H. R. 775—5
(2) INTERPRETATION OF CONTRACT.—In any Y2K action in
which a contract to which paragraph (1) applies is silent as
to a particular issue, the interpretation of the contract as
to that issue shall be determined by applicable law in effect
at the time the contract was executed.
(3) UNCONSCIONABILITY.—Nothing in paragraph (1) shall
prevent enforcement of State law doctrines of unconscionability,
including adhesion, recognized as of January 1, 1999, in control-
ling judicial precedent by the courts of the State whose law
applies to the Y2K action.
(e) PREEMPTION OF STATE LAW.—This Act supersedes State
law to the extent that it establishes a rule of law applicable to
a Y2K action that is inconsistent with State law, but nothing
in this Act implicates, alters, or diminishes the ability of a State
to defend itself against any claim on the basis of sovereign immu-
nity.
(f ) APPLICATION WITH YEAR 2000 INFORMATION AND READINESS
DISCLOSURE ACT.—Nothing in this Act supersedes any provision
of the Year 2000 Information and Readiness Disclosure Act.
(g) APPLICATION
TO ACTIONS BROUGHT
BY
A GOVERNMENT
ENTITY.—
(1) IN GENERAL.—To the extent provided in this subsection,
this Act shall apply to an action brought by a government
entity described in section 3(1)(C).
(2) DEFINITIONS.—In this subsection:
(A) DEFENDANT.—
(i) IN GENERAL.—The term ‘‘defendant’’ includes
a State or local government.
(ii) STATE.—The term ‘‘State’’ means each of the
several States of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, the
Virgin Islands, Guam, American Samoa, and the
Commonwealth of the Northern Mariana Islands.
(iii) LOCAL GOVERNMENT.—The term ‘‘local govern-
ment’’ means—
(I) any county, city, town, township, parish,
village, or other general purpose political subdivi-
sion of a State; and
(II) any combination of political subdivisions
described in subclause (I) recognized by the Sec-
retary of Housing and Urban Development.
(B) Y2K UPSET.—The term ‘‘Y2K upset’’—
(i) means an exceptional temporary noncompliance
with applicable federally enforceable measurement,
monitoring, or reporting requirements directly related
to a Y2K failure that are beyond the reasonable control
of the defendant charged with compliance; and
(ii) does not include—
(I) noncompliance with applicable federally
enforceable measurement, monitoring, or reporting
requirements that constitutes or would create an
imminent threat to public health, safety, or the
environment;
(II) noncompliance with applicable federally
enforceable measurement, monitoring, or reporting
requirements that provide for the safety and
soundness of the banking or monetary system, or
H. R. 775—6
for the integrity of the national securities markets,
including the protection of depositors and inves-
tors;
(III) noncompliance with applicable federally
enforceable measurement, monitoring, or reporting
requirements to the extent caused by operational
error or negligence;
(IV) lack of reasonable preventative mainte-
nance;
(V) lack of preparedness for a Y2K failure;
or
(VI) noncompliance with the underlying feder-
ally 
enforceable 
requirements 
to 
which 
the
applicable federally enforceable measurement,
monitoring, or reporting requirement relates.
(3) CONDITIONS NECESSARY FOR A DEMONSTRATION OF A
Y2K UPSET.—A defendant who wishes to establish the affirma-
tive defense of Y2K upset shall demonstrate, through properly
signed, contemporaneous operating logs, or other relevant evi-
dence that—
(A) the defendant previously made a reasonable good
faith effort to anticipate, prevent, and effectively remediate
a potential Y2K failure;
(B) a Y2K upset occurred as a result of a Y2K failure
or other emergency directly related to a Y2K failure;
(C) noncompliance with the applicable federally
enforceable measurement, monitoring, or reporting require-
ment was unavoidable in the face of an emergency directly
related to a Y2K failure and was necessary to prevent
the disruption of critical functions or services that could
result in harm to life or property;
(D) upon identification of noncompliance the defendant
invoking the defense began immediate actions to correct
any violation of federally enforceable measurement, moni-
toring, or reporting requirements; and
(E) the defendant submitted notice to the appropriate
Federal regulatory authority of a Y2K upset within 72
hours from the time that the defendant became aware
of the upset.
(4) GRANT OF A Y2K UPSET DEFENSE.—Subject to the other
provisions of this subsection, the Y2K upset defense shall be
a complete defense to the imposition of a penalty in any action
brought as a result of noncompliance with federally enforceable
measurement, monitoring, or reporting requirements for any
defendant who establishes by a preponderance of the evidence
that the conditions set forth in paragraph (3) are met.
(5) LENGTH OF Y2K UPSET.—The maximum allowable length
of the Y2K upset shall be not more than 15 days beginning
on the date of the upset unless specific relief by the appropriate
regulatory authority is granted.
(6) FRAUDULENT
INVOCATION
OF
Y2K
UPSET
DEFENSE.—
Fraudulent use of the Y2K upset defense provided for in this
subsection shall be subject to the sanctions provided in section
1001 of title 18, United States Code.
(7) EXPIRATION OF DEFENSE.—The Y2K upset defense may
not be asserted for a Y2K upset occurring after June 30, 2000.
H. R. 775—7
(8) PRESERVATION
OF
AUTHORITY.—Nothing in this sub-
section shall affect the authority of a government entity to
seek injunctive relief or require a defendant to correct a viola-
tion of a federally enforceable measurement, monitoring, or
reporting requirement.
(h) CONSUMER PROTECTION FROM Y2K FAILURES.—
(1) IN
GENERAL.—No person who transacts business on
matters directly or indirectly affecting residential mortgages
shall cause or permit a foreclosure on any such mortgage
against a consumer as a result of an actual Y2K failure that
results in an inability to accurately or timely process any mort-
gage payment transaction.
(2) NOTICE.—A consumer who is affected by an inability
described in paragraph (1) shall notify the servicer for the
mortgage, in writing and within 7 business days from the
time that the consumer becomes aware of the Y2K failure
and the consumer’s inability to accurately or timely fulfill his
or her obligation to pay, of such failure and inability and
shall provide to the servicer any available documentation with
respect to the failure.
(3) ACTIONS MAY RESUME AFTER GRACE PERIOD.—Notwith-
standing paragraph (1), an action prohibited under paragraph
(1) may be resumed, if the consumer’s mortgage obligation
has not been paid and the servicer of the mortgage has not
expressly and in writing granted the consumer an extension
of time during which to pay the consumer’s mortgage obligation,
but only after the later of—
(A) four weeks after January 1, 2000; or
(B) four weeks after notification is made as required
under paragraph (2), except that any notification made
on or after March 15, 2000, shall not be effective for pur-
poses of this subsection.
(4) APPLICABILITY.—This subsection does not apply to trans-
actions upon which a default has occurred before December
15, 1999, or with respect to which an imminent default was
foreseeable before December 15, 1999.
(5) ENFORCEMENT OF OBLIGATIONS MERELY TOLLED.—This
subsection delays but does not prevent the enforcement of finan-
cial obligations, and does not otherwise affect or extinguish
the obligation to pay.
(6) DEFINITION.—In this subsection—
(A) The term ‘‘consumer’’ means a natural person.
(B) The term ‘‘residential mortgage’’ has the meaning
given the term ‘‘federally related mortgage loan’’ under
section 3 of the Real Estate Settlement Procedures Act
of 1974 (12 U.S.C. 2602).
(C) The term ‘‘servicer’’ means the person, including
any successor, responsible for receiving any scheduled peri-
odic payments from a consumer pursuant to the terms
of a residential mortgage, including amounts for any escrow
account, and for making the payments of principal and
interest and such other payments with respect to the
amounts received from the borrower as may be required
pursuant to the terms of the mortgage. Such term includes
the person, including any successor, who makes or holds
a loan if such person also services the loan.
H. R. 775—8
(i) APPLICABILITY
TO SECURITIES LITIGATION.—In any Y2K
action in which the underlying claim arises under the securities
laws (as defined in section 3(a) of the Securities Exchange Act
of 1934 (15 U.S.C. 78c(a)), the provisions of this Act, other than
section 13(b) of this Act, shall not apply.
SEC. 5. PUNITIVE DAMAGES LIMITATIONS.
(a) IN GENERAL.—In any Y2K action in which punitive damages
are permitted by applicable law, the defendant shall not be liable
for punitive damages unless the plaintiff proves by clear and con-
vincing evidence that the applicable standard for awarding damages
has been met.
(b) CAPS ON PUNITIVE DAMAGES.—
(1) IN GENERAL.—Subject to the evidentiary standard estab-
lished by subsection (a), punitive damages permitted under
applicable law against a defendant described in paragraph (2)
in a Y2K action may not exceed the lesser of—
(A) three times the amount awarded for compensatory
damages; or
(B) $250,000.
(2) DEFENDANT DESCRIBED.—A defendant described in this
paragraph is a defendant—
(A) who—
(i) is sued in his or her capacity as an individual;
and
(ii) whose net worth does not exceed $500,000;
or
(B) that is an unincorporated business, a partnership,
corporation, association, or organization, with fewer than
50 full-time employees.
(3) NO CAP IF INJURY SPECIFICALLY INTENDED.—Paragraph
(1) does not apply if the plaintiff establishes by clear and
convincing evidence that the defendant acted with specific
intent to injure the plaintiff.
(c) GOVERNMENT ENTITIES.—Punitive damages in a Y2K action
may not be awarded against a government entity.
SEC. 6. PROPORTIONATE LIABILITY.
(a) IN GENERAL.—Except in a Y2K action that is a contract
action, and except as provided in subsections (b) through (g), a
person against whom a final judgment is entered in a Y2K action
shall be liable solely for the portion of the judgment that cor-
responds to the relative and proportionate responsibility of that
person. In determining the percentage of responsibility of any
defendant, the trier of fact shall determine that percentage as
a percentage of the total fault of all persons, including the plaintiff,
who caused or contributed to the total loss incurred by the plaintiff.
(b) PROPORTIONATE LIABILITY.—
(1) DETERMINATION OF RESPONSIBILITY.—In any Y2K action
that is not a contract action, the court shall instruct the jury
to answer special interrogatories, or, if there is no jury, the
court shall make findings with respect to each defendant,
including defendants who have entered into settlements with
the plaintiff or plaintiffs, concerning—
(A) the percentage of responsibility, if any, of each
defendant, measured as a percentage of the total fault
of all persons who caused or contributed to the loss incurred
by the plaintiff; and