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:

1 SECTION 1. SHORT TITLE; TABLE OF SECTIONS.

2 (a) SHORT TITLE.—This Act may be cited as the ‘‘Y2K

3 Act’’.

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

5 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.
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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.

1 SEC. 2. FINDINGS AND PURPOSES.

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

3 (1)(A) Many information technology systems, de4 vices, and programs are not capable of recognizing

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

6 and will read dates in the year 2000 and thereafter

7 as if those dates represent the year 1900 or thereafter

8 or will fail to process dates after December 31, 1999.

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

10 subparagraph (A) and resulting failures could inca11 pacitate systems that are essential to the functioning

12 of markets, commerce, consumer products, utilities,

13 Government, and safety and defense systems, in the

14 United States and throughout the world.

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

16 and users of technology products concentrate their at17 tention and resources in the time remaining before

18 January 1, 2000, on assessing, fixing, testing, and de19 veloping contingency plans to address any and all

20 outstanding year 2000 computer date-change prob-
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1 lems, so as to minimize possible disruptions associ2 ated with computer failures.

3 (3)(A) Because year 2000 computer date-change

4 problems may affect virtually all businesses and other

5 users of technology products to some degree, there is

6 a substantial likelihood that actual or potential year

7 2000 failures will prompt a significant volume of liti8 gation, much of it insubstantial.

9 (B) The litigation described in subparagraph (A)

10 would have a range of undesirable effects, including

11 the following:

12 (i) It would threaten to waste technical and

13 financial resources that are better devoted to cur14 ing year 2000 computer date-change problems

15 and ensuring that systems remain or become

16 operational.

17 (ii) It could threaten the network of valued

18 and trusted business and customer relationships

19 that are important to the effective functioning of

20 the national economy.

21 (iii) It would strain the Nation’s legal sys22 tem, causing particular problems for the small

23 businesses and individuals who already find that

24 system inaccessible because of its complexity and

25 expense.
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1 (iv) The delays, expense, uncertainties, loss

2 of control, adverse publicity, and animosities

3 that frequently accompany litigation of business

4 disputes could exacerbate the difficulties associ5 ated with the date change and work against the

6 successful resolution of those difficulties.

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

8 legislation to assure that Y2K problems do not unnec9 essarily disrupt interstate commerce or create unnec10 essary caseloads in Federal courts and to provide ini11 tiatives to help businesses prepare and be in a posi12 tion to withstand the potentially devastating eco13 nomic impact of Y2K.

14 (5) Resorting to the legal system for resolution of

15 Y2K problems is not feasible for many businesses and

16 individuals who already find the legal system inacces17 sible, particularly small businesses and individuals

18 who already find the legal system inaccessible, because

19 of its complexity and expense.

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

21 control, adverse publicity, and animosities that fre22 quently accompany litigation of business disputes can

23 only exacerbate the difficulties associated with the

24 Y2K date change, and work against the successful res25 olution of those difficulties.
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1 (7) Concern about the potential for liability—in

2 particular, concern about the substantial litigation

3 expense associated with defending against even the

4 most insubstantial lawsuits—is prompting many per5 sons and businesses with technical expertise to avoid

6 projects aimed at curing year 2000 computer date7 change problems.

8 (8) A proliferation of frivolous Y2K lawsuits by

9 opportunistic parties may further limit access to

10 courts by straining the resources of the legal system

11 and depriving deserving parties of their legitimate

12 rights to relief.

13 (9) Congress encourages businesses to approach

14 their Y2K disputes responsibly, and to avoid unneces15 sary, time-consuming and costly litigation about Y2K

16 failures, particularly those that are not material.

17 Congress supports good faith negotiations between

18 parties when there is a dispute over a Y2K problem,

19 and, if necessary, urges the parties to enter into vol20 untary, nonbinding mediation rather than litigation.

21 (b) PURPOSES.—Based upon the power of the Congress

22 under Article I, Section 8, Clause 3 of the Constitution of

23 the United States, the purposes of this Act are—

24 (1) to establish uniform legal standards that give

25 all businesses and users of technology products reason-
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1 able incentives to solve Y2K computer date-change

2 problems before they develop;

3 (2) to encourage continued Y2K remediation and

4 testing efforts by providers, suppliers, customers, and

5 other contracting partners;

6 (3) to encourage private and public parties alike

7 to resolve Y2K disputes by alternative dispute mecha8 nisms in order to avoid costly and time-consuming

9 litigation, to initiate those mechanisms as early as

10 possible, and to encourage the prompt identification

11 and correction of Y2K problems; and

12 (4) to lessen the burdens on interstate commerce

13 by discouraging insubstantial lawsuits while pre14 serving the ability of individuals and businesses that

15 have suffered real injury to obtain complete relief.

16 SEC. 3. DEFINITIONS.

17 In this Act:

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

19 (A) means a civil action commenced in any

20 Federal or State court, or an agency board of

21 contract appeal proceeding, in which the plain22 tiff’s alleged harm or injury resulted from a Y2K

23 failure;

24 (B) includes a civil action commenced in

25 any Federal or State court by a governmental
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1 entity when acting in a commercial or con2 tracting capacity; but

3 (C) does not include an action brought by

4 a governmental entity acting in a regulatory, su5 pervisory, or enforcement capacity.

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

7 means failure by any device or system (including any

8 computer system and any microchip or integrated

9 circuit embedded in another device or product), or

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

11 processing instructions to process, to calculate, to

12 compare, to sequence, to display, to store, to transmit,

13 or to receive year-2000 date-related data, including

14 failures—

15 (A) to deal with or account for transitions

16 or comparisons from, into, and between the years

17 1999 and 2000 accurately;

18 (B) to recognize or accurately to process

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

20 (C) accurately to account for the year

21 2000’s status as a leap year, including recogni22 tion and processing of the correct date on Feb23 ruary 29, 2000.

24 (3) GOVERNMENT ENTITY.—The term ‘‘govern25 ment entity’’ means an agency, instrumentality, or
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1 other entity of Federal, State, or local government

2 (including multijurisdictional agencies, instrumental3 ities, and entities).

4 (4) MATERIAL DEFECT.—The term ‘‘material de5 fect’’ means a defect in any item, whether tangible or

6 intangible, or in the provision of a service, that sub7 stantially prevents the item or service from operating

8 or functioning as designed or according to its speci9 fications. The term ‘‘material defect’’ does not include

10 a defect that—

11 (A) has an insignificant or de minimis ef12 fect on the operation or functioning of an item

13 or computer program;

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

15 program that, as a whole, substantially operates

16 or functions as designed; or

17 (C) has an insignificant or de minimis ef18 fect on the efficacy of the service provided.

19 (5) PERSONAL INJURY.—The term ‘‘personal in20 jury’’ means physical injury to a natural person,

21 including—

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

23 and
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1 (B) mental suffering, emotional distress, or

2 similar injuries suffered by that person in con3 nection with a physical injury.

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

5 of the United States, the District of Columbia, the

6 Commonwealth of Puerto Rico, the Northern Mariana

7 Islands, the United States Virgin Islands, Guam,

8 American Samoa, and any other territory or posses9 sion of the United States, and any political subdivi10 sion thereof.

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

12 contract, tariff, license, or warranty.

13 (8) ALTERNATIVE DISPUTE RESOLUTION.—The

14 term ‘‘alternative dispute resolution’’ means any

15 process or proceeding, other than adjudication by a

16 court or in an administrative proceeding, to assist in

17 the resolution of issues in controversy, through proc18 esses such as early neutral evaluation, mediation,

19 minitrial, and arbitration.

20 SEC. 4. APPLICATION OF ACT.

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

22 action brought in a State or Federal court after January

23 1, 1999, for a Y2K failure occurring before January 1,

24 2003, including any appeal, remand, stay, or other judicial,
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1 administrative, or alternative dispute resolution proceeding

2 in such an action.

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

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

5 otherwise explicitly provided in this Act, nothing in this

6 Act expands any liability otherwise imposed or limits any

7 defense otherwise available under Federal or State law.

8 (c) CLAIMS FOR PERSONAL INJURY OR WRONGFUL

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

10 for personal injury or for wrongful death.

11 (d) CONTRACT PRESERVATION.—

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

13 any Y2K action any written contractual term, in14 cluding a limitation or an exclusion of liability, or

15 a disclaimer of warranty, shall be strictly enforced

16 unless the enforcement of that term would manifestly

17 and directly contravene applicable State law em18 bodied in any statute in effect on January 1, 1999,

19 specifically addressing that term.

20 (2) INTERPRETATION OF CONTRACT.—In any

21 Y2K action in which a contract to which paragraph

22 (1) applies is silent as to a particular issue, the inter23 pretation of the contract as to that issue shall be de24 termined by applicable law in effect at the time the

25 contract was executed.
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1 (e) PREEMPTION OF STATE LAW.—This Act supersedes

2 State law to the extent that it establishes a rule of law ap3 plicable to a Y2K action that is inconsistent with State law,

4 but nothing in this Act implicates, alters, or diminishes the

5 ability of a State to defend itself against any claim on the

6 basis of sovereign immunity.

7 (f) APPLICATION WITH YEAR 2000 INFORMATION AND

8 READINESS DISCLOSURE ACT.—Nothing in this Act super9 sedes any provision of the Year 2000 Information and

10 Readiness Disclosure Act.

11 (g) APPLICATION TO ACTIONS BROUGHT BY A GOVERN12 MENTAL ENTITY.—

13 (1) IN GENERAL.—To the extent provided in this

14 subsection, this Act shall apply to an action brought

15 by a governmental entity described in section 3(1)(C).

16 (2) DEFINITIONS.—In this subsection:

17 (A) DEFENDANT.—

18 (i) IN GENERAL.—The term ‘‘defend19 ant’’ includes a State or local government.

20 (ii) STATE.—The term ‘‘State’’ means

21 each of the several States of the United

22 States, the District of Columbia, the Com23 monwealth of Puerto Rico, the Virgin Is24 lands, Guam, American Samoa, and the
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1 Commonwealth of the Northern Mariana Is2 lands.

3 (iii) LOCAL GOVERNMENT.—The term

4 ‘‘local government’’ means—

5 (I) any county, city, town, town6 ship, parish, village, or other general

7 purpose political subdivision of a

8 State; and

9 (II) any combination of political

10 subdivisions described in subclause (I)

11 recognized by the Secretary of Housing

12 and Urban Development.

13 (B) Y2K UPSET.—The term ‘‘Y2K upset’’—

14 (i) means an exceptional incident in15 volving temporary noncompliance with ap16 plicable federally enforceable measurement

17 or reporting requirements because of factors

18 related to a Y2K failure that are beyond the

19 reasonable control of the defendant charged

20 with compliance; and

21 (ii) does not include—

22 (I) noncompliance with applicable

23 federally enforceable requirements that

24 constitutes or would create an immi-
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1 nent threat to public health, safety, or

2 the environment;

3 (II) noncompliance with applica4 ble federally enforceable requirements

5 that provide for the safety and sound6 ness of the banking or monetary sys7 tem, including the protection of deposi8 tors;

9 (III) noncompliance to the extent

10 caused by operational error or neg11 ligence;

12 (IV) lack of reasonable preventa13 tive maintenance; or

14 (V) lack of preparedness for Y2K.

15 (3) CONDITIONS NECESSARY FOR A DEMONSTRA16 TION OF A Y2K UPSET.—A defendant who wishes to

17 establish the affirmative defense of Y2K upset shall

18 demonstrate, through properly signed, contempora19 neous operating logs, or other relevant evidence that—

20 (A) the defendant previously made a good

21 faith effort to effectively remediate Y2K prob22 lems;

23 (B) a Y2K upset occurred as a result of a

24 Y2K system failure or other Y2K emergency;
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1 (C) noncompliance with the applicable fed2 erally enforceable measurement or reporting re3 quirement was unavoidable in the face of a Y2K

4 emergency or was intended to prevent the dis5 ruption of critical functions or services that

6 could result in the harm of life or property;

7 (D) upon identification of noncompliance

8 the defendant invoking the defense began imme9 diate actions to remediate any violation of feder10 ally enforceable measurement or reporting re11 quirements; and

12 (E) the defendant submitted notice to the

13 appropriate Federal regulatory authority of a

14 Y2K upset within 72 hours from the time that

15 it became aware of the upset.

16 (4) GRANT OF A Y2K UPSET DEFENSE.—Subject

17 to the other provisions of this subsection, the Y2K

18 upset defense shall be a complete defense to any action

19 brought as a result of noncompliance with federally

20 enforceable measurement or reporting requirements

21 for any defendant who establishes by a preponderance

22 of the evidence that the conditions set forth in para23 graph (3) are met.

24 (5) LENGTH OF Y2K UPSET.—The maximum al25 lowable length of the Y2K upset shall be not more
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1 than 15 days beginning on the date of the upset un2 less granted specific relief by the appropriate regu3 latory authority.

4 (6) VIOLATION OF A Y2K UPSET.—Fraudulent

5 use of the Y2K upset defense provided for in this sub6 section shall be subject to penalties provided in section

7 1001 of title 18, United States Code.

8 (7) EXPIRATION OF DEFENSE.—The Y2K upset

9 defense may not be asserted for a Y2K upset occurring

10 after June 30, 2000.

11 (h) CREDIT PROTECTION FROM YEAR 2000 FAIL12 URES.—

13 (1) IN GENERAL.—No person who transacts busi14 ness on matters directly or indirectly affecting mort15 gages, credit accounts, banking, or other financial

16 transactions shall cause or permit a foreclosure, de17 fault, or other adverse action against any other per18 son as a result of the improper or incorrect trans19 mission or inability to cause transaction to occur,

20 which is caused directly or indirectly by an actual or

21 potential Y2K failure that results in an inability to

22 accurately or timely process any information or data,

23 including data regarding payments and transfers.

24 (2) SCOPE.—The prohibition of such adverse ac25 tion to enforce obligations referred to in paragraph
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1 (1) includes but is not limited to mortgages, con2 tracts, landlord-tenant agreements, consumer credit

3 obligations, utilities, and banking transactions.

4 (3) ADVERSE CREDIT INFORMATION.—The prohi5 bition on adverse action in paragraph (1) includes

6 the entry of any negative credit information to any

7 credit reporting agency, if the negative credit infor8 mation is due directly or indirectly by an actual or

9 potential disruption of the proper processing of finan10 cial responsibilities and information, or the inability

11 of the consumer to cause payments to be made to

12 creditors where such inability is due directly or indi13 rectly to an actual or potential Y2K failure.

14 (4) ACTIONS MAY RESUME AFTER PROBLEM IS

15 FIXED.—No enforcement or other adverse action pro16 hibited by paragraph (1) shall resume until the obli17 gor has a reasonable time after the full restoration of

18 the ability to regularly receive and dispense data nec19 essary to perform the financial transaction required

20 to fulfill the obligation.

21 (5) SUBSECTION DOES NOT APPLY TO NON-Y2K22 RELATED PROBLEMS.—This subsection shall not affect

23 transactions upon which a default has occurred prior

24 to a Y2K failure that disrupts financial or data

25 transfer operations of either party.
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1 (6) ENFORCEMENT OF OBLIGATIONS MERELY

2 TOLLED.—This subsection delays but does not prevent

3 the enforcement of financial obligations.

4 SEC. 5. PUNITIVE DAMAGES LIMITATIONS.

5 (a) IN GENERAL.—In any Y2K action in which puni6 tive damages are permitted by applicable law, the defendant

7 shall not be liable for punitive damages unless the plaintiff

8 proves by clear and convincing evidence that the applicable

9 standard for awarding damages has been met.

10 (b) CAPS ON PUNITIVE DAMAGES.—

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

12 standard established by subsection (a), punitive dam13 ages permitted under applicable law against a defend14 ant described in paragraph (2) in a Y2K action may

15 not exceed the lesser of—

16 (A) 3 times the amount awarded for com17 pensatory damages; or

18 (B) $250,000.

19 (2) DEFENDANT DESCRIBED.—A defendant de20 scribed in this paragraph is a defendant—

21 (A) who—

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

23 individual; and

24 (ii) whose net worth does not exceed

25 $500,000; or
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1 (B) that is an unincorporated business, a

2 partnership, corporation, association, or organi3 zation with fewer than 50 full-time employees.

4 (3) NO CAP IF INJURY SPECIFICALLY IN5 TENDED.—Paragraph (1) does not apply if the plain6 tiff establishes by clear and convincing evidence that

7 the defendant acted with specific intent to injure the

8 plaintiff.

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

10 Y2K action may not be awarded against a government enti11 ty.

12 SEC. 6. PROPORTIONATE LIABILITY.

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

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

15 entered in a Y2K action shall be liable solely for the portion

16 of the judgment that corresponds to the relative and propor17 tional responsibility of that person. In determining the per18 centage of responsibility of any defendant, the trier of fact

19 shall determine that percentage as a percentage of the total

20 fault of all persons, including the plaintiff, who caused or

21 contributed to the total loss incurred by the plaintiff.

22 (b) PROPORTIONATE LIABILITY.—

23 (1) DETERMINATION OF RESPONSIBILITY.—In

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

25 answer special interrogatories, or, if there is no jury,
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1 the court shall make findings with respect to each de2 fendant, including defendants who have entered into

3 settlements with the plaintiff or plaintiffs,

4 concerning—

5 (A) the percentage of responsibility, if any,

6 of each defendant, measured as a percentage of

7 the total fault of all persons who caused or con8 tributed to the loss incurred by the plaintiff; and

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

10 defendant (other than a defendant who has en11 tered into a settlement agreement with the plain12 tiff)—

13 (i) acted with specific intent to injure

14 the plaintiff; or

15 (ii) knowingly committed fraud.

16 (2) CONTENTS OF SPECIAL INTERROGATORIES OR

17 FINDINGS.—The responses to interrogatories or find18 ings under paragraph (1) shall specify the total

19 amount of damages that the plaintiff is entitled to re20 cover and the percentage of responsibility of each de21 fendant found to have caused or contributed to the

22 loss incurred by the plaintiff.

23 (3) FACTORS FOR CONSIDERATION.—In deter24 mining the percentage of responsibility under this

25 subsection, the trier of fact shall consider—
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1 (A) the nature of the conduct of each person

2 found to have caused or contributed to the loss

3 incurred by the plaintiff; and

4 (B) the nature and extent of the causal rela5 tionship between the conduct of each such person

6 and the damages incurred by the plaintiff.

7 (c) JOINT LIABILITY FOR SPECIFIC INTENT OR

8 FRAUD.—

9 (1) IN GENERAL.—Notwithstanding subsection

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

11 joint and several if the trier of fact specifically deter12 mines that the defendant—

13 (A) acted with specific intent to injure the

14 plaintiff; or

15 (B) knowingly committed fraud.

16 (2) FRAUD; RECKLESSNESS.—

17 (A) KNOWING COMMISSION OF FRAUD DE18 SCRIBED.—For purposes of subsection

19 (b)(1)(B)(ii) and paragraph (1)(B) of this sub20 section, a defendant knowingly committed fraud

21 if the defendant—

22 (i) made an untrue statement of a ma23 terial fact, with actual knowledge that the

24 statement was false;
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1 (ii) omitted a fact necessary to make

2 the statement not be misleading, with actual

3 knowledge that, as a result of the omission,

4 the statement was false; and

5 (iii) knew that the plaintiff was rea6 sonably likely to rely on the false statement.

7 (B) RECKLESSNESS.—For purposes of sub8 section (b)(1)(B) and paragraph (1) of this sub9 section, reckless conduct by the defendant does

10 not constitute either a specific intent to injure,

11 or the knowing commission of fraud, by the de12 fendant.

13 (3) RIGHT TO CONTRIBUTION NOT AFFECTED.—

14 Nothing in this section affects the right, under any

15 other law, of a defendant to contribution with respect

16 to another defendant found under subsection

17 (b)(1)(B), or determined under paragraph (1)(B) of

18 this subsection, to have acted with specific intent to

19 injure the plaintiff or to have knowingly committed

20 fraud.

21 (d) SPECIAL RULES.—

22 (1) UNCOLLECTIBLE SHARE.—

23 (A) IN GENERAL.—Notwithstanding sub24 section (a), if, upon motion made not later than

25 6 months after a final judgment is entered in
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1 any Y2K action, the court determines that all or

2 part of the share of the judgment against a de3 fendant for compensatory damages is not collect4 ible against that defendant, then each other de5 fendant in the action is liable for the

6 uncollectible share as follows:

7 (i) PERCENTAGE OF NET WORTH.—The

8 other defendants are jointly and severally

9 liable for the uncollectible share if the plain10 tiff establishes that—

11 (I) the plaintiff is an individual

12 whose recoverable damages under the

13 final judgment are equal to more than

14 10 percent of the net worth of the

15 plaintiff; and

16 (II) the net worth of the plaintiff

17 is less than $200,000.

18 (ii) OTHER PLAINTIFFS.—For a plain19 tiff not described in clause (i), each of the

20 other defendants is liable for the

21 uncollectible share in proportion to the per22 centage of responsibility of that defendant,

23 except that the total liability of a defendant

24 under this clause may not exceed 50 percent
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1 of the proportionate share of that defendant,

2 as determined under subsection (b)(2).

3 (B) OVERALL LIMIT.—The total payments

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

6 uncollectible share.

7 (C) SUBJECT TO CONTRIBUTION.—A defend8 ant against whom judgment is not collectible is

9 subject to contribution and to any continuing li10 ability to the plaintiff on the judgment.

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

12 extent that a defendant is required to make an addi13 tional payment under paragraph (1), that defendant

14 may recover contribution—

15 (A) from the defendant originally liable to

16 make the payment;

17 (B) from any other defendant that is jointly

18 and severally liable;

19 (C) from any other defendant held propor20 tionately liable who is liable to make the same

21 payment and has paid less than that other de22 fendant’s proportionate share of that payment;

23 or

24 (D) from any other person responsible for

25 the conduct giving rise to the payment that
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1 would have been liable to make the same pay2 ment.

3 (3) NONDISCLOSURE TO JURY.—The standard

4 for allocation of damages under subsection (a) and

5 subsection (b)(1), and the procedure for reallocation of

6 uncollectible shares under paragraph (1) of this sub7 section, shall not be disclosed to members of the jury.

8 (e) SETTLEMENT DISCHARGE.—

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

10 Y2K action at any time before final verdict or judg11 ment shall be discharged from all claims for contribu12 tion brought by other persons. Upon entry of the set13 tlement by the court, the court shall enter a bar order

14 constituting the final discharge of all obligations to

15 the plaintiff of the settling defendant arising out of

16 the action. The order shall bar all future claims for

17 contribution arising out of the action—

18 (A) by any person against the settling de19 fendant; and

20 (B) by the settling defendant against any

21 person other than a person whose liability has

22 been extinguished by the settlement of the settling

23 defendant.

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

25 settlement with the plaintiff before the final verdict or
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1 judgment, the verdict or judgment shall be reduced by

2 the greater of—

3 (A) an amount that corresponds to the per4 centage of responsibility of that defendant; or

5 (B) the amount paid to the plaintiff by that

6 defendant.

7 (f) GENERAL RIGHT OF CONTRIBUTION.—

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

9 and severally liable for damages in any Y2K action

10 may recover contribution from any other person who,

11 if joined in the original action, would have been liable

12 for the same damages. A claim for contribution shall

13 be determined based on the percentage of responsi14 bility of the claimant and of each person against

15 whom a claim for contribution is made.

16 (2) STATUTE OF LIMITATIONS FOR CONTRIBU17 TION.—An action for contribution in connection with

18 a Y2K action shall be brought not later than 6

19 months after the entry of a final, nonappealable judg20 ment in the Y2K action, except that an action for

21 contribution brought by a defendant who was re22 quired to make an additional payment under sub23 section (d)(1) may be brought not later than 6 months

24 after the date on which such payment was made.
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1 (g) MORE PROTECTIVE STATE LAW NOT PRE2 EMPTED.—Nothing in this section preempts or supersedes

3 any provision of State statutory law that—

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

5 action to a lesser amount than the amount deter6 mined under this section; or

7 (2) otherwise affords a greater degree of protec8 tion from joint or several liability than is afforded by

9 this section.

10 SEC. 7. PRELITIGATION NOTICE.

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

12 except an action that seeks only injunctive relief, a prospec13 tive plaintiff with a Y2K claim shall send a written notice

14 by certified mail (with either return receipt requested or

15 other means of verification that the notice was sent) to each

16 prospective defendant in that action. The notice shall pro17 vide specific and detailed information about—

18 (1) the manifestations of any material defect al19 leged to have caused harm or loss;

20 (2) the harm or loss allegedly suffered by the pro21 spective plaintiff;

22 (3) how the prospective plaintiff would like the

23 prospective defendant to remedy the problem;

24 (4) the basis upon which the prospective plaintiff

25 seeks that remedy; and
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1 (5) the name, title, address, and telephone num2 ber of any individual who has authority to negotiate

3 a resolution of the dispute on behalf of the prospective

4 plaintiff.

5 (b) PERSON TO WHOM NOTICE TO BE SENT.—The no6 tice required by subsection (a) shall be sent—

7 (1) to the registered agent of the prospective de8 fendant for service of legal process;

9 (2) if the prospective defendant does not have a

10 registered agent, then to the chief executive officer of

11 a corporation, the managing partner of a partner12 ship, the proprietor of a sole proprietorship, or to a

13 similarly-situated person for any other enterprise; or

14 (3) if the prospective defendant has designated a

15 person to receive prelitigation notices on a Year 2000

16 Internet Website (as defined in section 3(7) of the

17 Year 2000 Information and Readiness Disclosure

18 Act), to the designated person, if the prospective

19 plaintiff has reasonable access to the Internet.

20 (c) RESPONSE TO NOTICE.—

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

22 of the notice specified in subsection (a), each prospec23 tive defendant shall send by certified mail with return

24 receipt requested to each prospective plaintiff a writ25 ten statement acknowledging receipt of the notice, and
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1 describing the actions it has taken or will take to ad2 dress the problem identified by the prospective plain3 tiff.

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

5 written statement shall state whether the prospective

6 defendant is willing to engage in alternative dispute

7 resolution.

8 (3) INADMISSABILITY.—A written statement re9 quired by this paragraph is not admissible in evi10 dence, under Rule 408 of the Federal Rules of Evi11 dence or any analogous rule of evidence in any State,

12 in any proceeding to prove liability for, or the inva13 lidity of, a claim or its amount, or otherwise as evi14 dence of conduct or statements made in compromise

15 negotiations.

16 (4) PRESUMPTIVE TIME OF RECEIPT.—For pur17 poses of paragraph (1), a notice under subsection (a)

18 is presumed to be received 7 days after it was sent.

19 (5) PRIORITY.—A prospective defendant receiv20 ing more than 1 notice under this section may give

21 priority to notices with respect to a product or service

22 that involves a health or safety related Y2K failure.

23 (d) FAILURE TO RESPOND.—If a prospective

24 defendant—
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1 (1) fails to respond to a notice provided pursu2 ant to subsection (a) within the 30 days specified in

3 subsection (c)(1); or

4 (2) does not describe the action, if any, the pro5 spective defendant has taken, or will take, to address

6 the problem identified by the prospective plaintiff,

7 the prospective plaintiff may immediately commence a legal

8 action against that prospective defendant.

9 (e) REMEDIATION PERIOD.—

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

11 responds and proposes remedial action it will take, or

12 offers to engage in alternative dispute resolution, then

13 the prospective plaintiff shall allow the prospective

14 defendant an additional 60 days from the end of the

15 30-day notice period to complete the proposed reme16 dial action before commencing a legal action against

17 that prospective defendant.

18 (2) EXTENSION BY AGREEMENT.—The prospec19 tive plaintiff and prospective defendant may change

20 the length of the 60-day remediation period by writ21 ten agreement.

22 (3) MULTIPLE EXTENSIONS NOT ALLOWED.—Ex23 cept as provided in paragraph (2), a defendant in a

24 Y2K action is entitled to no more than one 30-day
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1 period and one 60-day remediation period under

2 paragraph (1).

3 (4) STATUTES OF LIMITATION, ETC., TOLLED.—

4 Any applicable statute of limitations or doctrine of

5 laches in a Y2K action to which paragraph (1) ap6 plies shall be tolled during the notice and remediation

7 period under that paragraph.

8 (f) FAILURE TO PROVIDE NOTICE.—If a defendant de9 termines that a plaintiff has filed a Y2K action without

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

11 awaiting the expiration of the appropriate waiting period

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

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

14 court and the plaintiff in its initial response to the plain15 tiff. If any defendant elects to treat the complaint as such

16 a notice—

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

18 other proceedings in the action for the appropriate

19 period after filing of the complaint; and

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

21 pleadings shall be tolled during the appropriate pe22 riod.

23 (g) EFFECT OF CONTRACTUAL OR STATUTORY WAIT24 ING PERIODS.—In cases in which a contract, or a statute

25 enacted before January 1, 1999, requires notice of non-
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1 performance and provides for a period of delay prior to the

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

3 period of delay provided by contract or the statute is con4 trolling over the waiting period specified in subsections (c)

5 and (d).

6 (h) STATE LAW CONTROLS ALTERNATIVE METH7 ODS.—Nothing in this section supersedes or otherwise pre8 empts any State law or rule of civil procedure with respect

9 to the use of alternative dispute resolution for Y2K actions.

10 (i) PROVISIONAL REMEDIES UNAFFECTED.—Nothing

11 in this section interferes with the right of a litigant to pro12 visional remedies otherwise available under Rule 65 of the

13 Federal Rules of Civil Procedure or any State rule of civil

14 procedure providing extraordinary or provisional remedies

15 in any civil action in which the underlying complaint seeks

16 both injunctive and monetary relief.

17 (j) SPECIAL RULE FOR CLASS ACTIONS.—For the pur18 pose of applying this section to a Y2K action that is main19 tained as a class action in Federal or State court, the re20 quirements of the preceding subsections of this section apply

21 only to named plaintiffs in the class action.

22 SEC. 8. PLEADING REQUIREMENTS.

23 (a) APPLICATION WITH RULES OF CIVIL PROCE24 DURE.—This section applies exclusively to Y2K actions

25 and, except to the extent that this section requires addi-
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1 tional information to be contained in or attached to plead2 ings, nothing in this section is intended to amend or other3 wise supersede applicable rules of Federal or State civil pro4 cedure.

5 (b) NATURE AND AMOUNT OF DAMAGES.—In all Y2K

6 actions in which damages are requested, there shall be filed

7 with the complaint a statement of specific information as

8 to the nature and amount of each element of damages and

9 the factual basis for the damages calculation.

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

11 which the plaintiff alleges that there is a material defect

12 in a product or service, there shall be filed with the com13 plaint a statement of specific information regarding the

14 manifestations of the material defects and the facts sup15 porting a conclusion that the defects are material.

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

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

18 prevail only on proof that the defendant acted with a par19 ticular state of mind, there shall be filed with the complaint,

20 with respect to each element of that claim, a statement of

21 the facts giving rise to a strong inference that the defendant

22 acted with the required state of mind.

23 SEC. 9. DUTY TO MITIGATE.

24 Damages awarded in any Y2K action shall exclude

25 compensation for damages the plaintiff could reasonably
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1 have avoided in light of any disclosure or other information

2 of which the plaintiff was, or reasonably should have been,

3 aware, including information made available by the defend4 ant to purchasers or users of the defendant’s product or

5 services concerning means of remedying or avoiding the

6 Y2K failure.

7 SEC. 10. APPLICATION OF EXISTING IMPOSSIBILITY OR

8 COMMERCIAL IMPRACTICABILITY DOC9 TRINES.

10 In any Y2K action for breach or repudiation of con11 tract, the applicability of the doctrines of impossibility and

12 commercial impracticability shall be determined by the law

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

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

15 assert defenses based upon such doctrines.

16 SEC. 11. DAMAGES LIMITATION BY CONTRACT.

17 In any Y2K action for breach or repudiation of con18 tract, no party may claim, nor be awarded, any category

19 of damages unless such damages are allowed—

20 (1) by the express terms of the contract; or

21 (2) if the contract is silent on such damages, by

22 operation of State law at the time the contract was

23 effective or by operation of Federal law.
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1 SEC. 12. DAMAGES IN TORT CLAIMS.

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

3 a tort claim may not recover damages for economic loss

4 unless—

5 (1) the recovery of such losses is provided for in

6 a contract to which the party seeking to recover such

7 losses is a party; or

8 (2) such losses result directly from damage to

9 tangible personal or real property caused by the Y2K

10 failure (other than damage to property that is the

11 subject of the contract between the parties to the Y2K

12 action or, in the event there is no contract between the

13 parties, other than damage caused only to the prop14 erty that experienced the Y2K failure),

15 and such damages are permitted under applicable Federal

16 or State law.

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

18 only, and except as otherwise specifically provided in a

19 valid and enforceable written contract between the plaintiff

20 and the defendant in a Y2K action, the term ‘‘economic

21 loss’’—

22 (1) means amounts awarded to compensate an

23 injured party for any loss other than losses described

24 in subsection (a)(2); and

25 (2) includes amounts awarded for damages such

26 as—
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1 (A) lost profits or sales;

2 (B) business interruption;

3 (C) losses indirectly suffered as a result of

4 the defendant’s wrongful act or omission;

5 (D) losses that arise because of the claims of

6 third parties;

7 (E) losses that must be plead as special

8 damages; and

9 (F) consequential damages (as defined in

10 the Uniform Commercial Code or analogous

11 State commercial law).

12 (c) CERTAIN ACTIONS EXCLUDED.—This section does

13 not affect, abrogate, amend, or alter any patent, copyright,

14 trade-secret, trademark, or service-mark action, or any

15 claim for defamation or invasion of privacy under Federal

16 or State law.

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

18 damages, whether by settlement or judgment, in a civil ac19 tion to which this Act does not apply because of section 4(c)

20 whose liability, in whole or in part, is the result of a Y2K

21 failure may, notwithstanding any other provision of this

22 Act, pursue any remedy otherwise available under Federal

23 or State law against the person responsible for that Y2K

24 failure to the extent of recovering the amount of those dam25 ages.
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1 SEC. 13. STATE OF MIND; BYSTANDER LIABILITY; CONTROL.

2 (a) DEFENDANT’S STATE OF MIND.—In a Y2K action

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

4 and in which the defendant’s actual or constructive aware5 ness of an actual or potential Y2K failure is an element

6 of the claim, the defendant is not liable unless the plaintiff

7 establishes that element of the claim by the standard of evi8 dence under applicable State law in effect before January

9 1, 1999.

10 (b) LIMITATION ON BYSTANDER LIABILITY FOR Y2K

11 FAILURES.—

12 (1) IN GENERAL.—With respect to any Y2K ac13 tion for money damages in which—

14 (A) the defendant is not the manufacturer,

15 seller, or distributor of a product, or the provider

16 of a service, that suffers or causes the Y2K fail17 ure at issue;

18 (B) the plaintiff is not in substantial priv19 ity with the defendant; and

20 (C) the defendant’s actual or constructive

21 awareness of an actual or potential Y2K failure

22 is an element of the claim under applicable law,

23 the defendant shall not be liable unless the plaintiff,

24 in addition to establishing all other requisite elements

25 of the claim, proves, by the standard of evidence

26 under applicable State law in effect before January 1,
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1 1999, that the defendant actually knew, or recklessly

2 disregarded a known and substantial risk, that such

3 failure would occur.

4 (2) SUBSTANTIAL PRIVITY.—For purposes of

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

6 substantial privity when, in a Y2K action arising out

7 of the performance of professional services, the plain8 tiff and the defendant either have contractual rela9 tions with one another or the plaintiff is a person

10 who, prior to the defendant’s performance of such

11 services, was specifically identified to and acknowl12 edged by the defendant as a person for whose special

13 benefit the services were being performed.

14 (3) CERTAIN CLAIMS EXCLUDED.—For purposes

15 of paragraph (1)(C), claims in which the defendant’s

16 actual or constructive awareness of an actual or po17 tential Y2K failure is an element of the claim under

18 applicable law do not include claims for negligence

19 but do include claims such as fraud, constructive

20 fraud, breach of fiduciary duty, negligent misrepre21 sentation, and interference with contract or economic

22 advantage.

23 (c) CONTROL NOT DETERMINATIVE OF LIABILITY.—

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

25 system, product, or component that was sold, leased, rented,
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1 or otherwise within the control of the party against whom

2 a claim is asserted in a Y2K action shall not constitute

3 the sole basis for recovery of damages in that action. A

4 claim in a Y2K action for breach or repudiation of contract

5 for such a failure is governed by the terms of the contract.

6 (d) PROTECTIONS OF THE YEAR 2000 INFORMATION

7 AND READINESS DISCLOSURE ACT APPLY.—The protec8 tions for the exchanges of information provided by section

9 4 of the Year 2000 Information and Readiness Disclosure

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

11 SEC. 14. APPOINTMENT OF SPECIAL MASTERS OR MAG12 ISTRATE JUDGES FOR Y2K ACTIONS.

13 Any District Court of the United States in which a

14 Y2K action is pending may appoint a special master or

15 a magistrate judge to hear the matter and to make findings

16 of fact and conclusions of law in accordance with Rule 53

17 of the Federal Rules of Civil Procedure.

18 SEC. 15. Y2K ACTIONS AS CLASS ACTIONS.

19 (a) MATERIAL DEFECT REQUIREMENT.—A Y2K ac20 tion involving a claim that a product or service is defective

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

22 court as to that claim only if—

23 (1) it satisfies all other prerequisites established

24 by applicable Federal or State law, including appli25 cable rules of civil procedure; and
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1 (2) the court finds that the defect in a product

2 or service as alleged would be a material defect for the

3 majority of the members of the class.

4 (b) NOTIFICATION.—In any Y2K action that is main5 tained as a class action, the court, in addition to any other

6 notice required by applicable Federal or State law, shall

7 direct notice of the action to each member of the class, which

8 shall include—

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

10 of the action;

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

12 and

13 (3) the fee arrangements with class counsel, in14 cluding the hourly fee being charged, or, if it is a con15 tingency fee, the percentage of the final award which

16 will be paid, including an estimate of the total

17 amount that would be paid if the requested damages

18 were to be granted.

19 (c) FORUM FOR Y2K CLASS ACTIONS.—

20 (1) JURISDICTION.—Except as provided in para21 graph (2), a Y2K action may be brought as a class

22 action in a United States District Court or removed

23 to a United States District Court if the amount in

24 controversy is greater than the sum or value of

25 $1,000,000 (exclusive of interest and costs), computed
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1 on the basis of all claims to be determined in the ac2 tion.

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

4 brought or removed as a class action under this sec5 tion if—

6 (A)(i) a substantial majority of the mem7 bers of the proposed plaintiff class are citizens of

8 a single State;

9 (ii) the primary defendants are citizens of

10 that State; and

11 (iii) the claims asserted will be governed

12 primarily by the law of that State; or

13 (B) the primary defendants are States,

14 State officials, or other governmental entities

15 against whom the United States District Court

16 may be foreclosed from ordering relief.

17 (d) EFFECT ON RULES OF CIVIL PROCEDURE.—Ex18 cept as otherwise provided in this section, nothing in this

19 section supersedes any rule of Federal or State civil proce20 dure applicable to class actions.

21 SEC. 16. APPLICABILITY OF STATE LAW.

22 Nothing in this Act shall be construed to affect the ap23 plicability of any State law that provides greater limits on

24 damages and liabilities than are provided in this Act.
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1 SEC. 17. ADMISSIBLE EVIDENCE ULTIMATE ISSUE IN STATE

2 COURTS.

3 Any party to a Y2K action in a State court in a State

4 that has not adopted a rule of evidence substantially similar

5 to Rule 704 of the Federal Rules of Evidence may introduce

6 in such action evidence that would be admissible if Rule

7 704 applied in that jurisdiction.

8 SEC. 18. SUSPENSION OF PENALTIES FOR CERTAIN YEAR

9 2000 FAILURES BY SMALL BUSINESS CON10 CERNS.

11 (a) DEFINITIONS.—In this section—

12 (1) the term ‘‘agency’’ means any executive agen13 cy, as defined in section 105 of title 5, United States

14 Code, that has the authority to impose civil penalties

15 on small business concerns;

16 (2) the term ‘‘first-time violation’’ means a vio17 lation by a small business concern of a Federal rule

18 or regulation (other than a Federal rule or regulation

19 that relates to the safety and soundness of the banking

20 or monetary system, including protection of deposi21 tors) resulting from a Y2K failure if that Federal rule

22 or regulation had not been violated by that small

23 business concern within the preceding 3 years; and

24 (3) the term ‘‘small business concern’’ has the

25 same meaning as a defendant described in section

26 5(b)(2)(B).
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1 (b) ESTABLISHMENT OF LIAISONS.—Not later than 30

2 days after the date of enactment of this section each agency

3 shall—

4 (1) establish a point of contact within the agency

5 to act as a liaison between the agency and small busi6 ness concerns with respect to problems arising out of

7 Y2K failures and compliance with Federal rules or

8 regulations; and

9 (2) publish the name and phone number of the

10 point of contact for the agency in the Federal Reg11 ister.

12 (c) GENERAL RULE.—Subject to subsections (d) and

13 (e), no agency shall impose any civil money penalty on a

14 small business concern for a first-time violation.

15 (d) STANDARDS FOR WAIVER.—In order to receive a

16 waiver of civil money penalties from an agency for a first17 time violation, a small business concern shall demonstrate

18 that—

19 (1) the small business concern previously made a

20 good faith effort to effectively remediate Y2K prob21 lems;

22 (2) a first-time violation occurred as a result of

23 the Y2K system failure of the small business concern

24 or other entity, which affected the small business con-
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1 cern’s ability to comply with a federal rule or regula2 tion;

3 (3) the first-time violation was unavoidable in

4 the face of a Y2K system failure or occurred as a re5 sult of efforts to prevent the disruption of critical

6 functions or services that could result in harm to life

7 or property;

8 (4) upon identification of a first-time violation,

9 the small business concern initiated reasonable and

10 timely measures to remediate the violation; and

11 (5) the small business concern submitted notice

12 to the appropriate agency of the first-time violation

13 within a reasonable time not to exceed 7 business

14 days from the time that the small business concern be15 came aware that a first-time violation had occurred.

16 (e) EXCEPTIONS.—An agency may impose civil money

17 penalties authorized under Federal law on a small business

18 concern for a first-time violation if—

19 (1) the small business concern’s failure to comply

20 with Federal rules or regulations constitutes or cre21 ates an imminent threat to public health, safety, or

22 the environment; or
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1 (2) the small business concern fails to correct the

2 violation not later than 1 month after initial notifi3 cation to the agency.

Attest:

Secretary.
106TH CONGRESS

1ST SESSION H. R. 775

AMENDMENT
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