Calendar No. 113

106TH CONGRESS

1ST SESSION H. R. 775

AN ACT

To establish certain procedures for civil actions

year 2000, and for other purposes.with the transition from the year 1999 to theany device or system to process or otherwise dealbrought for damages relating to the failure of

MAY 13, 1999

Received; read twice and placed on the calendar
II

Calendar No. 113

106TH CONGRESS

1ST SESSION H. R. 775

IN THE SENATE OF THE UNITED STATES

MAY 13, 1999

Received; read twice and placed on the calendar

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.

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.

2 This Act may be cited as the ‘‘Year 2000 Readiness

3 and Responsibility Act’’.

4 SEC. 2. FINDINGS.

5 The Congress finds the following:

6 (1) The Congress seeks to encourage businesses

7 to concentrate their attention and resources in the

8 short time remaining before January 1, 2000, on ad9 dressing, assessing, remediating, and testing their

10 year 2000 problems, and to minimize any possible

11 business disruptions associated with year 2000

12 issues.

13 (2) It is appropriate for the Congress to enact

14 legislation to assure that year 2000 problems do not

15 unnecessarily disrupt interstate commerce or create

16 unnecessary case loads in Federal and State courts

17 and to provide initiatives to help businesses prepare

18 and be in a position to withstand the potentially dev19 astating economic impact of the year 2000 problem.

20 (3) Year 2000 issues will affect practically all

21 business enterprises to some degree, giving rise to a

22 large number of disputes.

23 (4) Resorting to the legal system for resolution

24 of year 2000 problems is not feasible for many busi25 nesses, particularly small businesses, because of its

26 complexity and expense.
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1 (5) The delays, expense, uncertainties, loss of

2 control, adverse publicity and animosities that fre3 quently accompany litigation of business disputes

4 can only exacerbate the difficulties associated with

5 the year 2000 date change, and work against the

6 successful resolution of those difficulties.

7 (6) The Congress recognizes that every business

8 in the United States should be concerned that wide9 spread and protracted year 2000 litigation may

10 threaten the network of valued and trusted business

11 relationships that are so important to the effective

12 functioning of the world economy, and which may

13 put unbearable strains on an overburdened judicial

14 system.

15 (7) A proliferation of frivolous year 2000 ac16 tions by opportunistic parties may further limit ac17 cess to courts by straining the resources of the legal

18 system and depriving deserving parties of their le19 gitimate rights to relief.

20 (8) The Congress encourages businesses to ap21 proach their year 2000 disputes responsibly, and to

22 avoid unnecessary, time-consuming and costly litiga23 tion based on year 2000 failures. Congress supports

24 good faith negotiations between parties when there

25 is a dispute over a year 2000 problem, and, if nec-
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1 essary, urges the parties to enter into voluntary,

2 non-binding mediation rather than litigation.

3 SEC. 3. DEFINITIONS.

4 In this Act:

5 (1) CONTRACT.—The term ‘‘contract’’ means a

6 contract, tariff, license, or warranty.

7 (2) DAMAGES.—The term ‘‘damages’’ means

8 punitive, compensatory, and restitutionary relief.

9 (3) DEFENDANT.—The term ‘‘defendant’’

10 means any person against whom a year 2000 claim

11 has been asserted.

12 (4) ECONOMIC LOSS.—The term ‘‘economic

13 loss’’—

14 (A) means any damages other than dam15 ages arising out of personal injury or damage

16 to tangible property; and

17 (B) includes, but is not limited to, dam18 ages for lost profits or sales, for business inter19 ruption, for losses indirectly suffered as a result

20 of the defendant’s wrongful act or omission, for

21 losses that arise because of the claims of third

22 parties, for losses that must be pleaded as spe23 cial damages, and consequential damages (as

24 defined in the Uniform Commercial Code or

25 analogous State commercial law).
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1 (5) GOVERNMENTAL ENTITY.—The term ‘‘gov2 ernmental entity’’ means an agency, instrumentality,

3 other entity, or official of Federal, State, or local

4 government (including multijurisdictional agencies,

5 instrumentalities, and entities).

6 (6) MATERIAL DEFECT.—The term ‘‘material

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

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

9 substantially prevents the item or service from oper10 ating or functioning as designed or intended. The

11 term ‘‘material defect’’ does not include a defect

12 that has an insignificant or de minimis effect on the

13 operation or functioning of an item, that affects only

14 a component of an item that, as a whole, substan15 tially operates or functions as designed, or that has

16 an insignificant or de minimis effect on the efficacy

17 of the service provided.

18 (7) PERSON.—The term ‘‘person’’ means any

19 natural person and any entity, organization, or en20 terprise, including but not limited to corporations,

21 companies, joint stock companies, associations, part22 nerships, trusts, and governmental entities.

23 (8) PERSONAL INJURY.—The term ‘‘personal

24 injury’’ means any physical injury to a natural per25 son, including death of the person, and mental suf-
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1 fering, emotional distress, or like elements of injury

2 suffered by a natural person in connection with a

3 physical injury.

4 (9) PLAINTIFF.—The term ‘‘plaintiff’’ means

5 any person who asserts a year 2000 claim.

6 (10) PUNITIVE DAMAGES.—The term ‘‘punitive

7 damages’’ means damages that are awarded against

8 any person to punish such person or to deter such

9 person, or others, from engaging in similar behavior

10 in the future.

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

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

13 the Commonwealth of Puerto Rico, the Northern

14 Mariana Islands, the United States Virgin Islands,

15 Guam, American Samoa, and any other territory or

16 possession of the United States, and any political

17 subdivision thereof.

18 (12) YEAR 2000 ACTION.—The term ‘‘year 2000

19 action’’ means any civil action of any kind brought

20 in any court under Federal or State law, or an agen21 cy board of contract appeal proceeding, in which a

22 year 2000 claim is asserted.

23 (13) YEAR 2000 CLAIM.—The term ‘‘year 2000

24 claim’’—
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1 (A) means any claim or cause of action of

2 any kind, other than a claim based on personal

3 injury, whether asserted by way of claim, coun4 terclaim, cross-claim, third-party claim, defense,

5 or otherwise, in which the plaintiff’s alleged loss

6 or harm resulted, directly or indirectly, from a

7 year 2000 failure;

8 (B) includes a claim brought in any Fed9 eral or State court by a governmental entity

10 when acting in a commercial or contracting ca11 pacity; and

12 (C) does not include a claim brought by

13 such a governmental entity acting in a regu14 latory, supervisory, or enforcement capacity.

15 (14) YEAR 2000 FAILURE.—The term ‘‘year

16 2000 failure’’ means any failure by any device or

17 system (including, without limitation, any computer

18 system and any microchip or integrated circuit em19 bedded in another device or product), or any soft20 ware, firmware, or other set or collection of proc21 essing instructions, however constructed, in proc22 essing, calculating, comparing, sequencing, dis23 playing, storing, transmitting, or receiving year

24 2000 date-related data.
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1 SEC. 4. APPLICATION OF ACT.

2 (a) GENERAL RULE.—This Act applies to any year

3 2000 claim brought after January 1, 1999, including any

4 appeal, remand, stay, or other judicial, administrative, or

5 alternative dispute resolution proceeding with respect to

6 such claim.

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

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

9 otherwise explicitly provided in this Act, nothing in this

10 Act expands any liability otherwise imposed or limits any

11 defense otherwise available under Federal or State law.

12 (c) EXCLUSION OF PERSONAL INJURY CLAIMS.—

13 None of the provisions of this Act shall apply to any claim

14 based on personal injury, including any claim asserted by

15 way of claim, counterclaim, cross-claim, third-party claim,

16 or otherwise, that arises out of an underlying action for

17 personal injury.

18 (d) PREEMPTION OF STATE LAW.—Except as other19 wise provided in this Act, this Act supersedes State law

20 to the extent that it establishes a rule of law applicable

21 to a year 2000 claim that is inconsistent with State law.

22 (e) CERTAIN OTHER ACTIONS.—A person who is lia23 ble for damages, whether by settlement or judgment, in

24 a claim or civil action to which this Act does not apply

25 by reason of subsection (c) and whose liability, in whole

26 or in part, is the result of a year 2000 failure may pursue
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1 any remedy otherwise available under Federal or State law

2 against the person responsible for that year 2000 failure

3 to the extent of recovering the amount of those damages.

4 Any such remedy shall not be subject to this Act.

5 TITLE I—UNIFORM PRE6 LITIGATION PROCEDURES

7 FOR YEAR 2000 ACTIONS

8 SEC. 101. NOTICE PROCEDURES TO AVOID UNNECESSARY

9 YEAR 2000 ACTIONS.

10 (a) NOTIFICATION PERIOD.—Before filing a year

11 2000 action, except an action that seeks only injunctive

12 relief, a prospective plaintiff shall send by certified mail

13 to each prospective defendant a written notice that identi14 fies, with particularity as to any year 2000 claim—

15 (1) any symptoms of any material defect alleged

16 to have caused harm or loss;

17 (2) the harm or loss allegedly suffered by the

18 prospective plaintiff;

19 (3) the facts that lead the prospective plaintiff

20 to hold such person responsible for both the defect

21 and the injury;

22 (4) the relief or action sought by the prospec23 tive plaintiff; and

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

25 numbers of any individual who has authority to ne-
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1 gotiate a resolution of the dispute on behalf of the

2 prospective plaintiff.

3 The notice under this subsection does not require descrip4 tions of technical specifications or other technical details

5 with respect to the material defect at issue. Except as pro6 vided in subsection (c), the prospective plaintiff shall not

7 commence an action in Federal or State court until the

8 expiration of 90 days after the date on which such notice

9 is received. Such 90-day period shall be excluded in the

10 computation of any applicable statute of limitations.

11 (b) RESPONSE TO NOTICE.—

12 (1) IN GENERAL.—Not later than 30 days after

13 receipt of the notice specified in subsection (a), each

14 prospective defendant shall send by certified mail

15 with return receipt requested to each prospective

16 plaintiff a written statement acknowledging receipt

17 of the notice and describing any actions it has taken

18 or will take by not later than 60 days after the end

19 of that 30-day period, to remedy the problem identi20 fied by the prospective plaintiff.

21 (2) INADMISSIBILITY.—A written statement re22 quired by this subsection is not admissible in evi23 dence, under Rule 408 of the Federal Rules of Evi24 dence or any analogous rule of evidence in any

25 State, in any proceeding to prove liability for, or the
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1 invalidity of, a claim or its amount, or otherwise as

2 evidence of conduct or statements made in com3 promise negotiations.

4 (3) PRESUMPTIVE TIME OF RECEIPT.—For pur5 poses of paragraph (1), a notice under subsection

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

7 sent.

8 (c) FAILURE TO RESPOND.—If a prospective defend9 ant fails to respond to a notice provided pursuant to sub10 section (a) within the 30-day period specified in subsection

11 (b) or does not describe the action, if any, that the pro12 spective defendant has taken or will take to remedy the

13 problem identified by the prospective plaintiff within the

14 subsequent 60 days, the 90-day period specified in sub15 section (a) shall terminate at the end of that 30-day period

16 as to that prospective defendant and the prospective plain17 tiff may thereafter commence its action against that pro18 spective defendant.

19 (d) FAILURE TO PROVIDE NOTICE.—If a defendant

20 determines that a plaintiff has filed a year 2000 action

21 without providing the notice specified in subsection (a)

22 and without awaiting the expiration of the 90-day period

23 specified in subsection (a), the defendant may treat the

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

25 court and the plaintiff in its initial response to the com-
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1 plaint. If any defendant elects to treat the complaint as

2 such a notice—

3 (1) the court shall stay all discovery in the ac4 tion involving that defendant for the applicable time

5 period provided in subsection (a) or (c), as the case

6 may be, after filing of the complaint; and

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

8 pleadings shall be tolled during such applicable pe9 riod.

10 (e) EFFECT OF CONTRACTUAL WAITING PERIODS.—

11 In cases in which a contract or a statute enacted before

12 January 1, 1999, requires notice of nonperformance and

13 provides for a period of delay prior to the initiation of suit

14 for breach or repudiation of contract, the period of delay

15 provided in the contract or the statute is controlling over

16 the waiting period specified in subsections (a) and (d).

17 (f) SANCTION FOR FRIVOLOUS INVOCATION OF THE

18 STAY PROVISION.—In any action in which a defendant

19 acts pursuant to subsection (d) to stay the action, and

20 the court subsequently finds that the defendant’s assertion

21 that the suit is a year 2000 action was frivolous and made

22 for the purpose of causing unnecessary delay, the court

23 may award sanctions to opposing parties in accordance

24 with the provisions of Rule 11 of the Federal Rules of

25 Civil Procedure or the equivalent applicable State rule.
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1 (g) COMPUTATION OF TIME.—For purposes of this

2 section, the rules regarding computation of time shall be

3 governed by the applicable Federal or State rules of civil

4 procedure.

5 (h) SPECIAL RULE FOR CLASS ACTIONS.—For the

6 purpose of applying this section to a year 2000 action that

7 is maintained as a class action in Federal or State court,

8 the requirements of the preceding subsections of this sec9 tion apply only to named plaintiffs in the class action.

10 SEC. 102. ALTERNATIVE DISPUTE RESOLUTION TO AVOID

11 UNNECESSARY YEAR 2000 ACTIONS.

12 (a) IN GENERAL.—(1) At any time during the 90-

13 day period specified in section 101(a), either party may

14 request the other to use alternative dispute resolution. If,

15 based upon that request, the parties enter into an agree16 ment to use alternative dispute resolution, they may also

17 agree to an extension of the 90-day period.

18 (2) At any time after expiration of the 90-day period

19 specified in section 101(a), whether before or after the fil20 ing of a complaint, either party may request the other to

21 use alternative dispute resolution.

22 (b) PAYMENT OF MONEYS DUE.—If the parties re23 solve their dispute through alternative dispute resolution

24 as provided in subsection (a), the defendant shall pay all

25 moneys due within 30 days, unless another period of time
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1 is agreed to by the parties or established by contract be2 tween the parties.

3 (c) FORECLOSURE OF FURTHER PROCEEDINGS ON

4 RESOLVED ISSUES.—Resolution of the issues by the par5 ties prior to litigation through negotiation or alternative

6 dispute resolution shall foreclose any further proceedings

7 with respect to those issues.

8 SEC. 103. PLEADING REQUIREMENTS.

9 (a) APPLICATION WITH RULES OF CIVIL PROCE10 DURE.—This section applies exclusively to year 2000

11 claims and, except to the extent that this section requires

12 additional information to be contained in or attached to

13 pleadings, nothing in this section is intended to amend or

14 otherwise supersede applicable rules of Federal or State

15 civil procedure.

16 (b) NATURE AND AMOUNT OF DAMAGES.—With re17 spect to any year 2000 claim that seeks the award of

18 money damages, the complaint shall state with particu19 larity the nature and amount of each element of damages,

20 and the factual basis for the damages calculation.

21 (c) MATERIAL DEFECTS.—With respect to any year

22 2000 claim in which the plaintiff alleges that a product

23 or service was defective, the complaint shall identify with

24 particularity the symptoms of the material defects and
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1 shall state with particularity the facts supporting the con2 clusion that the defects are material.

3 (d) REQUIRED STATE OF MIND.—With respect to

4 any year 2000 claim as to which the plaintiff may prevail

5 only on proof that the defendant acted with a particular

6 state of mind, the complaint shall, with respect to each

7 element of the year 2000 claim, state with particularity

8 the facts giving rise to a strong inference that the defend9 ant acted with the required state of mind.

10 (e) MOTION TO DISMISS; STAY OF DISCOVERY.—

11 (1) DISMISSAL FOR FAILURE TO MEET PLEAD12 ING REQUIREMENTS.—In any year 2000 action, the

13 court shall, on the motion of any defendant, dismiss

14 the complaint without prejudice if the requirements

15 of subsection (a), (b), or (c) are not met with re16 spect to any year 2000 claim asserted therein.

17 (2) STAY OF DISCOVERY.—In any year 2000

18 action, all discovery shall be stayed during the pend19 ency of any motion to dismiss, unless the court finds

20 upon the motion of any party that particularized dis21 covery is necessary to preserve evidence or prevent

22 undue prejudice to that party.

23 (3) PRESERVATION OF EVIDENCE.—

24 (A) IN GENERAL.—During the pendency of

25 any stay of discovery entered pursuant to this
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1 subsection, unless otherwise ordered by the

2 court, any party to the action with actual notice

3 of the allegations contained in the complaint

4 shall treat all documents, data compilations (in5 cluding electronically stored or recorded data),

6 and tangible objects that are in the custody or

7 control of such person and that are relevant to

8 the allegations, as if they were a subject of a

9 continuing request for production of documents

10 from an opposing party under applicable Fed11 eral or State rules of civil procedure.

12 (B) SANCTION FOR WILLFUL VIOLA13 TION.—A party aggrieved by the willful failure

14 of an opposing party to comply with subpara15 graph (A) may apply to the court for an order

16 awarding appropriate sanctions.

17 SEC. 104. DUTY OF ALL PERSONS TO MITIGATE YEAR 2000

18 COMPUTER FAILURES AND RESULTING DAM19 AGES.

20 Damages awarded for any year 2000 claim shall ex21 clude compensation for damages the plaintiff could reason22 ably have avoided in light of any disclosure or other infor23 mation of which the plaintiff was, or reasonably should

24 have been, aware, including information made available by

25 the defendant to purchasers or users of the defendant’s
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1 product or services concerning means of remedying or

2 avoiding the year 2000 failure.

3 TITLE II—YEAR 2000 ACTIONS

4 INVOLVING CONTRACTS

5 SEC. 201. CERTAINTY OF CONTRACT TERMS FOR PREVEN6 TION OF YEAR 2000 DAMAGES.

7 (a) IN GENERAL.—Subject to subsection (b), in re8 solving any year 2000 claim, any written contractual term,

9 including a limitation or an exclusion of liability, or a dis10 claimer of warranty, shall be fully enforced unless the en11 forcement of that term would manifestly and directly con12 travene applicable State law embodied in any statute in

13 effect on January 1, 1999, specifically addressing that

14 term.

15 (b) INTERPRETATION OF CONTRACT.—In resolving

16 any year 2000 claim as to which a contract to which sub17 section (a) applies is silent with respect to a particular

18 issue, the interpretation of the contract with respect to

19 that issue shall be determined by applicable law in effect

20 at the time the contract was executed.

21 SEC. 202. APPLICATION OF EXISTING IMPOSSIBILITY OR

22 COMMERCIAL IMPRACTICABILITY DOC23 TRINES.

24 (a) DOCTRINE OF IMPOSSIBILITY AND COMMERCIAL

25 IMPRACTICABILITY.—With respect to any year 2000 claim
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1 for breach or repudiation of contract, the applicability of

2 the doctrines of impossibility and commercial imprac3 ticability shall be determined by the law in existence on

4 January 1, 1999. Nothing in this Act shall be construed

5 as limiting or impairing a party’s right to assert defenses

6 based upon such doctrines.

7 (b) REASONABLE EFFORTS.—To the extent that im8 possibility or commercial impracticability is raised as a de9 fense against a claim for breach or repudiation of contract,

10 the party asserting the defense shall be allowed to offer

11 evidence that its implementation of the contract, or its ef12 forts to implement the contract, were reasonable in light

13 of the circumstances.

14 SEC. 203. PROTECTION OF PERSONS FROM LIABILITY NOT

15 ANTICIPATED IN YEAR 2000 CONTRACTS.

16 With respect to any year 2000 claim involving a

17 breach of contract or a claim related to the contract, no

18 party may claim or be awarded any category of damages

19 unless such damages are allowed by the express terms of

20 the contract or, if the contract is silent on such damages,

21 by operation of the applicable Federal or State law that

22 governed interpretation of the contract at the time the

23 contract was entered into.
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1 TITLE III—YEAR 2000 ACTIONS

2 INVOLVING TORT AND OTHER

3 NONCONTRACTUAL CLAIMS

4 SEC. 301. PROPORTIONATE LIABILITY.

5 (a) IN GENERAL.—A person against whom a final

6 judgment is entered with respect to a year 2000 claim,

7 other than a claim for breach or repudiation of contract,

8 shall be liable solely for the portion of the judgment that

9 corresponds to the percentage of responsibility of that per10 son, as determined under subsection (b).

11 (b) DETERMINATION OF RESPONSIBILITY.—

12 (1) IN GENERAL.—With respect to any year

13 2000 claim, the court shall instruct the jury to an14 swer special interrogatories, or if there is no jury,

15 shall make findings, with respect to each defendant

16 and plaintiff, and each of the other persons claimed

17 by any of the parties to have caused or contributed

18 to the loss incurred by the plaintiff, including (but

19 not limited to) persons who have entered into settle20 ments with the plaintiff or plaintiffs, concerning the

21 percentage of responsibility of the defendant, the

22 plaintiff, and each such person, measured as a per23 centage of the total fault of all persons who caused

24 or contributed to the total loss incurred by the plain25 tiff.
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1 (2) CONTENTS OF SPECIAL INTERROGATORIES

2 OR FINDINGS.—The responses to interrogatories, or

3 findings, as appropriate, under paragraph (1) shall

4 specify the total amount of damages that the plain5 tiff is entitled to recover and the percentage of re6 sponsibility of each person found to have caused or

7 contributed to the loss incurred by the plaintiff or

8 plaintiffs.

9 (3) FACTORS FOR CONSIDERATION.—In deter10 mining the percentage of responsibility under this

11 subsection, the trier of fact shall consider—

12 (A) the nature of the conduct of each per13 son alleged to have caused or contributed to the

14 loss incurred by the plaintiff; and

15 (B) the nature and extent of the causal re16 lationship between the conduct of each such

17 person and the damages incurred by the plain18 tiff or plaintiffs.

19 (4) NONDISCLOSURE TO JURY.—The standard

20 for allocation of damages under paragraph (1) shall

21 not be disclosed to members of the jury.

22 SEC. 302. LIMITATION ON BYSTANDER LIABILITY FOR YEAR

23 2000 FAILURES.

24 (a) IN GENERAL.—With respect to any year 2000

25 claim for money damages in which—
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1 (1) the defendant is not the manufacturer, sell2 er, or distributor of a product, or the provider of a

3 service, that suffers or causes the year 2000 failure

4 at issue;

5 (2) the plaintiff is not in substantial privity

6 with the defendant; and

7 (3) the defendant’s actual or constructive

8 awareness of an actual or potential year 2000 failure

9 is an element of the claim under applicable law,

10 the defendant shall not be liable unless the plaintiff, in

11 addition to establishing all other requisite elements of the

12 claim, proves by clear and convincing evidence that the

13 defendant actually knew, or recklessly disregarded a

14 known and substantial risk, that such failure would occur.

15 (b) SUBSTANTIAL PRIVITY.—For purposes of sub16 section (a)(2), a plaintiff and a defendant are in substan17 tial privity when, in a year 2000 claim arising out of the

18 performance of professional services, the plaintiff and the

19 defendant either have contractual relations with one an20 other or the plaintiff is a person who, prior to the defend21 ant’s performance of such services, was specifically identi22 fied to and acknowledged by the defendant as a person

23 for whose special benefit the services were being per24 formed.
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1 (c) CERTAIN CLAIMS EXCLUDED.—For purposes of

2 subsection (a)(3), claims in which the defendant’s actual

3 or constructive awareness of an actual or potential year

4 2000 failure is an element of the claim under applicable

5 law do not include claims for negligence but do include

6 claims such as fraud, constructive fraud, breach of fidu7 ciary duty, negligent misrepresentation, and interference

8 with contract or economic advantage.

9 SEC. 303. REASONABLE EFFORTS DEFENSE.

10 With respect to any year 2000 claim seeking money

11 damages, except with respect to claims asserting breach

12 or repudiation of contract—

13 (1) the fact that a year 2000 failure occurred

14 in an entity, facility, system, product, or component

15 that was sold by, leased by, rented by, or otherwise

16 within the control of the party against whom the

17 claim is asserted shall not constitute the sole basis

18 for recovery; and

19 (2) the party against whom the claim is as20 serted shall be entitled to establish, as a complete

21 defense to the claim, that it took measures that were

22 reasonable under the circumstances to prevent the

23 year 2000 failure from occurring or from causing

24 the damages upon which the claim is based.
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1 SEC. 304. DAMAGES LIMITATION.

2 (a) STANDARD FOR AWARDS.—With respect to any

3 year 2000 claim for which punitive damages may be

4 awarded under applicable law, the defendant shall not be

5 liable for punitive damages unless the plaintiff proves by

6 clear and convincing evidence that conduct carried out by

7 the defendant showed a conscious, flagrant indifference to

8 the rights or safety of others and was the proximate cause

9 of the harm or loss that is the subject of the year 2000

10 claim. This requirement is in addition to any other re11 quirement in applicable law for the award of such dam12 ages.

13 (b) CAPS ON PUNITIVE DAMAGES.—

14 (1) IN GENERAL.—With respect to any year

15 2000 claim, if a defendant is found liable for puni16 tive damages, the amount of punitive damages that

17 may be awarded to a plaintiff shall not exceed the

18 greater of—

19 (A) three times the amount awarded to the

20 plaintiff for compensatory damages; or

21 (B) $250,000.

22 (2) SPECIAL RULE.—

23 (A) IN GENERAL.—Notwithstanding para24 graph (1), with respect to any year 2000 claim,

25 if the defendant is found liable for punitive

26 damages and the defendant—
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1 (i) is an individual whose net worth

2 does not exceed $500,000;

3 (ii) is an owner of an unincorporated

4 business that has fewer than 25 full-time

5 employees; or

6 (iii) is—

7 (I) a partnership;

8 (II) corporation;

9 (III) association;

10 (IV) unit of local government; or

11 (V) organization,

12 that has fewer than 25 full-time employees,

13 the amount of punitive damages shall not ex14 ceed the lesser of three times the amount

15 awarded to the plaintiff for compensatory dam16 ages, or $250,000.

17 (B) APPLICABILITY.—For purposes of de18 termining the applicability of this paragraph to

19 a corporation, the number of employees of a

20 subsidiary of a wholly owned corporation shall

21 include all employees of a parent corporation or

22 any subsidiary of that parent corporation.

23 (3) APPLICATION OF LIMITATIONS BY THE

24 COURT.—The limitations contained in paragraphs
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1 (1) and (2) shall be applied by the court and shall

2 not be disclosed to the jury.

3 SEC. 305. RECOVERY OF ECONOMIC DAMAGES FOR YEAR

4 2000 CLAIMS.

5 (a) LIMITATION ON RECOVERY OF ECONOMIC

6 LOSSES.—Subject to subsection (b), a plaintiff making a

7 year 2000 claim alleging a nonintentional tort may recover

8 economic losses only upon establishing, in addition to all

9 other elements of the claim under applicable law, that any

10 one of the following circumstances exists:

11 (1) The recovery of such losses is provided for

12 in a contract to which the plaintiff is a party.

13 (2) Such losses are incidental to a year 2000

14 claim based on damage to tangible personal or real

15 property caused by a year 2000 failure (other than

16 damage to property that is the subject of a contract

17 between the parties involved in the year 2000 claim).

18 (b) RECOVERY MUST BE PERMITTED UNDER APPLI19 CABLE LAW.—Economic losses shall be recoverable under

20 this section only if applicable Federal law, or applicable

21 State law embodied in statute or controlling judicial prece22 dent as of January 1, 1999, permits the recovery of such

23 losses.
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1 SEC. 306. LIABILITY OF OFFICERS AND DIRECTORS.

2 (a) IN GENERAL.—A director, officer, or trustee of

3 a business or other organization (including a corporation,

4 unincorporated association, partnership, or nonprofit or5 ganization) shall not be personally liable with respect to

6 any year 2000 claim in his or her capacity as a director

7 or officer of the business or organization for an aggregate

8 amount that exceeds the greater of—

9 (1) $100,000; or

10 (2) the amount of cash compensation received

11 by the director or officer from the business or orga12 nization during the 12-month period immediately

13 preceding the act or omission for which liability was

14 imposed.

15 (b) RULE OF CONSTRUCTION.—Nothing in this sec16 tion shall be deemed to impose, or to permit the imposition

17 of, personal liability on any director, officer, or trustee in

18 excess of the aggregate amount of liability to which such

19 director, officer, or trustee would be subject under applica20 ble State law in existence on January 1, 1999 (including

21 any charter or bylaw authorized by such State law).

22 TITLE IV—YEAR 2000 CLASS

23 ACTIONS

24 SEC. 401. MINIMUM INJURY REQUIREMENT.

25 (a) IN GENERAL.—In any year 2000 action involving

26 a year 2000 claim that a product or service is defective,
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1 the action may be maintained as a class action in Federal

2 or State court as to that claim only if it satisfies all other

3 prerequisites established by applicable Federal or State

4 law and the court also finds that the alleged defect in the

5 product or service was a material defect as to a majority

6 of the members of the class.

7 (b) DETERMINATION BY COURT.—As soon as prac8 ticable after the commencement of a year 2000 action in9 volving a year 2000 claim that a product or service is de10 fective and that is brought as a class action, the court

11 shall determine by order whether the requirement set forth

12 in subsection (a) is satisfied. An order under this sub13 section may be conditional, and may be altered or amend14 ed before the decision on the merits.

15 SEC. 402. NOTIFICATION.

16 (a) NOTICE BY MAIL.—In any year 2000 action that

17 is maintained as a class action, the court, in addition to

18 any other notice required by applicable Federal or State

19 law, shall direct notice of the action to each member of

20 the class by United States mail, return receipt requested.

21 Persons whose actual receipt of the notice is not verified

22 by the court or by counsel for one of the parties shall be

23 excluded from the class unless those persons inform the

24 court in writing, on a date no later than the commence-
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1 ment of trial or entry of judgment, that they wish to join

2 the class.

3 (b) CONTENTS OF NOTICE.—In addition to any infor4 mation required by applicable Federal or State law, the

5 notice described in this subsection shall—

6 (1) concisely and clearly describe the nature of

7 the action;

8 (2) identify the jurisdiction whose law will gov9 ern the action and where the action is pending;

10 (3) identify any potential claims that class

11 counsel chose not to pursue so that the action would

12 satisfy class certification requirements;

13 (4) describe the fee arrangements with class

14 counsel, including the hourly fee being charged, or,

15 if it is a contingency fee, the percentage of the final

16 award which will be paid, including an estimate of

17 the total amount that would be paid if the requested

18 damages were to be granted; and

19 (5) describe the procedure for opting out of the

20 class.

21 (c) SETTLEMENT.—The parties to a year 2000 action

22 that is brought as a class action may not enter into, nor

23 request court approval of, any settlement or compromise

24 before the class has been certified.
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1 SEC. 403. DISMISSAL PRIOR TO CERTIFICATION.

2 Before determining whether to certify a class in a

3 year 2000 action, the court may decide a motion to dis4 miss or for summary judgment made by any party if the

5 court concludes that decision will promote the fair and ef6 ficient adjudication of the controversy and will not cause

7 undue delay.

8 SEC. 404. FEDERAL JURISDICTION IN YEAR 2000 CLASS AC9 TIONS.

10 (a) JURISDICTION.—Except as provided in subsection

11 (b), a year 2000 action may be brought as a class action

12 in the United States district court or removed to the ap13 propriate United States district court if the amount in

14 controversy is greater than the sum or value of $1,000,000

15 (exclusive of interest and costs), computed on the basis

16 of all claims to be determined in the action.

17 (b) EXCEPTION.—A year 2000 action shall not be

18 brought or removed as a class action under this section

19 if—

20 (1)(A) the substantial majority of the members

21 of the proposed plaintiff class are citizens of a single

22 State of which the primary defendants are also citi23 zens; and

24 (B) the claims asserted will be governed pri25 marily by the laws of that State; or
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1 (2) the primary defendants are States, State of2 ficials, or other governmental entities against whom

3 the United States district court may be foreclosed

4 from ordering relief.

5 TITLE V—CLIENT PROTECTION

6 IN CONNECTION WITH YEAR

7 2000 ACTIONS

8 SEC. 501. SCOPE.

9 This title applies to any year 2000 action asserted

10 or brought in Federal or State court.

11 SEC. 502. DEFINITIONS.

12 In this title:

13 (1) ATTORNEY.—the term ‘‘attorney’’ means

14 any natural person, professional law association, cor15 poration, or partnership authorized under applicable

16 State law to practice law.

17 (2) ATTORNEY’S SERVICES.—The term ‘‘attor18 ney’s services’’ means the professional advice or

19 counseling of or representation by an attorney, but

20 such term shall not include other assistance in21 curred, directly or indirectly, in connection with an

22 attorney’s services, such as administrative or secre23 tarial assistance, overhead, travel expenses, witness

24 fees, or preparation by a person other than the at25 torney of any study, analysis, report, or test.
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1 (3) CONTINGENT FEE.—The term ‘‘contingent

2 fee’’ means the cost or price of an attorney’s services

3 determined by applying a specified percentage, which

4 may be a firm fixed percentage, a graduated or slid5 ing percentage, or any combination thereof, to the

6 amount of the settlement or judgment obtained.

7 (4) HOURLY FEE.—The term ‘‘hourly fee’’

8 means the cost or price per hour of an attorney’s

9 services.

10 (5) RETAIN.—The term ‘‘retain’’ means the act

11 of a client in engaging an attorney’s services, wheth12 er by express or implied agreement, by seeking and

13 obtaining the attorney’s services.

14 SEC. 503. CONSUMER’S RIGHT TO UP-FRONT DISCLOSURE

15 OF INFORMATION REGARDING FEES AND

16 SETTLEMENT PROPOSALS.

17 Before being retained by a client with respect to a

18 year 2000 claim or a year 2000 action, an attorney shall

19 disclose to the client the client’s rights under this title and

20 the client’s right to receive a written statement of the in21 formation described under sections 504 and 505.

22 SEC. 504. INFORMATION AFTER INITIAL MEETING.

23 (a) WRITTEN DISCLOSURE OF FEES.—Within 30

24 days after the disclosure described under section 503, an

25 attorney retained by a client with respect to a year 2000
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1 claim or a year 2000 action shall provide a written state2 ment to the client setting forth—

3 (1) in the case of an attorney retained on an

4 hourly basis, the attorney’s hourly fee for services in

5 pursuing the year 2000 claim or year 2000 action

6 and any conditions, limitations, restrictions, or other

7 qualifications on the fee, including likely expenses

8 and the client’s obligation for those expenses; and

9 (2) in the case of an attorney retained on a

10 contingent fee basis, the attorney’s contingent fee

11 for services in pursuing the year 2000 claim or year

12 2000 action and any conditions, limitations, restric13 tions, or other qualifications on the fee, including

14 likely expenses and the client’s obligation for those

15 expenses.

16 (b) CONSUMER’S RIGHT TO TIMELY UPDATED IN17 FORMATION ABOUT FEES.—In addition to the require18 ments contained in subsection (a), in the case of an attor19 ney retained on an hourly basis, the attorney shall also

20 render regular statements (at least once each 90 days) to

21 the client containing a description of hourly charges and

22 expenses incurred in the pursuit of the client’s year 2000

23 claim or year 2000 action by each attorney assigned to

24 the client’s matter.
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1 SEC. 505. CONSUMER’S RIGHT TO TIMELY UPDATED INFOR2 MATION ABOUT SETTLEMENT PROPOSALS

3 AND DETAILED STATEMENT OF HOURS AND

4 FEES.

5 An attorney retained by a client with respect to a

6 year 2000 claim or a year 2000 action shall advise the

7 client of all written settlement offers to the client and of

8 the attorney’s estimate of the likelihood of achieving a

9 more or less favorable resolution to the year 2000 claim

10 or year 2000 action, the likely timing of such resolution,

11 and the likely attorney’s fees and expenses required to ob12 tain such a resolution. An attorney retained by a client

13 with respect to a year 2000 claim or a year 2000 action

14 shall, within a reasonable time not later than 60 days after

15 the date on which the year 2000 claim or year 2000 action

16 is finally settled or adjudicated, provide a written state17 ment to the client containing—

18 (1) in the case of an attorney retained on an

19 hourly basis, the actual number of hours expended

20 by each attorney on behalf of the client in connec21 tion with the year 2000 claim or year 2000 action,

22 the attorney’s hourly rate, and the total amount of

23 hourly fees; and

24 (2) in the case of an attorney retained on a

25 contingent fee basis, the total contingent fee for the
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1 attorney’s services in connection with the year 2000

2 claim or year 2000 action.

3 SEC. 506. CLASS ACTIONS.

4 An attorney representing a class or a defendant in

5 a year 2000 action maintained as a class action shall make

6 the disclosures required under this title to the presiding

7 judge, in addition to making such disclosures to each

8 named representative of the class. The presiding judge

9 shall, at the outset of the year 2000 action, determine a

10 reasonable attorney’s fee by determining the appropriate

11 hourly rate and the maximum percentage of the recovery

12 to be paid in attorney’s fees. Notwithstanding any other

13 provision of law or agreement to the contrary, the pre14 siding judge shall award attorney’s fees only pursuant to

15 this title.

16 SEC. 507. AWARD OF REASONABLE COSTS AND ATTORNEY’S

17 FEES AFTER AN OFFER OF SETTLEMENT.

18 (a) OFFER OF SETTLEMENT.—With respect to any

19 year 2000 claim, any party may, at any time not less than

20 10 days before trial, serve upon any adverse party a writ21 ten offer to settle the year 2000 claim for money or prop22 erty, including a motion to dismiss the claim, and to enter

23 into a stipulation dismissing the claim or allowing judg24 ment to be entered according to the terms of the offer.
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1 Any such offer, together with proof of service thereof, shall

2 be filed with the clerk of the court.

3 (b) ACCEPTANCE OF OFFER.—If the party receiving

4 an offer under subsection (a) serves written notice on the

5 offeror that the offer is accepted, either party may then

6 file with the clerk of the court the notice of acceptance,

7 together with proof of service thereof.

8 (c) FURTHER OFFERS NOT PRECLUDED.—The fact

9 that an offer under subsection (a) is made but not accept10 ed does not preclude a subsequent offer under subsection

11 (a). Evidence of an offer is not admissible for any purpose

12 except in proceedings to enforce a settlement, or to deter13 mine costs and expenses under this section.

14 (d) EXEMPTION OF CLAIMS.—At any time before

15 judgment is entered, the court, upon its own motion or

16 upon the motion of any party, may exempt from this sec17 tion any year 2000 claim that the court finds presents

18 a question of law or fact that is novel and important and

19 that substantially affects nonparties. If a claim is exempt20 ed from this section, all offers made by any party under

21 subsection (a) with respect to that claim shall be void and

22 have no effect.

23 (e) PETITION FOR PAYMENT OF COSTS, ETC.—If all

24 offers made by a party under subsection (a) with respect

25 to a year 2000 claim, including any motion to dismiss the
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1 claim, are not accepted and the dollar amount of the judg2 ment, verdict, or order that is finally issued (exclusive of

3 costs, expenses, and attorneys’ fees incurred after judg4 ment or trial) with respect to the year 2000 claim is not

5 more favorable to the offeree with respect to the year 2000

6 claim than the last such offer, the offeror may file with

7 the court, within 10 days after the final judgment, verdict,

8 or order is issued, a petition for payment of costs and ex9 penses, including attorneys’ fees, incurred with respect to

10 the year 2000 claim from the date the last such offer was

11 made or, if the offeree made an offer under this section,

12 from the date the last such offer by the offeree was made.

13 (f) ORDER TO PAY COSTS, ETC.—If the court finds,

14 pursuant to a petition filed under subsection (e) with re15 spect to a year 2000 claim, that the dollar amount of the

16 judgment, verdict, or order that is finally issued is not

17 more favorable to the offeree with respect to the year 2000

18 claim than the last such offer, the court shall order the

19 offeree to pay the offeror’s costs and expenses, including

20 attorneys’ fees, incurred with respect to the year 2000

21 claim from the date the last offer was made or, if the

22 offeree made an offer under this section, from the date

23 the last such offer by the offeree was made, unless the

24 court finds that requiring the payment of such costs and

25 expenses would be manifestly unjust.
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1 (g) AMOUNT OF ATTORNEY’S FEES.—Attorney’s fees

2 under subsection (f) shall be a reasonable attorney’s fee

3 attributable to the year 2000 claim involved, calculated on

4 the basis of an hourly rate which may not exceed that

5 which the court considers acceptable in the community in

6 which the attorney practices law, taking into account the

7 attorney’s qualifications and experience and the com8 plexity of the case, except that the attorney’s fees under

9 subsection (f) may not exceed—

10 (A) the actual cost incurred by the offeree for

11 an attorney’s fee payable to an attorney for services

12 in connection with the year 2000 claim; or

13 (B) if no such cost was incurred by the offeree

14 due to a contingency fee agreement, a reasonable

15 cost that would have been incurred by the offeree for

16 an attorney’s noncontingent fee payable to an attor17 ney for services in connection with the year 2000

18 claim.

19 (h) INAPPLICABILITY TO EQUITABLE REMEDIES.—

20 This section does not apply to any claim seeking an equi21 table remedy.

22 (i) INAPPLICABILITY TO CLASS ACTIONS.—This sec23 tion does not apply with respect to a year 2000 action

24 brought as a class action.
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1 SEC. 508. ENFORCEMENT OF CONSUMER PROTECTION

2 RULES IN YEAR 2000 CLAIMS AND ACTIONS.

3 A client whose attorney fails to comply with this title

4 may file a civil action for damages in the court in which

5 the year 2000 claim or year 2000 action was filed or could

6 have been filed or other court of competent jurisdiction.

7 The remedy provided by this section is in addition to any

8 other available remedy or penalty.

Passed the House of Representatives May 12, 1999.

Attest: JEFF TRANDAHL,

Clerk.