[Congressional Record (Bound Edition), Volume 145 (1999), Part 6]
[SENA]
[Pages 7628-7629]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                  Y2K

  Mr. LEAHY. Mr. President, there has been some discussion about Y2K 
and the Y2K liability bill. It seems every moment I settle down in my 
office to do other work, I get calls for another meeting on Y2K. I 
thought it might be good to let my colleagues and the public know what 
is in the Y2K bill we will be discussing this afternoon.
  I have a chart; we like charts in this place. This chart shows how 
simple this bill is not. It illustrates the detours, roadblocks, and 
dead ends the bill would impose on innocent plaintiffs in our State-
based legal system.
  I have a real-life example so we can see what will happen. A small 
business owner from Warren, MI, Mark Yarsike, testified before the 
Commerce and Judiciary Committees about his Y2K problems. A few years 
ago, he bought a new computer cash register system for his small 
business, Produce Palace. However, they didn't tell him it wasn't Y2K 
compliant. This brand-new, high-tech cash register system, which the 
company was happy to sell him for almost $100,000, kept crashing.
  The computer cash register system kept breaking down. After more than 
200 service calls, it was finally discovered why; it couldn't read 
credit cards with an expiration date in the year 2000--like the credit 
card I have in my wallet right now. That is a Y2K computer defect that 
would be covered under this bill and the company would be protected, 
not Mark Yarsike. The company that sold him this defective piece of 
equipment for $100,000 would be protected.
  At the top of this chart is how the State-based court system works 
today for Mark Yarsike, whose business buys a new computerized cash 
register system and, because of a Y2K defect, the system crashes.
  I will in a moment speak to what happens if we pass this legislation 
before the Senate. Assume we show some sense and reject the 
legislation; if Mark Yarsike asks the company to fix the system, if the 
company knows they have to do something for the owner, they will either 
agree to fix the problem--which is really what he wants; he doesn't 
want to sue, he just wants his problem fixed--they agree to fix it and 
make a quick, fair settlement for his damages. That is it.
  Or they could fail to fix it, he could go into court, and a trial 
would decide who is at fault.
  Now, that is basically what happens today. In fact, that is what 
happened to Mark Yarsike. He was forced to buy a new computer cash 
register system from another company. He sued the first company which 
sold him the computer that wasn't Y2K compliant, that caused him to 
lose so much business. He recouped his losses through a fair 
settlement, and the court system worked for him.
  Now, say ``Joe's'' business--not Mark Yarsike, who went through the 
normal court process--buys a computer cash register system under the 
bill before the Senate. Assume we pass this bill, assume the President 
signs it into law. All of a sudden, instead of this very simple 
straight line as indicated on the chart, the Congress of the United 
States is saying: We are from the Government and we are here to help 
you, we will make life simpler for you.
  Instead of giving the nice straight line, which is what the law is 
today, this is what he is presented: first he has to wait 30 days, 
during which nothing happens; during that time, he still has to turn 
away business because every customer with a new credit card can't use 
it, and they will say, to heck with this place, I will go somewhere 
else. Even if after the 30 days, the company may send a written 
response and just say that we have another 60 days you will have to 
wait; if that doesn't put you out of business, then you can also file a 
lawsuit to recover damages if you are not already out of business 
anyway.
  If he files a lawsuit, under the bill's contract preservation 
provision we get to our first dead end on the road to justice. The cash 
register company may be able to enforce unconscionable limits on any 
recovery if it is in a written contract. Under this bill before the 
Senate, the unconscionable limits in the written contract are strictly 
enforced unless the enforcement of that term would manifestly and 
directly contravene State law and statute in effect January 1999 
specifically addressing that term.
  In other words, if the State legislatures had not known by January 1 
of this year what the U.S. Congress, in its infinite wisdom, was going 
to do in May of this year when enacting a statute that specifically 
anticipated what we might do, Joe is out of luck.
  If the small business owners can't recover the losses from the Y2K 
defective cash register system because of this contract preservation 
provision, then he does have other alternatives: He can go bankrupt; he 
can fire his employees, lay them off; or if somehow he was able to get 
past these roadblocks, he could actually file a suit.
  We have another detour. The company gets another 30-day extension to 
respond to the complaint. Their business isn't hurting, but Joe is 
barely able to hang on. When the small business owner files that 
lawsuit, he has to meet special pleading requirements under this bill. 
He has to file with complaints specific statements on the defendant's 
state of mind, the nature of the amount of damage, and the material Y2K 
defect. So he has three more roadblocks--all of which can lead to this 
dead end.
  If he misses any one of those hurdles we have put in his way, he is 
right back to a dead end. The cash register company can say, bye bye, 
see you; tough, Joe; we will send you a postcard when you are at the 
bankruptcy court.
  Now, suppose the cash register company had sold others of these 
$100,000 system with a Y2K defect. Should we all join together and 
bring a class action? No, we come into a new roadblock, back to a dead 
end, back to bankruptcy again. So let's move on to the next roadblock 
that is put in the bill--the roadblock we are putting in the way of 
small businesses. That is something the business lobbyists are not 
telling the small businesses about, all the roadblocks that are in this 
special interest legislation.
  This bill has a ``duty to mitigate'' section that turns traditional 
tort law on its head. It requires the plaintiff to anticipate and avoid 
any Y2K damage before it occurs, not after. Almost all the States have 
adopted the traditional duty to mitigate tort law, which requires the 
injured party to mitigate his damages once the harm occurs. That makes 
some sense. But this requires mitigation before the harm occurs. If the 
owners bought this $100,000 cash register and didn't anticipate that a 
lot of its customers are going to leave because the cash register does 
not work as he was told it was going to, how does he mitigate? He wants 
to run his business. He doesn't make cash registers. He expects them, 
for $100,000, to do it right. But if he didn't try to mitigate before 
the system crashed, then he could be caught in another dead end, end of 
the road here, and right back down to bankruptcy, and employees are 
out.
  I do not understand how he could have known his cash register system 
was not going to be able to read credit cards with the year 2000 
expiration date after he paid $100,000 for it, but that doesn't matter. 
This case would be dismissed because of the bill's duty to mitigate 
provision.
  So, roadblock after roadblock--in fact, there is another one. Let's 
assume somehow Joe is driving a humvee of some sort through the legal 
system and

[[Page 7629]]

he is getting it past these roadblocks. He has another one. Because 
what he does not know is that the Senate has overridden the 50 State 
legislatures. We have said to the legislators: Boy, you guys are dumb. 
The men and women in these State legislatures are not as smart as we 
are. So we are just going to throw your laws out and we will just pass 
our laws and override you. Because the bill would override State 
contract law and could even preempt existing implied warranties under 
State law.
  For the small business owner, the bill's Federal preemption contract 
clauses may override the State common law claims of breach of implied 
warranties. Again, here he is at another roadblock, another dead end 
leading back to bankruptcy.
  Then, say he somehow got through all of these roadblocks and dead 
ends that we put in, basically to make it impossible for a small 
business owner; everything that we have done to put roadblocks and dead 
ends in. Let's say he gets through all of them. He still has more 
limits on his legal rights at the jury verdict point. There are severe 
limits on recovery. In fact, if it is a small business, then $250,000 
is the ceiling for any punitive damages award. If he can prove they 
intentionally defrauded him, then there is an exemption from these 
punitive damage caps. This bill is saying: If you can prove intention 
to defraud, we might give you a chance.
  This is a meaningless exception in the real world. Nobody is going to 
be able to meet this exception, proving the injury was specifically 
intended. How in the world is our small business owner, who is just 
trying to keep the place alive at this point, going to prove the cash 
register company intentionally tried to injure him by selling him a Y2K 
defective cash register system? Let's get real here. It is not going to 
happen. Again, the best thing for him is bankruptcy. The big company 
can breathe a sigh of relief and they are out.
  And on and on. Severe joint liability limits; for directors and 
officers, partial immunity; severe caps on recovery--all of these 
things end up protecting the companies, overriding State laws, and 
saying to the small business owner we are not going to do anything for 
you.
  You know, directors and officers are already protected by the 
business judgment rule adopted by each of the 50 States. But we put a 
special legal protection for them in this bill. I think that sends the 
wrong message to the business community. We want to encourage decision 
makers to be overseeing aggressive year 2000 compliance measures. 
Instead, we say: 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.
  A few of these detours, roadblocks and dead ends may be justified to 
prevent frivolous Y2K litigation. But certainly not all of them.
  This bill makes seeking justice for the harm caused by a Y2K computer 
problem into a game of chutes and ladders--but there are only chutes 
for plaintiffs and no ladders. The defendant wins every time under the 
rigged rules of this game.
  Unfortunately, this bill overreaches again and again. It is not close 
to being balanced.
  In addition, this bill preempts all 50 state consumer protection laws 
and makes ordinary consumers face the bill's legal detours, road blocks 
and dead ends on the road to justice. That is not fair.
  Today, I filed a consumer protection amendment to exclude ordinary 
consumers from the legal restrictions in the bill. I hope the majority 
will permit amendments to be brought up on this legislation soon.
  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. 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 hope Members will look at what we are doing here. Here is the 
system we have today for Y2K. Here is the system we are suggesting with 
all these dead ends, all these roadblocks: Roadblock, roadblock, 
roadblock, roadblock, all leading to small businesses going bankrupt 
and all because we stand up here and say to 50 State legislatures: You 
are not smart enough. You are not as smart as we are. We are going to 
override you.
  I think that is wrong. I think we ought to go back to the drawing 
boards. I think we ought to do what we did last year when we passed 
good Y2K legislation because we did it in a bipartisan fashion where we 
had businesses, Members of Congress, lawyers, those in the high-tech 
field--we came together and passed legislation that worked and the 
President signed it into law.
  This maze, this unnecessary trampling of State legislatures, will not 
be signed into law by the President of the United States.
  The PRESIDING OFFICER. The Senator from Alabama.

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