|
|
|
|
|
"GOOD SAMARITAN" BILL WILL REDUCE THE RISKS OF SHARING YEAR 2000 INFORMATION By David M. Nadler and Edward W. Kirsch*
On July 27, 1998, the President Clinton submitted to Congress the "Good Samaritan" legislative proposal that he promised during his first Year 2000 policy speech on July 14, 1998, at the National Academy of Sciences. The proposal, officially known as the "Year 2000 Information Disclosure Act", will promote the exchange of Year 2000 information between companies, their customers, and vendors by significantly reducing the risk of lawsuits arising from disclosure of Year 2000 information. The legislation provides a "safe harbor" for information disclosures, however, it will not reduce the liability that may arise from actual Year 2000-related failures of software, hardware and systems. The legislation also will not alter existing contracts and warranties, nor will it reduce liability for violation of disclosure requirements imposed by state and federal securities laws. The Year 2000 Problem can be traced to the early days of computing, when memory and data storage were expensive. To conserve these limited resources, computer programmers decided to use just two digits in date fields to identify calendar years. In the year 2000 many computer programs will recognize the year "00" as 1900 rather than 2000 as intended. This error may cause systems to process incorrect data or simply shut down. Companies in the financial, manufacturing, energy and other sectors of the economy are precariously interdependent. Manufacturers, for example, have steadily improved the efficiency of plant operations by adopting just-in-time inventory, communicating with vendors using Electronic Data Interchange, outsourcing, and automating the factory floor. These practices have concomitantly increased the interdependence between suppliers, manufacturers, and customers such that a Year 2000 failure in one company could have a domino effect and impede operations throughout the entire supply-and-distribution chain. Similarly, the inability of a few financial firms to execute trades, transfer funds, or document transactions could disproportionately undermine public confidence in the entire financial system. Because of this interdependence, there is a pressing need for companies to exchange Year 2000 information regarding products, services, solutions and management practices so that companies can rapidly assess the readiness of their key business partners, their own readiness, and efficiently renovate systems. The Clinton proposal provides a "safe harbor" for exchange of Year 2000 information by establishing a uniform national scienter standard for actions involving Year 2000 disclosures. Under the proposal, there can be no liability for disclosure of Year 2000 information unless the Year 2000 statement was material and was "made with knowledge that the statement was false, inaccurate, or misleading; made with intent to mislead or deceive; or made with a grossly negligent failure to determine or verify that the statement was accurate." The proposal promotes Year 2000 information exchanges between companies by precluding actions based upon inadvertent inaccuracies or omissions. The Clinton proposal also encourages trade groups and others to compile and disseminate Year 2000 information provided by third parties. Specifically, the proposal provides that republication of a statement made by a third party cannot lead to liability for trade disparagement and other causes, absent "knowledge that the statement was false, inaccurate, or misleading," provided the republisher discloses that the repeated statement is based on third party information and has not been independently verified. The proposal excludes from protection Year 2000 statements "made directly to a consumer in connection with the sale of a consumer product by the seller or manufacturer." A consumer product is defined as personal property or services normally used by an individual for personal, family, or household purposes. The exclusion creates legal uncertainty because it excludes statements such as mass media advertisements made directly to consumers, but purports to protect statements made in trade publications or on websites directed to business users. This distinction will prove difficult to administer. Corporations have also hesitated to exchange Year 2000 information because of anti-trust concerns. The Justice Department sought to allay these fears on July 1, 1998, by issuing a business review letter to the Securities Industry Association. The letter has general applicability and is intended to reassure corporations that merely sharing Year 2000 information does not constitute a violation of anti-trust laws. If enacted, the safe harbor for Year 2000 information disclosure provided by Clinton’s Good Samaritan proposal, combined with the Justice Department’s reassuring letter regarding anti-trust laws should encourage corporations and trade groups to disclose accurate information concerning test results, remediation plans, and the Year 2000 compliance of products and services. The disclosure of information will assist companies in solving Year 2000 problems before time runs out. |
