Calendar No. 125

106TH CONGRESS

1ST SESSION S. 1138

A BILL

To regulate interstate commerce by making proviother matters affecting interstate commerce. communications, intermodal transportation, and 2000 Problem-related failures that may disrupt sion for dealing with losses arising from Year

MAY 27, 1999

Read the second time and placed on the calendar
II

Calendar No. 125

106TH CONGRESS

1ST SESSION S. 1138

To regulate interstate commerce by making provision for dealing with losses

arising from Year 2000 Problem-related failures that may disrupt communications, intermodal transportation, and other matters affecting interstate commerce.

IN THE SENATE OF THE UNITED STATES

MAY 26, 1999

Mr. MCCAIN (for himself, Mr. DODD, Mr. WYDEN, Mr. HATCH, Mrs. FEINSTEIN, Mr. GORTON, Mr. BENNETT, Mr. LOTT, Mr. ABRAHAM, Mr.

FRIST, Mr. BURNS, Mr. SANTORUM, Mr. SMITH of Oregon, and Mr.

LIEBERMAN) introduced the following bill; which was read the first time

MAY 27, 1999

Read the second time and placed on the calendar

A BILL

To regulate interstate commerce by making provision for

dealing with losses arising from Year 2000 Problemrelated failures that may disrupt communications, intermodal transportation, and other matters affecting interstate commerce.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; TABLE OF SECTIONS.

2 (a) SHORT TITLE.—This Act may be cited as the

3 ‘‘Y2K Act’’.

4 (b) TABLE OF SECTIONS.—The table of sections for

5 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. Pre-litigation 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.

6 SEC. 2. FINDINGS AND PURPOSES.

7 (a) FINDINGS.—The Congress finds that:

8 (1)(A) Many information technology systems,

9 devices and programs are not capable of recognizing

10 certain dates in 1999 and after December 31, 1999,

11 and will read dates in the year 2000 and thereafter

12 as if those dates represent the year 1900 or there13 after or will fail to process dates after December 31,

14 1999.

15 (B) If not corrected, the problem described in

16 subparagraph (A) and resulting failures could inca17 pacitate systems that are essential to the functioning

18 of markets, commerce, consumer products, utilities,
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1 Government, and safety and defense systems, in the

2 United States and throughout the world.

3 (2) It is in the national interest that producers

4 and users of technology products concentrate their

5 attention and resources in the time remaining before

6 January 1, 2000, on assessing, fixing, testing, and

7 developing contingency plans to address any and all

8 outstanding year 2000 computer date-change prob9 lems, so as to minimize possible disruptions associ10 ated with computer failures.

11 (3)(A) Because year 2000 computer date12 change problems may affect virtually all businesses

13 and others users of technology products to some de14 gree, there is a substantial likelihood that actual or

15 potential year 2000 failures will prompt a significant

16 volume of litigation, much of it insubstantial

17 (B) The litigation described in subparagraph

18 (A) would have a range of undesirable effects, in19 cluding the following:

20 (i) It would threaten to waste technical

21 and financial resources that are better devoted

22 to curing year 2000 computer date-change

23 problems and ensuring that systems remain or

24 become operational.
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1 (ii) It could threaten the network of valued

2 and trusted business and customer relationships

3 that are important to the effective functioning

4 of the national economy.

5 (iii) It would strain the Nation’s legal sys6 tem, causing particular problems for the small

7 businesses and individuals who already find

8 that system inaccessible because of its com9 plexity and expense.

10 (iv) The delays, expense, uncertainties, loss

11 of control, adverse publicity, and animosities

12 that frequently accompany litigation of business

13 disputes could exacerbate the difficulties associ14 ated with the date change and work against the

15 successful resolution of those difficulties.

16 (4) It is appropriate for the Congress to enact

17 legislation to assure that Y2K problems do not un18 necessarily disrupt interstate commerce or create un19 necessary caseloads in Federal courts and to provide

20 initiatives to help businesses prepare and be in a po21 sition to withstand the potentially devastating eco22 nomic impact of Y2K.

23 (5) Resorting to the legal system for resolution

24 of Y2K problems is not feasible for many businesses

25 and individuals who already find the legal system in-
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1 accessible, particularly small businesses and individ2 uals who already find the legal system inaccessible,

3 because of its complexity and expense.

4 (6) The delays, expense, uncertainties, loss of

5 control, adverse publicity, and animosities that fre6 quently accompany litigation of business disputes

7 can only exacerbate the difficulties associated with

8 the Y2K date change, and work against the success9 ful resolution of those difficulties.

10 (7) Concern about the potential for liability—in

11 particular, concern about the substantial litigation

12 expense associated with defending against even the

13 most insubstantial lawsuits—is prompting many per14 sons and businesses with technical expertise to avoid

15 projects aimed at curing year 2000 computer date16 change problems.

17 (8) A proliferation of frivolous Y2K lawsuits by

18 opportunistic parties may further limit access to

19 courts by straining the resources of the legal system

20 and depriving deserving parties of their legitimate

21 rights to relief.

22 (9) Congress encourages businesses to approach

23 their Y2K disputes responsibly, and to avoid unnec24 essary, time-consuming and costly litigation about

25 Y2K failures, particularly those that are not mate-
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1 rial. Congress supports good faith negotiations be2 tween parties when there is a dispute over a Y2K

3 problem, and, if necessary, urges the parties to enter

4 into voluntary, non-binding mediation rather than

5 litigation.

6 (b) PURPOSES.—Based upon the power of the Con7 gress under Article I, Section 8, Clause 3 of the Constitu8 tion of the United States, the purposes of this Act are—

9 (1) to establish uniform legal standards that

10 give all businesses and users of technology products

11 reasonable incentives to solve Y2K computer date12 change problems before they develop;

13 (2) to encourage continued Y2K remediation

14 and testing efforts by providers, suppliers, cus15 tomers, and other contracting partners;

16 (3) to encourage private and public parties alike

17 to resolve Y2K disputes by alternative dispute mech18 anisms in order to avoid costly and time-consuming

19 litigation, to initiate those mechanisms as early as

20 possible, and to encourage the prompt identification

21 and correction of Y2K problems; and

22 (4) to lessen the burdens on interstate com23 merce by discouraging insubstantial lawsuits while

24 preserving the ability of individuals and businesses
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1 that have suffered real injury to obtain complete re2 lief.

3 SEC. 3. DEFINITIONS.

4 In this Act:

5 (1) Y2K ACTION.—The term ‘‘Y2K action’’—

6 (A) means a civil action commenced in any

7 Federal or State court, or any agency board of

8 contract appeal proceeding, in which the plain9 tiff’s alleged harm or injury resulted from a

10 Y2K failure;

11 (B) includes a civil action commenced in

12 any Federal or State court by a governmental

13 entity when acting in a commercial or con14 tracting capacity; but

15 (C) does not include an action brought by

16 a governmental entity acting in a regulatory,

17 supervisory, or enforcement capacity.

18 (2) Y2K FAILURE.—The term ‘‘Y2K failure’’

19 means failure by any device or system (including any

20 computer system and any microchip or integrated

21 circuit embedded in another device or product), or

22 any software, firmware, or other set or collection of

23 processing instructions to process, to calculate, to

24 compare, to sequence, to display, to store, to trans-
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1 mit, or to receive year-2000 date-related data, in2 cluding failures—

3 (A) to deal with or account for transitions

4 or comparisons from, into, and between the

5 years 1999 and 2000 accurately;

6 (B) to recognize or accurately to process

7 any specific date in 1999, 2000, or 2001; or

8 (C) accurately to account for the year

9 2000’s status as a leap year, including recogni10 tion and processing of the correct date on Feb11 ruary 29, 2000.

12 (3) GOVERNMENT ENTITY.—The term ‘‘govern13 ment entity’’ means an agency, instrumentality, or

14 other entity of Federal, State, or local government

15 (including multijurisdictional agencies, instrumental16 ities, and entities).

17 (4) MATERIAL DEFECT.—The term ‘‘material

18 defect’’ means a defect in any item, whether tangible

19 or intangible, or in the provision of a service, that

20 substantially prevents the item or service from oper21 ating or functioning as designed or according to its

22 specifications. The term ‘‘material defect’’ does not

23 include a defect that—
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1 (A) has an insignificant or de minimis ef2 fect on the operation or functioning of an item

3 or computer program;

4 (B) affects only a component of an item or

5 program that, as a whole, substantially operates

6 or functions as designed; or

7 (C) has an insignificant or de minimis ef8 fect on the efficacy of the service provided.

9 (5) PERSONAL INJURY.—The term ‘‘personal

10 injury’’ means physical injury to a natural person,

11 including—

12 (A) death as a result of a physical injury;

13 and

14 (B) mental suffering, emotional distress, or

15 similar injuries suffered by that person in con16 nection with a physical injury.

17 (6) STATE.—The term ‘‘State’’ means any

18 State of the United States, the District of Columbia,

19 Commonwealth of Puerto Rico, the Northern Mar20 iana Islands, the United States Virgin Islands,

21 Guam, American Samoa, and any other territory or

22 possession of the United States, and any political

23 subdivision thereof.

24 (7) CONTRACT.—The term ‘‘contract’’ means a

25 contract, tariff, license, or warranty.
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1 (8) ALTERNATIVE DISPUTE RESOLUTION.—The

2 term ‘‘alternative dispute resolution’’ means any

3 process or proceeding, other than adjudication by a

4 court or in an administrative proceeding, to assist in

5 the resolution of issues in controversy, through proc6 esses such as early neutral evaluation, mediation,

7 minitrial, and arbitration.

8 SEC. 4. APPLICATION OF ACT.

9 (a) GENERAL RULE.—This Act applies to any Y2K

10 action brought in a State or Federal court after January

11 1, 1999, for a Y2K failure occurring before January 1,

12 2003, including any appeal, remand, stay, or other judi13 cial, administrative, or alternative dispute resolution pro14 ceeding in such an action.

15 (b) NO NEW CAUSE OF ACTION CREATED.—Nothing

16 in this Act creates a new cause of action, and, except as

17 otherwise explicitly provided in this Act, nothing in this

18 Act expands any liability otherwise imposed or limits any

19 defense otherwise available under Federal or State law.

20 (c) CLAIMS FOR PERSONAL INJURY OR WRONGFUL

21 DEATH EXCLUDED.—This Act does not apply to a claim

22 for personal injury or for wrongful death.

23 (d) CONTRACT PRESERVATION.—

24 (1) IN GENERAL.—Subject to paragraph (2), in

25 any Y2K action any written contractual term, in-
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1 cluding a limitation or an exclusion of liability, or a

2 disclaimer of warranty, shall be strictly enforced un3 less the enforcement of that term would manifestly

4 and directly contravene applicable State law em5 bodied in any statute in effect on January 1, 1999,

6 specifically addressing that term.

7 (2) INTERPRETATION OF CONTRACT.—In any

8 Y2K action in which a contract to which paragraph

9 (1) applies is silent as to a particular issue, the in10 terpretation of the contract as to that issue shall be

11 determined by applicable law in effect at the time

12 the contract was executed.

13 (e) PREEMPTION OF STATE LAW.—This Act super14 sedes State law to the extent that it establishes a rule of

15 law applicable to a Y2K action that is inconsistent with

16 State law, but nothing in this Act implicates, alters, or

17 diminishes the ability of a State to defend itself against

18 any claim on the basis of sovereign immunity.

19 (f) APPLICATION WITH YEAR 2000 INFORMATION

20 AND READINESS DISCLOSURE ACT.—Nothing in this Act

21 supersedes any provision of the Year 2000 Information

22 and Readiness Disclosure Act.

23 SEC. 5. PUNITIVE DAMAGES LIMITATIONS.

24 (a) IN GENERAL.—In any Y2K action in which puni25 tive damages are permitted by applicable law, the defend-
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1 ant shall not be liable for punitive damages unless the

2 plaintiff proves by clear and convincing evidence that the

3 applicable standard for awarding damages has been met.

4 (b) CAPS ON PUNITIVE DAMAGES.—

5 (1) IN GENERAL.—Subject to the evidentiary

6 standard established by subsection (a), punitive

7 damages permitted under applicable law against a

8 defendant described in paragraph (2) in a Y2K ac9 tion may not exceed the lesser of—

10 (A) 3 times the amount awarded for com11 pensatory damages; or

12 (B) $250,000.

13 (2) DEFENDANT DESCRIBED.—A defendant de14 scribed in this paragraph is a defendant—

15 (A) who—

16 (i) is sued in his or her capacity as an

17 individual; and

18 (ii) whose net worth does not exceed

19 $500,000; or

20 (B) that is an unincorporated business, a

21 partnership, corporation, association, or organi22 zation with fewer than 50 full-time employees.

23 (3) NO CAP IF INJURY SPECIFICALLY IN24 TENDED.—Paragraph (1) does not apply if the

25 plaintiff establishes by clear and convincing evidence
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1 that the defendant acted with specific intent to in2 jure the plaintiff.

3 (c) GOVERNMENT ENTITIES.—Punitive damages in a

4 Y2K action may not be awarded against a government

5 entity.

6 SEC. 6. PROPORTIONATE LIABILITY.

7 (a) IN GENERAL.—Except as provided in subsections

8 (b) and (c), a person against whom a final judgment is

9 entered in a Y2K action shall be liable solely for the por10 tion of a judgment that corresponds to the relative and

11 proportional responsibility of that person. In determining

12 the percentage of responsibility of any defendant, the trier

13 of fact shall determine that percentage as a percentage

14 of the total fault of all persons, including the plaintiff,

15 who caused or contributed to the total loss incurred by

16 the plaintiff.

17 (b) PROPORTIONATE LIABILITY.—

18 (1) DETERMINATION OF RESPONSIBILITY.—In

19 any Y2K action, the court shall instruct the jury to

20 answer special interrogatories, or, if there is no jury,

21 the court shall make findings with respect to each

22 defendant, including defendants who have entered

23 into settlements with the plaintiff or plaintiffs,

24 concerning—
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1 (A) the percentage of responsibility, if any,

2 of each defendant, measured as a percentage of

3 the total fault of all persons who caused or con4 tributed to the loss incurred by the plaintiff;

5 and

6 (B) if alleged by the plaintiff, whether the

7 defendant (other than a defendant who has en8 tered into a settlement agreement with the

9 plaintiff)—

10 (i) acted with specific intent to injure

11 the plaintiff; or

12 (ii) knowingly committed fraud.

13 (2) CONTENTS OF SPECIAL INTERROGATORIES

14 OR FINDINGS.—The responses to interrogatories or

15 findings under paragraph (1) shall specify the total

16 amount of damages that the plaintiff is entitled to

17 recover and the percentage of responsibility of each

18 defendant found to have caused or contributed to

19 the loss incurred by the plaintiff.

20 (3) FACTORS FOR CONSIDERATION.—In deter21 mining the percentage of responsibility under this

22 subsection, the trier of fact shall consider—

23 (A) the nature of the conduct of each per24 son found to have caused or contributed to the

25 loss incurred by the plaintiff; and
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1 (B) the nature and extent of the casual re2 lationship between the conduct of each such

3 person and the damages incurred by the plain4 tiff.

5 (c) JOINT LIABILITY FOR SPECIFIC INTENT OR

6 FRAUD.—

7 (1) IN GENERAL.—Notwithstanding subsection

8 (a), the liability of a defendant in a Y2K action is

9 joint and several if the trier of fact specifically deter10 mines that the defendant—

11 (A) acted with specific intent to injure the

12 plaintiff; or

13 (B) knowingly committed fraud.

14 (2) FRAUD; RECKLESSNESS.—

15 (A) KNOWING COMMISSION OF FRAUD DE16 SCRIBED.—For purposes of subsection

17 (b)(1)(B)(ii) and paragraph (1)(B) of this sub18 section, a defendant knowingly committed fraud

19 if the defendant—

20 (i) made an untrue statement of a

21 material fact, with actual knowledge that

22 the statement was false;

23 (ii) omitted a fact necessary to make

24 the statement not be misleading with ac-
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1 tual knowledge that, as a result of the

2 omission, the statement was false; and

3 (iii) knew that the plaintiff was rea4 sonably likely to rely on the false state5 ment.

6 (B) RECKLESSNESS.—For purposes of

7 subsection (b)(1)(B) and paragraph (1) of this

8 subsection, reckless conduct by the defendant

9 does not constitute either a specific intent to in10 jure, or the knowing commission of fraud, by

11 the defendant.

12 (3) RIGHT TO CONTRIBUTION NOT AF13 FECTED.—Nothing in this section affects the right

14 under any other law, of a defendant to contribution

15 with respect to another defendant found under sub16 section (b)(1)(B), or determined under paragraph

17 (1)(B) of this subsection, to have acted with specific

18 intent to injure the plaintiff or to have knowingly

19 committed fraud.

20 (d) SPECIAL RULES.—

21 (1) UNCOLLECTIBLE SHARE.—

22 (A) IN GENERAL.—Notwithstanding sub23 section (a), if, upon motion made not later than

24 6 months after a final judgment is entered in

25 any Y2K action, the court determines that all
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1 or part of the share of the judgment against a

2 defendant for compensatory damages is not col3 lectible against that defendant, then each other

4 defendant in the action is liable for the

5 uncollectible share as follows:

6 (i) PERCENTAGE OF NET WORTH.—

7 The other defendants are jointly and sever8 ally liable for any uncollectible share if the

9 plaintiff establishes that—

10 (I) the plaintiff is an individual

11 whose recoverable damages under the

12 final judgment are equal to more than

13 10 percent of the net worth of the

14 plaintiff; and

15 (II) the net worth of the plaintiff

16 is less than $200,000.

17 (ii) OTHER PLAINTIFFS.—For a plain18 tiff not described in clause (i), each of the

19 other defendants is liable for the

20 uncollectible share in proportion to the per21 centage of responsibility of that defendant,

22 except that the total liability of a defend23 ant under this clause may not exceed 50

24 percent of the proportionate share of that
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1 defendant, as determined under subsection

2 (b)(2).

3 (B) OVERALL LIMIT.—The total payments

4 required under subparagraph (A) from all de5 fendants may not exceed the amount of the

6 uncollectible share.

7 (C) SUBJECT TO CONTRIBUTION.—A de8 fendant against whom judgment is not collect9 ible is subject to contribution and to any con10 tinuing liability to the plaintiff on the judg11 ment.

12 (2) SPECIAL RIGHT OF CONTRIBUTION.—To the

13 extent that a defendant is required to make an addi14 tional payment under paragraph (1), that defendant

15 may recover contribution—

16 (A) from the defendant originally liable to

17 make the payment;

18 (B) from any other defendant that is joint19 ly and severally liable;

20 (C) from any other defendant held propor21 tionately liable who is liable to make the same

22 payment and has paid less than that other de23 fendant’s proportionate share of that payment;

24 or
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1 (D) from any other person responsible for

2 the conduct giving rise to the payment that

3 would have been liable to make the same pay4 ment.

5 (3) NONDISCLOSURE TO JURY.—The standard

6 for allocation of damages under subsection (a) and

7 subsection (b)(1), and the procedure for reallocation

8 of uncollectible shares under paragraph (1) of this

9 subsection, shall not be disclosed to members of the

10 jury.

11 (e) SETTLEMENT DISCHARGE.—

12 (1) IN GENERAL.—A defendant who settles a

13 Y2K action at any time before final verdict or judg14 ment shall be discharged from all claims for con15 tribution brought by other persons. Upon entry of

16 the settlement by the court, the court shall enter a

17 bar order constituting the final discharge of all obli18 gations to the plaintiff of the settling defendant aris19 ing out of the action. The order shall bar all future

20 claims for contribution arising out of the action—

21 (A) by any person against the settling de22 fendant; and

23 (B) by the settling defendant against any

24 person other than a person whose liability has
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1 been extinguished by the settlement of the set2 tling defendant.

3 (2) REDUCTION.—If a defendant enters into a

4 settlement with the plaintiff before the final verdict

5 or judgment, the verdict or judgment shall be re6 duced by the greater of—

7 (A) an amount that corresponds to the

8 percentage of responsibility of that defendant;

9 or

10 (B) the amount paid to the plaintiff by

11 that defendant.

12 (f) GENERAL RIGHT OF CONTRIBUTION.—

13 (1) IN GENERAL.—A defendant who is jointly

14 and severally liable for damages in any Y2K action

15 may recover contribution from any other person

16 who, if joined in the original action, would have been

17 liable for the same damages. A claim for contribu18 tion shall be determined based on the percentage of

19 responsibility of the claimant and of each person

20 against whom a claim for contribution is made.

21 (2) STATUTE OF LIMITATIONS FOR CONTRIBU22 TION.—An action for contribution in connection with

23 a Y2K action shall be brought not later than 6

24 months after the entry of a final, nonappealable

25 judgment in the Y2K action, except than an action
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1 for contribution brought by a defendant who was re2 quired to make an additional payment under sub3 section (d)(1) may be brought not later than 6

4 months after the date on which such payment was

5 made.

6 (g) MORE PROTECTIVE STATE LAW NOT PRE7 EMPTED.—Nothing in this section pre-empts or super8 sedes any provision of State statutory law that—

9 (1) limits the liability of a defendant in a Y2K

10 action to a lesser amount than the amount deter11 mined under this section; or

12 (2) otherwise affords a greater degree of protec13 tion from joint or several liability than is afforded by

14 this section.

15 SEC. 7. PRE-LITIGATION NOTICE.

16 (a) IN GENERAL.—Before commencing a Y2K action,

17 except an action that seeks only injunctive relief, a pro18 spective plaintiff with a Y2K claim shall send a written

19 notice by certified mail (with either return receipt re20 quested or other means of verification that the notice was

21 sent) to each prospective defendant in that action. The

22 notice shall provide specific and detailed information

23 about—

24 (1) the manifestations of any material defect al25 leged to have caused harm or loss;
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1 (2) the harm or loss allegedly suffered by the

2 prospective plaintiff;

3 (3) how the prospective plaintiff would like the

4 prospective defendant to remedy the problem;

5 (4) the basis upon which the prospective plain6 tiff seeks that remedy; and

7 (5) the name, title, address, and telephone

8 number of any individual who has authority to nego9 tiate a resolution of the dispute on behalf of the pro10 spective plaintiff.

11 (b) PERSON TO WHOM NOTICE TO BE SENT.—The

12 notice required by subsection (a) shall be sent—

13 (1) to the registered agent of the prospective

14 defendant for service of legal process;

15 (2) if the prospective defendant does not have

16 a registered agent, then to the chief executive officer

17 of a corporation, the managing partner of a partner18 ship, the proprietor of a sole proprietorship, or to a

19 similarly-situated person for any other enterprise; or

20 (3) if the prospective defendant has designated

21 a person to receive pre-litigation notices on a Year

22 2000 Internet Website (as defined in section 3(7) of

23 the Year 2000 Information and Readiness Disclo24 sure Act), to the designated person, if the prospec25 tive plaintiff has reasonable access to the Internet.
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1 (c) RESPONSE TO NOTICE.—

2 (1) IN GENERAL.—Within 30 days after receipt

3 of the notice specified in subsection (a), each pro4 spective defendant shall send by certified mail with

5 return receipt requested to each prospective plaintiff

6 a written statement acknowledging receipt of the no7 tice, and describing the actions it has taken or will

8 take to address the problem identified by the pro9 spective plaintiff.

10 (2) WILLINGNESS TO ENGAGE IN ADR.—The

11 written statement shall state whether the prospective

12 defendant is willing to engage in alternative dispute

13 resolution.

14 (3) INADMISSABILITY.—A written statement re15 quired by this paragraph is not admissible in evi16 dence, under Rule 408 of the Federal Rules of Evi17 dence or any analogous rule of evidence in any

18 State, in any proceeding to prove liability for, or the

19 invalidity of, a claim or its amount, or otherwise as

20 evidence of conduct or statements made in com21 promise negotiations.

22 (4) PRESUMPTIVE TIME OF RECEIPT.—For pur23 poses of paragraph (1), a notice under subsection

24 (a) is presumed to be received 7 days after it was

25 sent.
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1 (d) FAILURE TO RESPOND.—If a prospective

2 defendant—

3 (1) fails to respond to a notice provided pursu4 ant to subsection (a) within the 30 days specified in

5 subsection (c)(1); or

6 (2) does not describe the action, if any, the pro7 spective defendant has taken, or will take, to address

8 the problem identified by the prospective plaintiff,

9 the prospective plaintiff may immediately commence a

10 legal action against that prospective defendant.

11 (e) REMEDIATION PERIOD.—

12 (1) IN GENERAL.—If the prospective defendant

13 responds and proposes remedial action it will take,

14 or offers to engage in alternative dispute resolution,

15 then the prospective plaintiff shall allow the prospec16 tive defendant an additional 60 days from the end

17 of the 30-day notice period to complete the proposed

18 remedial action before commencing a legal action

19 against that prospective defendant.

20 (2) EXTENSION BY AGREEMENT.—The prospec21 tive plaintiff and prospective defendant may change

22 the length of the 60-day remediation period by writ23 ten agreement.

24 (3) MULTIPLE EXTENSIONS NOT ALLOWED.—

25 Except as provided in paragraph (2), a defendant in
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1 a Y2K action is entitled to no more than one 30-day

2 period and one 60-day remediation period under

3 paragraph (1).

4 (4) STATUTES OF LIMITATION, ETC.,

5 TOLLED.—Any applicable statute of limitations or

6 doctrine of laches in a Y2K action to which para7 graph (1) applies shall be tolled during the notice

8 and remediation period under that paragraph.

9 (f) FAILURE TO PROVIDE NOTICE.—If a defendant

10 determines that a plaintiff has filed a Y2K action without

11 providing the notice specified in subsection (a) or without

12 awaiting the expiration of the appropriate waiting period

13 specified in subsection (c), the defendant may treat the

14 plaintiff’s complaint as such a notice by so informing the

15 court and the plaintiff in its initial response to the plain16 tiff. If any defendant elects to treat the complaint as such

17 a notice—

18 (1) the court shall stay all discovery and all

19 other proceedings in the action for the appropriate

20 period after filing of the complaint; and

21 (2) the time for filing answers and all other

22 pleadings shall be tolled during the appropriate pe23 riod.

24 (g) EFFECT OF CONTRACTUAL OR STATUTORY WAIT25 ING PERIODS.—In cases in which a contract, or a statute
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1 enacted before January 1, 1999, requires notice of non2 performance and provides for a period of delay prior to

3 the initiation of suit for breach or repudiation of contract,

4 the period of delay provided by contract or the statute is

5 controlling over the waiting period specified in subsections

6 (c) and (d).

7 (h) STATE LAW CONTROLS ALTERNATIVE METH8 ODS.—Nothing in this section supersedes or otherwise pre9 empts any State law or rule of civil procedure with respect

10 to the use of alternative dispute resolution for Y2K ac11 tions.

12 (i) PROVISIONAL REMEDIES UNAFFECTED.—Noth13 ing in this section interferes with the right of a litigant

14 to provisional remedies otherwise available under Rule 65

15 of the Federal Rules of Civil Procedure or any State rule

16 of civil procedure providing extraordinary or provisional

17 remedies in any civil action in which the underlying com18 plaint seeks both injunctive and monetary relief.

19 (j) SPECIAL RULE FOR CLASS ACTIONS.—For the

20 purpose of applying this section to a Y2K action that is

21 maintained as a class action in Federal or State court,

22 the requirements of the preceding subsections of this sec23 tion apply only to named plaintiffs in the class action.
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1 SEC. 8. PLEADING REQUIREMENTS.

2 (a) APPLICATION WITH RULES OF CIVIL PROCE3 DURE.—This section applies exclusively to Y2K actions

4 and, except to the extent that this section requires addi5 tional information to be contained in or attached to plead6 ings, nothing in this section is intended to amend or other7 wise supersede applicable rules of Federal or State civil

8 procedure.

9 (b) NATURE AND AMOUNT OF DAMAGES.—In all

10 Y2K actions in which damages are requested, there shall

11 be filed with the complaint a statement of specific infor12 mation as to the nature and amount of each element of

13 damages and the factual basis for the damages calcula14 tion.

15 (c) MATERIAL DEFECTS.—In any Y2K action in

16 which the plaintiff alleges that there is a material defect

17 in a product or service, there shall be filed with the com18 plaint a statement of specific information regarding the

19 manifestations of the material defects and the facts sup20 porting a conclusion that the defects are material.

21 (d) REQUIRED STATE OF MIND.—In any Y2K action

22 in which a claim is asserted on which the plaintiff may

23 prevail only on proof that the defendant acted with a par24 ticular state of mind, there shall be filed with the com25 plaint, with respect to each element of that claim, a state-
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1 ment of the facts giving rise to a strong inference that

2 the defendant acted with the required state of mind.

3 SEC. 9. DUTY TO MITIGATE.

4 Damages awarded in any Y2K action shall exclude

5 compensation for damages the plaintiff could reasonably

6 have avoided in light of any disclosure or other informa7 tion of which the plaintiff was, or reasonably should have

8 been, aware, including information made available by the

9 defendant to purchasers or users of the defendant’s prod10 uct or services concerning means of remedying or avoiding

11 the Y2K failure.

12 SEC. 10. APPLICATION OF EXISTING IMPOSSIBILITY OR

13 COMMERCIAL IMPRACTICABILITY DOC14 TRINES.

15 In any Y2K action for breach or repudiation of con16 tract, the applicability of the doctrines of impossibility and

17 commercial impracticability shall be determined by the law

18 in existence on January 1, 1999. Nothing in this Act shall

19 be construed as limiting or impairing a party’s right to

20 assert defenses based upon such doctrines.

21 SEC. 11. DAMAGES LIMITATION BY CONTRACT.

22 In any Y2K action for breach or repudiation of con23 tract, no party may claim, nor be awarded, any category

24 of damages unless such damages are allowed—

25 (1) by the express terms of the contract; or
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1 (2) if the contract is silent on such damages, by

2 operation of State law at the time the contract was

3 effective or by operation of Federal law.

4 SEC. 12. DAMAGES IN TORT CLAIMS.

5 (a) IN GENERAL.—A party to a Y2K action making

6 a tort claim may not recover damages for economic loss

7 unless—

8 (1) the recovery of such losses is provided for

9 in a contract to which the party seeking to recover

10 such losses is a party; or

11 (2) such losses result directly from damage to

12 tangible personal or real property caused by the

13 Y2K failure (other than damage to property that is

14 the subject of the contract between the parties to the

15 Y2K action or, in the event there is no contract be16 tween the parties, other than damage caused only to

17 the property that experienced the Y2K failure),

18 and such damages are permitted under applicable Federal

19 or State law.

20 (b) ECONOMIC LOSS.—For purposes of this section

21 only, and except as otherwise specifically provided in a

22 valid and enforceable written contract between the plain23 tiff and the defendant in a Y2K action, the term ‘‘eco24 nomic loss’’—
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1 (1) means amounts awarded to compensate an

2 injured party for any loss other than losses described

3 in subsection (a)(2); and

4 (2) includes amounts awarded for damages such

5 as—

6 (A) lost profits or sales;

7 (B) business interruption;

8 (C) losses indirectly suffered as a result of

9 the defendant’s wrongful act or omission;

10 (D) losses that arise because of the claims

11 of third parties;

12 (E) losses that must be plead as special

13 damages; and

14 (F) consequential damages (as defined in

15 the Uniform Commercial Code or analogous

16 State commercial law).

17 (c) CERTAIN ACTIONS EXCLUDED.—This section

18 does not affect, abrogate, amend, or alter any patent,

19 copyright, trade-secret, trademark, or service-mark action,

20 or any claim for defamation or invasion of privacy under

21 Federal or State law.

22 (d) CERTAIN OTHER ACTIONS.—A person liable for

23 damages, whether by settlement or judgment, in a civil

24 action to which this Act does not apply because of section

25 4(c) whose liability, in whole or in part, is the result of
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1 a Y2K failure may, notwithstanding any other provision

2 of this Act, pursue any remedy otherwise available under

3 Federal or State law against the person responsible for

4 that Y2K failure to the extent of recovering the amount

5 of those damages.

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

7 (a) DEFENDANT’S STATE OF MIND.—In a Y2K ac8 tion other than a claim for breach or repudiation of con9 tract, and in which the defendant’s actual or constructive

10 awareness of an actual or potential Y2K failure is an ele11 ment of the claim, the defendant is not liable unless the

12 plaintiff establishes that element of the claim by the stand13 ard of evidence under applicable State law in effect before

14 January 1, 1999.

15 (b) LIMITATION ON BYSTANDER LIABILITY FOR Y2K

16 FAILURES.—

17 (1) IN GENERAL.—With respect to any Y2K ac18 tion for money damages in which—

19 (A) the defendant is not the manufacturer,

20 seller, or distributor of a product, or the pro21 vider of a service, that suffers or causes the

22 Y2K failure at issue;

23 (B) the plaintiff is not in substantial priv24 ity with the defendant; and
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1 (C) the defendant’s actual or constructive

2 awareness of an actual or potential Y2K failure

3 is an element of the claim under applicable law,

4 the defendant shall not be liable unless the plaintiff,

5 in addition to establishing all other requisite ele6 ments of the claim, proves, by the standard of evi7 dence under applicable State law in effect before

8 January 1, 1999, that the defendant actually knew,

9 or recklessly disregarded a known and substantial

10 risk, that such failure would occur.

11 (2) SUBSTANTIAL PRIVITY.—For purposes of

12 paragraph (1)(B), a plaintiff and a defendant are in

13 substantial privity when, in a Y2K action arising out

14 of the performance of professional services, the

15 plaintiff and the defendant either have contractual

16 relations with one another or the plaintiff is a per17 son who, prior to the defendant’s performance of

18 such services, was specifically identified to and ac19 knowledged by the defendant as a person for whose

20 special benefit the services were being performed.

21 (3) CERTAIN CLAIMS EXCLUDED.—For pur22 poses of paragraph (1)(C), claims in which the de23 fendant’s actual or constructive awareness of an ac24 tual or potential Y2K failure is an element of the

25 claim under applicable law do not include claims for
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1 negligence but do not include claims such as fraud,

2 constructive fraud, breach of fiduciary duty, neg3 ligent misrepresentation, and interference with con4 tract or economic advantage.

5 (c) CONTROL NOT DETERMINATIVE OF LIABILITY.—

6 The fact that a Y2K failure occurred in an entity, facility,

7 system, product, or component that was sold, leased,

8 rented, or otherwise within the control of the party against

9 whom a claim is asserted in a Y2K action shall not con10 stitute the sole basis for recovery of damages in that ac11 tion. A claim in a Y2K action for breach or repudiation

12 of contract for such a failure is governed by the terms

13 of the contract.

14 (d) PROTECTIONS OF THE YEAR 2000 INFORMATION

15 AND READINESS DISCLOSURE ACT APPLY.—The protec16 tions for the exchanges of information provided by section

17 4 of the Year 2000 Information and Readiness Disclosure

18 Act (Public Law 105–271) shall apply to this Act.

19 SEC. 14. APPOINTMENT OF SPECIAL MASTERS OR MAG20 ISTRATE JUDGES FOR Y2K ACTIONS.

21 Any District Court of the United States in which a

22 Y2K action is pending may appoint a special master or

23 a magistrate judge to hear the matter and to make find24 ings of fact and conclusions of law in accordance with Rule

25 53 of the Federal Rules of Civil Procedure.
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1 SEC. 15. Y2K ACTIONS AS CLASS ACTIONS.

2 (a) MATERIAL DEFECT REQUIREMENT.—A Y2K ac3 tion involving a claim that a product or service is defective

4 may be maintained as a class action in Federal or State

5 court as to that claim only if—

6 (1) it satisfies all other prerequisites established

7 by applicable Federal or State law, including appli8 cable rules of civil procedure; and

9 (2) the court finds that the defect in a product

10 or service as alleged would be a material defect for

11 the majority of the members of the class.

12 (b) NOTIFICATION.—In any Y2K action that is main13 tained as a class action, the court, in addition to any other

14 notice required by applicable Federal or State law, shall

15 direct notice of the action to each member of the class,

16 which shall include—

17 (1) a concise and clear description of the nature

18 of the action;

19 (2) the jurisdiction where the case is pending;

20 and

21 (3) the fee arrangements with class counsel, in22 cluding the hourly fee being charged, or if it is a

23 contingency fee, the percentage of the final award

24 which will be paid, including an estimate of the total

25 amount that would be paid if the requested damages

26 were to be granted.
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1 (c) FORUM FOR Y2K CLASS ACTIONS.—

2 (1) JURISDICTION.—Except as provided in

3 paragraph (2), a Y2K action may be brought as a

4 class action in a United States District Court or re5 moved to a United States District Court if the

6 amount in controversy is greater than the sum or

7 value of $1,000,000 (exclusive of interest and costs),

8 computed on the basis of all claims to be determined

9 in the action.

10 (2) EXCEPTION.—A Y2K action may not be

11 brought or removed as a class action under this sec12 tion if—

13 (A)(i) a substantial majority of the mem14 bers of the proposed plaintiff class are citizens

15 of a single State;

16 (ii) the primary defendants are citizens of

17 that State; and

18 (iii) the claims asserted will be governed

19 primarily by the law of that State; or

20 (B) the primary defendants are States,

21 State officials, or other governmental entities

22 against whom the United States District Court

23 may be foreclosed from ordering relief.

24 (d) EFFECT ON RULES OF CIVIL PROCEDURE.—Ex25 cept as otherwise provided in this section, nothing in this
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1 section supersedes any rule of Federal or State civil proce2 dure applicable to class actions.

Amend the title so as to read: An Act to regulate

commerce between and among the several States by providing for the orderly resolution of disputes arising out

of computer-based problems related to processing data

that includes a 2-digit expression of the year’s date

through fostering an incentive for businesses to continue

fixing and testing their systems, to communicate with

other businesses, resolve year-2000 business disputes

without litigation, and to settle year 2000 lawsuits that

may disrupt significant sectors of the American economy.