[Congressional Record (Bound Edition), Volume 145 (1999), Part 5]
[Senate]
[Pages 7149-7150]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        CBO ESTIMATE OF Y2K ACT

  Mr. McCAIN. Mr. President, when the Commerce Committee filed the 
report for S. 96, the Y2K Act, the Congressional Budget Office had not 
completed the cost estimate for the bill. Recently, the committee 
received the estimate. In summary, the estimate concludes that the 
measure would most likely result in a savings to the Federal court 
system. I look forward to debating this measure, and I ask unanimous 
consent that the report be printed in the Record.
  There being no objection, the report was ordered to be printed in the 
Record, as follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                   Washington, DC, March 19, 1999.
     Hon. John McCain,
     Chairman, Committee on Commerce, Science, and Transportation, 
         U.S. Senate, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for S. 96, the Y2K Act.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are Susanne 
     S. Mehlman (for federal costs), Lisa Cash Driskill (for the 
     state and local impact), and John Harris (for the private-
     sector impact).
           Sincerely,
                                                 Barry B. Anderson
                                   (For Dan L. Crippen, Director).
       Enclosure.


               congressional budget office cost estimate

                             S. 96--Y2K Act

       Summary: Enacting S. 96 would provide some liability 
     protection for businesses that fail to repair their year 2000 
     (Y2K) computer problems. CBO estimates that the net effect of 
     S. 96 would most likely be a savings to the federal court 
     system but we cannot estimate the extent of any such savings 
     because we cannot predict the number of lawsuits that would 
     arise--under either S. 96 or current law--from computer 
     failures associated with the year 2000.
       The cost of addressing the Y2K problem in the United States 
     is expected to total hundreds of billions of dollars. The 
     extent to which such problems will be resolved prior to next 
     January (or shortly thereafter) remains highly uncertain. 
     Even more uncertain is the extent to which companies and 
     individuals might file lawsuits against businesses because of 
     problems encountered next year. CBO expects that enacting S. 
     96 could deter some potential plaintiffs from filing such 
     lawsuits.
       Some class action lawsuits may be shifted from state courts 
     to federal court under this bill, so the federal courts could 
     incur an increase in costs because class action lawsuits tend 
     to be very timely and costly. However, CBO expects that any 
     such increase would be more than offset by savings 
     attributable to having fewer Y2K cases, overall, under the 
     bill than under current law. Any net change in costs to the 
     federal court system would affect appropriated spending. The 
     bill would not affect direct spending or receipts, so pay-as-
     you-go procedures would not apply.
       S. 96 contains intergovernmental mandates as defined in the 
     Unfunded Mandates Reform Act (UMRA) but, overall, CBO expects 
     that enacting this bill would lead to a savings for state and 
     local governments. The threshold established in UMRA ($50 
     million in 1996 dollars, adjusted annually for inflation) 
     would thus not be exceeded. The bill also would impose a new 
     private-sector mandate but CBO cannot estimate the cost of 
     the mandate.
       Description of the bill's major provisions: S. 96 would 
     provide various liability protections for businesses and 
     state and local governments facing possible litigation 
     arising from Y2K computer problems. In particular, the bill 
     would: limit punitive damages to $250,000 or three times the 
     actual damages that a plaintiff suffered, whichever is 
     larger, and cap punitive damages at $250,000 for companies 
     with fewer than 25 employees; require potential plaintiffs to 
     give a prospective defendant 90 days to propose a plan to 
     resolve the Y2K problem before any legal action could be 
     taken under a lawsuit; assess any liability on a proportional 
     basis, whereby a person against whom a judgment is made would 
     be liable for only the portion of damages corresponding to 
     that person's percentage of responsibility as determined by 
     the judge; and ease restrictions for filing class action 
     lawsuits in federal court.
       Estimated cost to the Federal Government: CBO estimates 
     that enacting S. 96 would probably result in a net reduction 
     in the workload of the federal court system as compared to 
     what would occur under current law. Thus far, about 60 
     complaints associated with Y2K problems have been filed; the 
     majority of cases based on those complaints are class action 
     lawsuits that have been filed in state courts. Several of the 
     larger cases have been settled, but there is little basis for 
     predicting the number or outcome of Y2K lawsuits that would 
     be filed under S. 96 or under current law. Therefore, CBO 
     cannot estimate the magnitude of any net savings to the 
     federal government under the bill.
       To the extent that a significant number of lawsuits related 
     to Y2K problems are filed under current law, the Judiciary 
     will either need to seek legislation authorizing additional 
     judgeships and support personnel to address the increased 
     workload or experience a severe backlog in cases. Because S. 
     96 would limit punitive damages associated with Y2K cases, 
     give businesses 90 days to respond to Y2K problems before any 
     legal action could be taken against such businesses, and make 
     other changes affecting liability laws, CBO expects that 
     parties to lawsuits would be encouraged to reach a 
     settlement. Thus, we anticipate that many lawsuits would not 
     result in a trial, which can be timely and expensive. 
     However, some class action lawsuits could be shifted from 
     state to federal jurisdiction under S. 96 because the bill 
     would ease restrictions for filing such actions in federal 
     court. On balance, CBO estimates that the savings from 
     eliminating trials for many lawsuits would more than offset 
     any increased costs that might be incurred from trying 
     additional class action lawsuits in federal court.
       Pay-as-you-go considerations: None.
       Estimated impact on State, local, and tribal governments: 
     S. 96 contains intergovernmental mandates as defined in the 
     UMRA but would impose no significant costs on state, local, 
     or tribal governments. The bill would preempt state law by 
     applying certain federal requirements to Y2K civil lawsuits 
     in state courts after February 22, 1999. CBO expects that 
     enacting this legislation would deter some potential 
     plaintiffs from filing and pursuing lawsuits, thus reducing 
     the resources state courts would expend on this type of 
     litigation.
       In addition, by easing the requirements for filing Y2K 
     class action lawsuits in federal court, the bill could 
     diminish some of the burden on state courts, where most of 
     the current lawsuits have been filed. On the other hand, more 
     individual cases might be filed in state courts to complement 
     class action suits in federal courts. Overall, CBO 
     anticipates the net effect of this bill would be a savings to 
     state courts.
       This bill would supersede any state laws inconsistent with 
     it. While no state has established Y2K liability protection 
     for the private sector, several states currently are 
     considering that issue in their legislative bodies. Finally, 
     S. 96 would provide state and local governments protection 
     from punitive damages arising from a Y2K action. Only six 
     states and the District of Columbia have already passed 
     legislation protecting themselves and their localities from 
     Y2K liability. To the extent that state and local governments 
     could become defendants in Y2K litigation and have not 
     protected themselves

[[Page 7150]]

     from liability, this bill would provide such protection and 
     could result in a savings.
       Estimated impact on the private sector: S. 96 would impose 
     a new private-sector mandate by requiring prospective 
     plaintiffs in legal actions related to Y2K computer problems 
     to notify prospective defendants of their intent to file suit 
     and wait up to ninety days after such notification before 
     filing. The notice must identify the cause and size of the 
     prospective plaintiff's loss, the remedy sought, and the 
     legal basis for the suit.
       For a single prospective plaintiff, the cost of complying 
     with the mandate, the expense incurred in drafting and 
     delivering the notice, is relatively small. The notice is, in 
     effect, a summary of the suit to be filed, so that 
     preparation for the suit is also preparation for the notice. 
     CBO cannot, however, produce an estimate of the aggregate 
     costs of the mandate, largely because we have no way to 
     predict the number of Y2K lawsuits.
       Estimate prepared by: Federal Costs: Susanne Mehlman; 
     Impact on State, Local, and Tribal Governments: Lisa Cash 
     Driskill; Impact on the Private Sector: John Harris.
       Estimate approved by: Robert A. Sunshine, Deputy Assistant 
     Director for Budget Analysis.

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