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Senate Judiciary Committee Approves Year 2000 Legislation By David M. Nadler and Bradley D. Wine* On March 26, 1999, the Senate Judiciary Committee approved "The Year 2000 Fairness and Responsibility Act," the latest of several Congressional proposals aimed at restricting lawsuits related to the Year 2000 problem. The Act is co-sponsored by Senators Orrin G. Hatch (R-Utah), Chairman of the Senate Judiciary Committee, and Dianne Feinstein (D-California) and has been enthusiastically embraced by industry associations, high-tech and insurance companies, and small businesses. Despite being approved by the Committee, the legislation faces significant resistance when it comes before the full Senate some time in late April or early May. All of the Judiciary Committee’s Democrat members, with the exception of Feinstein, voted against the measure, signaling the possibility of a larger partisan conflict. The Justice Department, the Association of Trial Lawyers of America, the Clinton administration, and the Judicial Conference of the United States have also expressed strong disapproval of the Act. According to Senator Hatch, the bill’s purpose is "to promote Year 2000 readiness and remediation by discouraging a wasteful diversion of resources" to Year 2000 litigation expenses. The proposal establishes a 90-day "cooling off" period designed to encourage potential defendants to solve Year 2000 problems and allow either party to request alternative dispute resolution ("ADR"). The Act also places limits on Year 2000 class actions and caps punitive damages awards. Other provisions include: special protections for small businesses and individuals, proportionate (as opposed to joint and several) liability requirements, and expanded federal jurisdiction for most Year 2000 class actions. The bill has received support from a number of industry groups such as the National Association of Manufacturers ("NAM"), the U.S. Chamber of Commerce, the Information Technology Association of America ("ITAA"), and the Semiconductor Industry Association ("SIA"). Indeed, ITAA has warned that without a legislative solution "systems are left unfixed because companies look to the courts to make things right or to recover damages that need not have occurred. Product and service delivery goes haywire, company reputations plummet and we enter a lose-lose outcome." Critics of the legislation argue that the bill provides unnecessary protection for special interests at the expense of consumers and small businesses. Senator Patrick Leahy (D-Vermont), the Judiciary Committee’s ranking Democrat, labeled the bill "a wish list for special interests that are or might become involved in Year 2000 litigation." Leahy and others, argue the legislation is little more than pretext for broad tort reform legislation. Assistant Attorney General Eleanor Acheson, speaking on behalf of the Justice Department in opposition to the Act, stated "preliminary analysis indicates that this bill would be by far the most sweeping litigation reform measure ever enacted." Federal judges have also expressed their concerns over the proposed expansion of federal jurisdiction. In a letter to Senator Hatch, the Judicial Conference of the United States wrote, "the transfer of this burden to the federal courts holds the potential of overwhelming federal judicial resources and the capacity of the federal courts to resolve not only Year 2000 cases, but other causes of action as well." The Senate Commerce Committee has already approved similar legislation, while a bipartisan group in the House of Representatives has put together its own version of Year 2000 liability reform. Senator John McCain (R-Arizona), Chairman of the Senate Commerce Committee, has sponsored "The Year 2000 Act" which contains similar provisions for a cooling off period, punitive damages caps, and proportionate liability requirements. McCain’s legislation also establishes threshold liability criteria for information technology product sellers, limits the liability of companies that make "good faith" efforts to resolve Year 2000 problems, and limits the liability of individuals and companies that lease or rent information technology products. Representative Donald Manzullo (R-Illinois) has sponsored "The Year 2000 Consumer Protection Act of 1999" in the House of Representatives. Manzullo’s proposal creates a mandatory arbitration procedure which is triggered by the filing of a Year 2000 complaint, limits the liability of corporate directors and officers, requires class actions to be filed in the U.S. District Court for the district in which the failure occurred, and limits punitive damages awards. To recover damages for a Year 2000 failure, the plaintiff must prove by a preponderance of the evidence that the failure was foreseeable, the defendant acted unreasonably, and the loss incurred by the plaintiff was proximately caused by the defendant. Manzullo’s bill requires lawsuits to be filed no later than January 1, 2002. In light of the potential for countless Year 2000-related lawsuits, litigation reform legislation will be one of several priorities for Congress in the final months before the new millennium. Despite a bipartisan consensus embracing the need for some type of legislative relief, the current debate over the Hatch and Feinstein proposal is one measure of the larger disagreement over how to fashion a legislative solution. *David M. Nadler is a partner in the Washington, DC law firm of Dickstein Shapiro Morin & Oshinsky LLP where he is Chairman of the Year 2000 Legal Strategies Team. Mr. Wine is an associate with the firm. |
