`[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 775 Reported in House (RH)]





                                                  Union Calendar No. 73

106th CONGRESS

  1st Session

                               H. R. 775

                      [Report No. 106-131, Part I]

_______________________________________________________________________

                                 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.

_______________________________________________________________________

                              May 11, 1999

  Committee on Commerce discharged; committed to the Committee of the 
    Whole House on the State of the Union and ordered to be printed





                                                  Union Calendar No. 73
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

                              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

                              May 11, 1999

 Additional sponsors: Mr. Houghton, Mr. Kolbe, Mr. Camp, Mr. Sweeney, 
                  Mr. Pitts, and Mr. Walden of Oregon

                              May 11, 1999

  Committee on Commerce discharged; committed to the Committee of the 
    Whole House on the State of the Union and ordered to be printed
    [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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Year 2000 Readiness and 
Responsibility Act''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) The Congress seeks to encourage businesses to 
        concentrate their attention and resources in the short time 
        remaining before January 1, 2000, on addressing, assessing, 
        remediating, and testing their year 2000 problems, and to 
        minimize any possible business disruptions associated with year 
        2000 issues.
            (2) It is appropriate for the Congress to enact legislation 
        to assure that year 2000 problems do not unnecessarily disrupt 
        interstate commerce or create unnecessary case loads in Federal 
        and State courts and to provide initiatives to help businesses 
        prepare and be in a position to withstand the potentially 
        devastating economic impact of the year 2000 problem.
            (3) Year 2000 issues will affect practically all business 
        enterprises to some degree, giving rise to a large number of 
        disputes.
            (4) Resorting to the legal system for resolution of year 
        2000 problems is not feasible for many businesses, particularly 
        small businesses, because of its complexity and expense.
            (5) The delays, expense, uncertainties, loss of control, 
        adverse publicity and animosities that frequently accompany 
        litigation of business disputes can only exacerbate the 
        difficulties associated with the year 2000 date change, and 
        work against the successful resolution of those difficulties.
            (6) The Congress recognizes that every business in the 
        United States should be concerned that widespread and 
        protracted year 2000 litigation may threaten the network of 
        valued and trusted business relationships that are so important 
        to the effective functioning of the world economy, and which 
        may put unbearable strains on an overburdened judicial system.
            (7) A proliferation of frivolous year 2000 actions 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) The Congress encourages businesses to approach their 
        year 2000 disputes responsibly, and to avoid unnecessary, time-
        consuming and costly litigation based on year 2000 failures. 
        Congress supports good faith negotiations between parties when 
        there is a dispute over a year 2000 problem, and, if 
necessary, urges the parties to enter into voluntary, non-binding 
mediation rather than litigation.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Contract.--The term ``contract'' means a contract, 
        tariff, license, or warranty.
            (2) Defendant.--The term ``defendant'' means any person 
        against whom a year 2000 claim has been asserted.
            (3) Economic loss.--The term ``economic loss''--
                    (A) means any damages other than damages arising 
                out of personal injury or damage to tangible property; 
                and
                    (B) includes, but is not limited to, damages for 
                lost profits or sales, for business interruption, for 
                losses indirectly suffered as a result of the 
                defendant's wrongful act or omission, for losses that 
                arise because of the claims of third parties, for 
                losses that must be pleaded as special damages, and 
                consequential damages (as defined in the Uniform 
                Commercial Code or analogous State commercial law).
            (4) Governmental entity.--The term ``governmental entity'' 
        means an agency, instrumentality, other entity, or official of 
        Federal, State, or local government (including 
        multijurisdictional agencies, instrumentalities, and entities).
            (5) 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 intended. 
        The term ``material defect'' does not include a defect that has 
        an insignificant or de minimis effect on the operation or 
        functioning of an item, that affects only a component of an 
        item that, as a whole, substantially operates or functions as 
        designed, or that has an insignificant or de minimis effect on 
        the efficacy of the service provided.
            (6) Person.--The term ``person'' means any natural person 
        and any entity, organization, or enterprise, including but not 
        limited to corporations, companies, joint stock companies, 
        associations, partnerships, trusts, and governmental entities.
            (7) Personal injury.--The term ``personal injury'' means 
        any physical injury to a natural person, including death of the 
        person, and mental suffering, emotional distress, or like 
        elements of injury suffered by a natural person in connection 
        with a physical injury.
            (8) Plaintiff.--The term ``plaintiff'' means any person who 
        asserts a year 2000 claim.
            (9) Punitive damages.--The term ``punitive damages'' means 
        damages that are awarded against any person to punish such 
        person or to deter such person, or others, from engaging in 
        similar behavior in the future.
            (10) 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.
            (11) Year 2000 action.--The term ``year 2000 action'' means 
        any civil action of any kind brought in any court under Federal 
        or State law, or an agency board of contract appeal proceeding, 
        in which a year 2000 claim is asserted.
            (12) Year 2000 claim.--The term ``year 2000 claim''--
                    (A) means any claim or cause of action of any kind, 
                other than a claim based on personal injury, whether 
                asserted by way of claim, counterclaim, cross-claim, 
                third-party claim, defense, or otherwise, in which the 
                plaintiff's alleged loss or harm resulted, directly or 
                indirectly, from a year 2000 failure;
                    (B) includes a claim brought in any Federal or 
                State court by a governmental entity when acting in a 
                commercial or contracting capacity; and
                    (C) does not include a claim brought by such a 
                governmental entity acting in a regulatory, 
                supervisory, or enforcement capacity.
            (13) Year 2000 failure.--The term ``year 2000 failure'' 
        means any failure by any device or system (including, without 
        limitation, 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, however constructed, in processing, calculating, 
        comparing, sequencing, displaying, storing, transmitting, or 
        receiving year 2000 date-related data.

SEC. 4. APPLICATION OF ACT.

    (a) General Rule.--This Act applies to any year 2000 claim brought 
after February 22, 1999, including any appeal, remand, stay, or other 
judicial, administrative, or alternative dispute resolution proceeding 
with respect to such claim.
    (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) Exclusion of Personal Injury Claims.--None of the provisions of 
this Act shall apply to any claim based on personal injury.
    (d) Preemption of State Law.--Except as otherwise provided in this 
Act, this Act supersedes State law to the extent that it establishes a 
rule of law applicable to a year 2000 claim that is inconsistent with 
State law.

                         TITLE I--UNIFORM PRE-
              LITIGATION PROCEDURES FOR YEAR 2000 ACTIONS

SEC. 101. NOTICE PROCEDURES TO AVOID UNNECESSARY YEAR 2000 ACTIONS.

    (a) Notification Period.--Before filing a year 2000 action, except 
an action that seeks only injunctive relief, a prospective plaintiff 
shall send by certified mail to each prospective defendant a written 
notice that identifies, with particularity as to any year 2000 claim--
            (1) any symptoms of any material defect alleged to have 
        caused harm or loss;
            (2) the harm or loss allegedly suffered by the prospective 
        plaintiff;
            (3) the facts that lead the prospective plaintiff to hold 
        such person responsible for both the defect and the injury;
            (4) the relief or action sought by the prospective 
        plaintiff; and
            (5) the name, title, address, and telephone numbers of any 
        individual who has authority to negotiate a resolution of the 
        dispute on behalf of the prospective plaintiff.
Except as provided in subsection (c), the prospective plaintiff shall 
not commence an action in Federal or State court until the expiration 
of 90 days after the date on which such notice is received. Such 90-day 
period shall be excluded in the computation of any applicable statute 
of limitations.
    (b) Response to Notice.--
            (1) In general.--Not later than 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 any actions 
        it has taken or will take by not later than 60 days after the 
        end of that 30-day period, to remedy the problem identified by 
        the prospective plaintiff.
            (2) 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.
            (3) 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.
    (c) Failure To Respond.--If a prospective defendant fails to 
respond to a notice provided pursuant to subsection (a) within the 30-
day period specified in subsection (b) or does not describe the action, 
if any, that the prospective defendant has taken or will take to remedy 
the problem identified by the prospective plaintiff within the 
subsequent 60 days, the 90-day period specified in subsection (a) shall 
terminate at the end of that 30-day period as to that prospective 
defendant and the prospective plaintiff may thereafter commence its 
action against that prospective defendant.
    (d) Failure To Provide Notice.--If a defendant determines that a 
plaintiff has filed a year 2000 action without providing the notice 
specified in subsection (a) and without awaiting the expiration of the 
90-day period specified in subsection (a), 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 complaint. If any 
defendant elects to treat the complaint as such a notice--
            (1) the court shall stay all discovery in the action 
        involving that defendant for the applicable time period 
        provided in subsection (a) or (c), as the case may be, after 
        filing of the complaint; and
            (2) the time for filing answers and all other pleadings 
        shall be tolled during such applicable period.
    (e) Effect of Contractual 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 in the contract or the statute is controlling over the 
waiting period specified in subsections (a) and (d).
    (f) Sanction for Frivolous Invocation of the Stay Provision.--In 
any action in which a defendant acts pursuant to subsection (d) to stay 
the action, and the court subsequently finds that the defendant's 
assertion that the suit is a year 2000 action was frivolous and made 
for the purpose of causing unnecessary delay, the court may award 
sanctions to opposing parties in accordance with the provisions of Rule 
11 of the Federal Rules of Civil Procedure or the equivalent applicable 
State rule.
    (g) Computation of Time.--For purposes of this section, the rules 
regarding computation of time shall be governed by the applicable 
Federal or State rules of civil procedure.
    (h) Special Rule for Class Actions.--For the purpose of applying 
this section to a year 2000 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. 102. ALTERNATIVE DISPUTE RESOLUTION TO AVOID UNNECESSARY YEAR 2000 
              ACTIONS.

    (a) In General.--(1) At any time during the 90-day period specified 
in section 101(a), either party may request the other to use 
alternative dispute resolution. If, based upon that request, the 
parties enter into an agreement to use alternative dispute resolution, 
they may also agree to an extension of the 90-day period.
    (2) At any time after expiration of the 90-day period specified in 
section 101(a), whether before or after the filing of a complaint, 
either party may request the other to use alternative dispute 
resolution.
    (b) Payment of Moneys Due.--If the parties resolve their dispute 
through alternative dispute resolution as provided in subsection (a), 
the defendant shall pay all moneys due within 30 days, unless another 
period of time is agreed to by the parties or established by contract 
between the parties.
    (c) Foreclosure of Further Proceedings on Resolved Issues.--
Resolution of the issues by the parties prior to litigation through 
negotiation or alternative dispute resolution shall foreclose any 
further proceedings with respect to those issues.

SEC. 103. PLEADING REQUIREMENTS.

    (a) Application With Rules of Civil Procedure.--This section 
applies exclusively to year 2000 claims 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.--With respect to any year 2000 
claim that seeks the award of money damages, the complaint shall state 
with particularity the nature and amount of each element of damages, 
and the factual basis for the damages calculation.
    (c) Material Defects.--With respect to any year 2000 claim in which 
the plaintiff alleges that a product or service was defective, the 
complaint shall identify with particularity the symptoms of the 
material defects and shall state with particularity the facts 
supporting the conclusion that the defects are material.
    (d) Required State of Mind.--With respect to any year 2000 claim as 
to which the plaintiff may prevail only on proof that the defendant 
acted with a particular state of mind, the complaint shall, with 
respect to each element of the year 2000 claim, state with 
particularity the facts giving rise to a strong inference that the 
defendant acted with the required state of mind.
    (e) Motion To Dismiss; Stay of Discovery.--
            (1) Dismissal for failure to meet pleading requirements.--
        In any year 2000 action, the court shall, on the motion of any 
        defendant, dismiss the complaint without prejudice if the 
        requirements of subsection (a), (b), or (c) are not met with 
        respect to any year 2000 claim asserted therein.
            (2) Stay of discovery.--In any year 2000 action, all 
        discovery shall be stayed during the pendency of any motion to 
        dismiss, unless the court finds upon the motion of any party 
        that particularized discovery is necessary to preserve evidence 
        or prevent undue prejudice to that party.
            (3) Preservation of evidence.--
                    (A) In general.--During the pendency of any stay of 
                discovery entered pursuant to this subsection, unless 
                otherwise ordered by the court, any party to the action 
                with actual notice of the allegations contained in the 
                complaint shall treat all documents, data compilations 
                (including electronically stored or recorded data), and 
                tangible objects that are in the custody or control of 
                such person and that are relevant to the allegations, 
                as if they were a subject of a continuing request for 
                production of documents from an opposing party under 
                applicable Federal or State rules of civil procedure.
                    (B) Sanction for willful violation.--A party 
                aggrieved by the willful failure of an opposing party 
                to comply with subparagraph (A) may apply to the court 
                for an order awarding appropriate sanctions.

SEC. 104. DUTY OF ALL PERSONS TO MITIGATE YEAR 2000 COMPUTER FAILURES 
              AND RESULTING DAMAGES.

    Damages awarded for any year 2000 claim 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 year 
2000 failure.

            TITLE II--YEAR 2000 ACTIONS INVOLVING CONTRACTS

SEC. 201. CERTAINTY OF CONTRACT TERMS FOR PREVENTION OF YEAR 2000 
              DAMAGES.

    (a) In General.--Subject to subsection (b), in resolving any year 
2000 claim, any written contractual term, including a limitation or an 
exclusion of liability, or a disclaimer of warranty, shall be fully 
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.
    (b) Interpretation of Contract.--In resolving any year 2000 claim 
as to which a contract to which subsection (a) applies is silent with 
respect to a particular issue, the interpretation of the contract with 
respect to that issue shall be determined by applicable law in effect 
at the time the contract was executed.

SEC. 202. APPLICATION OF EXISTING IMPOSSIBILITY OR COMMERCIAL 
              IMPRACTICABILITY DOCTRINES.

    (a) Doctrine of Impossibility and Commercial Impracticability.--
With respect to any year 2000 claim 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.
    (b) Reasonable Efforts.--To the extent that impossibility or 
commercial impracticability is raised as a defense against a claim for 
breach or repudiation of contract, the party asserting the defense 
shall be allowed to offer evidence that its implementation of the 
contract, or its efforts to implement the contract, were reasonable in 
light of the circumstances.

SEC. 203. PROTECTION OF PERSONS FROM LIABILITY NOT ANTICIPATED IN YEAR 
              2000 CONTRACTS.

    With respect to any year 2000 claim involving a breach of contract 
or a claim related to the contract, no party may claim or be awarded 
any category of damages unless such damages are allowed by the express 
terms of the contract or, if the contract is silent on such damages, by 
operation of the applicable Federal or State law that governed 
interpretation of the contract at the time the contract was entered 
into.

 TITLE III--YEAR 2000 ACTIONS INVOLVING TORT AND OTHER NONCONTRACTUAL 
                                 CLAIMS

SEC. 301. PROPORTIONATE LIABILITY.

    (a) In General.--A person against whom a final judgment is entered 
with respect to a year 2000 claim, other than a claim for breach or 
repudiation of contract, shall be liable solely for the portion of the 
judgment that corresponds to the percentage of responsibility of that 
person, as determined under subsection (b).
    (b) Determination of Responsibility.--
            (1) In general.--With respect to any year 2000 claim, the 
        court shall instruct the jury to answer special 
        interrogatories, or if there is no jury, shall make findings, 
        with respect to each defendant and plaintiff, and each of the 
        other persons claimed by any of the parties to have caused or 
        contributed to the loss incurred by the plaintiff, including 
        (but not limited to) persons who have entered into settlements 
        with the plaintiff or plaintiffs, concerning the percentage of 
        responsibility of the defendant, the plaintiff, and each such 
        person, measured as a percentage of the total fault of all 
        persons who caused or contributed to the total loss incurred by 
        the plaintiff.
            (2) Contents of special interrogatories or findings.--The 
        responses to interrogatories, or findings, as appropriate, 
        under paragraph (1) shall specify the total amount of damages 
        that the plaintiff is entitled to recover and the percentage of 
        responsibility of each person found to have caused or 
        contributed to the loss incurred by the plaintiff or 
        plaintiffs.
            (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 
                alleged 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 or 
                plaintiffs.
            (4) Nondisclosure to jury.--The standard for allocation of 
        damages under paragraph (1) shall not be disclosed to members 
        of the jury.

SEC. 302. LIMITATION ON BYSTANDER LIABILITY FOR YEAR 2000 FAILURES.

    (a) In General.--With respect to any year 2000 claim for money 
damages in which--
            (1) the defendant is not the manufacturer, seller, or 
        distributor of a product, or the provider of a service, that 
        suffers or causes the year 2000 failure at issue,
            (2) the plaintiff is not in substantial privity with the 
        defendant, and
            (3) the defendant's actual or constructive awareness of an 
        actual or potential year 2000 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 clear 
and convincing evidence that the defendant actually knew, or recklessly 
disregarded a known and substantial risk, that such failure would 
occur.
    (b) Substantial Privity.--For purposes of subsection (a)(2), a 
plaintiff and a defendant are in substantial privity when, in a year 
2000 claim 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.
    (c) Certain Claims Excluded.--For purposes of subsection (a)(3), 
claims in which the defendant's actual or constructive awareness of an 
actual or potential year 2000 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.

SEC. 303. REASONABLE EFFORTS DEFENSE.

    With respect to any year 2000 claim seeking money damages, except 
with respect to claims asserting breach or repudiation of contract--
            (1) the fact that a year 2000 failure occurred in an 
        entity, facility, system, product, or component that was within 
        the control of the party against whom the claim is asserted 
        shall not constitute the sole basis for recovery; and
            (2) the party against whom the claim is asserted shall be 
        entitled to establish, as a complete defense to the claim, that 
        it took measures that were reasonable under the circumstances 
        to prevent the year 2000 failure from occurring or from causing 
        the damages upon which the claim is based.

SEC. 304. DAMAGES LIMITATION.

    (a) Year 2000 Recovery Fund.--There is established in the Treasury 
a Year 2000 Recovery Fund. In any year 2000 action in which punitive 
damages are awarded under applicable law, including this Act, the 
entire amount of such damages shall be paid into the Year 2000 Recovery 
Fund. Amounts in the Fund shall be used for the assistance of small 
businesses, State and local governments, and nonprofit organizations, 
that are affected by year 2000 failures.
    (b) Standard for Awards.--With respect to any year 2000 claim for 
which punitive damages may be awarded under applicable law, the 
defendant shall not be liable for punitive damages unless the plaintiff 
proves by clear and convincing evidence that conduct carried out by the 
defendant showed a conscious, flagrant indifference to the rights or 
safety of others and was the proximate cause of the harm or loss that 
is the subject of the year 2000 claim. This requirement is in addition 
to any other requirement in applicable law for the award of such 
damages.
    (c) Caps on Punitive Damages.--
            (1) In general.--With respect to any year 2000 claim, if a 
        defendant is found liable for punitive damages, the amount of 
        punitive damages that may be awarded to a plaintiff shall not 
        exceed the greater of--
                    (A) 3 times the amount awarded to the plaintiff for 
                compensatory damages; or
                    (B) $250,000.
            (2) Special rule.--
                    (A) In general.--Notwithstanding paragraph (1), 
                with respect to any year 2000 claim, if the defendant 
                is found liable for punitive damages and the 
                defendant--
                            (i) is an individual whose net worth does 
                        not exceed $500,000,
                            (ii) is an owner of an unincorporated 
                        business that has fewer than 25 full-time 
                        employees, or
                            (iii) is--
                                    (I) a partnership,
                                    (II) corporation,
                                    (III) association,
                                    (IV) unit of local government, or
                                    (V) organization,
                        that has fewer than 25 full-time employees,
                the amount of punitive damages shall not exceed the 
                lesser of 3 times the amount awarded to the plaintiff 
                for compensatory damages, or $250,000.
                    (B) Applicability.--For purposes of determining the 
                applicability of this paragraph to a corporation, the 
                number of employees of a subsidiary of a wholly owned 
                corporation shall include all employees of a parent 
                corporation or any subsidiary of that parent 
                corporation.
            (3) Application of limitations by the court.--The 
        limitations contained in paragraphs (1) and (2) shall be 
        applied by the court and shall not be disclosed to the jury.

SEC. 305. RECOVERY OF ECONOMIC DAMAGES FOR YEAR 2000 CLAIMS.

    (a) Limitation on Recovery of Economic Losses.--Subject to 
subsection (b), a plaintiff making a year 2000 claim alleging a 
nonintentional tort may recover economic losses only upon establishing, 
in addition to all other elements of the claim under applicable law, 
that any one of the following circumstances exists:
            (1) The recovery of such losses is provided for in a 
        contract to which the plaintiff is a party.
            (2) Such losses are incidental to a year 2000 claim based 
        on damage to tangible personal or real property caused by a 
        year 2000 failure (other than damage to property that is the 
        subject of a contract between the parties involved in the year 
        2000 claim).
    (b) Recovery Must Be Permitted Under Applicable Law.--Economic 
losses shall be recoverable under this section only if applicable 
Federal law, or applicable State law embodied in statute or controlling 
judicial precedent as of January 1, 1999, permits the recovery of such 
losses.

SEC. 306. LIABILITY OF OFFICERS AND DIRECTORS.

    (a) In General.--A director, officer, or trustee of a business or 
other organization (including a corporation, unincorporated 
association, partnership, or nonprofit organization) shall not be 
personally liable with respect to any year 2000 claim in his or her 
capacity as a director or officer of the business or organization for 
an aggregate amount that exceeds the greater of--
            (1) $100,000; or
            (2) the amount of cash compensation received by the 
        director or officer from the business or organization during 
        the 12-month period immediately preceding the act or omission 
        for which liability was imposed.
    (b) Rule of Construction.--Nothing in this section shall be deemed 
to impose, or to permit the imposition of, personal liability on any 
director, officer, or trustee in excess of the aggregate amount of 
liability to which such director, officer, or trustee would be subject 
under applicable State law in existence on January 1, 1999 (including 
any charter or bylaw authorized by such State law).

                   TITLE IV--YEAR 2000 CLASS ACTIONS

SEC. 401. MINIMUM INJURY REQUIREMENT.

    (a) In General.--In any year 2000 action involving a year 2000 
claim that a product or service is defective, the action may be 
maintained as a class action in Federal or State court as to that claim 
only if it satisfies all other prerequisites established by applicable 
Federal or State law and the court also finds that the alleged defect 
in the product or service was a material defect as to a majority of the 
members of the class.
    (b) Determination by Court.--As soon as practicable after the 
commencement of a year 2000 action involving a year 2000 claim that a 
product or service is defective and that is brought as a class action, 
the court shall determine by order whether the requirement set forth in 
subsection (a) is satisfied. An order under this subsection may be 
conditional, and may be altered or amended before the decision on the 
merits.

SEC. 402. NOTIFICATION.

    (a) Notice by Mail.--In any year 2000 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 by United States mail, return receipt 
requested. Persons whose actual receipt of the notice is not verified 
by the court or by counsel for one of the parties shall be excluded 
from the class unless those persons inform the court in writing, on a 
date no later than the commencement of trial or entry of judgment, that 
they wish to join the class.
    (b) Contents of Notice.--In addition to any information required by 
applicable Federal or State law, the notice described in this 
subsection shall--
            (1) concisely and clearly describe the nature of the 
        action;
            (2) identify the jurisdiction whose law will govern the 
        action and where the action is pending;
            (3) identify any potential claims that class counsel chose 
        not to pursue so that the action would satisfy class 
        certification requirements;
            (4) describe 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; and
            (5) describe the procedure for opting out of the class.
    (c) Settlement.--The parties to a year 2000 action that is brought 
as a class action may not enter into, nor request court approval of, 
any settlement or compromise before the class has been certified.

SEC. 403. DISMISSAL PRIOR TO CERTIFICATION.

    Before determining whether to certify a class in a year 2000 
action, the court may decide a motion to dismiss or for summary 
judgment made by any party if the court concludes that decision will 
promote the fair and efficient adjudication of the controversy and will 
not cause undue delay.

SEC. 404. FEDERAL JURISDICTION IN YEAR 2000 CLASS ACTIONS.

    (a) Jurisdiction.--Except as provided in subsection (b), a year 
2000 action may be brought as a class action in the United States 
district court or removed to the appropriate United States district 
court if the amount in controversy is greater than the sum or value of 
$1,000,000 (exclusive of interest and costs), computed on the basis of 
all claims to be determined in the action.
    (b) Exception.--A year 2000 action shall not be brought or removed 
as a class action under this section if--
            (1)(A) the substantial majority of the members of the 
        proposed plaintiff class are citizens of a single State of 
        which the primary defendants are also citizens; and
            (B) the claims asserted will be governed primarily by the 
        laws of that State; or
            (2) the primary defendants are States, State officials, or 
        other governmental entities against whom the United States 
        district court may be foreclosed from ordering relief.

    TITLE V--CLIENT PROTECTION IN CONNECTION WITH YEAR 2000 ACTIONS

SEC. 501. SCOPE.

    This title applies to any year 2000 action asserted or brought in 
Federal or State court.

SEC. 502. DEFINITIONS.

    In this title:
            (1) Attorney.--the term ``attorney'' means any natural 
        person, professional law association, corporation, or 
        partnership authorized under applicable State law to practice 
        law.
            (2) Attorney's services.--The term ``attorney's services'' 
        means the professional advice or counseling of or 
        representation by an attorney, but such term shall not include 
        other assistance incurred, directly or indirectly, in 
        connection with an attorney's services, such as administrative 
        or secretarial assistance, overhead, travel expenses, witness 
        fees, or preparation by a person other than the attorney of any 
        study, analysis, report, or test.
            (3) Contingent fee.--The term ``contingent fee'' means the 
        cost or price of an attorney's services determined by applying 
        a specified percentage, which may be a firm fixed percentage, a 
        graduated or sliding percentage, or any combination thereof, to 
        the amount of the settlement or judgment obtained.
            (4) Hourly fee.--The term ``hourly fee'' means the cost or 
        price per hour of an attorney's services.
            (5) Retain.--The term ``retain'' means the act of a client 
        in engaging an attorney's services, whether by express or 
        implied agreement, by seeking and obtaining the attorney's 
        services.

SEC. 503. CONSUMER'S RIGHT TO UP-FRONT DISCLOSURE OF INFORMATION 
              REGARDING FEES AND SETTLEMENT PROPOSALS.

    Before being retained by a client with respect to a year 2000 claim 
or a year 2000 action, an attorney shall disclose to the client the 
client's rights under this title and the client's right to receive a 
written statement of the information described under sections 504 and 
505.

SEC. 504. INFORMATION AFTER INITIAL MEETING.

    (a) Written Disclosure of Fees.--Within 30 days after the 
disclosure described under section 503, an attorney retained by a 
client with respect to a year 2000 claim or a year 2000 action shall 
provide a written statement to the client setting forth--
            (1) in the case of an attorney retained on an hourly basis, 
        the attorney's hourly fee for services in pursuing the year 
        2000 claim or year 2000 action and any conditions, limitations, 
        restrictions, or other qualifications on the fee, including 
        likely expenses and the client's obligation for those expenses; 
        and
            (2) in the case of an attorney retained on a contingent fee 
        basis, the attorney's contingent fee for services in pursuing 
        the year 2000 claim or year 2000 action and any conditions, 
        limitations, restrictions, or other qualifications on the fee, 
        including likely expenses and the client's obligation for those 
        expenses.
    (b) Consumer's Right to Timely Updated Information About Fees.--In 
addition to the requirements contained in subsection (a), in the case 
of an attorney retained on an hourly basis, the attorney shall also 
render regular statements (at least once each 90 days) to the client 
containing a description of hourly charges and expenses incurred in the 
pursuit of the client's year 2000 claim or year 2000 action by each 
attorney assigned to the client's matter.

SEC. 505. CONSUMER'S RIGHT TO TIMELY UPDATED INFORMATION ABOUT 
              SETTLEMENT PROPOSALS AND DETAILED STATEMENT OF HOURS AND 
              FEES.

    An attorney retained by a client with respect to a year 2000 claim 
or a year 2000 action shall advise the client of all written settlement 
offers to the client and of the attorney's estimate of the likelihood 
of achieving a more or less favorable resolution to the year 2000 claim 
or year 2000 action, the likely timing of such resolution, and the 
likely attorney's fees and expenses required to obtain such a 
resolution. An attorney retained by a client with respect to a year 
2000 claim or a year 2000 action shall, within a reasonable time not 
later than 60 days after the date on which the year 2000 claim or year 
2000 action is finally settled or adjudicated, provide a written 
statement to the client containing--
            (1) in the case of an attorney retained on an hourly basis, 
        the actual number of hours expended by each attorney on behalf 
        of the client in connection with the year 2000 claim or year 
        2000 action, the attorney's hourly rate, and the total amount 
        of hourly fees; and
            (2) in the case of an attorney retained on a contingent fee 
        basis, the total contingent fee for the attorney's services in 
connection with the year 2000 claim or year 2000 action.

SEC. 506. CLASS ACTIONS.

    An attorney representing a class or a defendant in a year 2000 
action maintained as a class action shall make the disclosures required 
under this title to the presiding judge, in addition to making such 
disclosures to each named representative of the class. The presiding 
judge shall, at the outset of the year 2000 action, determine a 
reasonable attorney's fee by determining the appropriate hourly rate 
and the maximum percentage of the recovery to be paid in attorney's 
fees. Notwithstanding any other provision of law or agreement to the 
contrary, the presiding judge shall award attorney's fees only pursuant 
to this title.

SEC. 507. AWARD OF REASONABLE COSTS AND ATTORNEY'S FEES AFTER AN OFFER 
              OF SETTLEMENT.

    (a) Offer of Settlement.--With respect to any year 2000 claim, any 
party may, at any time not less than 10 days before trial, serve upon 
any adverse party a written offer to settle the year 2000 claim for 
money or property, including a motion to dismiss the claim, and to 
enter into a stipulation dismissing the claim or allowing judgment to 
be entered according to the terms of the offer. Any such offer, 
together with proof of service thereof, shall be filed with the clerk 
of the court.
    (b) Acceptance of Offer.--If the party receiving an offer under 
subsection (a) serves written notice on the offeror that the offer is 
accepted, either party may then file with the clerk of the court the 
notice of acceptance, together with proof of service thereof.
    (c) Further Offers Not Precluded.--The fact that an offer under 
subsection (a) is made but not accepted does not preclude a subsequent 
offer under subsection (a). Evidence of an offer is not admissible for 
any purpose except in proceedings to enforce a settlement, or to 
determine costs and expenses under this section.
    (d) Exemption of Claims.--At any time before judgment is entered, 
the court, upon its own motion or upon the motion of any party, may 
exempt from this section any year 2000 claim that the court finds 
presents a question of law or fact that is novel and important and that 
substantially affects nonparties. If a claim is exempted from this 
section, all offers made by any party under subsection (a) with respect 
to that claim shall be void and have no effect.
    (e) Petition for Payment of Costs, Etc.--If all offers made by a 
party under subsection (a) with respect to a year 2000 claim, including 
any motion to dismiss the claim, are not accepted and the dollar amount 
of the judgment, verdict, or order that is finally issued (exclusive of 
costs, expenses, and attorneys' fees incurred after judgment or trial) 
with respect to the year 2000 claim is not more favorable to the 
offeree with respect to the year 2000 claim than the last such offer, 
the offeror may file with the court, within 10 days after the final 
judgment, verdict, or order is issued, a petition for payment of costs 
and expenses, including attorneys' fees, incurred with respect to the 
year 2000 claim from the date the last such offer was made or, if the 
offeree made an offer under this section, from the date the last such 
offer by the offeree was made.
    (f) Order To Pay Costs, Etc.--If the court finds, pursuant to a 
petition filed under subsection (e) with respect to a year 2000 claim, 
that the dollar amount of the judgment, verdict, or order that is 
finally issued is not more favorable to the offeree with respect to the 
year 2000 claim than the last such offer, the court shall order the 
offeree to pay the offeror's costs and expenses, including attorneys' 
fees, incurred with respect to the year 2000 claim from the date the 
last offer was made or, if the offeree made an offer under this 
section, from the date the last such offer by the offeree was made, 
unless the court finds that requiring the payment of such costs and 
expenses would be manifestly unjust.
    (g) Amount of Attorney's Fees.--Attorney's fees under subsection 
(f) shall be a reasonable attorney's fee attributable to the year 2000 
claim involved, calculated on the basis of an hourly rate which may not 
exceed that which the court considers acceptable in the community in 
which the attorney practices law, taking into account the attorney's 
qualifications and experience and the complexity of the case, except 
that the attorney's fees under subsection (f) may not exceed--
            (A) the actual cost incurred by the offeree for an 
        attorney's fee payable to an attorney for services in 
        connection with the year 2000 claim; or
            (B) if no such cost was incurred by the offeree due to a 
        contingency fee agreement, a reasonable cost that would have 
        been incurred by the offeree for an attorney's noncontingent 
        fee payable to an attorney for services in connection with the 
        year 2000 claim.
    (h) Inapplicability to Equitable Remedies.--This section does not 
apply to any claim seeking an equitable remedy.
    (i) Inapplicability to Class Actions.--This section does not apply 
with respect to a year 2000 action brought as a class action.

SEC. 508. ENFORCEMENT OF CONSUMER PROTECTION RULES IN YEAR 2000 CLAIMS 
              AND ACTIONS.

    A client whose attorney fails to comply with this title may file a 
civil action for damages in the court in which the year 2000 claim or 
year 2000 action was filed or could have been filed or other court of 
competent jurisdiction. The remedy provided by this section is in 
addition to any other available remedy or penalty.`