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
IB
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 Vir-
ginia, Mr. CRAMER, and Mr. DOOLEY of California) introduced the fol-
lowing bill; which was referred to the Committee on the Judiciary, and
in addition to the Committee on Small Business, for a period to be subse-
quently 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 In-
diana, Mrs. FOWLER, Mr. CANNON, Mrs. MYRICK, Mr. NEY, Mr. RYUN
of Kansas, Mr. HOBSON, Mr. WHITFIELD, Mrs. BONO, Mr. SENSEN-
BRENNER, 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
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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 Representa-
tives 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’’.
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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 address-
ing, 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 dev-
astating 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 busi-
nesses, particularly small businesses, because of its
complexity and expense.
(5) The delays, expense, uncertainties, loss of
control, adverse publicity and animosities that fre-
quently accompany litigation of business disputes can
only exacerbate the difficulties associated with the
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year 2000 date change, and work against the success-
ful resolution of those difficulties.
(6) The Congress recognizes that every business
in the United States should be concerned that wide-
spread 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 ap-
proach their year 2000 disputes responsibly, and to
avoid unnecessary, time-consuming and costly litiga-
tion 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:
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(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 tan-
gible 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 de-
fendant’s wrongful act or omission, for losses
that arise because of the claims of third parties,
for losses that must be pleaded as special dam-
ages, and consequential damages (as defined in
the Uniform Commercial Code or analogous
State commercial law).
(4) GOVERNMENTAL ENTITY.—The term ‘‘govern-
mental entity’’ means an agency, instrumentality,
other entity, or official of Federal, State, or local gov-
ernment (including multijurisdictional agencies, in-
strumentalities, and entities).
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(5) MATERIAL DEFECT.—The term ‘‘material de-
fect’’ means a defect in any item, whether tangible or
intangible, or in the provision of a service, that sub-
stantially 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 compo-
nent of an item that, as a whole, substantially oper-
ates or functions as designed, or that has an insignifi-
cant 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 en-
terprise, including but not limited to corporations,
companies, joint stock companies, associations, part-
nerships, trusts, and governmental entities.
(7) PERSONAL INJURY.—The term ‘‘personal in-
jury’’ 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 in-
jury.
(8) PLAINTIFF.—The term ‘‘plaintiff’’ means
any person who asserts a year 2000 claim.
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(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 Mar-
iana Islands, the United States Virgin Islands,
Guam, American Samoa, and any other territory or
possession of the United States, and any political sub-
division 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 agen-
cy 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, coun-
terclaim, cross-claim, third-party claim, defense,
or otherwise, in which the plaintiff’s alleged loss
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or harm resulted, directly or indirectly, from a
year 2000 failure;
(B) includes a claim brought in any Fed-
eral or State court by a governmental entity
when acting in a commercial or contracting ca-
pacity; and
(C) does not include a claim brought by
such a governmental entity acting in a regu-
latory, 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 in-
structions, however constructed, in processing, calcu-
lating, 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.
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(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 other-
wise 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;
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(2) the harm or loss allegedly suffered by the pro-
spective 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 num-
bers 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 plain-
tiff 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
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that 30-day period, to remedy the problem identified
by the prospective plaintiff.
(2) INADMISSIBILITY.—A written statement re-
quired by this subsection is not admissible in evi-
dence, under Rule 408 of the Federal Rules of Evi-
dence or any analogous rule of evidence in any State,
in any proceeding to prove liability for, or the inva-
lidity of, a claim or its amount, or otherwise as evi-
dence of conduct or statements made in compromise
negotiations.
(3) PRESUMPTIVE TIME OF RECEIPT.—For pur-
poses 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 defend-
ant fails to respond to a notice provided pursuant to sub-
section (a) within the 30-day period specified in subsection
(b) or does not describe the action, if any, that the prospec-
tive 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 pro-
spective defendant and the prospective plaintiff may there-
after commence its action against that prospective defend-
ant.
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(d) FAILURE TO PROVIDE NOTICE.—If a defendant de-
termines that a plaintiff has filed a year 2000 action with-
out providing the notice specified in subsection (a) and
without awaiting the expiration of the 90-day period speci-
fied in subsection (a), the defendant may treat the plain-
tiff’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 ac-
tion 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 pe-
riod.
(e) EFFECT OF CONTRACTUAL WAITING PERIODS.—In
cases in which a contract or a statute enacted before Janu-
ary 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 pro-
vided 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
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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 provi-
sions of Rule 11 of the Federal Rules of Civil Procedure
or the equivalent applicable State rule.
(g) COMPUTATION OF TIME.—For purposes of this sec-
tion, the rules regarding computation of time shall be gov-
erned by the applicable Federal or State rules of civil proce-
dure.
(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.
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(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 pro-
vided 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 par-
ties.
(c) FORECLOSURE OF FURTHER PROCEEDINGS ON RE-
SOLVED ISSUES.—Resolution of the issues by the parties
prior to litigation through negotiation or alternative dis-
pute resolution shall foreclose any further proceedings with
respect to those issues.
SEC. 103. PLEADING REQUIREMENTS.
(a) APPLICATION WITH RULES
OF CIVIL PROCE-
DURE.—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 dam-
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ages, 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 ac-
tion, all discovery shall be stayed during the pendency
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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 elec-
tronically 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 op-
posing party to comply with subparagraph (A)
may apply to the court for an order awarding
appropriate sanctions.
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SEC. 104. DUTY OF ALL PERSONS TO MITIGATE YEAR 2000
COMPUTER FAILURES AND RESULTING DAM-
AGES.
Damages awarded for any year 2000 claim shall ex-
clude compensation for damages the plaintiff could reason-
ably have avoided in light of any disclosure or other infor-
mation 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 prod-
uct 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 PREVEN-
TION OF YEAR 2000 DAMAGES.
(a) IN GENERAL.—Subject to subsection (b), in resolv-
ing any year 2000 claim, any written contractual term,
including a limitation or an exclusion of liability, or a dis-
claimer of warranty, shall be fully enforced unless the en-
forcement of that term would manifestly and directly con-
travene 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
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be determined by applicable law in effect at the time the
contract was executed.
SEC. 202. APPLICATION OF EXISTING IMPOSSIBILITY OR
COMMERCIAL 
IMPRACTICABILITY 
DOC-
TRINES.
(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 imprac-
ticability 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 impos-
sibility or commercial impracticability is raised as a de-
fense against a claim for breach or repudiation of contract,
the party asserting the defense shall be allowed to offer evi-
dence 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
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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 con-
tract 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 cor-
responds 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 spe-
cial 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 in-
curred by the plaintiff, including (but not limited to)
persons who have entered into settlements with the
plaintiff or plaintiffs, concerning the percentage of re-
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sponsibility 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 find-
ings, as appropriate, under paragraph (1) shall speci-
fy 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 deter-
mining 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 rela-
tionship 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.
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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 serv-
ice, 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 aware-
ness 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 ad-
dition to establishing all other requisite elements of the
claim, proves by clear and convincing evidence that the de-
fendant actually knew, or recklessly disregarded a known
and substantial risk, that such failure would occur.
(b) SUBSTANTIAL PRIVITY.—For purposes of sub-
section (a)(2), a plaintiff and a defendant are in substan-
tial 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 an-
other or the plaintiff is a person who, prior to the defend-
ant’s performance of such services, was specifically identi-
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fied 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, neg-
ligent 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 fail-
ure from occurring or from causing the damages upon
which the claim is based.
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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 non-
profit 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—
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(A) 3 times the amount awarded to the
plaintiff for compensatory damages; or
(B) $250,000.
(2) SPECIAL RULE.—
(A) IN
GENERAL.—Notwithstanding para-
graph (1), with respect to any year 2000 claim,
if the defendant is found liable for punitive dam-
ages 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 deter-
mining the applicability of this paragraph to a
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corporation, the number of employees of a sub-
sidiary of a wholly owned corporation shall in-
clude 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 APPLI-
CABLE LAW.—Economic losses shall be recoverable under
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this section only if applicable Federal law, or applicable
State law embodied in statute or controlling judicial prece-
dent 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 orga-
nization) 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 organiza-
tion during the 12-month period immediately pre-
ceding the act or omission for which liability was im-
posed.
(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 ex-
cess of the aggregate amount of liability to which such direc-
tor, 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).
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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 prod-
uct or service was a material defect as to a majority of
the members of the class.
(b) DETERMINATION BY COURT.—As soon as prac-
ticable after the commencement of a year 2000 action in-
volving a year 2000 claim that a product or service is defec-
tive and that is brought as a class action, the court shall
determine by order whether the requirement set forth in sub-
section (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. Per-
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sons whose actual receipt of the notice is not verified by
the court or by counsel for one of the parties shall be ex-
cluded 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 infor-
mation required by applicable Federal or State law, the no-
tice described in this subsection shall—
(1) concisely and clearly describe the nature of
the action;
(2) identify the jurisdiction whose law will gov-
ern the action and where the action is pending;
(3) identify any potential claims that class coun-
sel chose not to pursue so that the action would sat-
isfy 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
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request court approval of, any settlement or compromise be-
fore 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 con-
cludes that decision will promote the fair and efficient adju-
dication of the controversy and will not cause undue delay.
SEC. 404. FEDERAL JURISDICTION IN YEAR 2000 CLASS AC-
TIONS.
(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 appro-
priate United States district court if the amount in con-
troversy is greater than the sum or value of $1,000,000 (ex-
clusive 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 citi-
zens; and
(B) the claims asserted will be governed pri-
marily by the laws of that State; or
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(2) the primary defendants are States, State offi-
cials, 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, corpora-
tion, or partnership authorized under applicable
State law to practice law.
(2) ATTORNEY’S
SERVICES.—The term ‘‘attor-
ney’s services’’ means the professional advice or coun-
seling of or representation by an attorney, but such
term shall not include other assistance incurred, di-
rectly or indirectly, in connection with an attorney’s
services, such as administrative or secretarial assist-
ance, overhead, travel expenses, witness fees, or prepa-
ration by a person other than the attorney of any
study, analysis, report, or test.
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(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 slid-
ing 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 ob-
taining the attorney’s services.
SEC. 503. CONSUMER’S RIGHT TO UP-FRONT DISCLOSURE
OF INFORMATION REGARDING FEES AND SET-
TLEMENT 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 cli-
ent’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
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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 con-
tingent fee basis, the attorney’s contingent fee for serv-
ices in pursuing the year 2000 claim or year 2000 ac-
tion and any conditions, limitations, restrictions, or
other qualifications on the fee, including likely ex-
penses and the client’s obligation for those expenses.
(b) CONSUMER’S RIGHT TO TIMELY UPDATED INFOR-
MATION ABOUT FEES.—In addition to the requirements
contained in subsection (a), in the case of an attorney re-
tained 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 in-
curred in the pursuit of the client’s year 2000 claim or year
2000 action by each attorney assigned to the client’s matter.
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SEC. 505. CONSUMER’S RIGHT TO TIMELY UPDATED INFOR-
MATION 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 attor-
ney’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 reso-
lution. An attorney retained by a client with respect to a
year 2000 claim or a year 2000 action shall, within a rea-
sonable 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 at-
torney’s hourly rate, and the total amount of hourly
fees; and
(2) in the case of an attorney retained on a con-
tingent fee basis, the total contingent fee for the attor-