[Congressional Record Volume 145, Number 94 (Tuesday, June 29, 1999)]
[House]
[Pages H5066-H5073]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 CONFERENCE REPORT ON H.R. 775, Y2K ACT

  Mr. GOODLATTE (during Special Order of the gentleman from New Jersey, 
Mr. Pallone) submitted the following conference report and statement on 
the bill (H.R. 775) to establish certain procedures for civil actions 
brought for damages relating to the failure of any device or system to 
process or otherwise deal with the transition from the year 1999 to the 
year 2000, and for other purposes:

                  Conference Report (H. Rept. 106-212)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendment of the Senate to the bill (H.R. 
     775), to establish certain procedures for civil actions 
     brought for damages relating to the failure of any device or 
     system to process or otherwise deal with the transition from 
     the year 1999 to the year 2000, and for other purposes, 
     having met, after full and free conference, have agreed to 
     recommend and do recommend to their respective Houses as 
     follows:
       That the House recede from its disagreement to the 
     amendment of the Senate and agree to the same with an 
     amendment as follows:
       In lieu of the matter proposed to be inserted by the Senate 
     amendment, insert the following:

     SECTION 1. SHORT TITLE; TABLE OF SECTIONS.

       (a) Short Title.--This Act may be cited as the ``Y2K Act''.
       (b) Table of Sections.--The table of sections for this Act 
     is as follows:
Sec. 1. Short title; table of sections.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.
Sec. 4. Application of Act.
Sec. 5. Punitive damages limitations.
Sec. 6. Proportionate liability.
Sec. 7. Prelitigation notice.
Sec. 8. Pleading requirements.
Sec. 9. Duty to mitigate.
Sec. 10. Application of existing impossibility or commercial 
              impracticability doctrines.
Sec. 11. Damages limitation by contract.
Sec. 12. Damages in tort claims.
Sec. 13. State of mind; bystander liability; control.
Sec. 14. Appointment of special masters or magistrate judges for Y2K 
              actions.
Sec. 15. Y2K actions as class actions.
Sec. 16. Applicability of State law.
Sec. 17. Admissible evidence ultimate issue in State courts.
Sec. 18. Suspension of penalties for certain year 2000 failures by 
              small business concerns.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds 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 dates after December 
     31, 1999.
       (B) If not corrected, the problem described in subparagraph 
     (A) and resulting failures could incapacitate systems that 
     are essential to the functioning of markets, commerce, 
     consumer products, utilities, Government, and safety and 
     defense systems, in the United States and throughout the 
     world.
       (2) It is in the national interest that producers and users 
     of technology products concentrate their attention and 
     resources in the time remaining before January 1, 2000, on 
     assessing, fixing, testing, and developing contingency plans 
     to address any and all outstanding year 2000 computer date-
     change problems, so as to minimize possible disruptions 
     associated with computer failures.
       (3)(A) Because year 2000 computer date-change problems may 
     affect virtually all businesses and other users of technology 
     products to some degree, there is a substantial likelihood 
     that actual or potential year 2000 failures will prompt a 
     significant volume of litigation, much of it insubstantial.
       (B) The litigation described in subparagraph (A) would have 
     a range of undesirable effects, including the following:
       (i) It would threaten to waste technical and financial 
     resources that are better devoted to curing year 2000 
     computer date-change problems and ensuring that systems 
     remain or become operational.
       (ii) It could threaten the network of valued and trusted 
     business and customer relationships that are important to the 
     effective functioning of the national economy.
       (iii) It would strain the Nation's legal system, causing 
     particular problems for the small businesses and individuals 
     who already find that system inaccessible because of its 
     complexity and expense.
       (iv) The delays, expense, uncertainties, loss of control, 
     adverse publicity, and animosities that frequently accompany 
     litigation of business disputes could exacerbate the 
     difficulties associated with the date change and work against 
     the successful resolution of those difficulties.
       (4) It is appropriate for the Congress to enact legislation 
     to assure that the year 2000 problems described in this 
     section do not unnecessarily disrupt interstate commerce or 
     create unnecessary caseloads in Federal courts and to provide 
     initiatives to help businesses prepare and be in a position 
     to withstand the potentially devastating economic impact of 
     such problems.
       (5) Resorting to the legal system for resolution of year 
     2000 problems described in this section is not feasible for 
     many businesses and individuals who already find the legal 
     system inaccessible, particularly small businesses and 
     individuals who already find the legal system 
     inaccessible, because of its complexity and expense.
       (6) 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.
       (7) A proliferation of frivolous lawsuits relating to year 
     2000 computer date-change problems by opportunistic parties 
     may further limit access to courts by straining the resources 
     of the legal system and depriving deserving parties of their 
     legitimate rights to relief.
       (8) Congress encourages businesses to approach their 
     disputes relating to year 2000 computer date-change problems 
     responsibly, and to avoid unnecessary, time-consuming, and 
     costly litigation about Y2K failures, particularly those that 
     are not material. Congress supports good faith negotiations 
     between parties when there is such a dispute, and, if 
     necessary, urges the parties to enter into voluntary, non-
     binding mediation rather than litigation.
       (b) Purposes.--Based upon the power of the Congress under 
     Article I, Section 8, Clause 3 of the Constitution of the 
     United States, the purposes of this Act are--
       (1) to establish uniform legal standards that give all 
     businesses and users of technology products reasonable 
     incentives to solve year 2000 computer date-change problems 
     before they develop;
       (2) to encourage continued remediation and testing efforts 
     to solve such problems by providers, suppliers, customers, 
     and other contracting partners;
       (3) to encourage private and public parties alike to 
     resolve disputes relating to year 2000

[[Page H5067]]

     computer date-change problems by alternative dispute 
     mechanisms in order to avoid costly and time-consuming 
     litigation, to initiate those mechanisms as early as 
     possible, and to encourage the prompt identification and 
     correction of such problems; and
       (4) to lessen the burdens on interstate commerce by 
     discouraging insubstantial lawsuits while preserving the 
     ability of individuals and businesses that have suffered real 
     injury to obtain complete relief.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Y2K actions.--The term ``Y2K action''--
       (A) means a civil action commenced in any Federal or State 
     court, or an agency board of contract appeal proceeding, in 
     which the plaintiff's alleged harm or injury arises from or 
     is related to an actual or potential Y2K failure, or a claim 
     or defense arises from or is related to an actual or 
     potential Y2K failure;
       (B) includes a civil action commenced in any Federal or 
     State court by a government entity when acting in a 
     commercial or contracting capacity; but
       (C) does not include an action brought by a government 
     entity acting in a regulatory, supervisory, or enforcement 
     capacity.
       (2) Y2K failure.--The term ``Y2K failure'' means failure by 
     any device or system (including any computer system and any 
     microchip or integrated circuit embedded in another device or 
     product), or any software, firmware, or other set or 
     collection of processing instructions to process, to 
     calculate, to compare, to sequence, to display, to store, to 
     transmit, or to receive year-2000 date-related data, 
     including failures--
       (A) to deal with or account for transitions or comparisons 
     from, into, and between the years 1999 and 2000 accurately;
       (B) to recognize or accurately to process any specific date 
     in 1999, 2000, or 2001; or
       (C) accurately to account for the year 2000's status as a 
     leap year, including recognition and processing of the 
     correct date on February 29, 2000.
       (3) Government entity.--The term ``government entity'' 
     means an agency, instrumentality, or other entity of Federal, 
     State, or local government (including multijurisdictional 
     agencies, instrumentalities, and entities).
       (4) Material defect.--The term ``material deject'' means a 
     defect in any item, whether tangible or intangible, or in the 
     provision of a service, that substantially prevents the item 
     or service from operating or functioning as designed or 
     according to its specifications. The term ``material defect'' 
     does not include a defect that--
       (A) has an insignificant or de minimis effect on the 
     operation or functioning of an item or computer program;
       (B) affects only a component of an item or program that, as 
     a whole, substantially operates or functions as designed; or
       (C) has an insignificant or de minimis effect on the 
     efficacy of the service provided.
       (5) Personal injury.--The ``personal injury'' means 
     physical injury to a natural person, including--
       (A) death as a result of a physical injury; and
       (B) mental suffering, emotional distress, or similar 
     injuries suffered by that person in connection with a 
     physical injury.
       (6) State.--The term ``State'' means any State of the 
     United States, the District of Columbia, the Commonwealth of 
     Puerto Rico, the Northern Mariana Islands, the United States 
     Virgin Islands, Guam, American Samoa, and any other territory 
     or possession of the United States, and any political 
     subdivision thereof.
       (7) Contract.--The term ``contract'' means a contract, 
     tariff, license, or warranty.
       (8) Alternative dispute resolution.--The term ``alternative 
     dispute resolution'' means any process or proceeding, other 
     than adjudication by a court or in an administrative 
     proceeding, to assist in the resolution of issues in 
     controversy, through processes such as early neutral 
     evaluation, mediation, minitrial, and arbitration.

     SEC. 4. APPLICATION OF ACT.

       (a) General Rule.--This Act applies to any Y2K action 
     brought after January 1, 1999, for a Y2K failure occurring 
     before January 1, 2003, or for a potential Y2K failure that 
     could occur or has allegedly caused harm or injury before 
     January 1, 2003, including any appeal, remand, stay, or other 
     judicial, administrative, or alternative dispute resolution 
     proceeding in such an action.
       (b) No New Cause of Action Created.--Nothing in this Act 
     creates a new cause of action, and, except as otherwise 
     explicitly provided in this Act, nothing in this Act expands 
     any liability otherwise imposed or limits any defense 
     otherwise available under Federal or State law.
       (c) Claims for Personal Injury or Wrongful Death 
     Excluded.--This Act does not apply to a claim for personal 
     injury or for wrongful death.
       (d) Warranty and Contract Preservation.--
       (1) In general.--Subject to paragraph (2), in any Y2K 
     action any written contractual term, including a limitation 
     or an exclusion of liability, or a disclaimer of warranty, 
     shall be strictly enforced unless the enforcement of that 
     term would manifestly and directly contravene applicable 
     State law embodied in any statute in effect on January 1, 
     1999, specifically addressing that term.
       (2) Interpretation of contract.--In any Y2K action in which 
     a contract to which paragraph (1) applies is silent as to a 
     particular issue, the interpretation of the contract as to 
     that issue shall be determined by applicable law in effect at 
     the time the contract was executed.
       (3) Unconscionability.--Nothing in paragraph (1) shall 
     prevent enforcement of State law doctrines of 
     unconscionability, including adhesion, recognized as of 
     January 1, 1999, in controlling judicial precedent by the 
     courts of the State whose law applies to the Y2K action.
       (e) Preemption of State Law.--This Act supersedes State law 
     to the extent that it establishes a rule of law applicable to 
     a Y2K action that is inconsistent with State law, but nothing 
     in this Act implicates, alters, or diminishes the ability of 
     a State to defend itself against any claim on the basis of 
     sovereign immunity.
       (f) Application with Year 2000 Information and Readiness 
     Disclosure Act.--Nothing in this Act supersedes any provision 
     of the Year 2000 Information and Readiness Disclosure Act.
       (g) Application to Actions Brought by a Government 
     Entity.--
       (1) In general.--To the extent provided in this subsection, 
     this Act shall apply to an action brought by a government 
     entity described in section 3(1)(C).
       (2) Definitions.--In this subsection:
       (A) Defendant.--
       (i) In general.--The term ``defendant'' includes a State or 
     local government.
       (ii) State.--The term ``State'' means each of the several 
     States of the United States, the District of Columbia, the 
     Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
     American Samoa, and the Commonwealth of the Northern Mariana 
     Islands.
       (iii) Local government.--The term ``local government'' 
     means--

       (I) any county, city, town, township, parish, village, or 
     other general purpose political subdivision of a State; and
       (II) any combination of political subdivisions described in 
     subclause (I) recognized by the Secretary of Housing and 
     Urban Development.

       (B) Y2K upset.--The term ``Y2K upset''--
       (i) means an exceptional temporary noncompliance with 
     applicable Federally enforceable measurement, monitoring, or 
     reporting requirements directly related to a Y2K failure that 
     are beyond the reasonable control of the defendant charged 
     with compliance; and
       (ii) does not include--

       (I) noncompliance with applicable Federally enforceable 
     measurement, monitoring, or reporting requirements that 
     constitutes or would create an imminent threat to public 
     health, safety, or the environment;
       (II) noncompliance with applicable Federally enforceable 
     measurement, monitoring, or reporting requirements that 
     provided for the safety and soundness of the banking or 
     monetary system, or for the integrity of the national 
     securities markets, including the protection of depositors 
     and investors;
       (III) noncompliance with applicable Federally enforceable 
     measurement, monitoring, or reporting requirements to the 
     extent caused by operational error or negligence;
       (IV) lack of reasonable preventative maintenance;
       (V) lack of preparedness for a Y2K failure; or
       (VI) noncompliance with the underlying Federally 
     enforceable requirements to which the applicable Federally 
     enforceable measurement, monitoring, or reporting requirement 
     relates.

       (3) Conditions necessary for a demonstration of a y2k 
     upset.--A defendant who wishes to establish the affirmative 
     defense of Y2K upset shall demonstrate, through properly 
     signed, contemporaneous operating logs, or other relevant 
     evidence that--
       (A) the defendant previously made a reasonable good faith 
     effort to anticipate, prevent, and effectively remediate a 
     potential Y2K failure;
       (B) a Y2K upset occurred as a result of a Y2K failure or 
     other emergency directly related to a Y2K failure;
       (C) noncompliance with the applicable Federally enforceable 
     measurement, monitoring, or reporting requirement was 
     unavoidable in the face of an emergency directly related to a 
     Y2K failure and was necessary to prevent the disruption of 
     critical functions or services that could result in harm to 
     life or property;
       (D) upon identification of noncompliance the defendant 
     invoking the defense began immediate actions to correct any 
     violation of Federally enforceable measurement, monitoring, 
     or reporting requirements; and
       (E) the defendant submitted notice to the appropriate 
     Federal regulatory authority of a Y2K upset within 72 hours 
     from the time that the defendant became aware of the upset.
       (4) Grant of a y2k upset defense.--Subject to the other 
     provisions of this subsection, the Y2K upset defense shall be 
     a complete defense to the imposition of a penalty in any 
     action brought as a result of noncompliance with Federally 
     enforceable measurement, monitoring, or reporting 
     requirements for any defendant who establishes by a 
     preponderance of the evidence that the conditions set forth 
     in paragraph (3) are met.
       (5) Length of y2k upset.--The maximum allowable length of 
     the Y2K upset shall be not more than 15 days beginning on the 
     date of the upset unless specific relief by the appropriate 
     regulatory authority is granted.
       (6) Fraudulent invocation of y2k upset defense.--Fraudulent 
     use of the Y2K upset defense provided for in this subjection 
     shall be subject to the sanctions provided in section 1001 of 
     title 18, United States Code.
       (7) Expiration of defense.--The Y2K upset defense may not 
     be asserted for a Y2K upset occurring after June 30, 2000.
       (8) Preservation of authority.--Nothing in this subsection 
     shall affect the authority of a government entity to seek 
     injunctive relief or require a defendant to correct a 
     violation of a Federal enforceable measurement, monitoring, 
     or reporting requirement.
       (h) Consumer Protection From Y2K Failures.--
       (1) In general.--No person who transacts business on 
     matters directly or indirectly affecting residential 
     mortgages shall cause or permit a

[[Page H5068]]

     foreclosure on any such mortgage against a consumer as a 
     result of an actual Y2K failure that results in an inability 
     accurately or timely to process any mortgage payment 
     transaction.
       (2) Notice.--A consumer who is affected by an inability 
     described in paragraph (1) shall notify the servicer for the 
     mortgage, in writing and within 7 business days from the time 
     that the consumer becomes aware of the Y2K failure and the 
     consumer's inability accurately or timely to fulfill his or 
     her obligation to pay, of such failure and inability and 
     shall provide to the servicer any available documentation 
     with respect to the failure.
       (3) Actions may resume after grace period.--Notwithstanding 
     paragraph (1), an action prohibited under paragraph (1) may 
     be resumed, if the consumer's mortgage obligation has not 
     been paid and the servicer of the mortgage has not expressly 
     and in writing granted the consumer an extension of time 
     during which to pay the consumer's mortgage obligation, buy 
     only after the later of--
       (A) 4 weeks after January 1, 2000; or
       (B) 4 weeks after notification is made as required under 
     paragraph (2), except that any notification made on or after 
     March 15, 2000, shall not be effective for purposes of this 
     subsection.
       (4) Applicability.--This subsection does not apply to 
     transactions upon which a default has occurred before 
     December 15, 1999, or with respect to which an imminent 
     default was foreseeable before December 15, 1999.
       (5) Enforcement of obligations merely tolled.--This 
     subsection delays but does not prevent the enforcement of 
     financial obligations, and does not otherwise affect or 
     extinguish the obligation to pay.
       (6) Definition.--In this subsection--
       (A) The term ``consumer'' means a natural person.
       (B) The term ``residential mortgage'' has the meaning given 
     the term ``federally related mortgage loan'' under section 3 
     of the Real Estate Settlement Procedures Act of 1974 (12 
     U.S.C. 2602).
       (C) The term ``servicer'' means the person, including any 
     successor, responsible for receiving any scheduled periodic 
     payments from a consumer pursuant to the terms of a 
     residential mortgage, including amounts for any escrow 
     account, and for making the payments of principal and 
     interest and such other payments with respect to the 
     amounts received from the borrower as may be required 
     pursuant to the terms of the mortgage. Such term includes 
     the person, including any successor, who makes or holds a 
     loan if such person also services the loan.
       (i) Applicability to Securities Litigation.--In any Y2K 
     action in which the underlying claim arises under the 
     securities laws (as defined in section 3(a) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78c(a)), the provisions of 
     this Act, other than section 13(b) of this Act, shall not 
     apply.

     SEC. 5. PUNITIVE DAMAGES LIMITATIONS.

       (a) In General.--In any Y2K action in which punitive 
     damages are permitted by applicable law, the defendant shall 
     not be liable for punitive damages unless the plaintiff 
     proves by clear and convincing evidence that the applicable 
     standard for awarding damages has been met.
       (b) Caps on Punitive Damages.--
       (1) In general.--Subject to the evidentiary standard 
     established by subsection (a), punitive damages permitted 
     under applicable law against a defendant described in 
     paragraph (2) in a Y2K action may not exceed the lesser of--
       (A) 3 times the amount awarded for compensatory damages; or
       (B) $250,000.
       (2) Defendant described.--A defendant described in this 
     paragraph is a defendant--
       (A) who--
       (i) is sued in his or her capacity as an individual; and
       (ii) whose net worth does not exceed $500,000; or
       (B) that is an unincorporated business, a partnership, 
     corporation, association, or organization, with fewer than 50 
     full-time employees.
       (3) No cap if injury specifically intended.--Paragraph (1) 
     does not apply if the plaintiff establishes by clear and 
     convincing evidence that the defendant acted with specific 
     intent to injure the plaintiff.
       (c) Government Entities.--Punitive damages in a Y2K action 
     may not be awarded against a government entity.

     SEC. 6. PROPORTIONATE LIABILITY.

       (a) In General.--Except in a Y2K action that is a contract 
     action, and except as provided in subsections (b) through 
     (g), a person against whom a final judgment is entered in a 
     Y2K action shall be liable solely for the portion of the 
     judgment that corresponds to the relative and proportionate 
     responsibility of that person. In determining the percentage 
     of responsibility of any defendant, the trier of fact shall 
     determine that percentage as a percentage of the total fault 
     of all persons, including the plaintiff, who caused or 
     contributed to the total loss incurred by the plaintiff.
       (b) Proportionate Liability.--
       (1) Determination of responsibility.--In any Y2K action 
     that is not a contract action, the court shall instruct the 
     jury to answer special interrogatories, or, if there is no 
     jury, the court shall make findings with respect to each 
     defendant, including defendants who have entered into 
     settlements with the plaintiff or plaintiffs, concerning--
       (A) the percentage of responsibility, if any, of each 
     defendant, measured as a percentage of the total fault of all 
     persons who caused or contributed to the loss incurred by the 
     plaintiff; and
       (B) if alleged by the plaintiff, whether the defendant 
     (other than a defendant who has entered into a settlement 
     agreement with the plaintiff)--
       (i) acted with specific intent to injure the plaintiff; or
       (ii) knowingly committed fraud.
       (2) Contents of special interrogatories or findings.--The 
     responses to interrogatories or findings under paragraph (1) 
     shall specify the total amount of damages that the plaintiff 
     is entitled to recover and the percentage of responsibility 
     of each defendant found to have caused or contributed to the 
     loss incurred by the plaintiff.
       (3) Factors for consideration.--In determining the 
     percentage of responsibility under this subsection, the trier 
     of fact shall consider--
       (A) the nature of the conduct of each person found to have 
     caused or contributed to the loss incurred by the plaintiff; 
     and
       (B) the nature and extent of the causal relationship 
     between the conduct of each such person and the damages 
     incurred by the plaintiff.
       (c) Joint Liability for Specific Intent or Fraud.--
       (1) In general.--Notwithstanding subsection (a), the 
     liability of a defendant in a Y2K action that is not a 
     contract action is joint and several if the trier of fact 
     specifically determines that the defendant--
       (A) acted with specific intent to injure the plaintiff; or
       (B) knowingly committed fraud.
       (2) Fraud; recklessness.--
       (A) Knowing commission of fraud described.--For purposes of 
     subsection (b)(1)(B)(ii) and paragraph (1)(B) of this 
     subsection, a defendant knowingly committed fraud if the 
     defendant--
       (i) made an untrue statement of a material fact, with 
     actual knowledge that the statement was false;
       (ii) omitted a fact necessary to make the statement not be 
     misleading, with actual knowledge that, as a result of the 
     omission, the statement was false; and
       (iii) knew that the plaintiff was reasonably likely to rely 
     on the false statement.
       (B) Recklessness.--For purposes of subsection (b)(1)(B) and 
     paragraph (1) of this subsection, reckless conduct by the 
     defendant does not constitute either a specific intent to 
     injure, or the knowing commission of fraud, by the defendant.
       (3) Right to contribution not affected.--Nothing in this 
     section affects the right, under any other law, of a 
     defendant to contribution with respect to another defendant 
     found under subsection (b)(1)(B), or determined under 
     paragraph (1)(B) of this subsection, to have acted with 
     specific intent to injure the plaintiff or to have knowingly 
     committed fraud.
       (d) Special rules.--
       (1) Uncollectible share.--
       (A) In general.--Notwithstanding subsection (a), if, upon 
     motion made not later than 6 months after a final judgment is 
     entered in any Y2K action that is not a contract action, the 
     court determines that all or part of the share of the 
     judgment against a defendant for compensatory damages is not 
     collectible against that defendant, then each other defendant 
     in the action is liable for the uncollectible share as 
     follows:
       (i) Percentage of net worth.--The other defendants are 
     jointly and severally liable for the uncollectible share if 
     the plaintiff establishes that--
       (I) the plaintiff is an individual whose recoverable 
     damages under the final judgment are equal to more than 10 
     percent of the net worth of the plaintiff; and
       (II) the net worth of the plaintiff is less than $200,000.
       (ii) Other plaintiffs.--For a plaintiff not described in 
     clause (i), each of the other defendants is liable for the 
     uncollectible share in proportion to the percentage of 
     responsibility of that defendant.
       (iii) For a plaintiff not described in clause (i), in 
     addition to the share indentified in clause (ii), the 
     defendant is liable for an additional portion of the 
     uncollecitble share in an amount equal to 50 percent of the 
     amount determined under clause (ii) if the plaintiff 
     demonstrates by a preponderance of the evidence that the 
     defendant acted with reckless disregard for the likelihood 
     that its acts would cause injury of the sort suffered by the 
     plaintiff.
       (B) Overall limit.--The total payments required under 
     subparagraph (A) from all defendants may not exceed the 
     amount of the uncollectible share.
       (C) Subject to contribution.--A defendant against whom 
     judgment is not collectible is subject to contribution and to 
     any continuing liability to the plaintiff on the judgment.
       (D) Suits by consumers.--
       (i) Notwithstanding subparagraph (A), the other defendants 
     are jointly and severally liable for the uncollectible share 
     if--

       (I) the plaintiff is a consumer whose suit alleges or 
     arises out of a defect in a consumer product; and
       (II) the plaintiff is suing as an individual and not a part 
     of a class action.

       (ii) In this subparagraph:

       (I) The term ``class action'' means--

       (aa) a single lawsuit in which (1) damages are sought on 
     behalf of more than 10 persons or prospective class members; 
     or (2) 1 or more named parties seek to recover damages on a 
     representative basis on behalf of themselves and other 
     unnamed parties similarly situated; or
       (bb) any group of lawsuits filed in or pending in the same 
     court in which (1) damages are sought on behalf of more than 
     10 persons; and (2) the lawsuits are joined, consolidated, or 
     otherwise proceed as a single action for any purpose.

       (II) The term ``consumer'' means an individual who acquires 
     a consumer product for purposes other than resale.
       (III) The term ``consumer product'' means any personal 
     property or service which is normally used for personal, 
     family, or household purposes.

[[Page H5069]]

       (2) Special right of contribution.--To the extent that a 
     defendant is required to make an additional payment under 
     paragraph (1), that defendant may recover contribution--
       (A) from the defendant originally liable to make the 
     payment;
       (B) from any other defendant that is jointly and severally 
     liable;
       (C) from any other defendant held proportionately liable 
     who is liable to make the same payment and has paid less than 
     that other defendant's proportionate share of that payment; 
     or
       (D) from any other person responsible for the conduct 
     giving rise to the payment that would have been liable to 
     make the same payment.
       (3) Nondisclosure to jury.--The standard for allocation of 
     damages under subsection (a) and subsection (b)(1), and the 
     procedure for reallocation of uncollectible shares under 
     paragraph (1) of this subsection, shall not be disclosed to 
     members of the jury.
       (e) Settlement Discharge.--
       (1) In general.--A defendant who settles a Y2K action that 
     is not a contract action at any time before final verdict or 
     judgment shall be discharged from all claims for contribution 
     brought by other persons. Upon entry of the settlement by the 
     court, the court shall enter an order constituting the final 
     discharge of all obligations to the plaintiff of the settling 
     defendant arising out of the action. The order shall bar all 
     future claims for contribution arising out of the action--
       (A) by any person against the settling defendant; and
       (B) by the settling defendant against any person other than 
     a person whose liability has been extinguished by the 
     settlement of the settling defendant.
       (2) Reduction.--If a defendant enters into a settlement 
     with the plaintiff before the final verdict or judgment, the 
     verdict or judgment shall be reduced by the greater of--
       (A) an amount that corresponds to the percentage of 
     responsibility of that defendant; or
       (B) the amount paid to the plaintiff by that defendant.
       (f) General Right of Contribution.--
       (1) In general.--A defendant who is jointly and severally 
     liable for damages in any Y2K action that is not a contract 
     action may recover contribution from any other person who, if 
     joined in the original action, would have been liable for the 
     same damages. A claim for contribution shall be determined 
     based on the percentage of responsibility of the claimant and 
     of each person against whom a claim for contribution is made.
       (2) Statute of limitations for contribution.--An action for 
     contribution in connection with a Y2K action that is not a 
     contract action shall be brought not later than 6 months 
     after the entry of a final, nonappealable judgment in the Y2K 
     action, except that an action for contribution brought by a 
     defendant who was required to make an additional payment 
     under subsection (d)(1) may be brought not later than 6 
     months after the date on which such payment was made.
       (g) More Protective State Law Not Preempted.--Nothing in 
     this section preempts or supersedes any provision of State 
     law that--
       (1) limits the liability of a defendant in a Y2K action to 
     a lesser amount than the amount determined under this 
     section; or
       (2) otherwise affords a greater degree of protection from 
     joint or several liability than is afforded by this section.

     SEC. 7. PRELITIGATION NOTICE.

       (a) In General.--Before commencing a Y2K action, except an 
     action that seeks only injunctive relief, a prospective 
     plaintiff in a Y2K action shall send a written notice by 
     certified mail (with either return receipt requested or other 
     means of verification that the notice was sent) to each 
     prospective defendant in that action. The notice shall 
     provide specific and detailed information about--
       (1) the manifestations of any material defect alleged to 
     have caused harm or loss;
       (2) the harm or loss allegedly suffered by the prospective 
     plaintiff;
       (3) how the prospective plaintiff would like the 
     prospective defendant to remedy the problem;
       (4) the basis upon which the prospective plaintiff seeks 
     that remedy; and
       (5) the name, title, address, and telephone number of any 
     individual who has authority to negotiate a resolution of the 
     dispute on behalf of the prospective plaintiff.
       (b) Person to Whom Notice To Be Sent.--The notice required 
     by subsection (a) shall be sent--
       (1) to the registered agent of the prospective defendant 
     for service of legal process;
       (2) if the prospective defendant does not have a registered 
     agent, then to the chief executive officer if the prospective 
     defendant is a corporation, to the managing partner if the 
     prospective defendant is a partnership, to the proprietor if 
     the prospective defendant is a sole proprietorship, or to a 
     similarly-situated person if the prospective defendant is any 
     other enterprise; or
       (3) if the prospective defendant has designated a person to 
     receive prelitigation notices on a Year 2000 Internet Website 
     (as defined in section 3(7) of the Year 2000 Information and 
     Readiness Disclosure Act), to the designated person, if the 
     prospective plaintiff has reasonable access to the Internet.
       (c) Response to Notice.--
       (1) In general.--Within 30 days after receipt of the notice 
     specified in subsection (a), each prospective defendant shall 
     send by certified mail with return receipt requested to each 
     prospective plaintiff a written statement acknowledging 
     receipt of the notice, and describing the actions it has 
     taken or will take to address the problem identified by the 
     prospective plaintiff.
       (2) Willingness to engage in adr.--The written statement 
     shall state whether the prospective defendant is willing to 
     engage in alternative dispute resolution.
       (3) Inadmissibility.--A written statement required by this 
     subsection is not admissible in evidence, under Rule 408 of 
     the Federal Rules of Evidence or any analogous rule of 
     evidence in any State, in any proceeding to prove liability 
     for, or the invalidity of, a claim or its amount, or 
     otherwise as evidence of conduct or statements made in 
     compromise negotiations.
       (4) Presumptive time of receipt.--For purposes of paragraph 
     (1), a notice under subsection (a) is presumed to be received 
     7 days after it was sent.
       (5) Priority.--A prospective defendant receiving more than 
     1 notice under this section may give priority to notices with 
     respect to a product or service that involves a health or 
     safety related Y2K failure.
       (d) Failure to Respond.--If a prospective defendant--
       (1) fails to respond to a notice provided pursuant to 
     subsection (a) within the 30 days specified in subsection 
     (c)(1), or
       (2) does not describe the action, if any, the prospective 
     defendant has taken, or will take, to address the problem 
     identified by the prospective plaintiff,

     the prospective plaintiff may immediately commence a legal 
     action against that prospective defendant.
       (e) Remediation Period.--
       (1) In general.--If the prospective defendant responds and 
     proposes remedial action it will take, or offers to engage in 
     alternative dispute resolution, then the prospective 
     plaintiff shall allow the prospective defendant an 
     additional 60 days from the end of the 30-day notice 
     period to complete the proposed remedial action or 
     alternative dispute resolution before commencing a legal 
     action against that prospective defendant.
       (2) Extension by agreement.--The prospective plaintiff and 
     prospective defendant may change the length of the 60-day 
     remediation period by written agreement.
       (3) Multiple extensions not allowed.--Except as provided in 
     paragraph (2), a defendant in a Y2K action is entitled to no 
     more than one 30-day period and one 60-day remediation period 
     under paragraph (1).
       (4) Statutes of limitation, etc., tolled.--Any applicable 
     statute of limitations or doctrine of laches in a Y2K action 
     of which paragraph (1) applies shall be tolled during the 
     notice and remediation period under that paragraph.
       (f) Failure to Provide Notice.--If a defendant determines 
     that a plaintiff has filed a Y2K action without providing the 
     notice specified in subsection (a) or without awaiting the 
     expiration of the appropriate waiting period specified in 
     subsection (c), the defendant may treat the plaintiff's 
     complaint as such a notice by so informing the court and the 
     plaintiff in its initial response to the plaintiff. If any 
     defendant elects to treat the complaint as such a notice--
       (1) the court shall stay all discovery and all other 
     proceedings in the action for the appropriate period after 
     filing of the complaint; and
       (2) the time for filing answers and all other pleadings 
     shall be tolled during the appropriate period.
       (g) Effect of Contractual or Statutory Waiting Periods.--In 
     cases in which a contract, or a statute enacted before 
     January 1, 1999, requires notice of non-performance and 
     provides for a period of delay prior to the initiation of 
     suit for breach or repudiation of contract, the period of 
     delay provided by contract or the statute is controlling over 
     the waiting period specified in subsections (c) and (d).
       (h) State Law Controls Alternative Methods.--Nothing in 
     this section supersedes or otherwise preempts any State law 
     or rule of civil procedure with respect to the use of 
     alternative dispute resolution for Y2K actions.
       (i) Provisional Remedies Unaffected.--Nothing in this 
     section interferes with the right of a litigant to 
     provisional remedies otherwise available under Rule 65 of the 
     Federal Rules of Civil Procedure or any State rule of civil 
     procedure providing extraordinary or provisional remedies in 
     any civil action in which the underlying complaint seeks both 
     injunctive and monetary relief.
       (j) Special Rule for Class Actions.--For the purpose of 
     applying this section to a Y2K action that is maintained as a 
     class action in Federal or State court, the requirements of 
     the preceding subsections of this section apply only to named 
     plaintiffs in the class action.

     SEC 8. PLEADING REQUIREMENTS.

       (a) Application With Rules of Civil Procedure.--This 
     section applies exclusively to Y2K actions and, except to the 
     extent that this section requires additional information to 
     be contained in or attached to pleadings, nothing in this 
     section is intended to amend or otherwise supersede 
     applicable rules of Federal or State civil procedures.
       (B) Nature and Amount of Damages.--In all Y2K actions in 
     which damages are requested, there shall be filed with the 
     complaint a statement of specific information as to the 
     nature and amount of each element of damages and the factual 
     basis for the damages calculation.
       (Co Material Defects.--In any Y2K action in which the 
     plaintiff alleges that there is a material defect in a 
     product or service, there shall be filed with the 
     complaint a statement of specific information regarding 
     the manifestations of the material defects and the facts 
     supporting a conclusion that the defects are material.
       (d) Required State of Mind.--In any Y2K action in which a 
     claim is asserted on which the plaintiff may prevail only on 
     proof that the defendant acted with a particular state of 
     mind, there shall be filed with the complaint, with respect 
     to each element of that claim, a statement of the facts 
     giving rise to a strong inference that the defendant acted 
     with the required state of mind.

[[Page H5070]]

     SEC. 9. DUTY TO MITIGATE.

       (A) In General.--Damages awarded in any Y2K action shall 
     exclude compensation for damages the plaintiff could 
     reasonably have avoided in light of any disclosure or other 
     information of which the plaintiff was, or reasonably should 
     have been, aware, including information made available by the 
     defendant to purchasers or users of the defendant's product 
     or services concerning means of remedying or avoiding the Y2K 
     failure involved in the action.
       (b) Preservation of Existing Law.--The duty imposed by this 
     section is in addition to any duty to mitigate imposed by 
     State law.
       (c) Exception for Intentional Fraud.--Subsection (a) does 
     not apply to damages suffered by reason of the plaintiff's 
     justifiable reliance upon an affirmative material 
     misrepresentation by the defendant, made by the defendant 
     with actual knowledge of its falsity, concerning the 
     potential for Y2K failure of the device or system used or 
     sold by the defendant that experienced the Y2K failure 
     alleged to have caused the plaintiff's harm.

     SEC. 10. APPLICATION OF EXISTING IMPOSSIBILITY OR COMMERCIAL 
                   IMPRACTICABILITY DOCTRINES.

       In any Y2K action for breach of repudiation of contract, 
     the applicability of the doctrines of impossibility and 
     commercial impracticability shall be determined by the law in 
     existence on January 1, 1999. Nothing in this Act shall be 
     construed as limiting or impairing a party's right to assert 
     defenses based upon such doctrines.

     SEC. 11. DAMAGES LIMITATION BY CONTRACT.

       In any Y2K action for breach or repudiation of contract, no 
     party may claim, or be awarded, any category of damages 
     unless such damages are allowed--
       (1) by the express terms of the contract; or
       (2) if the contract is silent on such damages, by operation 
     of State law at the time the contract was effective or by 
     operation of Federal law.

     SEC. 12. DAMAGES IN TORT CLAIMS.

       (a) In General.--A party to a Y2K action making a tort 
     claim, other than a claim of intentional tort arising 
     independent of a contract, may not recover damages for 
     economic loss unless--
       (1) the recovery of such losses is provided for in a 
     contract to which the party seeking to recover such losses is 
     a party, or
       (2) such losses result directly from damage to tangible 
     personal or real property caused by the Y2K failure involved 
     in the action (other than damage to property that is the 
     subject of the contract between the parties to the Y2K action 
     or, in the event there is no contract between the parties, 
     other than damage caused only to the property that 
     experienced the Y2K failure),

     and such damages are permitted under applicable Federal or 
     State law.
       (b) Economic Loss.--For purposes of this section only, and 
     except as otherwise specifically provided in a valid and 
     enforceable written contract between the plaintiff and the 
     defendant in a Y2K action, the term ``economic loss'' means 
     amounts awarded to compensate an injured party for any loss, 
     and includes amounts awarded for damages such as--
       (1) lost profits or sales;
       (2) business interruption;
       (3) losses indirectly suffered as a result of the 
     defendant's wrongful act or omission;
       (4) losses that arise because of the claims of third 
     parties;
       (5) losses that must be pled as special damages; and
       (6) consequential damages (as defined in the Uniform 
     Commercial Code or analogous State commercial law).
       (c) Certain Other Actions.--A person liable for damages, 
     whether by settlement or judgment, in a civil action to which 
     this Act does not apply because of section 4(c) whose 
     liability, in whole or in part, is the result of a Y2K 
     failure may, notwithstanding any other provision of this Act, 
     pursue any remedy otherwise available under Federal or State 
     law against the person responsible for that Y2K failure to 
     the extent of recovering the amount of those damages.

     SEC. 13. STATE OF MIND; BYSTANDER LIABILITY; CONTROL.

       (a) Defendant's State of Mind.--In a Y2K action other than 
     a claim for breach or repudiation of contract, and in which 
     the defendant's actual or constructive awareness of an actual 
     or potential Y2K failure is an element of the claim, the 
     defendant is not liable unless the plaintiff establishes that 
     element of the claim by the standard of evidence under 
     applicable State law in effect on the day before January 1, 
     1999.
       (b) Limitation on Bystander Liability for Y2K Failures.--
       (1) In general.--With respect to any Y2K action for money 
     damages in which--
       (A) the defendant is not the manufacturer, seller, or 
     distributor of a product, or the provider of a service, that 
     suffers or causes the Y2K failure at issue,
       (B) the plaintiff is not in substantial privity with the 
     defendant, and
       (C) the defendant's actual or constructive awareness of an 
     actual or potential Y2K failure is an element of the claim 
     under applicable law,

     the defendant shall not be liable unless the plaintiff, in 
     addition to establishing all other requisite elements of the 
     claim, proves, by the standard of evidence under applicable 
     State law in effect on the day before January 1, 1999, that 
     the defendant actually knew, or recklessly disregarded a 
     known and substantial risk, that such failure would occur.
       (2) Substantial privity.--For purposes of paragraph (1)(B), 
     a plaintiff and a defendant are in substantial privity when, 
     in a Y2K action arising out of the performance of 
     professional services, the plaintiff and the defendant either 
     have contractual relations with one another or the plaintiff 
     is a person who, prior to the defendant's performance of such 
     services, was specifically identified to and acknowledged by 
     the defendant as a person for whose special benefit the 
     services were being performed.
       (3) Certain claims excluded.--For purposes of paragraph 
     (1)(C), claims in which the defendant's actual or 
     constructive awareness of an actual or potential Y2K failure 
     is an element of the claim under applicable law do not 
     include claims for negligence but do include claims such as 
     fraud, constructive fraud, breach of fiduciary duty, 
     negligent misrepresentation, and interference with contract 
     or economic advantage.
       (c) Control Not Determinative of Liability.--The fact that 
     a Y2K failure occurred in an entity, facility, system, 
     product, or component that was sold, leased, rented, or 
     otherwise within the control of the party against whom a 
     claim is asserted in aY2K action shall not constitute the 
     sole basis for recovery of damages in that action. A claim in 
     a Y2K action for breach or repudiation of contract for such a 
     failure is governed by the terms of the contract.
       (d) Protections of the Year 2000 Information and Readiness 
     Disclosure Act Apply.--The protections for the exchanges of 
     information provided by section 4 of the Year 2000 
     Information and Readiness Disclosure Act (Public Law 105-271) 
     shall apply to any Y2K action.

     SEC. 14. APPOINTMENT OF SPECIAL MASTERS OR MAGISTRATE JUDGES 
                   FOR Y2K ACTIONS.

       Any district court of the United States in which a Y2K 
     action is pending may appoint a special master or a 
     magistrate judge to hear the matter and to make findings of 
     fact and conclusions of law in accordance with Rule 53 of the 
     Federal Rules of Civil Procedure.

     SEC. 15. Y2K ACTIONS AS CLASS ACTIONS.

       (a) Material Defect Requirement.--A Y2K action involving a 
     claim that a product or service is defective may be 
     maintained as a class action in Federal or State court as to 
     that claim only if--
       (1) it satisfies all other prerequisites established by 
     applicable Federal or State law, including applicable rules 
     of civil procedure; and
       (2) the court finds that the defect in a product or service 
     as alleged would be a material defect for the majority of the 
     members of the class.
       (b) Notification.--In any Y2K action that is maintained as 
     a class action, the court, in addition to any other notice 
     required by applicable Federal or State law, shall direct 
     notice of the action to each member of the class, which shall 
     include--
       (1) a concise and clear description of the nature of the 
     action;
       (2) the jurisdiction where the case is pending; and
       (3) the fee arrangements with class counsel, including the 
     hourly fee being charged, or, if it is a contingency fee, the 
     percentage of the final award which will be paid, including 
     an estimate of the total amount that would be paid if the 
     requested damages were to be granted.
       (c) Forum for Y2K Class Actions.--
       (1) Jurisdiction.--Except as provided in paragraph (2), the 
     district courts of the United States shall have original 
     jurisdiction of any Y2K action that is brought as a class 
     action.
       (2) Exceptions.--The district courts of the United States 
     shall not have original jurisdiction over a Y2K action 
     brought as a class action if--
       (A)(i) a substantial majority of the members of the 
     proposed plaintiff class are citizens of a single State;
       (ii) the primary defendants are citizens of that State; and
       (iii) the claims asserted will be governed primarily by the 
     laws of that State;
       (B) the primary defendants are States, State officials, or 
     other governmental entities against whom the district courts 
     of the United States may be foreclosed from ordering relief;
       (C) the plaintiff class does not seek an award of punitive 
     damages, and the amount in controversy is less than the sum 
     of $10,000,000 (exclusive of interest and costs), computed on 
     the basis of all claims to be determined in the action; or
       (D) there are less than 100 members of the proposed 
     plaintiff class.

     A party urging that any exception described in subparagraph 
     (A), (B), (C), or (D) applies to an action shall bear the 
     full burden of demonstrating the applicability of the 
     exception.
       (3) Procedure if requirements not met.--
       (A) dismissal or remand.--A United States district court 
     shall dismiss, of, if after removal, strike the class 
     allegations and remand, any Y2K action brought or removed 
     under this subsection as a class action if--
       (i) the action is subject to the jurisdiction of the court 
     solely under this subsection; and
       (ii) the court determines the action may not proceed as a 
     class action based on a failure to satisfy the conditions of 
     Rule 23 of the Federal Rules of Civil Procedure.
       (B) Amendment; removal.--Nothing in paragraph (A) shall 
     prohibit plaintiffs from filing an amended class action in 
     Federal or State court. A defendant shall have the right to 
     remove such an amended class action to a United States 
     district court under this subsection.
       (C) Period of limitations tolled.--Upon dismissal or 
     remand, the period of limitations for any claim that was 
     asserted in an 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.
       (D) Dismissal without prejudice.--The dismissal of a Y2K 
     action under subparagraph (A) shall be without prejudice.
       (d) Effect on Rules of Civil Procedure.--Except as 
     otherwise provided in this section, nothing in this section 
     supersedes any rule of Federal or State civil procedure 
     applicable to class actions.

[[Page H5071]]

     SEC. 16. APPLICABILITY OF STATE LAW.

       Nothing in this Act shall be construed to affect the 
     applicability of any State law that provides stricter limits 
     on damages and liabilities, affording greater protection to 
     defendants in Y2K actions, than are provided in this Act.

     SEC. 17. ADMISSIBLE EVIDENCE ULTIMATE ISSUE IN STATE COURTS.

       Any party to a Y2K action in a State court in a State that 
     has not adopted a rule of evidence substantially similar to 
     Rule 704 of the Federal Rules of Evidence may introduce in 
     such action evidence that would be admissible if Rule 704 
     applied in that jurisdiction.

     SEC. 18. SUSPENSION OF PENALTIES FOR CERTAIN YEAR 2000 
                   FAILURES BY SMALL BUSINESS CONCERNS.

       (a) Definitions.--In this section--
       (1) the term ``agency'' means any executive agency, as 
     defined in section 105 of title 5, United States Code, that 
     has the authority to impose civil penalties on small business 
     concerns;
       (2) the term ``first-time violation'' means a violation by 
     a small business concern of a federally enforceable rule or 
     regulation (other than a Federal rule or regulation that 
     relates to the safety and soundness of the banking or 
     monetary system or for the integrity of the National 
     Securities markets, including protection of depositors and 
     investors) caused by a Y2K failure if that Federal rule or 
     regulation has not been violated by that small business 
     concern within the preceding 3 years; and
       (3) the term ``small business concern'' has the same 
     meaning as a defendant described in section 5(b)(2)(B).
       (b) Establishment of Liaisons.--Not later than 30 days 
     after the date of enactment of this Act, each agency shall--
       (1) establish a point of contact with the agency to act as 
     a liaison between the agency and small business concerns with 
     respect to problems arising out of Y2K failures and 
     compliance with Federal rules or regulations; and
       (2) publish the name and phone number of the point of 
     contact for the agency in the Federal Register.
       (c) General Rule.--Subject to subsections (d) and (e), no 
     agency shall impose any civil money penalty on a small 
     business concern for a first-time violation.
       (d) Standards for Waiver.--An agency shall provide a waiver 
     of civil money penalties for a first-time violation, provided 
     that a small business concern demonstrates, and the agency 
     determines, that--
       (1) the small business concern previously made a reasonable 
     good faith effort to anticipate, prevent, and effectively 
     remediate a potential Y2K failure;
       (2) a first-time violation occurred as a result of the Y2K 
     failure of the small business concern or other entity, which 
     significantly affected the small business concern's ability 
     to comply with a Federal rule or regulation;
       (3) the first-time violation was unavoidable in the face of 
     a Y2K failure or occurred as a result of efforts to prevent 
     the disruption of critical functions or services that could 
     result in harm to life or property;
       (4) upon identification of a first-time violation, the 
     small business concern initiated reasonable and prompt 
     measures to correct the violation; and
       (5) the small business concern submitted notice to the 
     appropriate agency of the first-time violation within a 
     reasonable time not to exceed 5 business days from the time 
     that the small business concern became aware that the first-
     time violation had occurred.
       (e) Exceptions.--An agency may impose civil money penalties 
     authorized under Federal law on a small business concern for 
     a first-time violation if--
       (1) the small business concern's failure to comply with 
     Federal rules or regulations resulted in actual harm, or 
     constitutes or creates an imminent threat to public health, 
     safety, or the environment; or
       (2) the small business concern fails to correct the 
     violation not later than 1 month after initial notification 
     to the agency.
       (f) Expiration.--This section shall not apply to first-time 
     violations caused by a Y2K failure occurring after December 
     31, 2000.
       And the Senate agree to the same.
       From the Committee on the Judiciary:
     Henry Hyde,
     F. James Sensenbrenner, Jr.,
     Bob Goodlatte,
     From the Committee on Commerce, for consideration of section 
     18 of the Senate amendment:
     Tom Bliley,
     Michael G. Oxley,
                                Managers on the Part of the House.

     From the Committee on Commerce, Science, and Transportation:
     John McCain,
     Ted Stevens,
     Conrad Burns,
     Slade Gorton,
     Ron Wyden,
     From the Committee on the Judiciary:
     Orrin Hatch,
     Strom Thurmond,
     From the Special Committee on the Year 2000 Technology 
     Problem:
     Robert F. Bennett,
     Christopher Dodd,
     Managers on the Part of the Senate.
                                  ____


       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

       The managers on the part of the House and Senate at the 
     conference on the disagreeing vote of the two Houses on the 
     amendment of the Senate to the bill (H.R. 775), to establish 
     certain procedures for civil actions brought for damages 
     relating to the failure of any device or system to process or 
     otherwise deal with the transition from the year 1999 to the 
     year 2000, and for other purposes, submit the following joint 
     statement to the House and Senate in explanation of the 
     effects of the action agreed upon by the managers and 
     recommended in the accompanying report.
       The House recedes from its disagreement to the amendment of 
     the Senate with an amendment that is a substitute for the 
     House bill and the Senate amendment. The differences between 
     the House bill, the Senate amendment, and the substitute 
     agreed to in conference are noted below, except for clerical 
     corrections, conforming changes made necessary by agreements 
     reached by the conferees, and minor drafting and clerical 
     changes.


                        definition of y2k action

       The House and Senate versions had different definitions of 
     Y2K action. The conferees agreed to a definition that makes 
     the intended scope of the Act clear. The modified definition 
     includes actions that involve both actual and potential 
     failures that could occur or cause harm before January 1, 
     2003. The conferees want to ensure that the Act applies to 
     those cases involving questions such as the determination of 
     liability to shareholders or responsibility for the costs of 
     remediation even when there is no actual Y2K failure. 
     Additionally, the conferees note that there have already been 
     many cases filed involving Y2K issues in which there has been 
     no actual failure but only potential, prospective, or 
     anticipated failures. The conferees intend to include these 
     types of cases within the scope of the Act.


                         financial institutions

       The Senate amendment to H.R. 775 contained an amendment by 
     Senator Inhofe, incorporating language proposed by Senator 
     Hollings, to ensure that a homeowner cannot be foreclosed 
     upon due to a Y2K failure. The conferees agree that the 
     actual language adopted was broader than the intent stated by 
     Senator Hollings, and after consultation with the Federal 
     Deposit Insurance Corporation, and the House Committee on 
     Banking and Financial Services and the Senate Committee on 
     Banking, Housing, and Urban Affairs, the conferees have 
     agreed to modify section 4(h) of the Senate amendment. It is 
     the conferees' intent that the section, as modified, will 
     provide the protections proposed by Senator Hollings 
     without affecting all financial transactions, including 
     those which do not involve either a consumer/homeowner or 
     an actual Y2K failure.
       The modified language limits the applicability of the 
     protections to residential mortgages. It requires the 
     consumer to provide notice of the Y2K failure and of the 
     consumer's inability to timely fulfill his or her obligation 
     to pay. The modified language also limits the applicability 
     of this subsection to transactions occurring between December 
     16, 1999, and March 15, 2000.


                             other matters

       The conferees agree that while other differences exist 
     between the House bill and the Senate amendment, many of 
     these differences do not reflect a difference in intent. For 
     example, the House bill contained a definition of ``damages'' 
     while the Senate amendment does not. The conference 
     substitute does not include a definition of ``damages'' 
     because the conferees agree that the House definition is 
     self-evident in actual practice and under State law, so that 
     the definition is unnecessary.


                           application of act

       The conferees agreed to add language to section 4, relating 
     to the scope of application of the Act, to make it clear that 
     in any Y2K action that arises under the securities laws, the 
     provisions of the Act (other than section 13(b)) do not 
     apply.


                         y2k upset protections

       The conference substitute includes the Inhofe amendment 
     with modifications. The purpose of the Inhofe amendment is to 
     waive penalties for limited, exceptional and temporary 
     noncompliance with federally enforceable measurement, 
     monitoring, or reporting requirements, for which there was 
     otherwise no violation of the underlying substantive 
     federally enforceable regulation. For example, in the 
     environmental arena, because of a Y2K failure, a facility's 
     monitoring or reporting equipment fails to operate properly; 
     the facility continues to function normally and all 
     applicable pollution standards or limits are otherwise met. 
     In that situation, the facility would get the benefit of the 
     waiver provided it met the conditions set forth under this 
     section. However, if, aside from the monitoring or reporting 
     requirements, the facility has violated the underlying 
     federally enforceable requirement to which the monitoring or 
     reporting requirement related, or if there was actual or 
     imminent harm to the public health, safety, or the 
     environment, the facility would not get the benefit of the 
     defense.
       The phrase ``measurement, monitoring, or reporting'' 
     broadly covers a range of federal requirements, but not every 
     term need apply to every federal program. For example, the 
     term ``measurement'' is not intended to apply to federal 
     environmental statutes.


                        proportionate liability

       Prior to the conference, the House version of the 
     Proportionate Liability section provided that a defendant 
     would only be responsible for that portion of a Y2K claim 
     that corresponds to the defendant's percentage of 
     responsibility for the harm experienced by

[[Page H5072]]

     the plaintiff. This provision would supersede existing laws 
     imposing joint and several liability on defendants. The 
     Senate amendment was substantially similar in the scope of 
     the general rule but added several exceptions to it. The 
     conference substitute incorporates a number of modifications, 
     as follows:
       Under the original Senate formulation, in most 
     circumstances, a defendant would only be proportionately 
     liable for the damages for which the defendant was 
     responsible. The proportion of responsibility would be based 
     as a ``percentage of the total fault of all persons, 
     including the plaintiff, who caused or contributed to the 
     total loss incurred by the plaintiff.'' If alleged by the 
     plaintiff, the fact-finder would also have to make a 
     determination of whether the defendant ``acted with specific 
     intent to injure the plaintiff'' or knowingly committed 
     fraud. If the fact-finder answers either of those two 
     questions in the affirmative, then that individual defendant 
     will remain jointly and severally liable for the plaintiff's 
     damages. Subsection (c)(2)(A) defines the circumstance under 
     which a defendant commits knowing fraud for purposes of this 
     section. Subsection (c)(2)(B) makes clear that simply 
     reckless conduct by the defendant is not enough to trigger 
     the knowing fraud definition of this section.
       The other two exceptions to proportional liability 
     contained within the original Senate amendment deal with what 
     happens when there is an uncollectible share of liability. 
     The original formulation of the uncollectible share exception 
     provided that a defendant would be liable for an 
     uncollectible share in proportion to that defendant's total 
     responsibility but the defendant's total liability for the 
     uncollectible share could not exceed 50 percent of that 
     defendant's proportionate share. The second exception deals 
     with when there is an uncollectible share and ``the plaintiff 
     is an individual whose recoverable damages under the final 
     judgment are equal to more than 10 percent of the net worth 
     of the plaintiff'' and the plaintiff's overall net worth is 
     less than $200,000. In the second case, all other defendants 
     remain entirely jointly and severally liable for the 
     uncollectible share.
       The additional amendment proposed by the Senate and agreed 
     to by the House conferees modifies the general rule for 
     uncollectible shares. Under this amendment, a defendant would 
     be liable for an additional 100 percent of its proportionate 
     share as applied to the uncollectible share, rather than 
     being liable for only up to 50 percent of the defendant's 
     proportionate share. In addition, the amendment holds a 
     defendant liable for an additional 50 percent of that 
     defendant's proportionate share of the uncollectible amounts 
     if that defendant acted with reckless disregard for the 
     likelihood that the defendant's acts would cause the harm or 
     loss suffered by the plaintiff. The amendment also permits 
     certain plaintiffs who are individual consumers and who bring 
     individual suits, rather than class actions, to hold other 
     defendants liable for uncollectible shares consistent with 
     state law.
       The original Senate amendment also contains provisions 
     dealing with settlement discharge and a defendant's right to 
     contribution from fellow defendants. Subsection (e) indicates 
     that a defendant may settle a Y2K action at any time before a 
     final verdict or judgment is reached and such a defendant 
     will be discharged from all contribution claims brought by 
     other persons. The amendment also makes clear that a 
     defendant who, because of the exceptions contained in the 
     amendment, becomes jointly and severally liable for a 
     portion of the plaintiff's damages, may recover 
     contribution from any other person who would have been 
     liable for the plaintiff's damages. The determination of a 
     claim for contribution must be based on the percentage of 
     responsibility of the defendant ``against whom a claim for 
     contribution is made.''
       The conference agreement makes clear that State laws are 
     not preempted. This section does not preempt State statutes 
     that limit a defendant's liability to a lesser amount than 
     that determined under this section or otherwise provide 
     greater protection to a defendant from joint and several 
     liability.
       The general intent behind this section is to impose 
     proportional liability upon a defendant rather than joint and 
     several liability. The conferees are of the view, except for 
     limited exceptions, that it is inherently unfair to hold a 
     defendant that has limited culpability liable for the entire 
     amount of the judgment obtained by the plaintiff. This 
     section does not allow defendants to transfer the amount of 
     their responsibility to other parties. Rather, this section 
     recognizes and holds defendants liable for the actual amount 
     of harm they actually caused, and for orphan shares of 
     individual consumers.
       The original exceptions contained in the Senate amendment 
     as well as the subsequent Senate amendment agreed to by the 
     House conferees, provides a limited escape route for 
     plaintiffs that could be grossly disadvantaged by a pure 
     formulation of proportional liability. These exceptions only 
     apply in the context of when the defendant engaged in 
     especially egregious conduct or when the damages awarded to 
     the plaintiff may not be entirely recoverable due to a 
     defendant's insolvency or other problem in paying.


                            duty to mitigate

       Prior to the conference, the House version of the Duty to 
     Mitigate section stated the duty of plaintiffs to avoid 
     damages which ``could reasonably have been avoided in light 
     of any disclosure or other information'' including 
     information made available by the defendant. The Senate 
     Amendment was substantially identical except for its 
     reference to ``Y2K action'' rather than the House version's 
     ``Y2K claim.'' The House conferees agreed to recede to the 
     Senate formulation. The Senate proposed an additional 
     amendment that was agreed to by the House.
       The additional amendment kept the Senate formulation 
     substantially intact but added 2 new subsections. Subsection 
     (b) includes the plaintiffs duty to mitigate but makes clear 
     that the Federal mitigation requirement is in addition to any 
     State mitigation requirement. Subsection (c) provides an 
     exception to the plaintiff's affirmative duty to mitigate 
     where the plaintiff has relied on the defendant's fraudulent 
     representations regarding the Y2K readiness of the product 
     that is the basis of the plaintiff's suit.
       This provision is intended to further this legislation's 
     fundamental goal of Y2K remediation. This section affirms 
     State law that requires plaintiffs to take reasonable steps 
     to limit their damages. The amendments agreed to by the 
     conferees provide that in limited circumstances where the 
     defendants are engaged in egregious conduct, a plaintiff will 
     be relieved of this affirmative duty.
       Section 9 affirms, at the Federal level, the Uniform 
     Commercial Code provisions addressing the responsibility of 
     plaintiffs to limit their damages by obtaining other 
     conforming goods (UCC Sec. 2-712, duty to ``cover'') and 
     limitations on a buyer's consequential damages to those which 
     could not have ``reasonably'' been prevented. These concepts 
     establish an independent affirmative responsibility on 
     buyers. The basis for this responsibility to avoid ``losses 
     that reasonably could have been prevented'' arises without 
     reference to any action by the seller/defendant. Section 9, 
     as amended by the conferees, recognizes the unprecedented 
     risk attaching to Y2K and accordingly adds to these 
     established Uniform Commercial Code principles in one 
     significant way. The section extends the concept of 
     mitigation to events occurring prior to the actual tort or 
     contractual breach.


                             economic loss

       Both the House and Senate bills included language to codify 
     the economic loss rule. That rule states that a party who has 
     suffered only economic damages must generally sue to recover 
     those damages under contract, not tort, law. The House 
     version, however excepted all intentional torts from the 
     scope of the rule while the Senate version did not expressly 
     address intentional torts. The Senate and House agree to an 
     amendment that clarifies this exception to the economic loss 
     rule. Under the conference substitute, the economic loss rule 
     applies to all torts except intentional torts arising 
     independent of a contract. This codifies the rapidly emerging 
     trend in State law to apply the economic loss rule to bar 
     intentional tort claims, such as fraud claims, where such 
     claims are intrinsic to, or indistinguishable from, an 
     underlying contractual dispute between the parties. Simply 
     put, breach of contract, intentional or otherwise, does not 
     generally give rise to a tort claim; it is simply breach of 
     contract. If, however, there is an intentional tort that is 
     extraneous to the underlying contract claim, this section 
     will not limit a party's ability to recover economic losses 
     under applicable law.


                   warranty and contract preservation

       The intent of section 4(d) of the conference substitute is 
     to enhance business certaintly and discourage frivolous 
     lawsuits that attempt to undermine established contractual 
     relationships. This section makes clear that contract terms 
     and provisions shall be fully enforced so contracting 
     entities have the benefit of their bargains. The mere fact 
     that a Y2K-related problem arises should not cause courts to 
     disregard or diminish enforceable contract terms unless those 
     terms are directly contrary to a specific statute. Thus, 
     exclusions of liability, disclaimers of warranty and similar 
     limitations will be recognized and enforced as written. The 
     conferees, however, agreed to an amendment that clarifies 
     that this section does not make enforceable contract terms 
     that are otherwise unenforceable under State law doctrines of 
     unconscionability, including adhesion, recognized as of 
     January 1, 1999 under controlling judicial precedent.


                          application of irda

       The conferees agreed to an amendment to section 13 of the 
     Senate amendment to make it clear that the protection for 
     exchanges of information provided by the Year 2000 
     Information and Readiness Disclosure Act apply to Y2K actions 
     under the Act.


         technical change to section 16 (the allard amendment)

       The conference substitute contains a technical change to 
     section 16 which will prevent any potential misinterpretation 
     of this section. The intent of section 16, which is the text 
     of an amendment offered to S. 96 by Senator Allard, is to 
     clarify that nothing in this Act will preempt or prevent the 
     applicability of any State law which imposes more restrictive 
     limits on damages and liabilities than the limits provided 
     for in this Act. The original wording, ``greater limits,'' 
     left room for confusion and possible misinterpretation by 
     providing an opportunity for argument that any State law with 
     higher limits on damages and liabilities would supersede this

[[Page H5073]]

     Act. Because this Act supersedes any State law which allows a 
     plaintiff to pursue or collect any amount in damages or 
     liabilities which are above and beyond the amounts provided 
     for in this Act, the conferees want to clarify the wording of 
     this section. The new wording, ``stricter limits,'' coupled 
     with the language ``affording greater protection to 
     defendants in Y2K actions'' than would be afforded under the 
     Act, ensures that this Act grants deference only to State 
     laws which cap damages and liabilities at a lower amount than 
     provided for in this Act.

     From the Committee on the Judiciary:
     Henry Hyde,
     F. James Sensenbrenner, Jr.,
     Bob Goodlatte,
     From the Committee on Commerce, for consideration of section 
     18 of the Senate amendment:
     Tom Bliley,
     Michael G. Oxley,
                                Managers on the Part of the House.

     From the Committee on Commerce, Science, and Transportation:
     John McCain,
     Ted Stevens,
     Conrad Burns,
     Slade Gorton,
     Ron Wyden,
     From the Committee on the Judiciary:
     Orrin Hatch,
     Strom Thurmond,
     From the Special Committee on the Year 2000 Technology 
     Problem:
     Robert F. Bennett,
     Christopher Dodd,
     Managers on the Part of the Senate .

                          ____________________