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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 775 Enrolled Bill (ENR)]

        H.R.775

                       One Hundred Sixth Congress

                                 of the

                        United States of America

                          AT THE FIRST SESSION

         Begun and held at the City of Washington on Wednesday,
   the sixth day of January, one thousand nine hundred and ninety-nine

                                 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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF SECTIONS.

    (a) Short Title.--This Act may be cited as the ``Y2K Act''.
    (b) Table of Sections.--The table of sections for this Act is as 
follows:
Sec.  1. Short title; table of sections.
Sec.  2. Findings and purposes.
Sec.  3. Definitions.
Sec.  4. Application of Act.
Sec.  5. Punitive damages limitations.
Sec.  6. Proportionate liability.
Sec.  7. Prelitigation notice.
Sec.  8. Pleading requirements.
Sec.  9. Duty to mitigate.
Sec. 10. Application of existing impossibility or commercial 
          impracticability 
          doctrines.
Sec. 11. Damages limitation by contract.
Sec. 12. Damages in tort claims.
Sec. 13. State of mind; bystander liability; control.
Sec. 14. Appointment of special masters or magistrate judges for Y2K 
          actions.
Sec. 15. Y2K actions as class actions.
Sec. 16. Applicability of State law.
Sec. 17. Admissible evidence ultimate issue in State courts.
Sec. 18. Suspension of penalties for certain year 2000 failures by small 
          business concerns.

SEC. 2. FINDINGS AND PURPOSES.

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

SEC. 3. DEFINITIONS.

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

SEC. 4. APPLICATION OF ACT.

    (a) General Rule.--This Act applies to any Y2K action brought after 
January 1, 1999, for a Y2K failure occurring before January 1, 2003, or 
for a potential Y2K failure that could occur or has allegedly caused 
harm or injury before January 1, 2003, including any appeal, remand, 
stay, or other judicial, administrative, or alternative dispute 
resolution proceeding in such an action.
    (b) No New Cause of Action Created.--Nothing in this Act creates a 
new cause of action, and, except as otherwise explicitly provided in 
this Act, nothing in this Act expands any liability otherwise imposed 
or limits any defense otherwise available under Federal or State law.
    (c) Claims for Personal Injury or Wrongful Death Excluded.--This 
Act does not apply to a claim for personal injury or for wrongful 
death.
    (d) Warranty and Contract Preservation.--
        (1) In general.--Subject to paragraph (2), in any Y2K action 
    any written contractual term, including a limitation or an 
    exclusion of liability, or a disclaimer of warranty, shall be 
    strictly enforced unless the enforcement of that term would 
    manifestly and directly contravene applicable State law embodied in 
    any statute in effect on January 1, 1999, specifically addressing 
    that term.
        (2) Interpretation of contract.--In any Y2K action in which a 
    contract to which paragraph (1) applies is silent as to a 
    particular issue, the interpretation of the contract as to that 
    issue shall be determined by applicable law in effect at the time 
    the contract was executed.
        (3) Unconscionability.--Nothing in paragraph (1) shall prevent 
    enforcement of State law doctrines of unconscionability, including 
    adhesion, recognized as of January 1, 1999, in controlling judicial 
    precedent by the courts of the State whose law applies to the Y2K 
    action.
    (e) Preemption of State Law.--This Act supersedes State law to the 
extent that it establishes a rule of law applicable to a Y2K action 
that is inconsistent with State law, but nothing in this Act 
implicates, alters, or diminishes the ability of a State to defend 
itself against any claim on the basis of sovereign immunity.
    (f) Application with Year 2000 Information and Readiness Disclosure 
Act.--Nothing in this Act supersedes any provision of the Year 2000 
Information and Readiness Disclosure Act.
    (g) Application to Actions Brought by a Government Entity.--
        (1) In general.--To the extent provided in this subsection, 
    this Act shall apply to an action brought by a government entity 
    described in section 3(1)(C).
        (2) Definitions.--In this subsection:
            (A) Defendant.--
                (i) In general.--The term ``defendant'' includes a 
            State or local government.
                (ii) State.--The term ``State'' means each of the 
            several States of the United States, the District of 
            Columbia, the Commonwealth of Puerto Rico, the Virgin 
            Islands, Guam, American Samoa, and the Commonwealth of the 
            Northern Mariana Islands.
                (iii) Local government.--The term ``local government'' 
            means--

                    (I) any county, city, town, township, parish, 
                village, or other general purpose political subdivision 
                of a State; and
                    (II) any combination of political subdivisions 
                described in subclause (I) recognized by the Secretary 
                of Housing and Urban Development.

            (B) Y2K upset.--The term ``Y2K upset''--
                (i) means an exceptional temporary noncompliance with 
            applicable federally enforceable measurement, monitoring, 
            or reporting requirements directly related to a Y2K failure 
            that are beyond the reasonable control of the defendant 
            charged with compliance; and
                (ii) does not include--

                    (I) noncompliance with applicable federally 
                enforceable measurement, monitoring, or reporting 
                requirements that constitutes or would create an 
                imminent threat to public health, safety, or the 
                environment;
                    (II) noncompliance with applicable federally 
                enforceable measurement, monitoring, or reporting 
                requirements that provide for the safety and soundness 
                of the banking or monetary system, or for the integrity 
                of the national securities markets, including the 
                protection of depositors and investors;
                    (III) noncompliance with applicable federally 
                enforceable measurement, monitoring, or reporting 
                requirements to the extent caused by operational error 
                or negligence;
                    (IV) lack of reasonable preventative maintenance;
                    (V) lack of preparedness for a Y2K failure; or
                    (VI) noncompliance with the underlying federally 
                enforceable requirements to which the applicable 
                federally enforceable measurement, monitoring, or 
                reporting requirement relates.

        (3) Conditions necessary for a demonstration of a y2k upset.--A 
    defendant who wishes to establish the affirmative defense of Y2K 
    upset shall demonstrate, through properly signed, contemporaneous 
    operating logs, or other relevant evidence that--
            (A) the defendant previously made a reasonable good faith 
        effort to anticipate, prevent, and effectively remediate a 
        potential Y2K failure;
            (B) a Y2K upset occurred as a result of a Y2K failure or 
        other emergency directly related to a Y2K failure;
            (C) noncompliance with the applicable federally enforceable 
        measurement, monitoring, or reporting requirement was 
        unavoidable in the face of an emergency directly related to a 
        Y2K failure and was necessary to prevent the disruption of 
        critical functions or services that could result in harm to 
        life or property;
            (D) upon identification of noncompliance the defendant 
        invoking the defense began immediate actions to correct any 
        violation of federally enforceable measurement, monitoring, or 
        reporting requirements; and
            (E) the defendant submitted notice to the appropriate 
        Federal regulatory authority of a Y2K upset within 72 hours 
        from the time that the defendant became aware of the upset.
        (4) Grant of a y2k upset defense.--Subject to the other 
    provisions of this subsection, the Y2K upset defense shall be a 
    complete defense to the imposition of a penalty in any action 
    brought as a result of noncompliance with federally enforceable 
    measurement, monitoring, or reporting requirements for any 
    defendant who establishes by a preponderance of the evidence that 
    the conditions set forth in paragraph (3) are met.
        (5) Length of y2k upset.--The maximum allowable length of the 
    Y2K upset shall be not more than 15 days beginning on the date of 
    the upset unless specific relief by the appropriate regulatory 
    authority is granted.
        (6) Fraudulent invocation of y2k upset defense.--Fraudulent use 
    of the Y2K upset defense provided for in this subsection shall be 
    subject to the sanctions provided in section 1001 of title 18, 
    United States Code.
        (7) Expiration of Defense.--The Y2K upset defense may not be 
    asserted for a Y2K upset occurring after June 30, 2000.
        (8) Preservation of authority.--Nothing in this subsection 
    shall affect the authority of a government entity to seek 
    injunctive relief or require a defendant to correct a violation of 
    a federally enforceable measurement, monitoring, or reporting 
    requirement.
    (h) Consumer Protection From Y2K Failures.--
        (1) In general.--No person who transacts business on matters 
    directly or indirectly affecting residential mortgages shall cause 
    or permit a foreclosure on any such mortgage against a consumer as 
    a result of an actual Y2K failure that results in an inability to 
    accurately or timely process any mortgage payment transaction.
        (2) Notice.--A consumer who is affected by an inability 
    described in paragraph (1) shall notify the servicer for the 
    mortgage, in writing and within 7 business days from the time that 
    the consumer becomes aware of the Y2K failure and the consumer's 
    inability to accurately or timely fulfill his or her obligation to 
    pay, of such failure and inability and shall provide to the 
    servicer any available documentation with respect to the failure.
        (3) Actions may resume after grace period.--Notwithstanding 
    paragraph (1), an action prohibited under paragraph (1) may be 
    resumed, if the consumer's mortgage obligation has not been paid 
    and the servicer of the mortgage has not expressly and in writing 
    granted the consumer an extension of time during which to pay the 
    consumer's mortgage obligation, but only after the later of--
            (A) four weeks after January 1, 2000; or
            (B) four weeks after notification is made as required under 
        paragraph (2), except that any notification made on or after 
        March 15, 2000, shall not be effective for purposes of this 
        subsection.
        (4) Applicability.--This subsection does not apply to 
    transactions upon which a default has occurred before December 15, 
    1999, or with respect to which an imminent default was foreseeable 
    before December 15, 1999.
        (5) Enforcement of obligations merely tolled.--This subsection 
    delays but does not prevent the enforcement of financial 
    obligations, and does not otherwise affect or extinguish the 
    obligation to pay.
        (6) Definition.--In this subsection--
            (A) The term ``consumer'' means a natural person.
            (B) The term ``residential mortgage'' has the meaning given 
        the term ``federally related mortgage loan'' under section 3 of 
        the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 
        2602).
            (C) The term ``servicer'' means the person, including any 
        successor, responsible for receiving any scheduled periodic 
        payments from a consumer pursuant to the terms of a residential 
        mortgage, including amounts for any escrow account, and for 
        making the payments of principal and interest and such other 
        payments with respect to the amounts received from the borrower 
        as may be required pursuant to the terms of the mortgage. Such 
        term includes the person, including any successor, who makes or 
        holds a loan if such person also services the loan.
    (i) Applicability to Securities Litigation.--In any Y2K action in 
which the underlying claim arises under the securities laws (as defined 
in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)), the provisions of this Act, other than section 13(b) of this 
Act, shall not apply.

SEC. 5. PUNITIVE DAMAGES LIMITATIONS.

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

SEC. 6. PROPORTIONATE LIABILITY.

    (a) In General.--Except in a Y2K action that is a contract action, 
and except as provided in subsections (b) through (g), a person against 
whom a final judgment is entered in a Y2K action shall be liable solely 
for the portion of the judgment that corresponds to the relative and 
proportionate responsibility of that person. In determining the 
percentage of responsibility of any defendant, the trier of fact shall 
determine that percentage as a percentage of the total fault of all 
persons, including the plaintiff, who caused or contributed to the 
total loss incurred by the plaintiff.
    (b) Proportionate Liability.--
        (1) Determination of responsibility.--In any Y2K action that is 
    not a contract action, the court shall instruct the jury to answer 
    special interrogatories, or, if there is no jury, the court shall 
    make findings with respect to each defendant, including defendants 
    who have entered into settlements with the plaintiff or plaintiffs, 
    concerning--
            (A) the percentage of responsibility, if any, of each 
        defendant, measured as a percentage of the total fault of all 
        persons who caused or contributed to the loss incurred by the 
        plaintiff; and
            (B) if alleged by the plaintiff, whether the defendant 
        (other than a defendant who has entered into a settlement 
        agreement with the plaintiff)--
                (i) acted with specific intent to injure the 
            plaintiff; or
                (ii) knowingly committed fraud.
        (2) Contents of special interrogatories or findings.--The 
    responses to interrogatories or findings under paragraph (1) shall 
    specify the total amount of damages that the plaintiff is entitled 
    to recover and the percentage of responsibility of each defendant 
    found to have caused or contributed to the loss incurred by the 
    plaintiff.
        (3) Factors for consideration.--In determining the percentage 
    of responsibility under this subsection, the trier of fact shall 
    consider--
            (A) the nature of the conduct of each person found to have 
        caused or contributed to the loss incurred by the plaintiff; 
        and
            (B) the nature and extent of the causal relationship 
        between the conduct of each such person and the damages 
        incurred by the plaintiff.
    (c) Joint Liability for Specific Intent or Fraud.--
        (1) In general.--Notwithstanding subsection (a), the liability 
    of a defendant in a Y2K action that is not a contract action is 
    joint and several if the trier of fact specifically determines that 
    the defendant--
            (A) acted with specific intent to injure the 
        plaintiff; or
            (B) knowingly committed fraud.
        (2) Fraud; recklessness.--
            (A) Knowing commission of fraud described.--For purposes of 
        subsection (b)(1)(B)(ii) and paragraph (1)(B) of this 
        subsection, a defendant knowingly committed fraud if the 
        defendant--
                (i) made an untrue statement of a material fact, with 
            actual knowledge that the statement was false;
                (ii) omitted a fact necessary to make the statement not 
            be misleading, with actual knowledge that, as a result of 
            the omission, the statement was false; and
                (iii) knew that the plaintiff was reasonably likely to 
            rely on the false statement.
            (B) Recklessness.--For purposes of subsection (b)(1)(B) and 
        paragraph (1) of this subsection, reckless conduct by the 
        defendant does not constitute either a specific intent to 
        injure, or the knowing commission of fraud, by the defendant.
        (3) Right to contribution not affected.--Nothing in this 
    section affects the right, under any other law, of a defendant to 
    contribution with respect to another defendant found under 
    subsection (b)(1)(B), or determined under paragraph (1)(B) of this 
    subsection, to have acted with specific intent to injure the 
    plaintiff or to have knowingly committed fraud.
    (d) Special Rules.--
        (1) Uncollectible share.--
            (A) In general.--Notwithstanding subsection (a), if, upon 
        motion made not later than 6 months after a final judgment is 
        entered in any Y2K action that is not a contract action, the 
        court determines that all or part of the share of the judgment 
        against a defendant for compensatory damages is not collectible 
        against that defendant, then each other defendant in the action 
        is liable for the uncollectible share as follows:
                (i) Percentage of net worth.--The other defendants are 
            jointly and severally liable for the uncollectible share if 
            the plaintiff establishes that--

                    (I) the plaintiff is an individual whose 
                recoverable damages under the final judgment are equal 
                to more than 10 percent of the net worth of the 
                plaintiff; and
                    (II) the net worth of the plaintiff is less than 
                $200,000.

                (ii) Other plaintiffs.--For a plaintiff not described 
            in clause (i), each of the other defendants is liable for 
            the uncollectible share in proportion to the percentage of 
            responsibility of that defendant.
                (iii) For a plaintiff not described in clause (i), in 
            addition to the share identified in clause (ii), the 
            defendant is liable for an additional portion of the 
            uncollectible share in an amount equal to 50 percent of the 
            amount determined under clause (ii) if the plaintiff 
            demonstrates by a preponderance of the evidence that the 
            defendant acted with reckless disregard for the likelihood 
            that its acts would cause injury of the sort suffered by 
            the plaintiff.
            (B) Overall limit.--The total payments required under 
        subparagraph (A) from all defendants may not exceed the amount 
        of the uncollectible share.
            (C) Subject to contribution.--A defendant against whom 
        judgment is not collectible is subject to contribution and to 
        any continuing liability to the plaintiff on the judgment.
            (D) Suits by consumers.--
                (i) Notwithstanding subparagraph (A), the other 
            defendants are jointly and severally liable for the 
            uncollectible share if--

                    (I) the plaintiff is a consumer whose suit alleges 
                or arises out of a defect in a consumer product; and
                    (II) the plaintiff is suing as an individual and 
                not as part of a class action.

                (ii) In this subparagraph:

                    (I) The term ``class action'' means--

                        (aa) a single lawsuit in which: (1) damages are 
                    sought on behalf of more than 10 persons or 
                    prospective class members; or (2) one or more named 
                    parties seek to recover damages on a representative 
                    basis on behalf of themselves and other unnamed 
                    parties similarly situated; or
                        (bb) any group of lawsuits filed in or pending 
                    in the same court in which: (1) damages are sought 
                    on behalf of more than 10 persons; and (2) the 
                    lawsuits are joined, consolidated, or otherwise 
                    proceed as a single action for any purpose.

                    (II) The term ``consumer'' means an individual who 
                acquires a consumer product for purposes other than 
                resale.
                    (III) The term ``consumer product'' means any 
                personal property or service which is normally used for 
                personal, family, or household purposes.

        (2) Special right of contribution.--To the extent that a 
    defendant is required to make an additional payment under paragraph 
    (1), that defendant may recover contribution--
            (A) from the defendant originally liable to make the 
        payment;
            (B) from any other defendant that is jointly and severally 
        liable;
            (C) from any other defendant held proportionately liable 
        who is liable to make the same payment and has paid less than 
        that other defendant's proportionate share of that payment; or
            (D) from any other person responsible for the conduct 
        giving rise to the payment that would have been liable to make 
        the same payment.
        (3) Nondisclosure to jury.--The standard for allocation of 
    damages under subsection (a) and subsection (b)(1), and the 
    procedure for reallocation of uncollectible shares under paragraph 
    (1) of this subsection, shall not be disclosed to members of the 
    jury.
    (e) Settlement Discharge.--
        (1) In general.--A defendant who settles a Y2K action that is 
    not a contract action at any time before final verdict or judgment 
    shall be discharged from all claims for contribution brought by 
    other persons. Upon entry of the settlement by the court, the court 
    shall enter an order constituting the final discharge of all 
    obligations to the plaintiff of the settling defendant arising out 
    of the action. The order shall bar all future claims for 
    contribution arising out of the action--
            (A) by any person against the settling defendant; and
            (B) by the settling defendant against any person other than 
        a person whose liability has been extinguished by the 
        settlement of the settling defendant.
        (2) Reduction.--If a defendant enters into a settlement with 
    the plaintiff before the final verdict or judgment, the verdict or 
    judgment shall be reduced by the greater of--
            (A) an amount that corresponds to the percentage of 
        responsibility of that defendant; or
            (B) the amount paid to the plaintiff by that defendant.
    (f) General Right of Contribution.--
        (1) In general.--A defendant who is jointly and severally 
    liable for damages in any Y2K action that is not a contract action 
    may recover contribution from any other person who, if joined in 
    the original action, would have been liable for the same damages. A 
    claim for contribution shall be determined based on the percentage 
    of responsibility of the claimant and of each person against whom a 
    claim for contribution is made.
        (2) Statute of limitations for contribution.--An action for 
    contribution in connection with a Y2K action that is not a contract 
    action shall be brought not later than 6 months after the entry of 
    a final, nonappealable judgment in the Y2K action, except that an 
    action for contribution brought by a defendant who was required to 
    make an additional payment under subsection (d)(1) may be brought 
    not later than 6 months after the date on which such payment was 
    made.
    (g) More Protective State Law Not Preempted.--Nothing in this 
section preempts or supersedes any provision of State law that--
        (1) limits the liability of a defendant in a Y2K action to a 
    lesser amount than the amount determined under this section; or
        (2) otherwise affords a greater degree of protection from joint 
    or several liability than is afforded by this section.

SEC. 7. PRELITIGATION NOTICE.

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

SEC. 8. PLEADING REQUIREMENTS.

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

SEC. 9. DUTY TO MITIGATE.

    (a) In General.--Damages awarded in any Y2K action shall exclude 
compensation for damages the plaintiff could reasonably have avoided in 
light of any disclosure or other information of which the plaintiff 
was, or reasonably should have been, aware, including information made 
available by the defendant to purchasers or users of the defendant's 
product or services concerning means of remedying or avoiding the Y2K 
failure involved in the action.
    (b) Preservation of Existing Law.--The duty imposed by this section 
is in addition to any duty to mitigate imposed by State law.
    (c) Exception for Intentional Fraud.--Subsection (a) does not apply 
to damages suffered by reason of the plaintiff's justifiable reliance 
upon an affirmative material misrepresentation by the defendant, made 
by the defendant with actual knowledge of its falsity, concerning the 
potential for Y2K failure of the device or system used or sold by the 
defendant that experienced the Y2K failure alleged to have caused the 
plaintiff's harm.

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

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

SEC. 11. DAMAGES LIMITATION BY CONTRACT.

    In any Y2K action for breach or repudiation of contract, no party 
may claim, or be awarded, any category of damages unless such damages 
are allowed--
        (1) by the express terms of the contract; or
        (2) if the contract is silent on such damages, by operation of 
    State law at the time the contract was effective or by operation of 
    Federal law.

SEC. 12. DAMAGES IN TORT CLAIMS.

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

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

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

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

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

SEC. 15. Y2K ACTIONS AS CLASS ACTIONS.

    (a) Material Defect Requirement.--A Y2K action involving a claim 
that a product or service is defective may be maintained as a class 
action in Federal or State court as to that claim only if--
        (1) it satisfies all other prerequisites established by 
    applicable Federal or State law, including applicable rules of 
    civil procedure; and
        (2) the court finds that the defect in a product or service as 
    alleged would be a material defect for the majority of the members 
    of the class.
    (b) Notification.--In any Y2K action that is maintained as a class 
action, the court, in addition to any other notice required by 
applicable Federal or State law, shall direct notice of the action to 
each member of the class, which shall include--
        (1) a concise and clear description of the nature of the 
    action;
        (2) the jurisdiction where the case is pending; and
        (3) the fee arrangements with class counsel, including the 
    hourly fee being charged, or, if it is a contingency fee, the 
    percentage of the final award which will be paid, including an 
    estimate of the total amount that would be paid if the requested 
    damages were to be granted.
    (c) Forum for Y2K Class Actions.--
        (1) Jurisdiction.--Except as provided in paragraph (2), the 
    district courts of the United States shall have original 
    jurisdiction of any Y2K action that is brought as a class action.
        (2) Exceptions.--The district courts of the United States shall 
    not have original jurisdiction over a Y2K action brought as a class 
    action if--
            (A)(i) a substantial majority of the members of the 
        proposed plaintiff class are citizens of a single State;
            (ii) the primary defendants are citizens of that State; and
            (iii) the claims asserted will be governed primarily by the 
        laws of that State;
            (B) the primary defendants are States, State officials, or 
        other governmental entities against whom the district courts of 
        the United States may be foreclosed from ordering relief;
            (C) the plaintiff class does not seek an award of punitive 
        damages, and the amount in controversy is less than the sum of 
        $10,000,000 (exclusive of interest and costs), computed on the 
        basis of all claims to be determined in the action; or
            (D) there are less than 100 members of the proposed 
        plaintiff class.
    A party urging that any exception described in subparagraph (A), 
    (B), (C), or (D) applies to an action shall bear the full burden of 
    demonstrating the applicability of the exception.
        (3) Procedure if Requirements Not Met.--
            (A) Dismissal or remand.--A United States district court 
        shall dismiss, or, if after removal, strike the class 
        allegations and remand, any Y2K action brought or removed under 
        this subsection as a class action if--
                (i) the action is subject to the jurisdiction of the 
            court solely under this subsection; and
                (ii) the court determines the action may not proceed as 
            a class action based on a failure to satisfy the conditions 
            of Rule 23 of the Federal Rules of Civil Procedure.
            (B) Amendment; removal.--Nothing in paragraph (A) shall 
        prohibit plaintiffs from filing an amended class action in 
        Federal or State court. A defendant shall have the right to 
        remove such an amended class action to a United States district 
        court under this subsection.
            (C) Period of limitations tolled.--Upon dismissal or 
        remand, the period of limitations for any claim that was 
        asserted in an action on behalf of any named or unnamed member 
        of any proposed class shall be deemed tolled to the full extent 
        provided under Federal law.
            (D) Dismissal without prejudice.--The dismissal of a Y2K 
        action under subparagraph (A) shall be without prejudice.
    (d) Effect on Rules of Civil Procedure.--Except as otherwise 
provided in this section, nothing in this section supersedes any rule 
of Federal or State civil procedure applicable to class actions.

SEC. 16. APPLICABILITY OF STATE LAW.

    Nothing in this Act shall be construed to affect the applicability 
of any State law that provides stricter limits on damages and 
liabilities, affording greater protection to defendants in Y2K actions, 
than are provided in this Act.

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

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

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

    (a) Definitions.--In this section--
        (1) the term ``agency'' means any executive agency, as defined 
    in section 105 of title 5, United States Code, that has the 
    authority to impose civil penalties on small business concerns;
        (2) the term ``first-time violation'' means a violation by a 
    small business concern of a federally enforceable rule or 
    regulation (other than a Federal rule or regulation that relates to 
    the safety and soundness of the banking or monetary system or for 
    the integrity of the National Securities markets, including 
    protection of depositors and investors) caused by a Y2K failure if 
    that Federal rule or regulation had not been violated by that small 
    business concern within the preceding 3 years; and
        (3) the term ``small business concern'' has the same meaning as 
    a defendant described in section 5(b)(2)(B).
    (b) Establishment of Liaisons.--Not later than 30 days after the 
date of the enactment of this Act, each agency shall--
        (1) establish a point of contact within the agency to act as a 
    liaison between the agency and small business concerns with respect 
    to problems arising out of Y2K failures and compliance with Federal 
    rules or regulations; and
        (2) publish the name and phone number of the point of contact 
    for the agency in the Federal Register.
    (c) General Rule.--Subject to subsections (d) and (e), no agency 
shall impose any civil money penalty on a small business concern for a 
first-time violation.
    (d) Standards for Waiver.--An agency shall provide a waiver of 
civil money penalties for a first-time violation, provided that a small 
business concern demonstrates, and the agency determines, that--
        (1) the small business concern previously made a reasonable 
    good faith effort to anticipate, prevent, and effectively remediate 
    a potential Y2K failure;
        (2) a first-time violation occurred as a result of the Y2K 
    failure of the small business concern or other entity, which 
    significantly affected the small business concern's ability to 
    comply with a Federal rule or regulation;
        (3) the first-time violation was unavoidable in the face of a 
    Y2K failure or occurred as a result of efforts to prevent the 
    disruption of critical functions or services that could result in 
    harm to life or property;
        (4) upon identification of a first-time violation, the small 
    business concern initiated reasonable and prompt measures to 
    correct the violation; and
        (5) the small business concern submitted notice to the 
    appropriate agency of the first-time violation within a reasonable 
    time not to exceed 5 business days from the time that the small 
    business concern became aware that the first-time violation had 
    occurred.
    (e) Exceptions.--An agency may impose civil money penalties 
authorized under Federal law on a small business concern for a first-
time violation if--
        (1) the small business concern's failure to comply with Federal 
    rules or regulations resulted in actual harm, or constitutes or 
    creates an imminent threat to public health, safety, or the 
    environment; or
        (2) the small business concern fails to correct the violation 
    not later than 1 month after initial notification to the agency.
    (f) Expiration.--This section shall not apply to first-time 
violations caused by a Y2K failure occurring after December 31, 2000.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.
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