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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 775 Engrossed Amendment Senate (EAS)]

  
  
  
  
  
  
  
  
  
  

                  In the Senate of the United States,

                                                         June 15, 1999.
      Resolved, That the bill from the House of Representatives (H.R. 
775) entitled ``An Act to establish certain procedures for civil 
actions brought for damages relating to the failure of any device or 
system to process or otherwise deal with the transition from the year 
1999 to the year 2000, and for other purposes.'', do pass with the 
following

                               AMENDMENT:

            Strike out all after the enacting clause and insert:

SECTION 1. SHORT TITLE; TABLE OF SECTIONS.

    (a) Short Title.--This Act may be cited as the ``Y2K Act''.
    (b) Table of Sections.--The table of sections for 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. Prelitigation 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.
Sec. 16. Applicability of State law.
Sec. 17. Admissible evidence ultimate issue in State courts.
Sec. 18. Suspension of penalties for certain year 2000 failures by 
                            small business concerns.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that:
            (1)(A) Many information technology systems, devices, and 
        programs are not capable of recognizing certain dates in 1999 
        and after December 31, 1999, and will read dates in the year 
        2000 and thereafter as if those dates represent the year 1900 
        or thereafter or will fail to process dates after December 31, 
        1999.
             (B) If not corrected, the problem described in 
        subparagraph (A) and resulting failures could incapacitate 
        systems that are essential to the functioning of markets, 
        commerce, consumer products, utilities, Government, and safety 
        and defense systems, in the United States and throughout the 
        world.
            (2) It is in the national interest that producers and users 
        of technology products concentrate their attention and 
        resources in the time remaining before January 1, 2000, on 
        assessing, fixing, testing, and developing contingency plans to 
        address any and all outstanding year 2000 computer date-change 
        problems, so as to minimize possible disruptions associated 
        with computer failures.
            (3)(A) Because year 2000 computer date-change problems may 
        affect virtually all businesses and other users of technology 
        products to some degree, there is a substantial likelihood that 
        actual or potential year 2000 failures will prompt a 
        significant volume of litigation, much of it insubstantial.
            (B) The litigation described in subparagraph (A) would have 
        a range of undesirable effects, including the following:
                    (i) It would threaten to waste technical and 
                financial resources that are better devoted to curing 
                year 2000 computer date-change problems and ensuring 
                that systems remain or become operational.
                    (ii) It could threaten the network of valued and 
                trusted business and customer relationships that are 
                important to the effective functioning of the national 
                economy.
                    (iii) It would strain the Nation's legal system, 
                causing particular problems for the small businesses 
                and individuals who already find that system 
                inaccessible because of its complexity and expense.
                    (iv) The delays, expense, uncertainties, loss of 
                control, adverse publicity, and animosities that 
                frequently accompany litigation of business disputes 
                could exacerbate the difficulties associated with the 
                date change and work against the successful resolution 
                of those difficulties.
            (4) It is appropriate for the Congress to enact legislation 
        to assure that Y2K problems do not unnecessarily disrupt 
        interstate commerce or create unnecessary caseloads in Federal 
        courts and to provide initiatives to help businesses prepare 
        and be in a position to withstand the potentially devastating 
        economic impact of Y2K.
            (5) Resorting to the legal system for resolution of Y2K 
        problems is not feasible for many businesses and individuals 
        who already find the legal system inaccessible, particularly 
        small businesses and individuals who already find the legal 
        system inaccessible, because of its complexity and expense.
            (6) The delays, expense, uncertainties, loss of control, 
        adverse publicity, and animosities that frequently accompany 
        litigation of business disputes can only exacerbate the 
        difficulties associated with the Y2K date change, and work 
        against the successful resolution of those difficulties.
            (7) Concern about the potential for liability--in 
        particular, concern about the substantial litigation expense 
        associated with defending against even the most insubstantial 
        lawsuits--is prompting many persons and businesses with 
        technical expertise to avoid projects aimed at curing year 2000 
        computer date-change problems.
            (8) A proliferation of frivolous Y2K lawsuits by 
        opportunistic parties may further limit access to courts by 
        straining the resources of the legal system and depriving 
        deserving parties of their legitimate rights to relief.
            (9) Congress encourages businesses to approach their Y2K 
        disputes responsibly, and to avoid unnecessary, time-consuming 
        and costly litigation about Y2K failures, particularly those 
        that are not material. Congress supports good faith 
        negotiations between parties when there is a dispute over a Y2K 
        problem, and, if necessary, urges the parties to enter into 
        voluntary, nonbinding mediation rather than litigation.
    (b) Purposes.--Based upon the power of the Congress under Article 
I, Section 8, Clause 3 of the Constitution of the United States, the 
purposes of this Act are--
            (1) to establish uniform legal standards that give all 
        businesses and users of technology products reasonable 
        incentives to solve Y2K computer date-change problems before 
        they develop;
            (2) to encourage continued Y2K remediation and testing 
        efforts by providers, suppliers, customers, and other 
        contracting partners;
            (3) to encourage private and public parties alike to 
        resolve Y2K disputes by alternative dispute mechanisms in order 
        to avoid costly and time-consuming litigation, to initiate 
        those mechanisms as early as possible, and to encourage the 
        prompt identification and correction of Y2K problems; and
            (4) to lessen the burdens on interstate commerce by 
        discouraging insubstantial lawsuits while preserving the 
        ability of individuals and businesses that have suffered real 
        injury to obtain complete relief.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Y2K action.--The term ``Y2K action''--
                    (A) means a civil action commenced in any Federal 
                or State court, or an agency board of contract appeal 
                proceeding, in which the plaintiff's alleged harm or 
                injury resulted from a Y2K failure;
                    (B) includes a civil action commenced in any 
                Federal or State court by a governmental entity when 
                acting in a commercial or contracting capacity; but
                    (C) does not include an action brought by a 
                governmental entity acting in a regulatory, 
                supervisory, or enforcement capacity.
            (2) Y2K failure.--The term ``Y2K failure'' means failure by 
        any device or system (including any computer system and any 
        microchip or integrated circuit embedded in another device or 
        product), or any software, firmware, or other set or collection 
        of processing instructions to process, to calculate, to 
        compare, to sequence, to display, to store, to transmit, or to 
        receive year-2000 date-related data, including failures--
                    (A) to deal with or account for transitions or 
                comparisons from, into, and between the years 1999 and 
                2000 accurately;
                    (B) to recognize or accurately to process any 
                specific date in 1999, 2000, or 2001; or
                    (C) accurately to account for the year 2000's 
                status as a leap year, including recognition and 
                processing of the correct date on February 29, 2000.
            (3) Government entity.--The term ``government entity'' 
        means an agency, instrumentality, or other entity of Federal, 
        State, or local government (including multijurisdictional 
        agencies, instrumentalities, and entities).
            (4) Material defect.--The term ``material defect'' means a 
        defect in any item, whether tangible or intangible, or in the 
        provision of a service, that substantially prevents the item or 
        service from operating or functioning as designed or according 
        to its specifications. The term ``material defect'' does not 
        include a defect that--
                    (A) has an insignificant or de minimis effect on 
                the operation or functioning of an item or computer 
                program;
                    (B) affects only a component of an item or program 
                that, as a whole, substantially operates or functions 
                as designed; or
                    (C) has an insignificant or de minimis effect on 
                the efficacy of the service provided.
            (5) Personal injury.--The term ``personal injury'' means 
        physical injury to a natural person, including--
                    (A) death as a result of a physical injury; and
                    (B) mental suffering, emotional distress, or 
                similar injuries suffered by that person in connection 
                with a physical injury.
            (6) State.--The term ``State'' means any State of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Northern Mariana Islands, the United States 
        Virgin Islands, Guam, American Samoa, and any other territory 
        or possession of the United States, and any political 
        subdivision thereof.
            (7) Contract.--The term ``contract'' means a contract, 
        tariff, license, or warranty.
            (8) Alternative dispute resolution.--The term ``alternative 
        dispute resolution'' means any process or proceeding, other 
        than adjudication by a court or in an administrative 
        proceeding, to assist in the resolution of issues in 
        controversy, through processes such as early neutral 
        evaluation, mediation, minitrial, and arbitration.

SEC. 4. APPLICATION OF ACT.

    (a) General Rule.--This Act applies to any Y2K action brought in a 
State or Federal court after January 1, 1999, for a Y2K failure 
occurring before January 1, 2003, including any appeal, remand, stay, 
or other judicial, administrative, or alternative dispute resolution 
proceeding in such an action.
    (b) No New Cause of Action Created.--Nothing in this Act creates a 
new cause of action, and, except as otherwise explicitly provided in 
this Act, nothing in this Act expands any liability otherwise imposed 
or limits any defense otherwise available under Federal or State law.
    (c) Claims for Personal Injury or Wrongful Death Excluded.--This 
Act does not apply to a claim for personal injury or for wrongful 
death.
    (d) Contract Preservation.--
            (1) In general.--Subject to paragraph (2), in any Y2K 
        action any written contractual term, including a limitation or 
        an exclusion of liability, or a disclaimer of warranty, shall 
        be strictly enforced unless the enforcement of that term would 
        manifestly and directly contravene applicable State law 
        embodied in any statute in effect on January 1, 1999, 
        specifically addressing that term.
            (2) Interpretation of contract.--In any Y2K action in which 
        a contract to which paragraph (1) applies is silent as to a 
        particular issue, the interpretation of the contract as to that 
        issue shall be determined by applicable law in effect at the 
        time the contract was executed.
    (e) Preemption of State Law.--This Act supersedes State law to the 
extent that it establishes a rule of law applicable to a Y2K action 
that is inconsistent with State law, but nothing in this Act 
implicates, alters, or diminishes the ability of a State to defend 
itself against any claim on the basis of sovereign immunity.
    (f) Application with Year 2000 Information and Readiness Disclosure 
Act.--Nothing in this Act supersedes any provision of the Year 2000 
Information and Readiness Disclosure Act.
    (g) Application to Actions Brought by a Governmental Entity.--
            (1) In general.--To the extent provided in this subsection, 
        this Act shall apply to an action brought by a governmental 
        entity described in section 3(1)(C).
    (2) Definitions.--In this subsection:
                    (A) Defendant.--
                            (i) In general.--The term ``defendant'' 
                        includes a State or local government.
                            (ii) State.--The term ``State'' means each 
                        of the several States of the United States, the 
                        District of Columbia, the Commonwealth of 
                        Puerto Rico, the Virgin Islands, Guam, American 
                        Samoa, and the Commonwealth of the Northern 
                        Mariana Islands.
                            (iii) Local government.--The term ``local 
                        government'' means--
                                    (I) any county, city, town, 
                                township, parish, village, or other 
                                general purpose political subdivision 
                                of a State; and
                                    (II) any combination of political 
                                subdivisions described in subclause (I) 
                                recognized by the Secretary of Housing 
                                and Urban Development.
                    (B) Y2K upset.--The term ``Y2K upset''--
                            (i) means an exceptional incident involving 
                        temporary noncompliance with applicable 
                        federally enforceable measurement or reporting 
                        requirements because of factors related to a 
                        Y2K failure that are beyond the reasonable 
                        control of the defendant charged with 
                        compliance; and
                            (ii) does not include--
                                    (I) noncompliance with applicable 
                                federally enforceable requirements that 
                                constitutes or would create an imminent 
                                threat to public health, safety, or the 
                                environment;
                                    (II) noncompliance with applicable 
                                federally enforceable requirements that 
                                provide for the safety and soundness of 
                                the banking or monetary system, 
                                including the protection of depositors;
                                    (III) noncompliance to the extent 
                                caused by operational error or 
                                negligence;
                                    (IV) lack of reasonable 
                                preventative maintenance; or
                                    (V) lack of preparedness for Y2K.
            (3) Conditions necessary for a demonstration of a y2k 
        upset.--A defendant who wishes to establish the affirmative 
        defense of Y2K upset shall demonstrate, through properly 
        signed, contemporaneous operating logs, or other relevant 
        evidence that--
                    (A) the defendant previously made a good faith 
                effort to effectively remediate Y2K problems;
                    (B) a Y2K upset occurred as a result of a Y2K 
                system failure or other Y2K emergency;
                    (C) noncompliance with the applicable federally 
                enforceable measurement or reporting requirement was 
                unavoidable in the face of a Y2K emergency or was 
                intended to prevent the disruption of critical 
                functions or services that could result in the harm of 
                life or property;
                    (D) upon identification of noncompliance the 
                defendant invoking the defense began immediate actions 
                to remediate any violation of federally enforceable 
                measurement or reporting requirements; and
                    (E) the defendant submitted notice to the 
                appropriate Federal regulatory authority of a Y2K upset 
                within 72 hours from the time that it became aware of 
                the upset.
            (4) Grant of a y2k upset defense.--Subject to the other 
        provisions of this subsection, the Y2K upset defense shall be a 
        complete defense to any action brought as a result of 
        noncompliance with federally enforceable measurement or 
        reporting requirements for any defendant who establishes by a 
        preponderance of the evidence that the conditions set forth in 
        paragraph (3) are met.
            (5) Length of y2k upset.--The maximum allowable length of 
        the Y2K upset shall be not more than 15 days beginning on the 
        date of the upset unless granted specific relief by the 
        appropriate regulatory authority.
            (6) Violation of a y2k upset.--Fraudulent use of the Y2K 
        upset defense provided for in this subsection shall be subject 
        to penalties provided in section 1001 of title 18, United 
        States Code.
            (7) Expiration of Defense.--The Y2K upset defense may not 
        be asserted for a Y2K upset occurring after June 30, 2000.
    (h) Credit Protection from Year 2000 Failures.--
            (1) In general.--No person who transacts business on 
        matters directly or indirectly affecting mortgages, credit 
        accounts, banking, or other financial transactions shall cause 
        or permit a foreclosure, default, or other adverse action 
        against any other person as a result of the improper or 
        incorrect transmission or inability to cause transaction to 
        occur, which is caused directly or indirectly by an actual or 
        potential Y2K failure that results in an inability to 
        accurately or timely process any information or data, including 
        data regarding payments and transfers.
            (2) Scope.--The prohibition of such adverse action to 
        enforce obligations referred to in paragraph (1) includes but 
        is not limited to mortgages, contracts, landlord-tenant 
        agreements, consumer credit obligations, utilities, and banking 
        transactions.
            (3) Adverse credit information.--The prohibition on adverse 
        action in paragraph (1) includes the entry of any negative 
        credit information to any credit reporting agency, if the 
        negative credit information is due directly or indirectly by an 
        actual or potential disruption of the proper processing of 
        financial responsibilities and information, or the inability of 
        the consumer to cause payments to be made to creditors where 
        such inability is due directly or indirectly to an actual or 
        potential Y2K failure.
            (4) Actions may resume after problem is fixed.--No 
        enforcement or other adverse action prohibited by paragraph (1) 
        shall resume until the obligor has a reasonable time after the 
        full restoration of the ability to regularly receive and 
        dispense data necessary to perform the financial transaction 
        required to fulfill the obligation.
            (5) Subsection does not apply to non-y2k-related 
        problems.--This subsection shall not affect transactions upon 
        which a default has occurred prior to a Y2K failure that 
        disrupts financial or data transfer operations of either party.
            (6) Enforcement of obligations merely tolled.--This 
        subsection delays but does not prevent the enforcement of 
        financial obligations.

SEC. 5. PUNITIVE DAMAGES LIMITATIONS.

    (a) In General.--In any Y2K action in which punitive damages are 
permitted by applicable law, the defendant shall not be liable for 
punitive damages unless the plaintiff proves by clear and convincing 
evidence that the applicable standard for awarding damages has been 
met.
    (b) Caps on Punitive Damages.--
            (1) In general.--Subject to the evidentiary standard 
        established by subsection (a), punitive damages permitted under 
        applicable law against a defendant described in paragraph (2) 
        in a Y2K action may not exceed the lesser of--
                    (A) 3 times the amount awarded for compensatory 
                damages; or
                    (B) $250,000.
            (2) Defendant described.--A defendant described in this 
        paragraph is a defendant--
                    (A) who--
                            (i) is sued in his or her capacity as an 
                        individual; and
                            (ii) whose net worth does not exceed 
                        $500,000; or
                    (B) that is an unincorporated business, a 
                partnership, corporation, association, or organization 
                with fewer than 50 full-time employees.
            (3) No cap if injury specifically intended.--Paragraph (1) 
        does not apply if the plaintiff establishes by clear and 
        convincing evidence that the defendant acted with specific 
        intent to injure the plaintiff.
    (c) Government Entities.--Punitive damages in a Y2K action may not 
be awarded against a government entity.

SEC. 6. PROPORTIONATE LIABILITY.

    (a) In General.--Except as provided in subsections (b) and (c), a 
person against whom a final judgment is entered in a Y2K action shall 
be liable solely for the portion of the judgment that corresponds to 
the relative and proportional responsibility of that person. In 
determining the percentage of responsibility of any defendant, the 
trier of fact shall determine that percentage as a percentage of the 
total fault of all persons, including the plaintiff, who caused or 
contributed to the total loss incurred by the plaintiff.
    (b) Proportionate Liability.--
            (1) Determination of responsibility.--In any Y2K action, 
        the court shall instruct the jury to answer special 
        interrogatories, or, if there is no jury, the court shall make 
        findings with respect to each defendant, including defendants 
        who have entered into settlements with the plaintiff or 
        plaintiffs, concerning--
                    (A) the percentage of responsibility, if any, of 
                each defendant, measured as a percentage of the total 
                fault of all persons who caused or contributed to the 
                loss incurred by the plaintiff; and
                    (B) if alleged by the plaintiff, whether the 
                defendant (other than a defendant who has entered into 
                a settlement agreement with the plaintiff)--
                            (i) acted with specific intent to injure 
                        the plaintiff; or
                            (ii) knowingly committed fraud.
            (2) Contents of special interrogatories or findings.--The 
        responses to interrogatories or findings under paragraph (1) 
        shall specify the total amount of damages that the plaintiff is 
        entitled to recover and the percentage of responsibility of 
        each defendant found to have caused or contributed to the loss 
        incurred by the plaintiff.
            (3) Factors for consideration.--In determining the 
        percentage of responsibility under this subsection, the trier 
        of fact shall consider--
                    (A) the nature of the conduct of each person found 
                to have caused or contributed to the loss incurred by 
                the plaintiff; and
                    (B) the nature and extent of the causal 
                relationship between the conduct of each such person 
                and the damages incurred by the plaintiff.
    (c) Joint Liability for Specific Intent or Fraud.--
            (1) In general.--Notwithstanding subsection (a), the 
        liability of a defendant in a Y2K action is joint and several 
        if the trier of fact specifically determines that the 
        defendant--
                    (A) acted with specific intent to injure the 
                plaintiff; or
                    (B) knowingly committed fraud.
            (2) Fraud; recklessness.--
                    (A) Knowing commission of fraud described.--For 
                purposes of subsection (b)(1)(B)(ii) and paragraph 
                (1)(B) of this subsection, a defendant knowingly 
                committed fraud if the defendant--
                            (i) made an untrue statement of a material 
                        fact, with actual knowledge that the statement 
                        was false;
                            (ii) omitted a fact necessary to make the 
                        statement not be misleading, with actual 
                        knowledge that, as a result of the omission, 
                        the statement was false; and
                            (iii) knew that the plaintiff was 
                        reasonably likely to rely on the false 
                        statement.
                    (B) Recklessness.--For purposes of subsection 
                (b)(1)(B) and paragraph (1) of this subsection, 
                reckless conduct by the defendant does not constitute 
                either a specific intent to injure, or the knowing 
                commission of fraud, by the defendant.
            (3) Right to contribution not affected.--Nothing in this 
        section affects the right, under any other law, of a defendant 
        to contribution with respect to another defendant found under 
        subsection (b)(1)(B), or determined under paragraph (1)(B) of 
        this subsection, to have acted with specific intent to injure 
        the plaintiff or to have knowingly committed fraud.
    (d) Special Rules.--
            (1) Uncollectible share.--
                    (A) In general.--Notwithstanding subsection (a), 
                if, upon motion made not later than 6 months after a 
                final judgment is entered in any Y2K action, the court 
                determines that all or part of the share of the 
                judgment against a defendant for compensatory damages 
                is not collectible against that defendant, then each 
                other defendant in the action is liable for the 
                uncollectible share as follows:
                            (i) Percentage of net worth.--The other 
                        defendants are jointly and severally liable for 
                        the uncollectible share if the plaintiff 
                        establishes that--
                                    (I) the plaintiff is an individual 
                                whose recoverable damages under the 
                                final judgment are equal to more than 
                                10 percent of the net worth of the 
                                plaintiff; and
                                    (II) the net worth of the plaintiff 
                                is less than $200,000.
                            (ii) Other plaintiffs.--For a plaintiff not 
                        described in clause (i), each of the other 
                        defendants is liable for the uncollectible 
                        share in proportion to the percentage of 
                        responsibility of that defendant, except that 
                        the total liability of a defendant under this 
                        clause may not exceed 50 percent of the 
                        proportionate share of that defendant, as 
                        determined under subsection (b)(2).
                    (B) Overall limit.--The total payments required 
                under subparagraph (A) from all defendants may not 
                exceed the amount of the uncollectible share.
                    (C) Subject to contribution.--A defendant against 
                whom judgment is not collectible is subject to 
                contribution and to any continuing liability to the 
                plaintiff on the judgment.
            (2) Special right of contribution.--To the extent that a 
        defendant is required to make an additional payment under 
        paragraph (1), that defendant may recover contribution--
                    (A) from the defendant originally liable to make 
                the payment;
                    (B) from any other defendant that is jointly and 
                severally liable;
                    (C) from any other defendant held proportionately 
                liable who is liable to make the same payment and has 
                paid less than that other defendant's proportionate 
                share of that payment; or
                    (D) from any other person responsible for the 
                conduct giving rise to the payment that would have been 
                liable to make the same payment.
            (3) Nondisclosure to jury.--The standard for allocation of 
        damages under subsection (a) and subsection (b)(1), and the 
        procedure for reallocation of uncollectible shares under 
        paragraph (1) of this subsection, shall not be disclosed to 
        members of the jury.
    (e) Settlement Discharge.--
            (1) In general.--A defendant who settles a Y2K action at 
        any time before final verdict or judgment shall be discharged 
        from all claims for contribution brought by other persons. Upon 
        entry of the settlement by the court, the court shall enter a 
        bar order constituting the final discharge of all obligations 
        to the plaintiff of the settling defendant arising out of the 
        action. The order shall bar all future claims for contribution 
        arising out of the action--
                    (A) by any person against the settling defendant; 
                and
                    (B) by the settling defendant against any person 
                other than a person whose liability has been 
                extinguished by the settlement of the settling 
                defendant.
            (2) Reduction.--If a defendant enters into a settlement 
        with the plaintiff before the final verdict or judgment, the 
        verdict or judgment shall be reduced by the greater of--
                    (A) an amount that corresponds to the percentage of 
                responsibility of that defendant; or
                    (B) the amount paid to the plaintiff by that 
                defendant.
    (f) General Right of Contribution.--
            (1) In general.--A defendant who is jointly and severally 
        liable for damages in any Y2K action may recover contribution 
        from any other person who, if joined in the original action, 
        would have been liable for the same damages. A claim for 
        contribution shall be determined based on the percentage of 
        responsibility of the claimant and of each person against whom 
        a claim for contribution is made.
            (2) Statute of limitations for contribution.--An action for 
        contribution in connection with a Y2K action shall be brought 
        not later than 6 months after the entry of a final, 
        nonappealable judgment in the Y2K action, except that an action 
        for contribution brought by a defendant who was required to 
        make an additional payment under subsection (d)(1) may be 
        brought not later than 6 months after the date on which such 
        payment was made.
    (g) More Protective State Law Not Preempted.--Nothing in this 
section preempts or supersedes any provision of State statutory law 
that--
            (1) limits the liability of a defendant in a Y2K action to 
        a lesser amount than the amount determined under this section; 
        or
            (2) otherwise affords a greater degree of protection from 
        joint or several liability than is afforded by this section.

SEC. 7. PRELITIGATION NOTICE.

    (a) In General.--Before commencing a Y2K action, except an action 
that seeks only injunctive relief, a prospective plaintiff with a Y2K 
claim shall send a written notice by certified mail (with either return 
receipt requested or other means of verification that the notice was 
sent) to each prospective defendant in that action. The notice shall 
provide specific and detailed information about--
            (1) the manifestations of any material defect alleged to 
        have caused harm or loss;
            (2) the harm or loss allegedly suffered by the prospective 
        plaintiff;
            (3) how the prospective plaintiff would like the 
        prospective defendant to remedy the problem;
            (4) the basis upon which the prospective plaintiff seeks 
        that remedy; and
            (5) the name, title, address, and telephone number of any 
        individual who has authority to negotiate a resolution of the 
        dispute on behalf of the prospective plaintiff.
    (b) Person to Whom Notice To Be Sent.--The notice required by 
subsection (a) shall be sent--
            (1) to the registered agent of the prospective defendant 
        for service of legal process;
            (2) if the prospective defendant does not have a registered 
        agent, then to the chief executive officer of a corporation, 
        the managing partner of a partnership, the proprietor of a sole 
        proprietorship, or to a similarly-situated person for any other 
        enterprise; or
            (3) if the prospective defendant has designated a person to 
        receive prelitigation notices on a Year 2000 Internet Website 
        (as defined in section 3(7) of the Year 2000 Information and 
        Readiness Disclosure Act), to the designated person, if the 
        prospective plaintiff has reasonable access to the Internet.
    (c) Response to Notice.--
            (1) In general.--Within 30 days after receipt of the notice 
        specified in subsection (a), each prospective defendant shall 
        send by certified mail with return receipt requested to each 
        prospective plaintiff a written statement acknowledging receipt 
        of the notice, and describing the actions it has taken or will 
        take to address the problem identified by the prospective 
        plaintiff.
            (2) Willingness to engage in adr.--The written statement 
        shall state whether the prospective defendant is willing to 
        engage in alternative dispute resolution.
            (3) Inadmissability.--A written statement required by this 
        paragraph is not admissible in evidence, under Rule 408 of the 
        Federal Rules of Evidence or any analogous rule of evidence in 
        any State, in any proceeding to prove liability for, or the 
        invalidity of, a claim or its amount, or otherwise as evidence 
        of conduct or statements made in compromise negotiations.
            (4) Presumptive time of receipt.--For purposes of paragraph 
        (1), a notice under subsection (a) is presumed to be received 7 
        days after it was sent.
            (5) Priority.--A prospective defendant receiving more than 
        1 notice under this section may give priority to notices with 
        respect to a product or service that involves a health or 
        safety related Y2K failure.
    (d) Failure to Respond.--If a prospective defendant--
            (1) fails to respond to a notice provided pursuant to 
        subsection (a) within the 30 days specified in subsection 
        (c)(1); or
            (2) does not describe the action, if any, the prospective 
        defendant has taken, or will take, to address the problem 
        identified by the prospective plaintiff,
the prospective plaintiff may immediately commence a legal action 
against that prospective defendant.
    (e) Remediation Period.--
            (1) In general.--If the prospective defendant responds and 
        proposes remedial action it will take, or offers to engage in 
        alternative dispute resolution, then the prospective plaintiff 
        shall allow the prospective defendant an additional 60 days 
        from the end of the 30-day notice period to complete the 
        proposed remedial action before commencing a legal action 
        against that prospective defendant.
            (2) Extension by agreement.--The prospective plaintiff and 
        prospective defendant may change the length of the 60-day 
        remediation period by written agreement.
            (3) Multiple extensions not allowed.--Except as provided in 
        paragraph (2), a defendant in a Y2K action is entitled to no 
        more than one 30-day period and one 60-day remediation period 
        under paragraph (1).
            (4) Statutes of limitation, etc., tolled.--Any applicable 
        statute of limitations or doctrine of laches in a Y2K action to 
        which paragraph (1) applies shall be tolled during the notice 
        and remediation period under that paragraph.
    (f) Failure to Provide Notice.--If a defendant determines that a 
plaintiff has filed a Y2K action without providing the notice specified 
in subsection (a) or without awaiting the expiration of the appropriate 
waiting period specified in subsection (c), the defendant may treat the 
plaintiff's complaint as such a notice by so informing the court and 
the plaintiff in its initial response to the plaintiff. If any 
defendant elects to treat the complaint as such a notice--
            (1) the court shall stay all discovery and all other 
        proceedings in the action for the appropriate period after 
        filing of the complaint; and
            (2) the time for filing answers and all other pleadings 
        shall be tolled during the appropriate period.
    (g) Effect of Contractual or Statutory Waiting Periods.--In cases 
in which a contract, or a statute enacted before January 1, 1999, 
requires notice of nonperformance and provides for a period of delay 
prior to the initiation of suit for breach or repudiation of contract, 
the period of delay provided by contract or the statute is controlling 
over the waiting period specified in subsections (c) and (d).
    (h) State Law Controls Alternative Methods.--Nothing in this 
section supersedes or otherwise preempts any State law or rule of civil 
procedure with respect to the use of alternative dispute resolution for 
Y2K actions.
    (i) Provisional Remedies Unaffected.--Nothing in this section 
interferes with the right of a litigant to provisional remedies 
otherwise available under Rule 65 of the Federal Rules of Civil 
Procedure or any State rule of civil procedure providing extraordinary 
or provisional remedies in any civil action in which the underlying 
complaint seeks both injunctive and monetary relief.
    (j) Special Rule for Class Actions.--For the purpose of applying 
this section to a Y2K action that is maintained as a class action in 
Federal or State court, the requirements of the preceding subsections 
of this section apply only to named plaintiffs in the class action.

SEC. 8. PLEADING REQUIREMENTS.

    (a) Application with Rules of Civil Procedure.--This section 
applies exclusively to Y2K actions and, except to the extent that this 
section requires additional information to be contained in or attached 
to pleadings, nothing in this section is intended to amend or otherwise 
supersede applicable rules of Federal or State civil procedure.
    (b) Nature and Amount of Damages.--In all Y2K actions in which 
damages are requested, there shall be filed with the complaint a 
statement of specific information as to the nature and amount of each 
element of damages and the factual basis for the damages calculation.
    (c) Material Defects.--In any Y2K action in which the plaintiff 
alleges that there is a material defect in a product or service, there 
shall be filed with the complaint a statement of specific information 
regarding the manifestations of the material defects and the facts 
supporting a conclusion that the defects are material.
    (d) Required State of Mind.--In any Y2K action in which a claim is 
asserted on which the plaintiff may prevail only on proof that the 
defendant acted with a particular state of mind, there shall be filed 
with the complaint, with respect to each element of that claim, a 
statement of the facts giving rise to a strong inference that the 
defendant acted with the required state of mind.

SEC. 9. DUTY TO MITIGATE.

    Damages awarded in any Y2K action shall exclude compensation for 
damages the plaintiff could reasonably have avoided in light of any 
disclosure or other information of which the plaintiff was, or 
reasonably should have been, aware, including information made 
available by the defendant to purchasers or users of the defendant's 
product or services concerning means of remedying or avoiding the Y2K 
failure.

SEC. 10. APPLICATION OF EXISTING IMPOSSIBILITY OR COMMERCIAL 
              IMPRACTICABILITY DOCTRINES.

    In any Y2K action for breach or repudiation of contract, the 
applicability of the doctrines of impossibility and commercial 
impracticability shall be determined by the law in existence on January 
1, 1999. Nothing in this Act shall be construed as limiting or 
impairing a party's right to assert defenses based upon such doctrines.

SEC. 11. DAMAGES LIMITATION BY CONTRACT.

    In any Y2K action for breach or repudiation of contract, no party 
may claim, nor be awarded, any category of damages unless such damages 
are allowed--
            (1) by the express terms of the contract; or
            (2) if the contract is silent on such damages, by operation 
        of State law at the time the contract was effective or by 
        operation of Federal law.

SEC. 12. DAMAGES IN TORT CLAIMS.

    (a) In General.--A party to a Y2K action making a tort claim may 
not recover damages for economic loss unless--
            (1) the recovery of such losses is provided for in a 
        contract to which the party seeking to recover such losses is a 
        party; or
            (2) such losses result directly from damage to tangible 
        personal or real property caused by the Y2K failure (other than 
        damage to property that is the subject of the contract between 
        the parties to the Y2K action or, in the event there is no 
        contract between the parties, other than damage caused only to 
        the property that experienced the Y2K failure),
and such damages are permitted under applicable Federal or State law.
    (b) Economic Loss.--For purposes of this section only, and except 
as otherwise specifically provided in a valid and enforceable written 
contract between the plaintiff and the defendant in a Y2K action, the 
term ``economic loss''--
            (1) means amounts awarded to compensate an injured party 
        for any loss other than losses described in subsection (a)(2); 
        and
            (2) includes amounts awarded for damages such as--
                    (A) lost profits or sales;
                    (B) business interruption;
                    (C) losses indirectly suffered as a result of the 
                defendant's wrongful act or omission;
                    (D) losses that arise because of the claims of 
                third parties;
                    (E) losses that must be plead as special damages; 
                and
                    (F) consequential damages (as defined in the 
                Uniform Commercial Code or analogous State commercial 
                law).
    (c) Certain Actions Excluded.--This section does not affect, 
abrogate, amend, or alter any patent, copyright, trade-secret, 
trademark, or service-mark action, or any claim for defamation or 
invasion of privacy under Federal or State law.
    (d) Certain Other Actions.--A person liable for damages, whether by 
settlement or judgment, in a civil action to which this Act does not 
apply because of section 4(c) whose liability, in whole or in part, is 
the result of a Y2K failure may, notwithstanding any other provision of 
this Act, pursue any remedy otherwise available under Federal or State 
law against the person responsible for that Y2K failure to the extent 
of recovering the amount of those damages.

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

    (a) Defendant's State of Mind.--In a Y2K action other than a claim 
for breach or repudiation of contract, and in which the defendant's 
actual or constructive awareness of an actual or potential Y2K failure 
is an element of the claim, the defendant is not liable unless the 
plaintiff establishes that element of the claim by the standard of 
evidence under applicable State law in effect before January 1, 1999.
    (b) Limitation on Bystander Liability for Y2K Failures.--
            (1) In general.--With respect to any Y2K action for money 
        damages in which--
                    (A) the defendant is not the manufacturer, seller, 
                or distributor of a product, or the provider of a 
                service, that suffers or causes the Y2K failure at 
                issue;
                    (B) the plaintiff is not in substantial privity 
                with the defendant; and
                    (C) the defendant's actual or constructive 
                awareness of an actual or potential Y2K failure is an 
                element of the claim under applicable law,
        the defendant shall not be liable unless the plaintiff, in 
        addition to establishing all other requisite elements of the 
        claim, proves, by the standard of evidence under applicable 
        State law in effect before January 1, 1999, that the defendant 
        actually knew, or recklessly disregarded a known and 
        substantial risk, that such failure would occur.
            (2) Substantial privity.--For purposes of paragraph (1)(B), 
        a plaintiff and a defendant are in substantial privity when, in 
        a Y2K action arising out of the performance of professional 
        services, the plaintiff and the defendant either have 
        contractual relations with one another or the plaintiff is a 
        person who, prior to the defendant's performance of such 
        services, was specifically identified to and acknowledged by 
        the defendant as a person for whose special benefit the 
        services were being performed.
            (3) Certain claims excluded.--For purposes of paragraph 
        (1)(C), claims in which the defendant's actual or constructive 
        awareness of an actual or potential Y2K failure is an element 
        of the claim under applicable law do not include claims for 
        negligence but do include claims such as fraud, constructive 
        fraud, breach of fiduciary duty, negligent misrepresentation, 
        and interference with contract or economic advantage.
    (c) Control Not Determinative of Liability.--The fact that a Y2K 
failure occurred in an entity, facility, system, product, or component 
that was sold, leased, rented, or otherwise within the control of the 
party against whom a claim is asserted in a Y2K action shall not 
constitute the sole basis for recovery of damages in that action. A 
claim in a Y2K action for breach or repudiation of contract for such a 
failure is governed by the terms of the contract.
    (d) Protections of the Year 2000 Information and Readiness 
Disclosure Act Apply.--The protections for the exchanges of information 
provided by section 4 of the Year 2000 Information and Readiness 
Disclosure Act (Public Law 105-271) shall apply to this Act.

SEC. 14. APPOINTMENT OF SPECIAL MASTERS OR MAGISTRATE JUDGES FOR Y2K 
              ACTIONS.

    Any District Court of the United States in which a Y2K action is 
pending may appoint a special master or a magistrate judge to hear the 
matter and to make findings of fact and conclusions of law in 
accordance with Rule 53 of the Federal Rules of Civil Procedure.

SEC. 15. Y2K ACTIONS AS CLASS ACTIONS.

    (a) Material Defect Requirement.--A Y2K action involving a claim 
that a product or service is defective may be maintained as a class 
action in Federal or State court as to that claim only if--
            (1) it satisfies all other prerequisites established by 
        applicable Federal or State law, including applicable rules of 
        civil procedure; and
            (2) the court finds that the defect in a product or service 
        as alleged would be a material defect for the majority of the 
        members of the class.
    (b) Notification.--In any Y2K action that is maintained as a class 
action, the court, in addition to any other notice required by 
applicable Federal or State law, shall direct notice of the action to 
each member of the class, which shall include--
            (1) a concise and clear description of the nature of the 
        action;
            (2) the jurisdiction where the case is pending; and
            (3) the fee arrangements with class counsel, including the 
        hourly fee being charged, or, if it is a contingency fee, the 
        percentage of the final award which will be paid, including an 
        estimate of the total amount that would be paid if the 
        requested damages were to be granted.
    (c) Forum for Y2K Class Actions.--
            (1) Jurisdiction.--Except as provided in paragraph (2), a 
        Y2K action may be brought as a class action in a United States 
        District Court or removed to a United States District Court if 
        the amount in controversy is greater than the sum or value of 
        $1,000,000 (exclusive of interest and costs), computed on the 
        basis of all claims to be determined in the action.
            (2) Exception.--A Y2K action may not be brought or removed 
        as a class action under this section if--
                    (A)(i) a substantial majority of the members of the 
                proposed plaintiff class are citizens of a single 
                State;
                    (ii) the primary defendants are citizens of that 
                State; and
                    (iii) the claims asserted will be governed 
                primarily by the law of that State; or
                    (B) the primary defendants are States, State 
                officials, or other governmental entities against whom 
                the United States District Court may be foreclosed from 
                ordering relief.
    (d) Effect on Rules of Civil Procedure.--Except as otherwise 
provided in this section, nothing in this section supersedes any rule 
of Federal or State civil procedure applicable to class actions.

SEC. 16. APPLICABILITY OF STATE LAW.

    Nothing in this Act shall be construed to affect the applicability 
of any State law that provides greater limits on damages and 
liabilities than are provided in this Act.

SEC. 17. ADMISSIBLE EVIDENCE ULTIMATE ISSUE IN STATE COURTS.

    Any party to a Y2K action in a State court in a State that has not 
adopted a rule of evidence substantially similar to Rule 704 of the 
Federal Rules of Evidence may introduce in such action evidence that 
would be admissible if Rule 704 applied in that jurisdiction.

SEC. 18. SUSPENSION OF PENALTIES FOR CERTAIN YEAR 2000 FAILURES BY 
              SMALL BUSINESS CONCERNS.

    (a) Definitions.--In this section--
            (1) the term ``agency'' means any executive agency, as 
        defined in section 105 of title 5, United States Code, that has 
        the authority to impose civil penalties on small business 
        concerns;
            (2) the term ``first-time violation'' means a violation by 
        a small business concern of a Federal rule or regulation (other 
        than a Federal rule or regulation that relates to the safety 
        and soundness of the banking or monetary system, including 
        protection of depositors) resulting from a Y2K failure if that 
        Federal rule or regulation had not been violated by that small 
        business concern within the preceding 3 years; and
            (3) the term ``small business concern'' has the same 
        meaning as a defendant described in section 5(b)(2)(B).
    (b) Establishment of Liaisons.--Not later than 30 days after the 
date of enactment of this section each agency shall--
            (1) establish a point of contact within the agency to act 
        as a liaison between the agency and small business concerns 
        with respect to problems arising out of Y2K failures and 
        compliance with Federal rules or regulations; and
            (2) publish the name and phone number of the point of 
        contact for the agency in the Federal Register.
    (c) General Rule.--Subject to subsections (d) and (e), no agency 
shall impose any civil money penalty on a small business concern for a 
first-time violation.
    (d) Standards for Waiver.--In order to receive a waiver of civil 
money penalties from an agency for a first-time violation, a small 
business concern shall demonstrate that--
            (1) the small business concern previously made a good faith 
        effort to effectively remediate Y2K problems;
            (2) a first-time violation occurred as a result of the Y2K 
        system failure of the small business concern or other entity, 
        which affected the small business concern's ability to comply 
        with a federal rule or regulation;
            (3) the first-time violation was unavoidable in the face of 
        a Y2K system failure or occurred as a result of efforts to 
        prevent the disruption of critical functions or services that 
        could result in harm to life or property;
            (4) upon identification of a first-time violation, the 
        small business concern initiated reasonable and timely measures 
        to remediate the violation; and
            (5) the small business concern submitted notice to the 
        appropriate agency of the first-time violation within a 
        reasonable time not to exceed 7 business days from the time 
        that the small business concern became aware that a first-time 
        violation had occurred.
    (e) Exceptions.--An agency may impose civil money penalties 
authorized under Federal law on a small business concern for a first-
time violation if--
            (1) the small business concern's failure to comply with 
        Federal rules or regulations constitutes or creates an imminent 
        threat to public health, safety, or the environment; or
            (2) the small business concern fails to correct the 
        violation not later than 1 month after initial notification to 
        the agency.

            Attest:

                                                             Secretary.
106th CONGRESS

  1st Session

                               H. R. 775

_______________________________________________________________________

                               AMENDMENT

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