the new model needed for 2000 is the Year 2000-compliant model.
But what happens is that a side group has come in, upon this
particular concern and interest, not at all interested in the Y2K. We
could win this debate hands down on Y2K. But they are interested in
distorting the tort liability laws of America. They have been about it
and I have been with them for 20 years. There is a wonderful gentleman
named Victor Schwartz with the National Association of Manufacturers,
and he sends me a wonderful Christmas greeting, thanking me for the
wonderful year he has had, because I keep his clients current as long
as we can continue to defeat product liability.
But now we have another gentleman who has come over to the Chamber of
Commerce named Tom Donohue, and I know him well. I worked with him in
the Truckers'. He is coordinating this conspiracy. There is a great
problem. ``We have legitimate business folks in the computerization
business who are going to front for us. We don't want to argue about
taking away the rights of trial by jury that we have beat upon.'' They
don't want to have to take on the Association of State Supreme Court
Justices and everything else of that kind. ``We want to talk about Y2K,
Y2K, Y2K, crisis, crisis, crisis.'' And they even act like there is
one, 7 months ahead of time.
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My little State of South Carolina just reported they would be
compliant in July of this particular year, 1999. If South Carolina can
get ready, everybody and anybody can get ready by the year 2000, I can
tell you that. But they come in under the auspices of a crisis, to try
to change punitive damages, try to change trial by jury, try to change
joint and several liability--they are trying to change it all. Anywhere
they can get a foot in the door for this particular precedent by this
particular Congress under the general phraseology ``tort reform,'' they
think they are home free. And I am afraid they would be.
The truth of the matter is, under the present legal system of the
States', we are having the finest, most booming economy you have ever
seen. The stock market has gone over 10,000, the interest rates are
low, the unemployment rate is about the lowest it has ever been in 30
years, and right on down the list. So what you are finding out, right
to the point, is that there is not a problem. Business is doing well.
In fact, the analysis done in this particular debate over 20 years
has found it has not been greedy trial lawyers bringing fanciful suits
with no substance whatsoever, just harassing. Mr. President, the good
trial lawyer has no time for that nonsense. He does not get paid until
he wins. He has to prevail. He has to come to court, he has to prove
his case by the greater preponderance of evidence. He has to get not
just 5 or 6 votes, he has to get all 12 votes. Then he has to go
through the obstacle course of an appeal to the Supreme Court. Why?
Because corporate America continues to get paid as long as the clock
runs.
It is a tragic thing that has been occurring in the system of
jurisprudence in America, because I practiced law for 20 years and I
practiced representing businesses, incorporated and otherwise, but
predominantly on the trial side with poor clients. I did not get a
recovery unless the client got a recovery.
I was against continuances, against motions, against more
depositions, against more discoveries. You see that mahogany-wall,
oriental-rug crowd down here. There are 60,000 registered to practice
in the District of Columbia trying to fix your vote and my vote, just
fixing juries. They will never get to the courtroom. They sit around
and tell the clients: Come on, computer industry, we can change the
tort system so we can take away the rights of the very group, Mr.
President, that it is supposed to protect--mainly small business.
They have the National Federation of Independent Businesses. That is
the small business group that the law now protects. Instead, under the
bill as proposed, a small business owner will have to wait 90 days
before he or she could bring proceedings in court to recover damages.
They know at the very beginning what is contracted for and what is
wrong, but this requirement is going to delay them, increasing the time
and costs of the suit. Then you have to prove various other measures by
one of the highest standards of proof, almost like in a civil case. In
cases where a party generally is required to prove by a preponderance,
they seek to have the standard to be clear and convincing.
I say that advisedly because with this particular system, as it has
worked out over the years--come to South Carolina. We had tort reform,
but I have, they say, the competitive businesses. I am bringing in the
Hondas, the BMWs, as well as the expansion of the GEs and other
industries from all over the United States and the world coming into
South Carolina where we have a civil statewide tort system.
Actually, these contracts are under the Uniform Commercial Code and
ought to be tried on a contract basis. But, no, they do not want to
even talk about the defect in the entire measure. The measure is not
needed. The measure is misguided. The measure is an adulteration of the
system, and bringing it to the Federal level, trying to tell the
States--and that is what I hear from the other side of the aisle, that
the people back home know best, they keep quoting Jefferson to me, less
Government, let the States operate and everything else of that kind.
They do that until they get something for big business. Now they want
to come in and make sure they can have that clock run, that they can
make a fortune, and the little man cannot even afford to bring his
particular action.
I have every objection in the world to this measure. I do not mind
compromising. I have always dealt with that particular approach for the
almost 50 years now that I have been in public service. But I can tell
you what this is. This is not Y2K. They have everybody running all
around. Look at the morning Washington Post and you will see the
different people. It is like: ``Sooey, pig, you come, we got them,
we're going to get you to do this, get them to do that,'' and take the
person who has made the contract--and right now they can look at their
contract and see what is what in April 1999, months ahead of January 1.
They know whether they have the bad model or the right contract, and
they know what is going to be required. This really allows an industry
to offload all the old stuff and then come in with an adaptation next
year that is going to cost over and above the particular computer.
It is bad business. It really distorts the jury system and the tried-
and-true system of American jurisprudence. That is why I had to object,
because I have been busy on this other farce, this so-called lockbox
that allows everybody to have the key but the poor Social Security
crowd that is bringing about the surplus. There is not any question
about that farce that is going on. They are just trying to make for a
TV short in next year's campaign. We are going to make TV spots and
show the inaccuracy of it. That is exactly what we have been doing,
paying down public debt with Social Security money, thereby running up,
up, up and away the Social Security debt. When you pay down someone
else's debt with your money, you incur an indebtedness increase in your
own program, namely Social Security.
There we are. They are trying their best to ram it through on Y2K,
and they are all going around oozing and goozing how reasonable we are
and we are trying to work this out. It ought to be killed dead in its
tracks. Anybody who is looking out for the individual rights of the
small businessman, the little doctor, the little law firm--any little
business person who does not keep a lawyer on retainer and they have an
instrumentality, namely a computer, that they say is ready to comply,
and then they find out it does not comply, that is a breach of contract
under the Uniform Contract Code. They can bring that action. Mr.
President, unless there is a fraudulent breach, it does not come under
tort law, it comes under the contract law.
Incidentally, it is businesses suing businesses. That is the big
logjam. Any study, any research done with respect to the actual
increase in the volume of lawsuits in America will find businesses
suing businesses. I am exhibit 1 on this particular issue, for the main
and simple reason, we worked for 4 years to get through the 1996
Telecommunications Act. Once we got it through, rather than businesses
doing what they said, namely competing, they all started with their
lawyers: It was unconstitutional, take it up to this court--they have
all been in court. Why? The ratepayers are paying for the lawyers. It
does not cost them any money, and they are going around buying up each
other, combining rather than competing.
They have a legal game going, which is in some measure the same thing
they had going with AT&T that caused Judge Greene to break it up. It
seems to me that we are going to have to break it up again. That is
what we are looking at now with the FCC: getting a drop-dead date for
them to comply with the law that they wrote.
They do not want to comply. They want to combine. They want to use
their monopolistic powers with their lawyers in business. But it is not
the poor little injured party in court with a jury trial that is at
issue, generally speaking, with respect to Y2K. It is the downtown
crowd that is scaring up clients and scaring up fees and scaring up
activity against the States.
The States have their own laws. The State of Illinois is well
regarded as a place of high jurisprudence, and they do not need the
Federal Government coming in and telling them how to protect the little
man. Here, under the auspices of protecting the little man, we are
going to take away his rights and drag him out, as if he had a lawyer
[[Page S4097]]
waiting. It is to discourage the little man's day in court. That is why
we will be watching it very closely.
I don't know that this one will be worked out. In all reality, I
think we can get the votes--not necessarily on the matter of
proceeding. We do not mind proceeding, we are just trying to get the
time. We can get the votes on the cloture to kill this measure.
If the computer industry is really serious about it, there may be
some compromise, but for this particular Senator, I have no plans at
all of compromising on the fundamental constitutional rights of a trial
by jury and what the States have developed over many, many years, which
is the finest business environment that exists in the world today.
Nothing is hurting them. I do not have any of these foreign industries
coming in and saying, ``But, Senator, we're worried about product
liability, we are worried about joint and several, we are worried about
trial by jury, we are worried about all these other punitive
damages.'' You do not hear that until you can get politicians running
for national office, and then they put it in the polls.
Under ``Henry V,'' Shakespeare said, ``Kill all the lawyers.'' Of
course, it was the biggest compliment. The only way that individual
rights and freedom could not be sustained is to kill off the crowd that
was going to protect individual rights and freedom. So it really was
the greatest of all compliments. It was not that they were against
lawyers, but they knew how to start anarchy. So that is what they told
Dick the Butcher when they shouted, ``Kill all the lawyers.''
That is what you have on Monday when we get to the regular debate. We
will see which lawyer crowd we are going to kill off.
I yield the floor.
Mr. LEAHY. Mr. President, the sweeping terms of the bill before us
are not justified. Senator McCain's substitute, like the underlying
bill, unfortunately, remains a wish list for special interests that are
or might become involved in Y2K litigation. The broad liability
limitations in the legislation risk rewarding irresponsible parties at
the expense of the responsible and the innocent. That is not fair or
responsible.
I cannot support such one-sided legislation that restricts the rights
of American consumers, small business owners and family farmers who
seek redress for harms caused by Year 2000 computer problems.
I remain open to continuing to work with interested members of the
Senate on bipartisan, consensus legislation that would deter frivolous
Y2K lawsuits and encourage responsible Y2K compliance. In my judgment,
today's bill would more likely have the opposite effect. It proposes
sweeping liability protection that will encourage more Y2K litigation
and discourage curing Y2K problems.
The right approach is to fix as many of these problems ahead of time
as we can. Ultimately, the best defense against any Y2K-based lawsuit
is to be Y2K compliant.
Let me offer a few examples how this bill would restructure the laws
of the 50 states and cause great harm to the nationwide effort to fix
our Y2K computer problems in 1999.
First, this bill provides special liability protection to directors
and officers of companies involved in Y2K disputes. Why are we doing
this? Directors and officers are already protected by the business
judgment rule, which has been adopted by each of the 50 states. How
will this special legal protection for corporate directors and officers
affect the well-established precedents interpreting the business
judgment rule in our states?
Moreover, every director and officer of a corporation has standard
insurance coverage to protect him or her from personal liability in the
course of their duties. Will insurance companies reap windfall profits
from this special legal protection for corporate directors and
officers? Or should insurance companies rebate the premiums they have
charged for existing insurance coverage for corporate directors or
officers because it might be superfluous now? Who knows? But these
questions will be hot spots for future litigation if this bill becomes
law.
Providing special Y2K liability protection to the key decision makers
in a company at this juncture sends the wrong message to the business
community.
We want to encourage these key decision makers to be overseeing
aggressive year 2000 compliance measures. Instead, this bill says to
corporate officers and directors: ``Don't worry, be happy.''
I want those corporate officers motivated to fix their company's Y2K
problems now. After their corporation is Y2K compliant and they have
worked with their suppliers and customers and business partners and we
have avoided Y2K problems is the time to be happy.
Second, this bill caps punitive damages to 3 times the amount of
compensatory damages or $250,000, whichever is greater. If the
defendant is a small business, then $250,000 is the ceiling for any
punitive damage award.
These punitive damages caps again send the wrong message to the
business community by protecting the bad actor, instead of rewarding
the responsible business owner.
The bill contains an exception to these punitive damages caps if a
plaintiff can prove by clear and convincing evidence that the defendant
intentionally defrauded the plaintiff. This exception will prove
meaningless in the real world because no one will be able to meet this
high and specific standard for proving the injury was specifically
intended. How in the world is a plaintiff going to prove some
intentionally tried to injury him or her in a Y2K case? Get real.
Punitive damages are awarded only in cases of outrageous conduct. If
a business takes responsible steps to become Y2K compliant, it will not
be subject to punitive damages. These caps on punitive damages, like
many other parts of the bill, discourage responsible Y2K remediation
efforts.
Indeed, by limiting punitive damage to a dollar figure, $250,000,
these special legal protections may encourage some companies to analyze
the costs and potential risks of Y2K noncompliance and make the
calculated business decision not to make the investment needed to come
into compliance. The same type of calculation, for example, apparently
made by Ford in the exploding Pinto gas tank case.
A cost-benefit approach does not fix a corporation's Y2K problems,
but only leads to more litigation. Litigation with punitive damages
caps may, in the judgment of the company's accountants, be worth
enduring if it costs less than Y2K compliance.
Third, the bill severely restricts the amount of damages that an
innocent plaintiff can recover from a guilty defendant by abolishing
joint and several liability in most cases. The exceptions to this
proportionate liability are so complex that they invited more
litigation, not less.
This proportionate liability may unfairly penalize innocent consumers
and small businesses and reward irresponsible companies.
For example, a small business forced to shut down temporarily because
of a Y2K computer malfunction may not be able to recoup all of its
losses under proportionate liability if it fails to identify all the
responsible parties that caused that Y2K problem. As a result, that
small business may be forced to file for bankruptcy because of its
limited resources. Why is the innocent small business owner, who may
not know and should not know all the responsible parties in the
manufacturing chain of a non Y2K compliant product, forced to go out of
business?
Moreover, this bill's many federal preemptions of state contract and
tort law are all one-sided. The bill's provisions benefit only
defendants, not plaintiffs, in Y2K disputes.
The bill raises the standards of proof from a preponderance test to a
clear and convincing test for plaintiffs to prove negligence and other
torts claims without any corresponding responsibility on defendants.
The bill adds new state of mind requirements on plaintiffs to prove
tort claims without any corresponding responsibility on defendants.
The bill also greatly expands the jurisdiction of the federal courts
to consider Y2K cases under its class action provisions--an approach
soundly rejected last month by Chief Justice Rehnquist and the Judicial
Conference. The Judicial Conference found that shifting Y2K cases from
state courts ``holds the potential for overwhelming the federal courts,
resulting in substantial costs and delays.''
[[Page S4098]]
In addition, the Judicial Conference concluded ``the proposed Y2K
amendments are inconsistent with the objective of preserving the
federal courts as tribunals of limited jurisdiction.'' I ask unanimous
consent that a letter from the Judicial Conference opposing this
expanded federal court jurisdiction be printed in the Record.
Finally, the bill adds a sunset date of January 1, 2016, according to
the latest public draft. A bill that stays effective for the next 17
years is not narrow in scope. This sunset date is not reasonable. Is
this bill intended to cover year 2015 computer problems?
I agree with Assistant Attorney General Eleanor Acheson who testified
at the Judiciary Committee hearing a few weeks ago on similar Y2K
liability legislation that ``this bill would be by far the most
sweeping litigation reform measure ever enacted.''
So why do we need these sweeping litigation reforms to address year
2000 computer problems? I don't know. The proponents of this
legislation have offered no solid evidence to justify these sweeping
provisions.
There is no reasonable justification for the sweeping liability
protections in this bill because these protections are not reasonable.
This bill overreaches again and again. It is not close to being
balanced.
Worst of all, this bill as presently drafted would preempt the
consumer protection laws of each of the 50 states and restrict the
legal rights of consumers who are harmed by Y2K computer failures. Why
is this bill taking away existing protections for the ordinary citizen?
We all know that individual consumers do not have the same knowledge
or bargaining power in the marketplace as businesses with more
resources. Many consumers may not be aware of potential Y2K problems in
the products that they buy for personal, family or household purposes.
Consumers just go to the local store downtown or at the mall to buy a
home computer or the latest software package. They expect their new
purchase to work. But what if it does not work because of a Y2K
problem?
Then the average consumer should be able to use his or her home
state's consumer protection laws to get a refund, replacement part or
other justice. During the Judiciary Committee consideration of similar
legislation, I offered an amendment to allow consumers to do just that.
I may offer a similar amendment on this bill.
Those of us in Congress who have been active on technology-related
issues have struggled mightily, and successfully, to act in a
bipartisan way. It would be unfortunate, and it would be harmful to the
technology industry, technology users and to all consumers, if that
pattern is broken over this bill.
I sense that some may be seeking to use fear of the Y2K millennium
bug to revive failed liability limitation legislation of the past.
These controversial proposals may be good politics in some circles, but
they are not true solutions to the Y2K problem. Instead, we should be
looking to the future and creating incentives in this country and
around the world for accelerating our efforts to resolve potential Y2K
problems before they cause harm.
Last year, I joined with Senator Hatch to pass into law a consensus
bill known as ``The Year 2000 Information and Readiness Disclosure
Act.'' We worked on a bipartisan basis with Senator Bennett, Senator
Dodd, the Administration, industry representatives and others to reach
agreement on a bill to facilitate information sharing to encourage Y2K
compliance.
The new law, enacted six months ago, is working to encourage
companies to work together and share Y2K solutions and test results. It
promotes company-to-company information sharing while not limiting
rights of consumers. That is the model we should use to enact balanced
and narrow legislation to deter any frivolous Y2K litigation while
encouraging responsible Y2K compliance.
I am continuing to work with Senators from both sides of the aisle to
negotiate a narrow and balanced bill.
Unfortunately, this special interest legislation before us today is
not narrow and it is not balanced.
I must oppose it.
Mr. President, I ask Unanimous Consent that a letter received by the
Judiciary Committee from the Judicial Conference of the United States
be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Judicial Conference of
the United States,
Washington, DC, March 24, 1999.
Hon. Orrin G. Hatch,
Committee on the Judiciary, U.S. Senate, Dirksen Senate
Office Building, Washington, DC.
Dear Mr. Chairman: On behalf of the Judicial Conference of
the United States, I write to transmit views with respect to
pending year 2000 (``Y2K'') legislation. S. 461, as well as
S. 96 and H.R. 775, seeks to promote the resolution of
potentially large numbers of Y2K disputes. The federal
judiciary recognizes the commendable efforts of Congress to
resolve Y2K disputes short of full-scale litigation so as to
alleviate the burden of such litigation on private parties as
well as on federal and state courts. These are clearly
laudable public policy objectives.
Some of the provisions, however, will affect the
administration of justice in the federal courts. The Judicial
Conference, at its March 16th session, determined to oppose
the provisions expanding federal court jurisdiction over Y2K
class actions in bills (S. 461, S. 96, and H.R. 775)
currently under consideration by the 106th Congress. In
addition, because the Y2K pleading requirements included in
these bills circumvent the Rules Enabling Act, the Conference
also opposes these provisions.
class actions
These bills create no federal cause of action. Instead,
they assume that plaintiffs will rely on typical state causes
of action to provide relief in Y2K disputes. Under the bills,
individual plaintiffs, as opposed to class action plaintiffs,
can bring their tort, contract, and fraud suits in a state
court where they will remain until resolved. While federal
defenses and liability limitations established in the
legislation may be raised in such litigation, the bills
recognize that state courts are fully capable of applying
these provisions and carrying out federal policy. This
reliance on state courts, which today handle 95 percent of
the nation's judicial business, follows the traditional
allocation of work between the state and federal courts.
The provisions of these Y2K bills take a radically
different approach to Y2K class actions--one that would
effect a major reallocation of class action workloads. These
bills create original federal court jurisdiction over any Y2K
class action based on state law, regardless of the amount in
controversy, where there is minimal diversity of
citizenship--that is, where any single member of the proposed
plaintiff class and any defendant are from different states.
They also provide for the removal of any such Y2K class
action to federal court by any single defendant or any single
member of the plaintiff class who is not a representative
party. While these bills do identify limited circumstances in
which a federal district court may abstain from hearing a Y2K
class action, it is unlikely that many actions will meet the
specified criteria. The net result of these provisions will
be that most Y2K class action cases will be litigated in the
federal courts.
This assignment of the class action workload to the federal
courts is particularly troubling because the Y2K problem may
result in a very large number of class actions. While no one
knows how many cases will be filed, Senator Robert Bennett,
Chair of the Special Committee on the Year 2000 Technology
Problem, has predicted that there could be a ``tidal wave''
of litigation resulting from Y2K problems. Given the nature
of the Y2K problem, it is reasonable to expect that similar
claims will often arise in favor of multiple plaintiffs
against the same defendant or defendants. Thus, it can be
expected that a substantial portion of these cases will be
brought as class actions. Responding to class actions,
regardless of where they are filed, will likely be a
monumental task. If the current class action provisions
remain in these bills, however, the important contribution
the state courts would otherwise make to meeting this
challenge will be lost, and the burden of the federal system
will be correspondingly increased. The transfer of this
burden of the federal courts holds the potential of
overwhelming federal judicial resources and the capacity of
the federal courts to resolve not only Y2K cases, but other
causes of action as well.
Federal administration of these state-law class actions
will impose other substantial burdens. By shifting state-
created claims into federal court, the bills confront the
federal courts with the responsibility to engage in difficult
and time-consuming choice-of-law decisions. The Erie doctrine
requires that federal district courts, sitting in diversity,
apply the law of the forum state of determine which body of
state law controls the existence of a right of action. The
wholesale shift of state-law class actions into federal court
makes this choice-of-law obligation all the more daunting as
the sheer number of possible subclasses and relevant bodies
of state law multiples. Some federal courts have taken the
position that such multiplicity of law itself stands as a
barrier to the certification of a nationwide class action.
Even where a district court agreed to certify a class, it
would have to make choice of law
[[Page S4099]]
and substantive determinations that would have no binding
force in subsequent Y2K litigation in the states in question.
In addition to the potential adverse docket impact on the
federal courts, the proposed bills infringe upon the
traditional authority of the states to manage their own
judicial business. State legislatures and other rule-making
bodies provide rules for the aggregation of state-law
claims into class-wide litigation in order to achieve
certain litigation economies of scale. By providing for
class treatment, state policymakers express the view that
the state's own resources can be best deployed not through
repetitive and potentially duplicative individual
litigation, but through some form of class treatment. The
proposed bills could deprive the state courts of the power
to hear much of this class litigation and might well
create incentives for plaintiffs who prefer a state forum
to bring a series of individual claims. Such individual
litigation might place a greater burden on the state
courts and thwart the states' policies of more efficient
disposition.
Federal jurisdiction over class action litigation is an
area where change should be approached with caution and
careful consideration of the underlying relationship between
state and federal courts. The Judicial Conference Advisory
Committee on Civil Rules has recently devoted several years
of study to the rules in class action litigation. One
outgrowth of that study was the appointment by the Chief
Justice of a Mass Torts Working Group. The Working Group
undertook a study which revealed the complexities of
litigation that aggregates large numbers of claims and
illustrates the need for a deliberative review of the issues
that must be addressed in attempting to improve the process
for resolution of such litigation. Such issues involve not
only procedural rules, but also the jurisdiction of federal
and state courts and the interaction between federal and
state law. Y2K class action litigation implicates the same
complex and fundamental issues that the Working Group
identified. Even for familiar categories of litigation, these
issues can be satisfactorily resolved only by further study.
An attempt to address them in isolation, for an unfamiliar
category of cases that remains to be developed only in the
future, is unwise.
It may well be that extending minimal diversity to mass
torts may be appropriate if accompanied by suitable
restrictions. The Judicial Conference, for example, has
endorsed in principle the use of minimal diversity
jurisdiction in single-event, mass tort situations, like
airplane crash litigation, and there may be other situations
in which the efficiencies to be gained from consolidating
mass tort litigation in federal courts are justified.
Expansion of class action jurisdiction over Y2K class actions
in the manner provided in the pending bills, however, would
be inconsistent with the objective of preserving the federal
courts as tribunals of limited jurisdiction and the reality
that the federal courts are staffed and supported to function
as tribunals of limited jurisdiction.
Judicial federalism relies on the principle that state and
federal courts together comprise an integrated system for the
delivery of justice in the United States. There appears to be
no substantial justification for the potentially massive
transfer of workload under these bills, and such a transfer
would seem to be counterproductive. State courts provide most
of the nation's judicial capacity, and a decision to limit
access to this capacity in the face of the burden that Y2K
litigation may impose could have significant consequences for
the efficient resolution of Y2K disputes.
pleading requirements
S. 461, as well as S. 96 and H.R. 775, sets forth specific
pleading provisions in Y2K litigation that would require a
plaintiff to state with particularity certain matters in the
complaint regarding the nature and amount of damages,
material defects, and the defendant's state of mind. These
requirements are inconsistent with the general notice
pleading provisions found in the Federal Rules of civil
Procedure (i.e., Rule 8), which apply to civil cases. The
bills' provisions bypass the rulemaking provisions in the
rules Enabling Act (28 U.S.C. Sec. Sec. 2071-77). They have
not been subjected to bench, bar, and public scrutiny
envisioned under the Rules Enabling Act and are inconsistent
with the policies underlying the Act, which the Judicial
Conference has long supported.
Not only do the statutory pleading requirements bypass the
Rules Enabling Act, they do so in a particularly
objectionable way because they are contained in stand-alone
statutory provisions outside the federal rules. This will
cause confusion and traps for unwary lawyers who are
accustomed to relying on the Federal Rules of civil Procedure
for pleading requirements. It also would signal yet another
departure from uniform, national procedural rules, following
closely in the wake of similar pleading requirements
contained in the Private Securities Reform Litigation Act.
On behalf of the federal judiciary, I appreciate your
consideration of these views. If you or your staff have any
questions, please contact Mike Blommer, Assistant Director,
Office of Legislative Affairs (202-502-1700).
Sincerely,
Leonidas Ralph Mecham,
Secretary.
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