IB

106TH CONGRESS

1ST SESSION H. R. 775

[Report No. 106–131, Part I]

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.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 23, 1999

Mr. DAVIS of Virginia (for himself, Mr. DREIER, Mr. COX, Mr. MORAN of Virginia, Mr. CRAMER, and Mr. DOOLEY of California) introduced the following bill; which was referred to the Committee on the Judiciary, and

in addition to the Committee on Small Business, for a period to be subsequently determined by the Speaker, in each case for consideration of such

provisions as fall within the jurisdiction of the committee concerned

MAY 7, 1999

Additional sponsors: Mrs. MORELLA, Mr. SUNUNU, Mr. CUNNINGHAM, Mr.

GOODE, Mrs. TAUSCHER, Mr. GOODLATTE, Ms. DUNN, Mr. RILEY, Mr.

HALL of Texas, Mr. GALLEGLY, Mr. COOK, Mr. JOHN, Mr. CAMPBELL,

Mr. HAYES, Mr. ROYCE, Mr. ROGAN, Mrs. BIGGERT, Mr. BURTON of Indiana, Mrs. FOWLER, Mr. CANNON, Mrs. MYRICK, Mr. NEY, Mr. RYUN

of Kansas, Mr. HOBSON, Mr. WHITFIELD, Mrs. BONO, Mr. SENSENBRENNER, Mr. BLUNT, Mr. CHABOT, Mr. STENHOLM, Mr. ROEMER, Mr.

FOLEY, Mr. KNOLLENBERG, Mr. GILLMOR, Mr. OSE, Mr. BARCIA, Mr.

SHAYS, Mr. SESSIONS, Mr. BRYANT, Mr. MCINTOSH, Mr. HAYWORTH,

Mr. STUMP, Mr. SHIMKUS, Mr. OXLEY, Mr. GOSS, Mr. ARMEY, Mr.

SHADEGG, Mrs. CUBIN, Mr. WAMP, Mr. LATHAM, Mr. BOEHNER, Mr.

KASICH, Mr. PICKERING, Mr. COOKSEY, Mr. RAMSTAD, Mr. ENGLISH,

Mr. TANCREDO, Mr. METCALF, Mr. KINGSTON, Mr. SAM JOHNSON of

Texas, Mr. BAKER, Mr. BACHUS, Mr. FORD, Mr. GREEN of Wisconsin,

Mr. HOLDEN, Mr. MORAN of Kansas, Mr. LAHOOD, Mr. THORNBERRY,

Mr. WOLF, Mr. BEREUTER, Mrs. NORTHUP, Mr. BALLENGER, Mr. HILL

of Montana, Mr. LARGENT, Mr. ROHRABACHER, Mr. GARY MILLER of

California, Mr. WATTS of Oklahoma, Mrs. WILSON, Mrs. JOHNSON of

Connecticut, Mr. MCCRERY, Mr. SIMPSON, Mr. FORBES, Mr. LEWIS of

Kentucky, Mr. EWING, Mr. CALVERT, Mr. REYNOLDS, and Mr. WELLER
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MAY 7, 1999

Reported from the Committee on the Judiciary with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

MAY 7, 1999

Referral to the Committee on Small Business extended for a period ending

not later than May 7, 1999

MAY 7, 1999

Committee on Small Business discharged

MAY 7, 1999

Referred to the Committee on Commerce for a period ending not later than

May 11, 1999, for consideration of such provisions of the introduced bill

as fall within the jurisdiction of that committee pursuant to clause 1(f),

rule X

[For text of introduced bill, see copy of bill as introduced on February 23, 1999]

A BILL

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,

3 SECTION 1. SHORT TITLE.

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

5 and Responsibility Act’’.

6 SEC. 2. FINDINGS.

7 The Congress finds the following:

8 (1) The Congress seeks to encourage businesses to

9 concentrate their attention and resources in the short

10 time remaining before January 1, 2000, on address-
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1 ing, assessing, remediating, and testing their year

2 2000 problems, and to minimize any possible business

3 disruptions associated with year 2000 issues.

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

5 legislation to assure that year 2000 problems do not

6 unnecessarily disrupt interstate commerce or create

7 unnecessary case loads in Federal and State courts

8 and to provide initiatives to help businesses prepare

9 and be in a position to withstand the potentially dev10 astating economic impact of the year 2000 problem.

11 (3) Year 2000 issues will affect practically all

12 business enterprises to some degree, giving rise to a

13 large number of disputes.

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

15 year 2000 problems is not feasible for many busi16 nesses, particularly small businesses, because of its

17 complexity and expense.

18 (5) The delays, expense, uncertainties, loss of

19 control, adverse publicity and animosities that fre20 quently accompany litigation of business disputes can

21 only exacerbate the difficulties associated with the

22 year 2000 date change, and work against the success23 ful resolution of those difficulties.

24 (6) The Congress recognizes that every business

25 in the United States should be concerned that wide-
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1 spread and protracted year 2000 litigation may

2 threaten the network of valued and trusted business

3 relationships that are so important to the effective

4 functioning of the world economy, and which may

5 put unbearable strains on an overburdened judicial

6 system.

7 (7) A proliferation of frivolous year 2000 actions

8 by opportunistic parties may further limit access to

9 courts by straining the resources of the legal system

10 and depriving deserving parties of their legitimate

11 rights to relief.

12 (8) The Congress encourages businesses to ap13 proach their year 2000 disputes responsibly, and to

14 avoid unnecessary, time-consuming and costly litiga15 tion based on year 2000 failures. Congress supports

16 good faith negotiations between parties when there is

17 a dispute over a year 2000 problem, and, if necessary,

18 urges the parties to enter into voluntary, non-binding

19 mediation rather than litigation.

20 SEC. 3. DEFINITIONS.

21 In this Act:

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

23 contract, tariff, license, or warranty.
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1 (2) DEFENDANT.—The term ‘‘defendant’’ means

2 any person against whom a year 2000 claim has been

3 asserted.

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

5 loss’’—

6 (A) means any damages other than damages

7 arising out of personal injury or damage to tan8 gible property; and

9 (B) includes, but is not limited to, damages

10 for lost profits or sales, for business interruption,

11 for losses indirectly suffered as a result of the de12 fendant’s wrongful act or omission, for losses

13 that arise because of the claims of third parties,

14 for losses that must be pleaded as special dam15 ages, and consequential damages (as defined in

16 the Uniform Commercial Code or analogous

17 State commercial law).

18 (4) GOVERNMENTAL ENTITY.—The term ‘‘govern19 mental entity’’ means an agency, instrumentality,

20 other entity, or official of Federal, State, or local gov21 ernment (including multijurisdictional agencies, in22 strumentalities, and entities).

23 (5) MATERIAL DEFECT.—The term ‘‘material de24 fect’’ means a defect in any item, whether tangible or

25 intangible, or in the provision of a service, that sub-
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1 stantially prevents the item or service from operating

2 or functioning as designed or intended. The term

3 ‘‘material defect’’ does not include a defect that has

4 an insignificant or de minimis effect on the operation

5 or functioning of an item, that affects only a compo6 nent of an item that, as a whole, substantially oper7 ates or functions as designed, or that has an insignifi8 cant or de minimis effect on the efficacy of the service

9 provided.

10 (6) PERSON.—The term ‘‘person’’ means any

11 natural person and any entity, organization, or en12 terprise, including but not limited to corporations,

13 companies, joint stock companies, associations, part14 nerships, trusts, and governmental entities.

15 (7) PERSONAL INJURY.—The term ‘‘personal in16 jury’’ means any physical injury to a natural person,

17 including death of the person, and mental suffering,

18 emotional distress, or like elements of injury suffered

19 by a natural person in connection with a physical in20 jury.

21 (8) PLAINTIFF.—The term ‘‘plaintiff’’ means

22 any person who asserts a year 2000 claim.

23 (9) PUNITIVE DAMAGES.—The term ‘‘punitive

24 damages’’ means damages that are awarded against

25 any person to punish such person or to deter such
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1 person, or others, from engaging in similar behavior

2 in the future.

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

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

5 the Commonwealth of Puerto Rico, the Northern Mar6 iana Islands, the United States Virgin Islands,

7 Guam, American Samoa, and any other territory or

8 possession of the United States, and any political sub9 division thereof.

10 (11) YEAR 2000 ACTION.—The term ‘‘year 2000

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

12 in any court under Federal or State law, or an agen13 cy board of contract appeal proceeding, in which a

14 year 2000 claim is asserted.

15 (12) YEAR 2000 CLAIM.—The term ‘‘year 2000

16 claim’’—

17 (A) means any claim or cause of action of

18 any kind, other than a claim based on personal

19 injury, whether asserted by way of claim, coun20 terclaim, cross-claim, third-party claim, defense,

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

22 or harm resulted, directly or indirectly, from a

23 year 2000 failure;

24 (B) includes a claim brought in any Fed25 eral or State court by a governmental entity
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1 when acting in a commercial or contracting ca2 pacity; and

3 (C) does not include a claim brought by

4 such a governmental entity acting in a regu5 latory, supervisory, or enforcement capacity.

6 (13) YEAR 2000 FAILURE.—The term ‘‘year 2000

7 failure’’ means any failure by any device or system

8 (including, without limitation, any computer system

9 and any microchip or integrated circuit embedded in

10 another device or product), or any software,

11 firmware, or other set or collection of processing in12 structions, however constructed, in processing, calcu13 lating, comparing, sequencing, displaying, storing,

14 transmitting, or receiving year 2000 date-related

15 data.

16 SEC. 4. APPLICATION OF ACT.

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

18 2000 claim brought after February 22, 1999, including any

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

20 alternative dispute resolution proceeding with respect to

21 such claim.

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

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

24 otherwise explicitly provided in this Act, nothing in this
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1 Act expands any liability otherwise imposed or limits any

2 defense otherwise available under Federal or State law.

3 (c) EXCLUSION OF PERSONAL INJURY CLAIMS.—None

4 of the provisions of this Act shall apply to any claim based

5 on personal injury.

6 (d) PREEMPTION OF STATE LAW.—Except as other7 wise provided in this Act, this Act supersedes State law to

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

9 year 2000 claim that is inconsistent with State law.

10 TITLE I—UNIFORM PRE11 LITIGATION PROCEDURES

12 FOR YEAR 2000 ACTIONS

13 SEC. 101. NOTICE PROCEDURES TO AVOID UNNECESSARY

14 YEAR 2000 ACTIONS.

15 (a) NOTIFICATION PERIOD.—Before filing a year 2000

16 action, except an action that seeks only injunctive relief,

17 a prospective plaintiff shall send by certified mail to each

18 prospective defendant a written notice that identifies, with

19 particularity as to any year 2000 claim—

20 (1) any symptoms of any material defect alleged

21 to have caused harm or loss;

22 (2) the harm or loss allegedly suffered by the pro23 spective plaintiff;
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1 (3) the facts that lead the prospective plaintiff to

2 hold such person responsible for both the defect and

3 the injury;

4 (4) the relief or action sought by the prospective

5 plaintiff; and

6 (5) the name, title, address, and telephone num7 bers of any individual who has authority to negotiate

8 a resolution of the dispute on behalf of the prospective

9 plaintiff.

10 Except as provided in subsection (c), the prospective plain11 tiff shall not commence an action in Federal or State court

12 until the expiration of 90 days after the date on which such

13 notice is received. Such 90-day period shall be excluded in

14 the computation of any applicable statute of limitations.

15 (b) RESPONSE TO NOTICE.—

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

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

18 prospective defendant shall send by certified mail

19 with return receipt requested to each prospective

20 plaintiff a written statement acknowledging receipt of

21 the notice and describing any actions it has taken or

22 will take by not later than 60 days after the end of

23 that 30-day period, to remedy the problem identified

24 by the prospective plaintiff.
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1 (2) INADMISSIBILITY.—A written statement re2 quired by this subsection is not admissible in evi3 dence, under Rule 408 of the Federal Rules of Evi4 dence or any analogous rule of evidence in any State,

5 in any proceeding to prove liability for, or the inva6 lidity of, a claim or its amount, or otherwise as evi7 dence of conduct or statements made in compromise

8 negotiations.

9 (3) PRESUMPTIVE TIME OF RECEIPT.—For pur10 poses of paragraph (1), a notice under subsection (a)

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

12 (c) FAILURE TO RESPOND.—If a prospective defend13 ant fails to respond to a notice provided pursuant to sub14 section (a) within the 30-day period specified in subsection

15 (b) or does not describe the action, if any, that the prospec16 tive defendant has taken or will take to remedy the problem

17 identified by the prospective plaintiff within the subsequent

18 60 days, the 90-day period specified in subsection (a) shall

19 terminate at the end of that 30-day period as to that pro20 spective defendant and the prospective plaintiff may there21 after commence its action against that prospective defend22 ant.

23 (d) FAILURE TO PROVIDE NOTICE.—If a defendant de24 termines that a plaintiff has filed a year 2000 action with25 out providing the notice specified in subsection (a) and
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1 without awaiting the expiration of the 90-day period speci2 fied in subsection (a), the defendant may treat the plain3 tiff’s complaint as such a notice by so informing the court

4 and the plaintiff in its initial response to the complaint.

5 If any defendant elects to treat the complaint as such a

6 notice—

7 (1) the court shall stay all discovery in the ac8 tion involving that defendant for the applicable time

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

10 may be, after filing of the complaint; and

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

12 pleadings shall be tolled during such applicable pe13 riod.

14 (e) EFFECT OF CONTRACTUAL WAITING PERIODS.—In

15 cases in which a contract or a statute enacted before Janu16 ary 1, 1999, requires notice of nonperformance and provides

17 for a period of delay prior to the initiation of suit for

18 breach or repudiation of contract, the period of delay pro19 vided in the contract or the statute is controlling over the

20 waiting period specified in subsections (a) and (d).

21 (f) SANCTION FOR FRIVOLOUS INVOCATION OF THE

22 STAY PROVISION.—In any action in which a defendant acts

23 pursuant to subsection (d) to stay the action, and the court

24 subsequently finds that the defendant’s assertion that the

25 suit is a year 2000 action was frivolous and made for the
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1 purpose of causing unnecessary delay, the court may award

2 sanctions to opposing parties in accordance with the provi3 sions of Rule 11 of the Federal Rules of Civil Procedure

4 or the equivalent applicable State rule.

5 (g) COMPUTATION OF TIME.—For purposes of this sec6 tion, the rules regarding computation of time shall be gov7 erned by the applicable Federal or State rules of civil proce8 dure.

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

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

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

12 the requirements of the preceding subsections of this section

13 apply only to named plaintiffs in the class action.

14 SEC. 102. ALTERNATIVE DISPUTE RESOLUTION TO AVOID

15 UNNECESSARY YEAR 2000 ACTIONS.

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

17 period specified in section 101(a), either party may request

18 the other to use alternative dispute resolution. If, based

19 upon that request, the parties enter into an agreement to

20 use alternative dispute resolution, they may also agree to

21 an extension of the 90-day period.

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

23 specified in section 101(a), whether before or after the filing

24 of a complaint, either party may request the other to use

25 alternative dispute resolution.
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1 (b) PAYMENT OF MONEYS DUE.—If the parties resolve

2 their dispute through alternative dispute resolution as pro3 vided in subsection (a), the defendant shall pay all moneys

4 due within 30 days, unless another period of time is agreed

5 to by the parties or established by contract between the par6 ties.

7 (c) FORECLOSURE OF FURTHER PROCEEDINGS ON RE8 SOLVED ISSUES.—Resolution of the issues by the parties

9 prior to litigation through negotiation or alternative dis10 pute resolution shall foreclose any further proceedings with

11 respect to those issues.

12 SEC. 103. PLEADING REQUIREMENTS.

13 (a) APPLICATION WITH RULES OF CIVIL PROCE14 DURE.—This section applies exclusively to year 2000

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

16 additional information to be contained in or attached to

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

18 otherwise supersede applicable rules of Federal or State

19 civil procedure.

20 (b) NATURE AND AMOUNT OF DAMAGES.—With respect

21 to any year 2000 claim that seeks the award of money dam22 ages, the complaint shall state with particularity the nature

23 and amount of each element of damages, and the factual

24 basis for the damages calculation.
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1 (c) MATERIAL DEFECTS.—With respect to any year

2 2000 claim in which the plaintiff alleges that a product

3 or service was defective, the complaint shall identify with

4 particularity the symptoms of the material defects and shall

5 state with particularity the facts supporting the conclusion

6 that the defects are material.

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

8 year 2000 claim as to which the plaintiff may prevail only

9 on proof that the defendant acted with a particular state

10 of mind, the complaint shall, with respect to each element

11 of the year 2000 claim, state with particularity the facts

12 giving rise to a strong inference that the defendant acted

13 with the required state of mind.

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

15 (1) DISMISSAL FOR FAILURE TO MEET PLEADING

16 REQUIREMENTS.—In any year 2000 action, the court

17 shall, on the motion of any defendant, dismiss the

18 complaint without prejudice if the requirements of

19 subsection (a), (b), or (c) are not met with respect to

20 any year 2000 claim asserted therein.

21 (2) STAY OF DISCOVERY.—In any year 2000 ac22 tion, all discovery shall be stayed during the pendency

23 of any motion to dismiss, unless the court finds upon

24 the motion of any party that particularized discovery
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1 is necessary to preserve evidence or prevent undue

2 prejudice to that party.

3 (3) PRESERVATION OF EVIDENCE.—

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

5 any stay of discovery entered pursuant to this

6 subsection, unless otherwise ordered by the court,

7 any party to the action with actual notice of the

8 allegations contained in the complaint shall treat

9 all documents, data compilations (including elec10 tronically stored or recorded data), and tangible

11 objects that are in the custody or control of such

12 person and that are relevant to the allegations,

13 as if they were a subject of a continuing request

14 for production of documents from an opposing

15 party under applicable Federal or State rules of

16 civil procedure.

17 (B) SANCTION FOR WILLFUL VIOLATION.—A

18 party aggrieved by the willful failure of an op19 posing party to comply with subparagraph (A)

20 may apply to the court for an order awarding

21 appropriate sanctions.
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1 SEC. 104. DUTY OF ALL PERSONS TO MITIGATE YEAR 2000

2 COMPUTER FAILURES AND RESULTING DAM3 AGES.

4 Damages awarded for any year 2000 claim shall ex5 clude compensation for damages the plaintiff could reason6 ably have avoided in light of any disclosure or other infor7 mation of which the plaintiff was, or reasonably should

8 have been, aware, including information made available by

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

11 the year 2000 failure.

12 TITLE II—YEAR 2000 ACTIONS

13 INVOLVING CONTRACTS

14 SEC. 201. CERTAINTY OF CONTRACT TERMS FOR PREVEN15 TION OF YEAR 2000 DAMAGES.

16 (a) IN GENERAL.—Subject to subsection (b), in resolv17 ing any year 2000 claim, any written contractual term,

18 including a limitation or an exclusion of liability, or a dis19 claimer of warranty, shall be fully enforced unless the en20 forcement of that term would manifestly and directly con21 travene applicable State law embodied in any statute in

22 effect on January 1, 1999, specifically addressing that term.

23 (b) INTERPRETATION OF CONTRACT.—In resolving any

24 year 2000 claim as to which a contract to which subsection

25 (a) applies is silent with respect to a particular issue, the

26 interpretation of the contract with respect to that issue shall
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1 be determined by applicable law in effect at the time the

2 contract was executed.

3 SEC. 202. APPLICATION OF EXISTING IMPOSSIBILITY OR

4 COMMERCIAL IMPRACTICABILITY DOC5 TRINES.

6 (a) DOCTRINE OF IMPOSSIBILITY AND COMMERCIAL

7 IMPRACTICABILITY.—With respect to any year 2000 claim

8 for breach or repudiation of contract, the applicability of

9 the doctrines of impossibility and commercial imprac10 ticability shall be determined by the law in existence on

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

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

13 based upon such doctrines.

14 (b) REASONABLE EFFORTS.—To the extent that impos15 sibility or commercial impracticability is raised as a de16 fense against a claim for breach or repudiation of contract,

17 the party asserting the defense shall be allowed to offer evi18 dence that its implementation of the contract, or its efforts

19 to implement the contract, were reasonable in light of the

20 circumstances.

21 SEC. 203. PROTECTION OF PERSONS FROM LIABILITY NOT

22 ANTICIPATED IN YEAR 2000 CONTRACTS.

23 With respect to any year 2000 claim involving a

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

25 party may claim or be awarded any category of damages
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1 unless such damages are allowed by the express terms of

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

3 by operation of the applicable Federal or State law that

4 governed interpretation of the contract at the time the con5 tract was entered into.

6 TITLE III—YEAR 2000 ACTIONS

7 INVOLVING TORT AND OTHER

8 NONCONTRACTUAL CLAIMS

9 SEC. 301. PROPORTIONATE LIABILITY.

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

11 judgment is entered with respect to a year 2000 claim, other

12 than a claim for breach or repudiation of contract, shall

13 be liable solely for the portion of the judgment that cor14 responds to the percentage of responsibility of that person,

15 as determined under subsection (b).

16 (b) DETERMINATION OF RESPONSIBILITY.—

17 (1) IN GENERAL.—With respect to any year 2000

18 claim, the court shall instruct the jury to answer spe19 cial interrogatories, or if there is no jury, shall make

20 findings, with respect to each defendant and plaintiff,

21 and each of the other persons claimed by any of the

22 parties to have caused or contributed to the loss in23 curred by the plaintiff, including (but not limited to)

24 persons who have entered into settlements with the

25 plaintiff or plaintiffs, concerning the percentage of re-
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1 sponsibility of the defendant, the plaintiff, and each

2 such person, measured as a percentage of the total

3 fault of all persons who caused or contributed to the

4 total loss incurred by the plaintiff.

5 (2) CONTENTS OF SPECIAL INTERROGATORIES OR

6 FINDINGS.—The responses to interrogatories, or find7 ings, as appropriate, under paragraph (1) shall speci8 fy the total amount of damages that the plaintiff is

9 entitled to recover and the percentage of responsibility

10 of each person found to have caused or contributed to

11 the loss incurred by the plaintiff or plaintiffs.

12 (3) FACTORS FOR CONSIDERATION.—In deter13 mining the percentage of responsibility under this

14 subsection, the trier of fact shall consider—

15 (A) the nature of the conduct of each person

16 alleged to have caused or contributed to the loss

17 incurred by the plaintiff; and

18 (B) the nature and extent of the causal rela19 tionship between the conduct of each such person

20 and the damages incurred by the plaintiff or

21 plaintiffs.

22 (4) NONDISCLOSURE TO JURY.—The standard

23 for allocation of damages under paragraph (1) shall

24 not be disclosed to members of the jury.
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1 SEC. 302. LIMITATION ON BYSTANDER LIABILITY FOR YEAR

2 2000 FAILURES.

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

4 claim for money damages in which—

5 (1) the defendant is not the manufacturer, seller,

6 or distributor of a product, or the provider of a serv7 ice, that suffers or causes the year 2000 failure at

8 issue,

9 (2) the plaintiff is not in substantial privity

10 with the defendant, and

11 (3) the defendant’s actual or constructive aware12 ness of an actual or potential year 2000 failure is an

13 element of the claim under applicable law,

14 the defendant shall not be liable unless the plaintiff, in ad15 dition to establishing all other requisite elements of the

16 claim, proves by clear and convincing evidence that the de17 fendant actually knew, or recklessly disregarded a known

18 and substantial risk, that such failure would occur.

19 (b) SUBSTANTIAL PRIVITY.—For purposes of sub20 section (a)(2), a plaintiff and a defendant are in substan21 tial privity when, in a year 2000 claim arising out of the

22 performance of professional services, the plaintiff and the

23 defendant either have contractual relations with one an24 other or the plaintiff is a person who, prior to the defend25 ant’s performance of such services, was specifically identi-
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1 fied to and acknowledged by the defendant as a person for

2 whose special benefit the services were being performed.

3 (c) CERTAIN CLAIMS EXCLUDED.—For purposes of

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

5 constructive awareness of an actual or potential year 2000

6 failure is an element of the claim under applicable law do

7 not include claims for negligence but do include claims such

8 as fraud, constructive fraud, breach of fiduciary duty, neg9 ligent misrepresentation, and interference with contract or

10 economic advantage.

11 SEC. 303. REASONABLE EFFORTS DEFENSE.

12 With respect to any year 2000 claim seeking money

13 damages, except with respect to claims asserting breach or

14 repudiation of contract—

15 (1) the fact that a year 2000 failure occurred in

16 an entity, facility, system, product, or component that

17 was within the control of the party against whom the

18 claim is asserted shall not constitute the sole basis for

19 recovery; and

20 (2) the party against whom the claim is asserted

21 shall be entitled to establish, as a complete defense to

22 the claim, that it took measures that were reasonable

23 under the circumstances to prevent the year 2000 fail24 ure from occurring or from causing the damages upon

25 which the claim is based.
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1 SEC. 304. DAMAGES LIMITATION.

2 (a) YEAR 2000 RECOVERY FUND.—There is established

3 in the Treasury a Year 2000 Recovery Fund. In any year

4 2000 action in which punitive damages are awarded under

5 applicable law, including this Act, the entire amount of

6 such damages shall be paid into the Year 2000 Recovery

7 Fund. Amounts in the Fund shall be used for the assistance

8 of small businesses, State and local governments, and non9 profit organizations, that are affected by year 2000 failures.

10 (b) STANDARD FOR AWARDS.—With respect to any

11 year 2000 claim for which punitive damages may be

12 awarded under applicable law, the defendant shall not be

13 liable for punitive damages unless the plaintiff proves by

14 clear and convincing evidence that conduct carried out by

15 the defendant showed a conscious, flagrant indifference to

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

17 of the harm or loss that is the subject of the year 2000 claim.

18 This requirement is in addition to any other requirement

19 in applicable law for the award of such damages.

20 (c) CAPS ON PUNITIVE DAMAGES.—

21 (1) IN GENERAL.—With respect to any year 2000

22 claim, if a defendant is found liable for punitive

23 damages, the amount of punitive damages that may

24 be awarded to a plaintiff shall not exceed the greater

25 of—
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1 (A) 3 times the amount awarded to the

2 plaintiff for compensatory damages; or

3 (B) $250,000.

4 (2) SPECIAL RULE.—

5 (A) IN GENERAL.—Notwithstanding para6 graph (1), with respect to any year 2000 claim,

7 if the defendant is found liable for punitive dam8 ages and the defendant—

9 (i) is an individual whose net worth

10 does not exceed $500,000,

11 (ii) is an owner of an unincorporated

12 business that has fewer than 25 full-time

13 employees, or

14 (iii) is—

15 (I) a partnership,

16 (II) corporation,

17 (III) association,

18 (IV) unit of local government, or

19 (V) organization,

20 that has fewer than 25 full-time employees,

21 the amount of punitive damages shall not exceed

22 the lesser of 3 times the amount awarded to the

23 plaintiff for compensatory damages, or $250,000.

24 (B) APPLICABILITY.—For purposes of deter25 mining the applicability of this paragraph to a
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1 corporation, the number of employees of a sub2 sidiary of a wholly owned corporation shall in3 clude all employees of a parent corporation or

4 any subsidiary of that parent corporation.

5 (3) APPLICATION OF LIMITATIONS BY THE

6 COURT.—The limitations contained in paragraphs (1)

7 and (2) shall be applied by the court and shall not

8 be disclosed to the jury.

9 SEC. 305. RECOVERY OF ECONOMIC DAMAGES FOR YEAR

10 2000 CLAIMS.

11 (a) LIMITATION ON RECOVERY OF ECONOMIC

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

13 year 2000 claim alleging a nonintentional tort may recover

14 economic losses only upon establishing, in addition to all

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

16 one of the following circumstances exists:

17 (1) The recovery of such losses is provided for in

18 a contract to which the plaintiff is a party.

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

20 claim based on damage to tangible personal or real

21 property caused by a year 2000 failure (other than

22 damage to property that is the subject of a contract

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

24 (b) RECOVERY MUST BE PERMITTED UNDER APPLI25 CABLE LAW.—Economic losses shall be recoverable under
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1 this section only if applicable Federal law, or applicable

2 State law embodied in statute or controlling judicial prece3 dent as of January 1, 1999, permits the recovery of such

4 losses.

5 SEC. 306. LIABILITY OF OFFICERS AND DIRECTORS.

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

7 business or other organization (including a corporation,

8 unincorporated association, partnership, or nonprofit orga9 nization) shall not be personally liable with respect to any

10 year 2000 claim in his or her capacity as a director or

11 officer of the business or organization for an aggregate

12 amount that exceeds the greater of—

13 (1) $100,000; or

14 (2) the amount of cash compensation received by

15 the director or officer from the business or organiza16 tion during the 12-month period immediately pre17 ceding the act or omission for which liability was im18 posed.

19 (b) RULE OF CONSTRUCTION.—Nothing in this section

20 shall be deemed to impose, or to permit the imposition of,

21 personal liability on any director, officer, or trustee in ex22 cess of the aggregate amount of liability to which such direc23 tor, officer, or trustee would be subject under applicable

24 State law in existence on January 1, 1999 (including any

25 charter or bylaw authorized by such State law).
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1 TITLE IV—YEAR 2000 CLASS

2 ACTIONS

3 SEC. 401. MINIMUM INJURY REQUIREMENT.

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

5 a year 2000 claim that a product or service is defective,

6 the action may be maintained as a class action in Federal

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

8 prerequisites established by applicable Federal or State law

9 and the court also finds that the alleged defect in the prod10 uct or service was a material defect as to a majority of

11 the members of the class.

12 (b) DETERMINATION BY COURT.—As soon as prac13 ticable after the commencement of a year 2000 action in14 volving a year 2000 claim that a product or service is defec15 tive and that is brought as a class action, the court shall

16 determine by order whether the requirement set forth in sub17 section (a) is satisfied. An order under this subsection may

18 be conditional, and may be altered or amended before the

19 decision on the merits.

20 SEC. 402. NOTIFICATION.

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

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

23 any other notice required by applicable Federal or State

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

25 class by United States mail, return receipt requested. Per-
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1 sons whose actual receipt of the notice is not verified by

2 the court or by counsel for one of the parties shall be ex3 cluded from the class unless those persons inform the court

4 in writing, on a date no later than the commencement of

5 trial or entry of judgment, that they wish to join the class.

6 (b) CONTENTS OF NOTICE.—In addition to any infor7 mation required by applicable Federal or State law, the no8 tice described in this subsection shall—

9 (1) concisely and clearly describe the nature of

10 the action;

11 (2) identify the jurisdiction whose law will gov12 ern the action and where the action is pending;

13 (3) identify any potential claims that class coun14 sel chose not to pursue so that the action would sat15 isfy class certification requirements;

16 (4) describe the fee arrangements with class

17 counsel, including the hourly fee being charged, or, if

18 it is a contingency fee, the percentage of the final

19 award which will be paid, including an estimate of

20 the total amount that would be paid if the requested

21 damages were to be granted; and

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

23 class.

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

25 that is brought as a class action may not enter into, nor
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1 request court approval of, any settlement or compromise be2 fore the class has been certified.

3 SEC. 403. DISMISSAL PRIOR TO CERTIFICATION.

4 Before determining whether to certify a class in a year

5 2000 action, the court may decide a motion to dismiss or

6 for summary judgment made by any party if the court con7 cludes that decision will promote the fair and efficient adju8 dication of the controversy and will not cause undue delay.

9 SEC. 404. FEDERAL JURISDICTION IN YEAR 2000 CLASS AC10 TIONS.

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

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

13 in the United States district court or removed to the appro14 priate United States district court if the amount in con15 troversy is greater than the sum or value of $1,000,000 (ex16 clusive of interest and costs), computed on the basis of all

17 claims to be determined in the action.

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

19 brought or removed as a class action under this section if—

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

21 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 offi2 cials, or other governmental entities against whom the

3 United States district court may be foreclosed from

4 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 or

10 brought in Federal or State court.

11 SEC. 502. DEFINITIONS.

12 In this title:

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

14 natural person, professional law association, corpora15 tion, 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 coun19 seling of or representation by an attorney, but such

20 term shall not include other assistance incurred, di21 rectly or indirectly, in connection with an attorney’s

22 services, such as administrative or secretarial assist23 ance, overhead, travel expenses, witness fees, or prepa24 ration by a person other than the attorney of any

25 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’’ means

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

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

10 of a client in engaging an attorney’s services, whether

11 by express or implied agreement, by seeking and ob12 taining the attorney’s services.

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

14 OF INFORMATION REGARDING FEES AND SET15 TLEMENT PROPOSALS.

16 Before being retained by a client with respect to a year

17 2000 claim or a year 2000 action, an attorney shall disclose

18 to the client the client’s rights under this title and the cli19 ent’s right to receive a written statement of the information

20 described under sections 504 and 505.

21 SEC. 504. INFORMATION AFTER INITIAL MEETING.

22 (a) WRITTEN DISCLOSURE OF FEES.—Within 30 days

23 after the disclosure described under section 503, an attorney

24 retained by a client with respect to a year 2000 claim or
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1 a year 2000 action shall provide a written statement to the

2 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 con10 tingent fee basis, the attorney’s contingent fee for serv11 ices in pursuing the year 2000 claim or year 2000 ac12 tion and any conditions, limitations, restrictions, or

13 other qualifications on the fee, including likely ex14 penses and the client’s obligation for those expenses.

15 (b) CONSUMER’S RIGHT TO TIMELY UPDATED INFOR16 MATION ABOUT FEES.—In addition to the requirements

17 contained in subsection (a), in the case of an attorney re18 tained on an hourly basis, the attorney shall also render

19 regular statements (at least once each 90 days) to the client

20 containing a description of hourly charges and expenses in21 curred in the pursuit of the client’s year 2000 claim or year

22 2000 action by each attorney assigned to 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 year

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

7 of all written settlement offers to the client and of the attor8 ney’s estimate of the likelihood of achieving a more or less

9 favorable resolution to the year 2000 claim or year 2000

10 action, the likely timing of such resolution, and the likely

11 attorney’s fees and expenses required to obtain such a reso12 lution. An attorney retained by a client with respect to a

13 year 2000 claim or a year 2000 action shall, within a rea14 sonable time not later than 60 days after the date on which

15 the year 2000 claim or year 2000 action is finally settled

16 or adjudicated, provide a written statement to the client

17 containing—

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

19 hourly basis, the actual number of hours expended by

20 each attorney on behalf of the client in connection

21 with the year 2000 claim or year 2000 action, the at22 torney’s hourly rate, and the total amount of hourly

23 fees; and

24 (2) in the case of an attorney retained on a con25 tingent fee basis, the total contingent fee for the attor-
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1 ney’s services in connection with the year 2000 claim

2 or year 2000 action.

3 SEC. 506. CLASS ACTIONS.

4 An attorney representing a class or a defendant in a

5 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 named

8 representative of the class. The presiding judge shall, at the

9 outset of the year 2000 action, determine a reasonable attor10 ney’s fee by determining the appropriate hourly rate and

11 the maximum percentage of the recovery to be paid in attor12 ney’s fees. Notwithstanding any other provision of law or

13 agreement to the contrary, the presiding judge shall award

14 attorney’s fees only pursuant to this title.

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

16 FEES AFTER AN OFFER OF SETTLEMENT.

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

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

19 10 days before trial, serve upon any adverse party a written

20 offer to settle the year 2000 claim for money or property,

21 including a motion to dismiss the claim, and to enter into

22 a stipulation dismissing the claim or allowing judgment

23 to be entered according to the terms of the offer. Any such

24 offer, together with proof of service thereof, shall be filed

25 with the clerk of the court.
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1 (b) ACCEPTANCE OF OFFER.—If the party receiving an

2 offer under subsection (a) serves written notice on the offeror

3 that the offer is accepted, either party may then file with

4 the clerk of the court the notice of acceptance, together with

5 proof of service thereof.

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

7 that an offer under subsection (a) is made but not accepted

8 does not preclude a subsequent offer under subsection (a).

9 Evidence of an offer is not admissible for any purpose ex10 cept in proceedings to enforce a settlement, or to determine

11 costs and expenses under this section.

12 (d) EXEMPTION OF CLAIMS.—At any time before judg13 ment is entered, the court, upon its own motion or upon

14 the motion of any party, may exempt from this section any

15 year 2000 claim that the court finds presents a question

16 of law or fact that is novel and important and that substan17 tially affects nonparties. If a claim is exempted from this

18 section, all offers made by any party under subsection (a)

19 with respect to that claim shall be void and have no effect.

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

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

22 to a year 2000 claim, including any motion to dismiss the

23 claim, are not accepted and the dollar amount of the judg24 ment, verdict, or order that is finally issued (exclusive of

25 costs, expenses, and attorneys’ fees incurred after judgment
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1 or trial) with respect to the year 2000 claim is not more

2 favorable to the offeree with respect to the year 2000 claim

3 than the last such offer, the offeror may file with the court,

4 within 10 days after the final judgment, verdict, or order

5 is issued, a petition for payment of costs and expenses, in6 cluding attorneys’ fees, incurred with respect to the year

7 2000 claim from the date the last such offer was made or,

8 if the offeree made an offer under this section, from the date

9 the last such offer by the offeree was made.

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

11 pursuant to a petition filed under subsection (e) with re12 spect to a year 2000 claim, that the dollar amount of the

13 judgment, verdict, or order that is finally issued is not more

14 favorable to the offeree with respect to the year 2000 claim

15 than the last such offer, the court shall order the offeree to

16 pay the offeror’s costs and expenses, including attorneys’

17 fees, incurred with respect to the year 2000 claim from the

18 date the last offer was made or, if the offeree made an offer

19 under this section, from the date the last such offer by the

20 offeree was made, unless the court finds that requiring the

21 payment of such costs and expenses would be manifestly un22 just.

23 (g) AMOUNT OF ATTORNEY’S FEES.—Attorney’s fees

24 under subsection (f) shall be a reasonable attorney’s fee at25 tributable to the year 2000 claim involved, calculated on
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1 the basis of an hourly rate which may not exceed that which

2 the court considers acceptable in the community in which

3 the attorney practices law, taking into account the attor4 ney’s qualifications and experience and the complexity of

5 the case, except that the attorney’s fees under subsection (f)

6 may not exceed—

7 (A) the actual cost incurred by the offeree for an

8 attorney’s fee payable to an attorney for services in

9 connection with the year 2000 claim; or

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

11 due to a contingency fee agreement, a reasonable cost

12 that would have been incurred by the offeree for an

13 attorney’s noncontingent fee payable to an attorney

14 for services in connection with the year 2000 claim.

15 (h) INAPPLICABILITY TO EQUITABLE REMEDIES.—

16 This section does not apply to any claim seeking an equi17 table remedy.

18 (i) INAPPLICABILITY TO CLASS ACTIONS.—This sec19 tion does not apply with respect to a year 2000 action

20 brought as a class action.

21 SEC. 508. ENFORCEMENT OF CONSUMER PROTECTION

22 RULES IN YEAR 2000 CLAIMS AND ACTIONS.

23 A client whose attorney fails to comply with this title

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

25 the year 2000 claim or year 2000 action was filed or could
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1 have been filed or other court of competent jurisdiction. The

2 remedy provided by this section is in addition to any other

3 available remedy or penalty.

Æ