II

106TH CONGRESS

1ST SESSION S. 461

To assure that innocent users and businesses gain access to solutions to

the year 2000 problem-related failures through fostering an incentive

to settle year 2000 lawsuits that may disrupt significant sectors of

the American economy.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 24, 1999

Mr. HATCH (for himself, Mrs. FEINSTEIN, and Mr. MCCONNELL) introduced

the following bill; which was read twice and referred to the Committee

on the Judiciary

A BILL

To assure that innocent users and businesses gain access

to solutions to the year 2000 problem-related failures

through fostering an incentive to settle year 2000 lawsuits that may disrupt significant sectors of the American economy.

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Year 2000 Fairness and Responsibility Act’’.

6 (b) TABLE OF CONTENTS.—The table of contents for

7 this Act is as follows:
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Sec. 1. Short title and table of contents.

Sec. 2. Findings, purposes, and scope.

Sec. 3. Definitions.

TITLE I—PRELITIGATION PROCEDURES FOR YEAR 2000 CIVIL

ACTIONS

Sec. 101. Pre-trial notice.

Sec. 102. Alternative dispute resolution.

Sec. 103. Pleading requirements.

Sec. 104. Duty to mitigate.

TITLE II—YEAR 2000 CIVIL ACTIONS INVOLVING CONTRACTS

Sec. 201. Contract preservation.

Sec. 202. Evidence of reasonable efforts and defenses.

Sec. 203. Damages limitation.

TITLE III—YEAR 2000 CIVIL ACTIONS INVOLVING TORT AND

OTHER NONCONTRACTUAL CLAIMS

Sec. 301. Proportionate liability.

Sec. 302. State of mind and foreseeability.

Sec. 303. Reasonable efforts defense.

Sec. 304. Damages limitation.

Sec. 305. Economic losses.

Sec. 306. Liability of officers and directors.

TITLE IV—CLASS ACTIONS INVOLVING YEAR 2000 CLAIMS

Sec. 401. Minimum injury requirement.

Sec. 402. Notification.

Sec. 403. Dismissal prior to certification.

Sec. 404. Federal jurisdiction in class actions involving year 2000 claims.

TITLE V—EFFECTIVE DATE

Sec. 501. Effective date.

1 SEC. 2. FINDINGS, PURPOSES, AND SCOPE.

2 (a) FINDINGS.—Congress finds the following:

3 (1)(A) Many information technology systems,

4 devices, and programs are not capable of recognizing

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

6 and will read dates in the year 2000 and thereafter

7 as if those dates represent the year 1900 or there8 after or will fail to process those dates.
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1 (B) If not corrected, the problem described in

2 subparagraph (A) and resulting failures could inca3 pacitate systems that are essential to the functioning

4 of markets, commerce, consumer products, utilities,

5 Government, and safety and defense systems, in the

6 United States and throughout the world.

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

8 and users of technology products concentrate their

9 attention and resources in the time remaining before

10 January 1, 2000, on assessing, fixing, testing, and

11 developing contingency plans to address any and all

12 outstanding year 2000 computer date-change prob13 lems, so as to minimize possible disruptions associ14 ated with computer failures.

15 (3)(A) Because year 2000 computer date16 change problems may affect virtually all businesses

17 and other users of technology products to some de18 gree, there is a substantial likelihood that actual or

19 potential year 2000 failures will prompt a significant

20 volume of litigation, much of it insubstantial.

21 (B) The litigation described in subparagraph

22 (A) would have a range of undesirable effects includ23 ing the following:

24 (i) It would threaten to waste technical

25 and financial resources that are better devoted
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1 to curing year 2000 computer date-change

2 problems and ensuring that systems remain or

3 become operational.

4 (ii) It could threaten the network of valued

5 and trusted business and customer relationships

6 that are important to the effective functioning

7 of the national economy.

8 (iii) It would strain the Nation’s legal sys9 tem, causing particular problems for the small

10 businesses and individuals who already find

11 that system inaccessible because of its complex12 ity and expense.

13 (iv) The delays, expense, uncertainties, loss

14 of control, adverse publicity, and animosities

15 that frequently accompany litigation of business

16 disputes could exacerbate the difficulties associ17 ated with the date change and work against the

18 successful resolution of those difficulties.

19 (v) Concern about the potential for liabil20 ity—in particular, concern about the substan21 tial litigation expense associated with defending

22 against even the most insubstantial lawsuits—

23 is prompting many persons and businesses with

24 technical expertise to avoid projects aimed at
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1 curing year 2000 computer date-change prob2 lems.

3 (b) PURPOSES.—Based upon the power contained in

4 article I, section 8, clause 3 of the Constitution of the

5 United States, the purposes of this Act are—

6 (1) to establish uniform legal standards that

7 give all businesses and users of technology products

8 reasonable incentives to solve year 2000 computer

9 date-change problems before they develop;

10 (2) to encourage the resolution of year 2000

11 computer date-change disputes involving economic

12 damages without recourse to unnecessary, time con13 suming, and wasteful litigation; and

14 (3) to lessen burdens on interstate commerce by

15 discouraging insubstantial lawsuits, while also pre16 serving the ability of individuals and businesses that

17 have suffered real injury to obtain complete relief.

18 (c) SCOPE.—Nothing in this Act affects claims for

19 personal injury.

20 SEC. 3. DEFINITIONS.

21 In this Act:

22 (1) ACTUAL DAMAGES.—The term ‘‘actual

23 damages’’—

24 (A) means damages for physical injury to

25 any person or property; and
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1 (B) includes the cost of repairing or re2 placing a product that has a material defect.

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

4 contract, tariff, license, or warranty.

5 (3) DEFENDANT.—The term ‘‘defendant’’

6 means any person against whom a year 2000 claim

7 is asserted.

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

9 loss’’—

10 (A) means any damages other than dam11 ages arising out of personal injury or damage

12 to tangible property; and

13 (B) includes damages for—

14 (i) lost profits or sales;

15 (ii) business interruption;

16 (iii) losses indirectly suffered as a re17 sult of the defendant’s wrongful act or

18 omission;

19 (iv) losses that arise because of the

20 claims of third parties;

21 (v) losses that are required to be

22 pleaded as special damages; or

23 (vi) items defined as consequential

24 damages in the Uniform Commercial Code

25 or an analogous State commercial law.
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1 (5) MATERIAL DEFECT.—

2 (A) IN GENERAL.—The term ‘‘material de3 fect’’ means a defect in any item, whether tan4 gible or intangible, or in the provision of a serv5 ice, that substantially prevents the item or serv6 ice from operating or functioning as designed or

7 intended.

8 (B) EXCLUSIONS.—The term does not in9 clude any defect that—

10 (i) has an insignificant or de minimis

11 effect on the operation or functioning of an

12 item;

13 (ii) affects only a component of an

14 item that, as a whole, substantially oper15 ates or functions as designed; or

16 (iii) has an insignificant or de minimis

17 effect on the efficacy of the service pro18 vided.

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

20 natural person and any entity, organization, or en21 terprise, including any corporation, company (includ22 ing any joint stock company), association, partner23 ship, trust, or governmental entity.

24 (7) PERSONAL INJURY.—
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1 (A) IN GENERAL.—The term ‘‘personal in2 jury’’ means any physical injury to a natural

3 person, including death of the person.

4 (B) EXCLUSIONS.—The term does not in5 clude mental suffering, emotional distress, or

6 like elements of injury that do not constitute

7 physical harm to a natural person.

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

9 any person who asserts a year 2000 claim.

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

11 damages’’ means damages, other than compensatory

12 damages, that, in whole or in part, are awarded

13 against any person—

14 (A) to punish that person; or

15 (B) to deter that person, or other persons,

16 from engaging in similar behavior.

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

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

19 the Commonwealth of Puerto Rico, the Northern

20 Mariana Islands, the U.S. Virgin Islands, Guam,

21 American Samoa, and any other territory or posses22 sion of the United States, and any political subdivi23 sion thereof.

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

25 2000 civil action’’ means any civil action of any kind
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1 brought in any court under Federal, State, or for2 eign law, in which—

3 (A) a year 2000 claim is asserted; or

4 (B) any claim or defense is related, di5 rectly or indirectly, to an actual or potential

6 year 2000 failure.

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

8 claim’’ means any claim or cause of action of any

9 kind, whether asserted by way of claim, counter10 claim, cross-claim, third-party claim, or otherwise, in

11 which the plaintiff’s alleged loss or harm resulted,

12 directly or indirectly, from an actual or potential

13 year 2000 failure.

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

15 2000 failure’’ means any failure by any device or

16 system (including any computer system and any

17 microchip or integrated circuit embedded in another

18 device or product), or any software, firmware, or

19 other set or collection of processing instructions,

20 however constructed, in processing, calculating, com21 paring, sequencing, displaying, storing, transmitting,

22 or receiving date-related data, including—

23 (A) the failure to accurately administer or

24 account for transitions or comparisons from,
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1 into, and between the 20th and 21st centuries,

2 and between 1999 and 2000; or

3 (B) the failure to recognize or accurately

4 process any specific date, and the failure accu5 rately to account for the status of the year

6 2000 as a leap year.

7 TITLE I—PRELITIGATION PRO8 CEDURES FOR YEAR 2000

9 CIVIL ACTIONS

10 SEC. 101. PRE-TRIAL NOTICE.

11 (a) NOTIFICATION PERIOD.—

12 (1) IN GENERAL.—Before filing a year 2000

13 claim, except an action for a claim that seeks only

14 injunctive relief, a prospective plaintiff shall be re15 quired to provide to each prospective defendant a

16 written notice that identifies and describes with

17 particularity—

18 (A) any manifestation of a material defect

19 alleged to have caused injury;

20 (B) the injury allegedly suffered or reason21 ably risked by the prospective plaintiff; and

22 (C) the relief or action sought by the pro23 spective plaintiff.

24 (2) COMMENCEMENT OF ACTION.—Except as

25 provided in subsections (c) and (e), a prospective
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1 plaintiff shall not file a year 2000 claim in Federal

2 or State court until the expiration of the 90-day pe3 riod beginning on the date on which the prospective

4 plaintiff provides notice under paragraph (1).

5 (b) RESPONSE TO NOTICE.—Not later than 30 days

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

7 prospective defendant shall provide each prospective plain8 tiff a written statement that—

9 (1) acknowledges receipt of the notice; and

10 (2) describes any actions that the defendant will

11 take, or has taken, to address the defect or injury

12 identified by the prospective plaintiff in the notice.

13 (c) FAILURE TO RESPOND.—If a prospective defend14 ant fails to respond to a notice provided under subsection

15 (a)(1) during the 30-day period prescribed in subsection

16 (b) or does not include in the response a description of

17 actions referred to in subsection (b)(2)—

18 (1) the 90-day waiting period identified in sub19 section (a) shall terminate at the expiration of the

20 30-day period specified in subsection (b) with re21 spect to that prospective defendant; and

22 (2) the prospective plaintiff may commence a

23 year 2000 civil action against such prospective de24 fendant immediately upon the termination of that

25 waiting period.
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1 (d) FAILURE TO PROVIDE NOTICE.—

2 (1) IN GENERAL.—Subject to subsections (c)

3 and (e), a defendant may treat a complaint filed by

4 the plaintiff as a notice required under subsection

5 (a) by so informing the court and the plaintiff if the

6 defendant determines that a plaintiff has com7 menced a year 2000 civil action—

8 (A) without providing the notice specified

9 in subsection (a); or

10 (B) before the expiration of the 90-day

11 waiting period specified in subsection (a).

12 (2) STAY.—If a defendant elects under para13 graph (1) to treat a complaint as a notice—

14 (A) the court shall stay all discovery and

15 other proceedings in the action for a period of

16 90 days beginning on the date of filing of the

17 complaint; and

18 (B) the time for filing answers and all

19 other pleadings shall be tolled during this 90-

20 day period.

21 (e) EFFECT OF CONTRACTUAL WAITING PERIODS.—

22 In any case in which a contract requires notice of non23 performance and provides for a period of delay before the

24 initiation of suit for breach or repudiation of contract, the
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1 contractual period of delay controls and shall apply in lieu

2 of the waiting period specified in subsections (a) and (d).

3 (f) SANCTION FOR FRIVOLOUS INVOCATION OF THE

4 STAY PROVISION.—If a defendant acts under subsection

5 (d) to stay an action, and the court subsequently finds

6 that the assertion by the defendant that the action is a

7 year 2000 civil action was frivolous and made for the pur8 pose of causing unnecessary delay, the court may impose

9 a sanction, including an order to make payments to oppos10 ing parties in accordance with Rule 11 of the Federal

11 Rules of Civil Procedure.

12 (g) COMPUTATION OF TIME.—For purposes of this

13 section, the rules regarding computation of time shall be

14 governed by the applicable Federal or State rules of civil

15 procedure.

16 SEC. 102. ALTERNATIVE DISPUTE RESOLUTION.

17 (a) REQUESTS MADE DURING NOTIFICATION PE18 RIOD.—At any time during the 90-day notification period

19 under section 101(a), either party may request the other

20 party to use alternative dispute resolution. If, based upon

21 that request, the parties enter into an agreement to use

22 alternative dispute resolution, the parties may also agree

23 to an extension of that 90-day period.

24 (b) REQUEST MADE AFTER NOTIFICATION PE25 RIOD.—At any time after expiration of the 90-day notifi-
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1 cation period under section 101(a), whether before or after

2 the filing of a complaint, either party may request the

3 other party to use alternative dispute resolution.

4 (c) PAYMENT DATE.—If a dispute that is the subject

5 of the complaint or responsive pleading is resolved through

6 alternative dispute resolution as provided in subsection (a)

7 or (b), the defendant shall pay any amount of funds that

8 the defendant is required to pay the plaintiff under the

9 settlement not later than 30 days after the date on which

10 the parties settle the dispute, and all other terms shall

11 be implemented as promptly as possible based upon the

12 agreement of the parties, unless another period of time

13 is agreed to by the parties or established by contract be14 tween the parties.

15 SEC. 103. PLEADING REQUIREMENTS.

16 (a) NATURE AND AMOUNT OF DAMAGES.—In any

17 year 2000 civil action in which a plaintiff seeks an award

18 of money damages, the complaint shall state with particu19 larity with regard to each year 2000 claim—

20 (1) the nature and amount of each element of

21 damages; and

22 (2) the factual basis for the calculation of the

23 damages.

24 (b) MATERIAL DEFECTS.—In any year 2000 civil ac25 tion in which the plaintiff alleges that a product or service
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1 was defective, the complaint shall, with respect to each

2 year 2000 claim—

3 (1) identify with particularity the manifesta4 tions of the material defects; and

5 (2) state with particularity the facts supporting

6 the conclusion that the defects were material.

7 (c) REQUIRED STATE OF MIND.—In any year 2000

8 civil action in which a year 2000 claim is asserted with

9 respect to which the plaintiff may prevail only on proof

10 that the defendant acted with a particular state of mind,

11 the complaint shall, with respect to each element of the

12 claim, state in detail the facts giving rise to a strong infer13 ence that the defendant acted with the required state of

14 mind.

15 (d) MOTION TO DISMISS; STAY OF DISCOVERY.—

16 (1) DISMISSAL FOR FAILURE TO MEET PLEAD17 ING REQUIREMENTS.—In any year 2000 civil action,

18 the court shall, on the motion of any defendant, dis19 miss without prejudice any year 2000 claim asserted

20 in the complaint if any of the requirements under

21 subsection (a), (b), or (c) is not met with respect to

22 the claim.

23 (2) STAY OF DISCOVERY.—In any year 2000

24 civil action, all discovery and other proceedings shall

25 be stayed during the pendency of any motion to dis-
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1 miss, unless the court finds upon the motion of any

2 party that particularized discovery is necessary to

3 preserve evidence or prevent undue prejudice to that

4 party.

5 (3) PRESERVATION OF EVIDENCE.—

6 (A) IN GENERAL.—

7 (i) TREATMENT OF EVIDENCE.—Dur8 ing the pendency of any stay of discovery

9 entered under this paragraph, unless oth10 erwise ordered by the court, any party to

11 the action with actual notice of the allega12 tions contained in the complaint shall treat

13 the items described in clause (ii) as if they

14 were a subject of a continuing request for

15 production of documents from an opposing

16 party under applicable Federal or State

17 rules of civil procedure.

18 (ii) ITEMS.—The items described in

19 this clause are all documents, data com20 pilations (including electronically stored or

21 recorded data), and tangible objects that—

22 (I) are in the custody or control

23 of the party described in clause (i);

24 and

25 (II) relevant to the allegations.
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1 (B) SANCTION FOR WILLFUL VIOLA2 TION.—A party aggrieved by the willful failure

3 of an opposing party to comply with clause (A)

4 may apply to the court for an order awarding

5 appropriate sanctions.

6 SEC. 104. DUTY TO MITIGATE.

7 (a) IN GENERAL.—There shall be no recovery for any

8 year 2000 claim on account of injury that the plaintiff

9 could reasonably have avoided in light of any disclosure

10 or other information with respect to which the plaintiff

11 was, or reasonably could have been, aware.

12 (b) DAMAGES.—The damages awarded for any claim

13 described in subsection (a) shall exclude any amount that

14 the plaintiff reasonably could have avoided in light of any

15 disclosure or information described in that subsection.

16 TITLE II—YEAR 2000 CIVIL AC17 TIONS INVOLVING CON18 TRACTS

19 SEC. 201. CONTRACT PRESERVATION.

20 (a) IN GENERAL.—Subject to subsections (b) and (c),

21 notwithstanding any other provision of Federal or State

22 statutory or case law, in any action in which a year 2000

23 claim is advanced, in resolving that claim all written con24 tractual terms, including limitations or exclusions of liabil25 ity or disclaimers of warranty, shall be fully enforceable.
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1 (b) INTERPRETATION OF CONTRACT.—In any case in

2 which a contract is silent as to a particular issue, the in3 terpretation of the contract as to that issue shall be deter4 mined by applicable law in effect at the time that the con5 tract was entered into.

6 (c) UNENFORCEABLE CONTRACTS.—Subsection (a)

7 does not apply in any case in which a court determines

8 that the contract as a whole is unenforceable due to an

9 infirmity in the formation of the contract under applicable

10 law in effect at the time the contract was entered into.

11 SEC. 202. EVIDENCE OF REASONABLE EFFORTS AND DE12 FENSES.

13 (a) REASONABLE EFFORTS.—In any action in which

14 a year 2000 claim is advanced and in which a breach of

15 contract or related claim is alleged, in the resolution of

16 that claim, in addition to any other rights provided by ap17 plicable law, the party against whom the claim of breach

18 is asserted shall be allowed, for the purpose of limiting

19 or eliminating the defendant’s liability, to offer evidence

20 that the implementation of the contract by that party, or

21 the efforts made by that party to implement the contract,

22 were reasonable in light of the circumstances.

23 (b) IMPOSSIBILITY OR COMMERCIAL IMPRACTICABIL24 ITY.—
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1 (1) IN GENERAL.—In any action in which a

2 year 2000 claim is advanced and in which a breach

3 of contract or related claim is alleged, in resolving

4 that claim applicability of the doctrines of impos5 sibility and commercial impracticability shall be de6 termined by applicable law in existence on January

7 1, 1999.

8 (2) RULE OF CONSTRUCTION.—Nothing in this

9 Act shall be construed as limiting or impairing a

10 party’s right to assert defenses based upon the doc11 trines referred to in paragraph (1).

12 SEC. 203. DAMAGES LIMITATION.

13 In any action in which a year 2000 claim is advanced

14 and that involves a breach of contract, warranty, or relat15 ed claim, in resolving that claim the court shall not award

16 any damages—

17 (1) unless those damages are provided for by

18 the express terms of the contract; or

19 (2) if the contract is silent on those damages,

20 by operation of the applicable Federal or State law

21 that governed interpretation of the contract at the

22 time the contract was entered into.
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1 TITLE III—YEAR 2000 CIVIL AC2 TIONS INVOLVING TORT AND

3 OTHER NONCONTRACTUAL

4 CLAIMS

5 SEC. 301. PROPORTIONATE LIABILITY.

6 (a) IN GENERAL.—Except in cases involving personal

7 injury, a person against whom a final judgment is entered

8 on a year 2000 claim shall be liable solely for the portion

9 of the judgment that corresponds to the percentage of re10 sponsibility of that person, as determined under subsection

11 (b).

12 (b) DETERMINATION OF RESPONSIBILITY.—

13 (1) IN GENERAL.—As to any year 2000 claim,

14 the court shall instruct the jury to answer special in15 terrogatories, or if there is no jury, make findings,

16 with respect to each defendant and plaintiff, and

17 each of the other persons claimed by any of the par18 ties to have caused or contributed to the loss in19 curred by the plaintiff, including persons who have

20 entered into settlements with the plaintiff or plain21 tiffs, concerning the percentage of responsibility of

22 that person, measured as a percentage of the total

23 fault of all persons who caused or contributed to the

24 total loss incurred by the plaintiff.
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1 (2) CONTENTS OF SPECIAL INTERROGATORIES

2 OR FINDINGS.—The responses to interrogatories, or

3 findings, as appropriate, under paragraph (1) shall

4 specify—

5 (A) the total amount of damages that the

6 plaintiff is entitled to recover; and

7 (B) the percentage of responsibility of each

8 person found to have caused or contributed to

9 the loss incurred by the plaintiff or plaintiffs.

10 (3) FACTORS FOR CONSIDERATION.—In deter11 mining the percentage of responsibility under this

12 paragraph, the trier of fact shall consider—

13 (A) the nature of the conduct of each per14 son alleged to have caused or contributed to the

15 loss incurred by the plaintiff; and

16 (B) the nature and extent of the causal re17 lationship between the conduct of each such

18 person and the damages incurred by the plain19 tiff or plaintiffs.

20 (4) NONDISCLOSURE TO JURY.—The standard

21 for allocation of damages under paragraph (1) shall

22 not be disclosed to members of the jury.

23 SEC. 302. STATE OF MIND AND FORESEEABILITY.

24 (a) DEFENDANT’S STATE OF MIND AS TO YEAR 2000

25 FAILURE.—With respect to any year 2000 claim for
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1 money damages in which the defendant’s actual or con2 structive awareness of an actual or potential year 2000

3 failure is an element of the claim under applicable law,

4 the defendant shall not be liable unless the plaintiff, in

5 addition to establishing all other requisite elements of the

6 claim, proves by clear and convincing evidence that the

7 defendant actually knew, or recklessly disregarded a

8 known and substantial risk, that the failure would occur.

9 (b) INJURY TO PLAINTIFF.—With respect to any year

10 2000 claim for money damages in which the defendant’s

11 actual or constructive awareness of actual or potential

12 harm to plaintiff is greater than the standard for neg13 ligence in subsection (c) and is an element of the claim

14 under applicable law, the defendant shall not be liable un15 less the plaintiff, in addition to establishing all other req16 uisite elements of the claim, proves by clear and convinc17 ing evidence that the defendant actually knew, or reck18 lessly disregarded a known and substantial risk, that

19 plaintiff would suffer that harm.

20 (c) NEGLIGENCE.—With respect to any year 2000

21 claim for money damages, the defendant shall not be liable

22 unless the plaintiff establishes by clear and convincing evi23 dence, in addition to all other requisite elements of the

24 claim, that the defendant knew or should have known that
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1 the actions of the defendant created an unreasonable risk

2 of harm to the plaintiff.

3 (d) PRESERVATION OF EXISTING LAW.—Nothing in

4 subsection (a), (b), or (c) shall be deemed to create any

5 year 2000 claim or to relieve the plaintiff in any year 2000

6 civil action of the obligation of that plaintiff to establish

7 any element of the cause of action of that plaintiff under

8 applicable law.

9 SEC. 303. REASONABLE EFFORTS DEFENSE.

10 Except for breach or repudiation of contract claims,

11 as to any year 2000 claim seeking money damages—

12 (1) the fact that a year 2000 failure occurred

13 in an entity, facility, system, product, or component

14 that was within the control of the party against

15 whom the claim is asserted shall not constitute the

16 sole basis for recovery; and

17 (2) the party against whom the claim is as18 serted shall be entitled to establish, as a complete

19 defense to the claim, that the party took measures

20 that were reasonable under the circumstances to pre21 vent the year 2000 failure from occurring or from

22 causing the damages upon which the claim is based.

23 SEC. 304. DAMAGES LIMITATION.

24 (a) IN GENERAL.—As to any year 2000 claim in

25 which punitive damages may be awarded under applicable
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1 law and in which a defendant is found liable for punitive

2 damages, the amount of punitive damages that may be

3 awarded to a claimant shall not exceed the greater of—

4 (1) 3 times the amount awarded to the claimant

5 for actual damages; or

6 (2) $250,000.

7 (b) SPECIAL RULE.—

8 (1) RULE.—

9 (A) IN GENERAL.—Notwithstanding sub10 section (a), as to any year 2000 claim in which

11 the defendant is found liable for punitive dam12 ages and the defendant is an individual de13 scribed in subparagraph (B), the amount of pu14 nitive damages shall not exceed the lesser of—

15 (i) 3 times the amount awarded to the

16 claimant for actual damages; or

17 (ii) $250,000.

18 (B) DESCRIPTION OF INDIVIDUAL.—An in19 dividual described in this clause is an individual

20 whose net worth does not exceed $500,000, is

21 an owner of an unincorporated business that

22 has fewer than 25 full-time employees, or is any

23 partnership, corporation, association, unit of

24 local government, or organization that has

25 fewer than 25 full-time employees.
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1 (2) APPLICABILITY.—For purposes of determin2 ing the applicability of this subsection to a corpora3 tion, the number of employees of a subsidiary of a

4 wholly owned corporation shall include all employees

5 of a parent corporation or any subsidiary of that

6 parent corporation.

7 (c) APPLICATION OF LIMITATIONS BY THE COURT.—

8 The limitations contained in subsection (a) or (b) shall be

9 applied by the court and shall not be disclosed to the jury.

10 SEC. 305. ECONOMIC LOSSES.

11 (a) IN GENERAL.—Subject to subsection (b), a party

12 to a year 2000 civil action may not recover economic losses

13 for a year 2000 claim based on tort unless the party is

14 able to show that at least one of the following cir15 cumstances exists:

16 (1) The recovery of these losses is provided for

17 in the contract to which the party seeking to recover

18 such losses is a party.

19 (2) If the contract is silent on those losses, and

20 the application of the applicable Federal or State

21 law that governed interpretation of the contract at

22 the time the contract was entered into would allow

23 recovery of such losses.
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1 (3) These losses are incidental to a claim in the

2 year 2000 civil action based on personal injury

3 caused by a year 2000 failure.

4 (4) These losses are incidental to a claim in the

5 year 2000 civil action based on damage to tangible

6 property caused by a year 2000 failure.

7 (b) TREATMENT OF ECONOMIC LOSSES.—Economic

8 losses shall be recoverable in a year 2000 civil action only

9 if applicable Federal law, or applicable State law embodied

10 in statute or controlling judicial precedent as of January

11 1, 1999, permits the recovery of such losses in the action.

12 SEC. 306. LIABILITY OF OFFICERS AND DIRECTORS.

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

14 a business or other organization (including a corporation,

15 unincorporated association, partnership, or non-profit or16 ganization) shall not be personally liable as to any year

17 2000 claim in the capacity of that individual as a director

18 or officer of the business or organization for an aggregate

19 amount greater than the greater of—

20 (1) $100,000; or

21 (2) the amount of cash compensation received

22 by the director or officer from the business or orga23 nization during the 12-month period immediately

24 preceding the act or omission for which liability was

25 imposed.
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1 (b) EXCEPTION.—The limitation in subsection (a)

2 shall not apply to any claim in which it is found by clear

3 and convincing evidence that the director or officer, with

4 specific intent to cause harm to the plaintiff—

5 (1) intentionally made materially misleading

6 statements relied upon by the plaintiff regarding any

7 actual or potential year 2000 problem; or

8 (2) intentionally withheld material information

9 regarding any actual or potential year 2000 problem

10 of the business or organization that the director or

11 officer had a duty to disclose.

12 (c) RULE OF CONSTRUCTION.—Nothing in this sec13 tion shall be deemed to impose, or to permit the imposition

14 of, personal liability on any director, officer, or trustee in

15 excess of the aggregate amount of liability to which such

16 director, officer, or trustee would be subject under applica17 ble State law in existence on January 1, 1999 (including

18 any charter or bylaw authorized by that State law).

19 TITLE IV—CLASS ACTIONS

20 INVOLVING YEAR 2000 CLAIMS

21 SEC. 401. MINIMUM INJURY REQUIREMENT.

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

23 2000 claim that a product or service is defective, the ac24 tion may be maintained as a class action in Federal or

25 State court with respect to that claim only if—
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1 (1) the claim satisfies all other prerequisites es2 tablished by applicable Federal or State law; and

3 (2) the court finds that the alleged defect in the

4 product or service was a material defect with respect

5 to a majority of the members of the class.

6 (b) DETERMINATION BY COURT.—

7 (1) IN GENERAL.—As soon as practicable after

8 the commencement of an action involving a year

9 2000 claim that a product or service is defective and

10 that is brought as a class action, the court shall de11 termine by order whether the requirement stated in

12 paragraph (1) is satisfied.

13 (2) ORDERS.—An order under this subsection

14 may be—

15 (A) conditional; and

16 (B) altered or amended before the decision

17 on the merits.

18 SEC. 402. NOTIFICATION.

19 (a) NOTICE BY MAIL.—

20 (1) IN GENERAL.—In any year 2000 civil action

21 that is maintained as a class action, the court, in ad22 dition to any other notice required by applicable

23 Federal or State law, shall direct notice of the action

24 to each member of the class by United States mail,

25 return receipt requested.
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1 (2) EXCLUSION OF CERTAIN PERSONS.—Any

2 person whose actual receipt of the notice is not veri3 fied by the court or by counsel for 1 of the parties

4 shall be excluded from the class unless that person

5 informs the court in writing, on a date no later than

6 the commencement of trial or entry of judgment,

7 that the person wishes to join the class.

8 (b) CONTENTS OF NOTICE.—In addition to any infor9 mation required by applicable Federal or State law, the

10 notice described in this subsection shall—

11 (1) concisely and clearly describe the nature of

12 the action;

13 (2) identify the jurisdiction whose law will gov14 ern the action;

15 (3) identify any potential claims that class

16 counsel chose not to pursue so that the action would

17 satisfy class certification requirements; and

18 (4) describe the fee arrangement of class coun19 sel.

20 SEC. 403. DISMISSAL PRIOR TO CERTIFICATION.

21 Before determining whether to certify a class in a

22 year 2000 civil action, the court may decide a motion to

23 dismiss or for summary judgment made by any party if

24 the court concludes that decision will—
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1 (1) promote the fair and efficient adjudication

2 of the controversy; and

3 (2) not cause undue delay.

4 SEC. 404. FEDERAL JURISDICTION IN CLASS ACTIONS IN5 VOLVING YEAR 2000 CLAIMS.

6 (a) DIVERSITY JURISDICTION.—Section 1332 of title

7 28, United States Code, is amended—

8 (1) by redesignating subsections (b), (c), and

9 (d) as subsections (c), (d), and (e), respectively; and

10 (2) by inserting after subsection (a) the follow11 ing:

12 ‘‘(b)(1)(A) The district courts shall, regardless of the

13 sum or value of the matter in controversy therein, have

14 original jurisdiction of any year 2000 civil action which

15 is brought as a class action and in which—

16 ‘‘(i) any member of a proposed plaintiff class is

17 a citizen of a State different from any defendant;

18 ‘‘(ii) any member of a proposed plaintiff class

19 is a foreign state or a citizen or subject of a foreign

20 state and any defendant is a citizen of a State; or

21 ‘‘(iii) any member of a proposed plaintiff class

22 is a citizen of a State and any defendant is a citizen

23 or subject of a foreign state.

24 ‘‘(B) As used in this paragraph, the term ‘foreign

25 state’ has the meaning given that term in section 1603(a).
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1 ‘‘(2)(A) The district court may, in its discretion, ab2 stain from hearing such action in a year 2000 civil action

3 described in paragraph (1) in which—

4 ‘‘(i) the substantial majority of the members of

5 all proposed plaintiff classes are citizens of a single

6 State of which the primary defendants are also citi7 zens; and

8 ‘‘(ii) the claims asserted will be governed pri9 marily by the laws of that State, the district court

10 should abstain from hearing such action.

11 ‘‘(B) The district court may, in its discretion, abstain

12 from hearing such action in a year 2000 civil action de13 scribed in paragraph (1) in which—

14 ‘‘(i) all matters in controversy asserted by the

15 individual members of all proposed plaintiff classes

16 in the aggregate do not exceed the sum or value of

17 $1,000,000, exclusive of interest and costs;

18 ‘‘(ii) the number of members of all proposed

19 plaintiff classes in the aggregate is less than 100; or

20 ‘‘(iii) the primary defendants are States, State

21 officials, or other governmental entities against

22 whom the district court may be foreclosed from or23 dering relief, the district court may, in its discretion,

24 abstain from hearing such action.
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1 ‘‘(3)(A) Paragraph (1) and section 1453 shall not

2 apply to any class action that is brought under the Securi3 ties Act of 1933 (15 U.S.C. 77a et seq.).

4 ‘‘(B) Paragraph (1) and section 1453 shall not apply

5 to a class action described in subparagraph (C) that is

6 based upon the statutory or common law of the State in

7 which the issuer concerned is incorporated (in the case of

8 a corporation) or organized (in the case of any other en9 tity).

10 ‘‘(C) A class action is described in this subparagraph

11 if it involves—

12 ‘‘(i) the purchase or sale of securities by an

13 issuer or an affiliate of an issuer exclusively from or

14 to holders of equity securities of the issuer; or

15 ‘‘(ii) any recommendation, position, or other

16 communication with respect to the sale of securities

17 of an issuer that—

18 ‘‘(I) is made by or on behalf of the issuer

19 or an affiliate of the issuer to holders of equity

20 securities of the issuer; and

21 ‘‘(II) concerns decisions of those equity

22 holders with respect to voting their securities,

23 acting in response to a tender or exchange

24 offer, or exercising dissenters’ or appraisal

25 rights.
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1 ‘‘(D) As used in this paragraph, the terms ‘issuer’,

2 ‘security’, and ‘equity security’ have the meanings given

3 those terms in section 3 of the Securities Exchange Act

4 of 1934 (15 U.S.C. 78c).’’.

5 (b) CONFORMING AMENDMENT.—Section 1332(c) of

6 title 281 United States Code, (as redesignated by this sec7 tion) is amended by inserting after ‘‘pursuant to sub8 section (a)’’ after ‘‘Federal courts’’.

9 (c) DETERMINATION OF DIVERSITY.—Section 1332,

10 as amended by this section, is further amended by adding

11 at the end the following:

12 ‘‘(f) For purposes of subsection (b), a member of a

13 proposed class shall be deemed to be a citizen of a State

14 different from a defendant corporation only if that mem15 ber is a citizen of a State different from all States of which

16 the defendant corporation is deemed a citizen.’’.

17 (d) REMOVAL OF CLASS ACTIONS.—Chapter 89 of

18 title 28, United States Code is amended by adding at the

19 end the following:

20 ‘‘§ 1453. Removal of class actions

21 ‘‘(a) IN GENERAL.—A year 2000 civil action that is

22 brought as a class action may be removed to a district

23 court of the United States in accordance with this chapter,

24 except that such action may be removed—
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1 ‘‘(1) by any defendant without the consent of

2 all defendants; or

3 ‘‘(2) by any plaintiff class member who is not

4 a named or representative class member of the ac5 tion for which removal is sought, without the con6 sent of all members of such class.

7 ‘‘(b) WHEN REMOVABLE.—This section shall apply

8 to any year 2000 civil action that is brought as a class

9 action before or after the entry of any order certifying a

10 class.

11 ‘‘(c) PROCEDURE FOR REMOVAL.—

12 ‘‘(1) IN GENERAL.—The provisions of section

13 1446(a) relating to a defendant removing a case

14 shall apply to a plaintiff removing a case under this

15 section.

16 ‘‘(2) APPLICATION.—With respect to the appli17 cation of section 1446(b), the requirement relating

18 to the 30-day filing period shall be met if a plaintiff

19 class member who is not a named or representative

20 class member of the action for which removal is

21 sought files notice of removal within 30 days after

22 receipt by such class member, through service or

23 otherwise, of the initial written notice of the class

24 action provided at the trial court’s direction.’’.
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1 (e) REMOVAL LIMITATIONS.—Section 1446(b) is

2 amended in the second undesignated paragraph—

3 (1) by inserting ‘‘, by exercising due diligence,’’

4 after ‘‘ascertained’’; and

5 (2) by striking ‘‘section 1332’’ and inserting

6 ‘‘section’’.

7 (f) TECHNICAL AND CONFORMING AMENDMENTS.—

8 The table of sections for chapter 89 of title 28, United

9 States Code, is amended by adding after the item relating

10 to section 1452 the following:

‘‘1453. Removal of class actions.’’.

11 (g) PROCEDURE AFTER REMOVAL.—Section 1447 of

12 title 28, United States Code, is amended by adding at the

13 end the following:

14 ‘‘(f)(1) If, after removal, the court determines that

15 no aspect of an action that is subject to its jurisdiction

16 solely under the provisions of section 1332(b) may be

17 maintained as a class action under Rule 23 of the Federal

18 Rules of Civil Procedure, the court shall strike the class

19 allegations from the action and remand the action to the

20 State court.

21 ‘‘(2) Upon remand of the action, the period of limita22 tions for any claim that was asserted in the action on be23 half of any named or unnamed member of any proposed

24 class shall be deemed tolled to the full extent provided

25 under Federal law.’’.
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1 (h) APPLICATION OF SUBSTANTIVE STATE LAW.—

2 Nothing in the amendments made by this section shall

3 alter the substantive law applicable to an action to which

4 such amendments apply.

5 TITLE V—EFFECTIVE DATE

6 SEC. 501. EFFECTIVE DATE.

7 This Act and the amendments made by this Act shall

8 take effect on January 1, 1999.

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