Calendar No. 34

106TH CONGRESS

1ST SESSION S. 96

[Report No. 106–10]

A BILL

To regulate commerce between and among the sevdigit expression of the year’s date. lems related to processing data that includes a 2- of disputes arising out of computer-based prob- eral States by providing for the orderly resolution

MARCH 10, 1999

Reported with an amendment
II

Calendar No. 34

106TH CONGRESS

1ST SESSION S. 96

[Report No. 106–10]

To regulate commerce between and among the several States by providing

for the orderly resolution of disputes arising out of computer-based

problems related to processing data that includes a 2-digit expression

of the year’s date.

IN THE SENATE OF THE UNITED STATES

JANUARY 19, 1999

Mr. MCCAIN (for himself and Mr. FRIST) introduced the following bill; which

was read twice and referred to the Committee on Commerce, Science, and

Transportation

MARCH 10, 1999

Reported by Mr. MCCAIN, with an amendment

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

A BILL

To regulate commerce between and among the several States

by providing for the orderly resolution of disputes arising

out of computer-based problems related to processing

data that includes a 2-digit expression of the year’s

date.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Y2K Act’’.

3 SEC. 2. DEFINITIONS.

4 In this Act:

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

6 means a civil action commenced in any Federal or

7 State court for a cause of action arising out of a

8 Y2K failure but does include an action to recover

9 damages for personal injury (excluding emotional

10 harm) or wrongful death.

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

12 means a systems product failure caused by the in13 ability of a computer system, program, or software’s

14 failure to accurately store, process, provide, or re15 ceive data containing the year-2000 date.

16 (3) Y2K-COMPLIANT.—The term ‘‘Y2K-compli17 ant’’ means—

18 (A) with respect to an information tech19 nology product, that the product does not have

20 a Y2K failure; and

21 (B) with respect to a business, that none

22 of that business’s information technology prod23 ucts that materially affects the business’s ca24 pacity to deliver goods and services has a Y2K

25 failure.
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1 (4) INFORMATION TECHNOLOGY PRODUCT.—

2 The term ‘‘information technology product’’ means a

3 computer, a computer program, or computer soft4 ware, or product using a computer program, chip, or

5 computer software.

6 SEC. 3. APPLICABILITY; PREEMPTION.

7 (a) APPLICABILITY TO Y2K ACTIONS.—This Act ap8 plies to any Y2K action, commenced after the date of en9 actment of this Act, brought in a Federal or State court.

10 (b) SCOPE OF PREEMPTION.—This Act supersedes

11 any State law regarding recovery for harm caused by a

12 Y2K failure only to the extent that this Act establishes

13 a rule of law applicable to any such recovery which is in14 consistent with State law. Any issue arising under this Act

15 that is not governed by any such rule of law shall be gov16 erned by applicable State or Federal law.

17 (c) ACTIONS FOR PERSONAL INJURY.—This Act does

18 not apply to a civil action brought for personal injury to

19 the extent that the action is based on physical injury.

20 SEC. 4. EXCLUSIVE REMEDIES.

21 (a) IN GENERAL.—The remedies provided by this Act

22 are the exclusive remedies available to a plaintiff in a Y2K

23 action, except as may be otherwise provided in a contract

24 to which the plaintiff and the defendant are parties.
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1 (b) DEFENDANT’S OPPORTUNITY TO FIX PROB2 LEM.—A Y2K action may not proceed to trial until—

3 (1) the plaintiff has notified the defendant in

4 writing, describing the Y2K failure with particular5 ity; and

6 (2) the plaintiff has afforded the defendant the

7 opportunity, including reasonable access to comput8 ers and computer software affected by the Y2K fail9 ure described in the notice, to fix the problem.

10 SEC. 5. DAMAGES.

11 (a) ECONOMIC LOSS.—Except as otherwise provided

12 in this section, damages awarded in a Y2K action are lim13 ited to economic loss.

14 (b) OTHER DAMAGES.—

15 (1) IN GENERAL.—Damages in a Y2K action

16 (including punitive damages) other than for eco17 nomic loss may not exceed the greater of—

18 (A) 3 times the amount awarded for eco19 nomic loss; or

20 (B) $250,000.

21 (2) SPECIAL RULE.—In the case of a

22 defendant—

23 (A) who—

24 (i) is sued in his or her capacity as a

25 individual; and
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1 (ii) whose net worth does not exceed

2 $500,000; or

3 (B) that is an unincorporated business, a

4 partnership, corporation, association, unit of

5 local government, or organization with fewer

6 than 25 full-time employees,

7 paragraph (1) shall be applied by substituting

8 ‘‘$50,000’’ for ‘‘$250,000’’ in subparagraph (B).

9 (c) PUNITIVE DAMAGES.—No amount shall be award10 ed a plaintiff in a Y2K action for punitive damages—

11 (1) except to the extent authorized by State

12 law; and

13 (2) unless the plaintiff proves that the economic

14 damages suffered resulted from conscious and fla15 grant disregard, rather than mere negligence, on the

16 part of the defendant.

17 (d) GOOD FAITH LIMITATION.—Damages in a Y2K

18 action may not be awarded, except for economic loss,

19 against any defendant who demonstrates that the defend20 ant exercised due diligence and reasonable care to prevent

21 or remedy the Y2K failure according to generally accepted

22 standards of care and effort in the business activity in

23 which the defendant was engaged.
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1 SEC. 6. SEVERAL LIABILITY.

2 The liability of more than 1 defendant in a Y2K ac3 tion may be several but may not be joint.

4 SEC. 7. APPOINTMENT OF SPECIAL MASTERS FOR Y2K AC5 TIONS.

6 Any District Court of the United States in which a

7 Y2K action is pending may appoint a special master to

8 hear the matter and to make findings of fact and conclu9 sions of law in accordance with Rule 53 of the Federal

10 Rules of Civil Procedure.

11 SEC. 8. LIABILITY RULES APPLICABLE TO PRODUCT SELL12 ERS, RENTERS, AND LESSORS.

13 (a) GENERAL RULE.—

14 (1) IN GENERAL.—In any Y2K action, an infor15 mation technology product seller other than a manu16 facturer shall be liable to a claimant only if the

17 claimant establishes—

18 (A) that—

19 (i) the information technology product

20 that allegedly caused the harm that is the

21 subject of the complaint was sold, rented,

22 or leased by the information technology

23 product seller;

24 (ii) the information technology prod25 uct seller failed to exercise reasonable care
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1 with respect to the information technology

2 product; and

3 (iii) the failure to exercise reasonable

4 care was a proximate cause of harm to the

5 claimant;

6 (B) that—

7 (i) the information technology product

8 seller made an express warranty applicable

9 to the information technology product that

10 allegedly caused the harm that is the sub11 ject of the complaint, independent of any

12 express warranty made by a manufacturer

13 as to the same information technology

14 product;

15 (ii) the information technology prod16 uct failed to conform to the warranty; and

17 (iii) the failure of the information

18 technology product to conform to the war19 ranty caused harm to the claimant; or

20 (C) that—

21 (i) the information technology product

22 seller engaged in intentional wrongdoing,

23 as determined under applicable State law;

24 and
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1 (ii) such intentional wrongdoing was a

2 proximate cause of the harm that is the

3 subject of the complaint.

4 (2) REASONABLE OPPORTUNITY FOR INSPEC5 TION.—For purposes of paragraph (1)(A)(ii), an in6 formation technology product seller shall not be con7 sidered to have failed to exercise reasonable care

8 with respect to an information technology product

9 based upon an alleged failure to inspect the informa10 tion technology product—

11 (A) if the failure occurred because there

12 was no reasonable opportunity to inspect the in13 formation technology product; or

14 (B) if the inspection, in the exercise of rea15 sonable care, would not have revealed the as16 pect of the information technology product

17 which allegedly caused the claimant’s harm.

18 (b) SPECIAL RULE.—

19 (1) IN GENERAL.—An information technology

20 product seller shall be liable as a manufacturer of an

21 information technology product for harm caused by

22 the information technology product if—

23 (A) the manufacturer is not subject to

24 service of process under the laws of any State

25 in which the action may be brought; or
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1 (B) the court determines that the claimant

2 would be unable to enforce a judgment against

3 the manufacturer.

4 (2) STATUTE OF LIMITATIONS.—For purposes

5 of this subsection only, the statute of limitations ap6 plicable to claims asserting liability of an informa7 tion technology product seller as a manufacturer

8 shall be tolled from the date of the filing of a com9 plaint against the manufacturer to the date that

10 judgment is entered against the manufacturer.

11 (c) RENTED OR LEASED PRODUCTS.—Any person

12 engaged in the business of renting or leasing an informa13 tion technology product (other than a person that is an

14 information technology product manufacturer or a seller

15 liable as a manufacturer under paragraph (1)) shall be

16 subject to liability in a Y2K action, but any person en17 gaged in the business of renting or leasing an information

18 technology product shall not be liable to a claimant for

19 the acts of another solely by reason of ownership of such

20 information technology product.

21 SECTION 1. SHORT TITLE; TABLE OF SECTIONS.

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

23 Act’’.

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

25 Act is as follows:

Sec. 1. Short title; table of sections.
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Sec. 2. Findings and purposes.

Sec. 3. Definitions.

Sec. 4. Application of Act.

Sec. 5. Punitive damages limitations.

TITLE I—OPPORTUNITY TO RESOLVE Y2K PROBLEMS.

Sec. 101. Pre-filing notice.

Sec. 102. Pleading requirements.

Sec. 103. Duty to mitigate.

Sec. 104. Proportionate liability.

TITLE II—Y2K ACTIONS INVOLVING CONTRACT-RELATED CLAIMS.

Sec. 201. Contracts enforced.

Sec. 202. Defenses.

Sec. 203. Damages limitation .

Sec. 204. Mixed actions.

TITLE III—Y2K ACTIONS INVOLVING TORT CLAIMS.

Sec. 301. Damages in tort claims.

Sec. 302. Certain defenses.

Sec. 303. Liability of officers and directors.

TITLE IV—Y2K CLASS ACTIONS.

Sec. 401. Minimum injury requirement.

Sec. 402. Notification.

Sec. 403. Forum for Y2K class actions.

1 SEC. 2. FINDINGS AND PURPOSES.

2 The Congress finds that:

3 (1) The majority of responsible business enter4 prises in the United States are committed to working

5 in cooperation with their contracting partners to6 wards the timely and cost-effective resolution of the

7 many technological, business, and legal issues associ8 ated with the Y2K date change.

9 (2) Congress seeks to encourage businesses to con10 centrate their attention and resources in short time

11 remaining before January 1, 2000, on addressing, as12 sessing, remediating, and testing their Y2K problems,
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1 and to minimize any possible business disruptions as2 sociated with the Y2K issues.

3 (3) It is appropriate for the Congress to enact

4 legislation to assure that Y2K problems do not unnec5 essarily disrupt interstate commerce or create unnec6 essary caseloads in Federal courts and to provide ini7 tiatives to help businesses prepare and be in a posi8 tion to withstand the potentially devastating eco9 nomic impact of Y2K.

10 (4) Y2K issues will potentially affect practically

11 all business enterprises to at least some degree, giving

12 rise possibly to a large number of disputes.

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

14 Y2K problems is not feasible for many businesses,

15 particularly small businesses, because of its complex16 ity and expense.

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

18 control, adverse publicity and animosities that fre19 quently accompany litigation of business disputes can

20 only exacerbate the difficulties associated with the

21 Y2K date change, and work against the successful res22 olution of those difficulties.

23 (7) Congress recognizes that every business in the

24 United States should be concerned that widespread

25 and protracted Y2K litigation may threaten the net-
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1 work of valued and trusted business relationships that

2 are so important to the effective functioning of the

3 world economy, and which may put unbearable

4 strains on an overburdened and sometime ineffective

5 judicial system.

6 (8) A proliferation of frivolous Y2K lawsuits by

7 opportunistic parties may further limit access to

8 courts by straining the resources of the legal system

9 and depriving deserving parties of their legitimate

10 rights to relief.

11 (9) Congress encourages businesses to approach

12 their Y2K disputes responsibly, and to avoid unneces13 sary, time-consuming and costly litigation about Y2K

14 failures, particularly those that are not material.

15 Congress supports good faith negotiations between

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

17 and, if necessary, urges the parties to enter into vol18 untary, non-binding mediation rather than litigation.

19 SEC. 3. DEFINITIONS.

20 In this Act:

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

22 means a civil action commenced in any Federal or

23 State court in which the plaintiff’s alleged harm or

24 injury resulted directly or indirectly from an actual

25 or potential Y2K failure, or a claim or defense of a
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1 defendant is related directly or indirectly to an actual

2 or potential Y2K failure.

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

4 means failure by any device or system (including any

5 computer system and any microchip or integrated

6 circuit embedded in another device or product), or

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

8 processing instructions to process, to calculate, to

9 compare, to sequence, to display, to store, to transmit,

10 or to receive date-related data, including failures—

11 (A) to deal with or account for transitions

12 or comparisons from, into, and between the years

13 1999 and 2000 accurately;

14 (B) to recognize or accurately process any

15 specific date in 1999, 2000, or 2001; or

16 (C) accurately to account for the year

17 2000’s status as a leap year, including recogni18 tion and processing of the correct date on Feb19 ruary 29, 2000.

20 (3) ACTUAL DAMAGES.—The term ‘‘actual dam21 ages’’ means direct damages for injury to tangible

22 property, and the cost of repairing or replacing prod23 ucts that have a material defect.

24 (4) ECONOMIC LOSS.—Except as otherwise spe25 cifically provided in a written contract between the
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1 plaintiff and the defendant in a Y2K action (and sub2 ject to applicable State law), the term ‘‘economic

3 loss’’—

4 (A) means amounts awarded to compensate

5 an injured party for any loss other than for per6 sonal injury or damage to tangible property

7 (other than property that is the subject of the

8 contract); and

9 (B) includes amounts awarded for—

10 (i) lost profits or sales;

11 (ii) business interruption;

12 (iii) losses indirectly suffered as a re13 sult of the defendant’s wrongful act or omis14 sion;

15 (iv) losses that arise because of the

16 claims of third parties;

17 (v) losses that must be pleaded as spe18 cial damages; and

19 (vi) consequential damages (as defined

20 in the Uniform Commercial Code or analo21 gous State commercial law); but

22 (C) does not include actual damages.

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

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

2 or functioning as designed or intended. The term

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

4 (A) has an insignificant or de minimis ef5 fect on the operation or functioning of an item

6 or computer program;

7 (B) affects only on a component of an item

8 or program that, as a whole, substantially oper9 ates or functions as designed; or

10 (C) has an insignificant or de minimis ef11 fect on the efficacy of the service provided.

12 (6) PERSONAL INJURY.—The term ‘‘personal

13 injury’’—

14 (A) means any physical injury to a natural

15 person, including death of the person; but

16 (B) does not include mental suffering, emo17 tional distress, or like elements of injury that do

18 not constitute physical harm to a natural per19 son.

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

21 of the United States, the District of Columbia, Com22 monwealth of Puerto Rico, the Northern Mariana Is23 lands, the United States Virgin Islands, Guam, Amer24 ican Samoa, and any other territory or possession of
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1 the United States, and any political subdivision

2 thereof.

3 (8) CONTRACT.—The term ‘‘contract’’ means a

4 contract, tariff, license, or warranty.

5 (9) PERSON.—

6 (A) IN GENERAL.—The term ‘‘person’’ has

7 the meaning given to that term by section 1 of

8 title 1, United States Code.

9 (B) GOVERNMENT ENTITIES.—The term

10 ‘‘person’’ includes an agency, instrumentality, or

11 other entity of Federal, State, or local govern12 ment (including multijurisdictional agencies, in13 strumentalities, and entities) when that agency,

14 instrumentality, or other entity is a plaintiff or

15 a defendant in a Y2K action.

16 (10) ALTERNATIVE DISPUTE RESOLUTION.—The

17 term ‘‘alternative dispute resolution’’ means any

18 process or proceeding, other than adjudication by a

19 court or in an administrative proceeding, in which a

20 neutral third party participates to assist in the reso21 lution of issues in controversy, through processes such

22 as early neutral evaluation, mediation, minitrial,

23 and arbitration.
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1 SEC. 4. APPLICATION OF ACT.

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

3 action brought in a State or Federal court after February

4 22, 1999.

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

6 in this Act creates a new cause of action under Federal or

7 State law.

8 (c) ACTIONS FOR PERSONAL INJURY OR WRONGFUL

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

10 for personal injury or for wrongful death.

11 (d) WRITTEN CONTRACT CONTROLS.—The provisions

12 of this Act do not supersede a valid, enforceable written con13 tract between a plaintiff and a defendant in a Y2K action.

14 (e) PREEMPTION OF STATE LAW.—This Act supersedes

15 State law to the extent that it establishes a rule of law ap16 plicable to a Y2K action that is inconsistent with State law.

17 SEC. 5. PUNITIVE DAMAGES LIMITATIONS.

18 (a) IN GENERAL.—In any Y2K action in which puni19 tive damages may be awarded under applicable State law,

20 the defendant shall not be liable for punitive damages unless

21 the plaintiff proves by clear and convincing evidence that

22 the defendant acted with conscious and flagrant disregard

23 for the rights and property of others.

24 (b) CAPS ON PUNITIVE DAMAGES.—
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1 (1) IN GENERAL.—Punitive damages against a

2 defendant in such a Y2K action may not exceed the

3 larger of—

4 (A) 3 times the amount awarded for actual

5 damages; or

6 (B) $250,000.

7 (2) SPECIAL RULE.—In the case of a

8 defendant—

9 (A) who—

10 (i) is sued in his or her capacity as a

11 individual; and

12 (ii) whose net worth does not exceed

13 $500,000; or

14 (B) that is an unincorporated business, a

15 partnership, corporation, association, unit of

16 local government, or organization with fewer

17 than 25 full-time employees,

18 paragraph (1) shall be applied by substituting

19 ‘‘smaller’’ for ‘‘larger’’.

20 (c) GOVERNMENT ENTITIES.—Punitive damages in

21 such a Y2K action may not be awarded against a person

22 described in section 3(8)(B).
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1 TITLE I—OPPORTUNITY TO

2 RESOLVE Y2K PROBLEMS

3 SEC. 101. PRE-FILING NOTICE.

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

5 except an action that seeks only injunctive relief, a prospec6 tive plaintiff with a Y2K claim shall serve on each prospec7 tive defendant in that action a written notice that identifies

8 with particularity—

9 (1) the manifestations of any material defect al10 leged to have caused harm or loss;

11 (2) the harm or loss allegedly suffered by the pro12 spective plaintiff;

13 (3) the remedy sought by the prospective plain14 tiff;

15 (4) the basis upon which the prospective plaintiff

16 seeks that remedy; and

17 (5) the name, title, address, and telephone num18 ber of any individual who has authority to negotiate

19 a resolution of the dispute on behalf of the prospective

20 plaintiff.

21 (b) DELAY OF ACTION.—Except as provided in sub22 section (d), a prospective plaintiff may not commence a

23 Y2K action in Federal or State court until the expiration

24 of 90 days from the date of service of the notice required

25 by subsection (a).
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1 (c) RESPONSE TO NOTICE.—Within 30 days after re2 ceipt of the notice specified in subsection (a), each prospec3 tive defendant shall serve on each prospective plaintiff a

4 written statement acknowledging receipt of the notice, and

5 proposing the actions it has taken or will take to address

6 the problem identified by the prospective plaintiff. The writ7 ten statement shall state whether the prospective defendant

8 is willing to engage in alternative dispute resolution.

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

10 defendant—

11 (1) fails to respond to a notice provided pursu12 ant to subsection (a) within the 30 days specified in

13 subsection (c); or

14 (2) does not describe the action, if any, the pro15 spective defendant will take to address the problem

16 identified by the prospective plaintiff,

17 then the 90-day period specified in subsection (a) will ter18 minate at the end of the 30-day period as to that prospective

19 defendant and the prospective plaintiff may commence its

20 action against that prospective defendant.

21 (e) FAILURE TO PROVIDE NOTICE.—If a defendant de22 termines that a plaintiff has filed a Y2K action without

23 providing the notice specified in subsection (a) and without

24 awaiting the expiration of the 90-day period specified in

25 subsection (b), the defendant may treat the plaintiff’s com-
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1 plaint as such a notice by so informing the court and the

2 plaintiff. If any defendant elects to treat the complaint as

3 such a notice—

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

5 other proceedings in the action for 90 days after filing

6 of the complaint; and

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

8 pleadings shall be tolled during this 90-day period.

9 (f) EFFECT OF CONTRACTUAL WAITING PERIODS.—In

10 cases in which a contract requires notice of nonperformance

11 and provides for a period of delay prior to the initiation

12 of suit for breach or repudiation of contract, the period of

13 delay provided in the contract is controlling over the wait14 ing period specified in subsections (a) and (e).

15 (g) STATE LAW CONTROLS ALTERNATIVE METHODS.—

16 Nothing in this section supersedes or otherwise preempts

17 any State law or rule of civil procedure with respect to the

18 use of alternative dispute resolution for Y2K actions.

19 SEC. 102. PLEADING REQUIREMENTS.

20 (a) NATURE AND AMOUNT OF DAMAGES.—In all Y2K

21 actions in which damages are requested, the complaint shall

22 provide specific information as to the nature and amount

23 of each element of damages and the factual basis for the

24 damages calculation.
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1 (b) MATERIAL DEFECTS.—In any Y2K action in

2 which the plaintiff alleges that a product or service is defec3 tive, the complaint shall contain specific information re4 garding the manifestations of the material defects and the

5 facts supporting a conclusion that the defects are material.

6 (c) REQUIRED STATE OF MIND.—In any Y2K action

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

8 prevail only on proof that the defendant acted with a par9 ticular state of mind, the complaint shall, with respect to

10 each element of that claim, state with particularity the facts

11 giving rise to a strong inference that the defendant acted

12 with the required state of mind.

13 SEC. 103. DUTY TO MITIGATE.

14 Damages awarded in any Y2K action shall exclude

15 compensation for damages the plaintiff could reasonably

16 have avoided in light of any disclosure or other information

17 of which the plaintiff was, or reasonably could have been,

18 aware, including reasonable efforts made by a defendant to

19 make information available to purchasers or users of the

20 defendant’s product or services concerning means of rem21 edying or avoiding Y2K failure.

22 SEC. 104. PROPORTIONATE LIABILITY.

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

24 judgment is entered in a Y2K action shall be liable solely

25 for the portion of the judgment that corresponds to the rel-
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1 ative and proportional responsibility of that person. In de2 termining the percentage of responsibility of any defendant,

3 the trier of fact shall determine that percentage as a per4 centage of the total fault of all persons, including the plain5 tiff, who caused or contributed to the total loss incurred by

6 the plaintiff.

7 (b) SEVERAL LIABILITY.—Liability in a Y2K action

8 shall be several but not joint.

9 TITLE II—Y2K ACTIONS INVOLV10 ING CONTRACT-RELATED

11 CLAIMS

12 SEC. 201. CONTRACTS ENFORCED.

13 In any Y2K action, any written term or condition of

14 a valid and enforceable contract between the plaintiff and

15 the defendant, including limitations or exclusions of liabil16 ity and disclaimers of warranty, is fully enforceable, unless

17 the court determines that the contract as a whole is unen18 forceable. If the contract is silent with respect to any mat19 ter, the interpretation of the contract with respect to that

20 matter shall be determined by applicable law in force at

21 the time the contract was executed.

22 SEC. 202. DEFENSES.

23 (a) REASONABLE EFFORTS.—In any Y2K action in

24 which breach of contract is alleged, in addition to any other

25 rights provided by applicable law, the party against whom
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1 the claim of breach is asserted shall be allowed to offer evi2 dence that its implementation of the contract, or its efforts

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

4 circumstances for the purpose of limiting or eliminating the

5 defendant’s liability.

6 (b) IMPOSSIBILITY OR COMMERCIAL IMPRACTICABIL7 ITY.—In any Y2K action in which breach of contract is

8 alleged, the applicability of the doctrines of impossibility

9 and commercial impracticability shall be determined by ap10 plicable law in existence on January 1, 1999, and nothing

11 in this Act shall be construed as limiting or impairing a

12 party’s right to assert defenses based upon such doctrines.

13 SEC. 203. DAMAGES LIMITATION.

14 In any Y2K action for breach or repudiation of con15 tract, no party may claim, nor be awarded, consequential

16 or punitive damages unless such damages are allowed—

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

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

19 operation of State law at the time the contract was

20 executed or by operation of Federal law.

21 SEC. 204. MIXED ACTIONS.

22 If a Y2K action includes claims based on breach of

23 contract and tort or other noncontract claims, then this title

24 shall apply to the contract-related claims and title III shall

25 apply to the tort or other noncontract claims.
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1 TITLE III—Y2K ACTIONS

2 INVOLVING TORT CLAIMS

3 SEC. 301. DAMAGES IN TORT CLAIMS.

4 A party to a Y2K action making a tort claim may

5 not recover damages for economic loss unless—

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

7 a contract to which the party seeking to recover such

8 losses is a party;

9 (2) such losses result directly from a personal in10 jury claim resulting from the Y2K failure; or

11 (3) such losses result directly from damage to

12 tangible property caused by the Y2K failure (other

13 than damage to property that is the subject of the

14 contract),

15 and such damages are permitted under applicable Federal

16 or State law.

17 SEC. 302. CERTAIN DEFENSES.

18 (a) GOOD FAITH; REASONABLE EFFORTS.—In any

19 Y2K action except an action for breach or repudiation of

20 contract, the party against whom the claim is asserted shall

21 be entitled to establish, as a complete defense to any claim

22 for damages, that it acted in good faith and took measures

23 that were reasonable under the circumstances to prevent the

24 Y2K failure from occurring or from causing the damages

25 upon which the claim is based.
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1 (b) DEFENDANT’S STATE OF MIND.—In a Y2K action

2 making a claim for money damages in which the defend3 ant’s actual or constructive awareness of an actual or po4 tential Y2K failure is an element of the claim, the defendant

5 is not liable unless the plaintiff, in addition to establishing

6 all other requisite elements of the claim, proves by clear and

7 convincing evidence that the defendant knew, or recklessly

8 disregarded a known and substantial risk, that the failure

9 would occur in the specific facts and circumstances of the

10 claim.

11 (c) FORESEEABILITY.—In a Y2K action making a

12 claim for money damages, the defendant is not liable unless

13 the plaintiff proves by clear and convincing evidence, in

14 addition to all other requisite elements of the claim, that

15 the defendant knew, or should have known, that the defend16 ant’s action or failure to act would cause harm to the plain17 tiff in the specific facts and circumstances of the claim.

18 (d) CONTROL NOT DETERMINATIVE OF LIABILITY.—

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

20 system, product, or component that was within the control

21 of the party against whom a claim for money damages is

22 asserted in a Y2K action shall not constitute the sole basis

23 for recovery of damages in that action.

24 (e) PRESERVATION OF EXISTING LAW.—The provi25 sions of this section are in addition to, and not in lieu of,
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1 any requirement under applicable law as to burdens of

2 proof and elements necessary for prevailing in a claim for

3 money damages.

4 SEC. 303. LIABILITY OF OFFICERS AND DIRECTORS.

5 (a) IN GENERAL.—A director, officer, trustee, or em6 ployee of a business or other organization (including a cor7 poration, unincorporated association, partnership, or non8 profit organization) shall not be personally liable in any

9 Y2K action making a tort or other noncontract claim in

10 that person’s capacity as a director, officer, trustee, or em11 ployee of the business or organization for more than the

12 greater of—

13 (1) $100,000; or

14 (2) the amount of pre-tax compensation received

15 by the director, officer, trustee, or employee from the

16 business or organization during the 12 months imme17 diately preceding the act or omission for which liabil18 ity was imposed.

19 (b) EXCEPTION.—Subsection (a) does not apply in any

20 Y2K action in which it is found by clear and convincing

21 evidence that the director, officer, trustee, or employee—

22 (1) intentionally made misleading statements re23 garding any actual or potential year 2000 problem;

24 or
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1 (2) intentionally withheld from the public sig2 nificant information there was a legal duty to disclose

3 to the public regarding any actual or potential year

4 2000 problem of that business or organization which

5 would likely result in actionable Y2K failure.

6 (c) STATE LAW, CHARTER, OR BYLAWS.—Nothing in

7 this section supersedes any provision of State law, charter,

8 or a bylaw authorized by State law, in existence on Janu9 ary 1, 1999, that establishes lower limits on the liability

10 of a director, officer, trustee, or employee of such a business

11 or organization.

12 TITLE IV—Y2K CLASS ACTIONS

13 SEC. 401. MINIMUM INJURY REQUIREMENT.

14 In any Y2K action involving a claim that a product

15 or service is defective, the action may be maintained as a

16 class action in Federal or State court as to that claim only

17 if—

18 (1) it satisfies all other prerequisites established

19 by applicable Federal or State law or applicable rules

20 of civil procedure; and

21 (2) the court finds that the alleged defect in a

22 product or service is material as to the majority of

23 the members of the class.
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1 SEC. 402. NOTIFICATION.

2 (a) NOTICE BY MAIL.—In any Y2K action that is

3 maintained as a class action, the court, in addition to any

4 other notice required by applicable Federal or State law,

5 shall direct notice of the action to each member of the class

6 by United States mail, return receipt requested. Persons

7 whose receipt of the notice is not verified by the court or

8 by counsel for one of the parties shall be excluded from the

9 class unless those persons inform the court in writing, on

10 a date no later than the commencement of trial or entry

11 of judgment, that they wish to join the class.

12 (b) CONTENTS OF NOTICE.—In addition to any infor13 mation required by applicable Federal or State law, the no14 tice described in this subsection shall—

15 (1) concisely and clearly describe the nature of

16 the action;

17 (2) identify the jurisdiction where the case is

18 pending; and

19 (3) describe the fee arrangement of class counsel.

20 SEC. 403. FORUM FOR Y2K CLASS ACTIONS.

21 (a) JURISDICTION.—The District Courts of the United

22 States have original jurisdiction of any Y2K action, with23 out regard to the sum or value of the matter in controversy

24 involved, that is brought as a class action if—
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1 (1) any member of the proposed plaintiff class is

2 a citizen of a State different from the State of which

3 any defendant is a citizen;

4 (2) any member of the proposed plaintiff class is

5 a foreign Nation or a citizen of a foreign Nation and

6 any defendant is a citizen or lawful permanent resi7 dent of the United States; or

8 (3) any member of the proposed plaintiff class is

9 a citizen or lawful permanent resident of the United

10 States and any defendant is a citizen or lawful per11 manent resident of a foreign Nation.

12 (b) PREDOMINANT STATE INTEREST.—A United

13 States District Court in an action described in subsection

14 (a) may abstain from hearing the action if—

15 (1) a substantial majority of the members of all

16 proposed plaintiff classes are citizens of a single

17 State;

18 (2) the primary defendants are citizens of that

19 State; and

20 (3) the claims asserted will be governed pri21 marily by the laws of that State.

22 (c) LIMITED CONTROVERSIES.—A United States Dis23 trict Court in an action described in subsection (a) may

24 abstain from hearing the action if—
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1 (1) the value of all matters in controversy as2 serted by the individual members of all proposed

3 plaintiff classes in the aggregate does not exceed

4 $1,000,000, exclusive of interest and costs;

5 (2) the number of members of all proposed plain6 tiff classes in the aggregate in less than 100; or

7 (3) the primary defendants are States, State offi8 cials, or other governmental entities against whom the

9 district court may be foreclosed from ordering relief.

10 (d) DIVERSITY DETERMINATION.—For purposes of ap11 plying section 1322(b) of title 28, United States Code, to

12 actions described in subsection (a) of this section, a member

13 of a proposed class is deemed to be a citizen of a State dif14 ferent from a corporation that is a defendant if that mem15 ber is a citizen of a State different from each State of which

16 that corporation is deemed a citizen.

17 (e) REMOVAL.—

18 (1) IN GENERAL.—A class action described in

19 subsection (a) may be removed to a district court of

20 the United States in accordance with chapter 89 of

21 title 28, United States Code, except that the action

22 may be removed—

23 (A) by any defendant without the consent of

24 all defendants; or
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1 (B) any plaintiff class member who is not

2 a named or representative class member of the

3 action for which removal is sought, without the

4 consent of all members of the class.

5 (2) TIMING.—This subsection applies to any

6 class before or after the entry of any order certifying

7 a class.

8 (3) PROCEDURE.—

9 (A) IN GENERAL.—Section 1446(a) of title

10 28, United States Code, shall be applied to a

11 plaintiff removing a case under this section by

12 treating the 30-day filing period as met if a

13 plaintiff class member who is not a named or

14 representative class member of the action for

15 which removal is sought files notice of removal

16 within 30 days after receipt by such class mem17 ber of the initial written notice of the class ac18 tion provided at the trial court’s direction.

19 (B) APPLICATION OF SECTION 1446.—Sec20 tion 1446 of title 28, United States Code, shall

21 be applied—

22 (i) to the removal of a case by a plain23 tiff under this section by substituting the

24 term ‘‘plaintiff’’ for the term ‘‘defendant’’

25 each place it appears; and
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1 (ii) to the removal of a case by a

2 plaintiff or a defendant under this

3 section—

4 (I) by inserting the phrase ‘‘by ex5 ercising due diligence’’ after

6 ‘‘ascertained’’ in the second paragraph

7 of subsection (b); and

8 (II) by treating the reference to

9 ‘‘jurisdiction conferred by section 1332

10 of this title’’ as a reference to sub11 section (a) of this section.

12 (f) APPLICATION OF SUBSTANTIVE STATE LAW.—

13 Nothing in this section alters the substantive law applicable

14 to an action described in subsection (a).

15 (g) PROCEDURE AFTER REMOVAL.—If, after removal,

16 the court determines that no aspect of an action that is sub17 ject to its jurisdiction solely under the provisions of section

18 1332(b) of title 28, United States Code, may be maintained

19 as a class action under Rule 23 of the Federal Rules of

20 Civil Procedure, the court shall strike the class allegations

21 from the action and remand the action to the State court.

22 Upon remand of the action, the period of limitations for

23 any claim that was asserted in the action on behalf of any

24 named or unnamed member of any proposed class shall be

25 deemed tolled to the full extent provided under Federal law.