TRANSCRIPT: CNN Burden Of Proof on Y2K (Legal & Other Industry Comments)

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TRANSCRIPT: CNN Burden Of Proof on Y2K (Legal & Other Industry Comments)

Warning: Long post.

Thanks for the heads-up Linda and Roland!

Very informative.

Diane

CNN Main Transcripts Page

http://cnn.com/TRANSCRIPTS

March 02, 1999 -- Burden Of Proof

Y2K Takes Center Stage on Capitol Hill

http://cnn.com/TRANSCRIPTS/9903/02/bp.00.html

Burden of Proof

Y2K Takes Center Stage on Capitol Hill

Aired March 2, 1999 - 12:30 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

GRETA VAN SUSTEREN, HOST: Today on BURDEN OF PROOF: the United States declares today Y2K Day. Should corporate America be getting special protection from Congress?

(BEGIN VIDEO CLIP)

SEN. CHRISTOPHER DODD (D), CONNECTICUT: If your company, your larger business has not begun to work on this, you should continue to work on it. You ought to be in the contingency plan phase, here. There's not enough time left for you to be completely compliant if you're starting right now, and so we're urging contingency planning in certain areas.

(END VIDEO CLIP)

ANNOUNCER: This is BURDEN OF PROOF with Greta Van Susteren and Roger Cossack.

VAN SUSTEREN: Hello and welcome to BURDEN OF PROOF. Roger is off today.

In just a few minutes, a special Senate panel on the year 2000 computer problem will be releasing a report. It's expected to detail the potential for widespread problems which could occur on January 1st, which is just 10 months. The report warns many sectors of the economy, including health care, telecommunications, transportation and national security.

(BEGIN VIDEO CLIP)

SEN. ROBERT BENNETT (R-UT), CHMN., Y2K SPECIAL COMM.: If you eliminate liability entirely, there are some people who will say, well then failure is an option because nothing will happen to me. So you have to keep liability there for those who don't act in good faith. On the other hand, if somebody does as much as he possibly can to try to fix the problem and there are still difficulties that pass through to his customers, he should -- his liability should be limited to actual damages, rather than punitive damages. That's what we're trying to do.

(END VIDEO CLIP)

VAN SUSTEREN: Joining us today from Los Angeles, Warren Reid, who is the author of "The Year 2000 Computer Crisis." And in New York, new media and technology lawyer Christopher Wolf. And here in Washington, Brenda Culler (ph), Republican Congressman and author of a bill on Y2K litigation Tom Davis, and Anthony Dotson (ph). And in the back row, Lisa Shafto (ph) and Anne Hill (ph).

Congressman, let me go first to you to ask you about the bill that you've introduced in the House to solve this Y2K problem. What's the bill?

REP. TOM DAVIS (R), VIRGINIA: Well, we try to solve it. We give loans up to $50,000 for small businesses trying to work with this. We do have limited liability, but anybody who's injured can get their full damages under this. Instead of the joint and sever liability, we have something called proportion liability so companies will not be afraid to mix -- fix a system and be afraid they get taken to the cleaners by some lawyer if something goes wrong down stream. And there is a notice and cure provision which we think is very important. We try to solve the problems ahead of time.

And companies that don't make a good faith effort, of course, don't get any of the protections of the bill.

VAN SUSTEREN: Congressman, you say -- let me take you to the test on one thing. You say so some lawyer doesn't basically come along, but when a lawyer sues, it's usually suing on behalf of a consumer; somebody's been hurt.

DAVIS: Sure.

VAN SUSTEREN: Why do you want to limit the liability? If a corporation has done something negligently -- not intentionally but negligently -- that's hurt a consumer, why should the consumer pay and the corporation get special protection?

DAVIS: Well, they don't get special protection; they get full damages. But what we do is we limit the punitive damages that can come out of this because, as you know, punitive damages the sky is the limit, and we believe that our technology companies and American businesses ought to be investing their money in fixing the problem and in reinvesting in technology so we can be competitive on the worldwide scene instead of putting it to trial lawyers.

VAN SUSTEREN: When you talk about limiting, I mean, we always -- you and I are going to battle this on whether its trial lawyers or the person who's suing that gets the money. We'll probably...

DAVIS: Punitive damages usually go to the trial lawyers on a contingency. A small piece of it ends up going to the individuals, but.

VAN SUSTEREN: Well, you and I will forever debate that one, but let me ask you this question. If a company has notice that the year 2000 is eventually going to come around -- at least we hope it's going to come around -- why shouldn't they be held fully responsible, because they've got plenty of time to fix this? They've known about this for 2,000 years.

DAVIS: Well, in many cases -- well, I guess you could say it's been known about 2,000 -- why 2,000? Why start at the year zero? You could start at 5, 4,000 B.C., but the reality is a lot of this is so complex. They have bought equipment, you have embedded chips, you have issues the company bought these products in good faith from some manufacturer, software designer or information technology company. They make good-faith efforts to fix it, they test it and still some bug occurs, they ought to be held accountable for the actual damages somebody suffers, but they shouldn't be able to pay high punitive damages and put the company out of business.

VAN SUSTEREN: Chris, let me go to you. What about the Senate bill that's been introduced? Is that in any way different from the House bill that Congressman Davis has introduced.

CHRISTOPHER WOLF, NEW MEDIA AND TECHNOLOGY ATTY.: Well, it does have some different wrinkles. I think my fundamental problem with the legislation is twofold. First, I think it's going to lull corporations into a false sense of security, because, as the congressman points out, it does not immunize them from liability; it simply creates a new set of issues to be litigated. And so I'm afraid that some of our clients who've been working very hard to get the Y2K problem under control may feel now that with legislation they don't have to work quite as hard, and I think that's a problem.

VAN SUSTEREN: As the congressman says, though, they're still liable for what we call compensatory or actual damages, and under the congressman's bill there's a limitation on punitive damages. But nonetheless, they can get hit with some punitive damages, so are they really sort of lulled into a sense of security that they can sort of relax?

DAVIS: Greta, also on the personal injuries, that's (UNINTELLIGIBLE). They can get full personal injuries; you can get unlimited liability on those.

WOLF: Well, Greta, as you hear the congressman describe the legislation -- I mean, I think the motivation behind it is perfectly laudable -- but as you hear it described and as you read Senator Hatch's legislation, I think it adds more complication than the existing law of contract and negligence would have once these claims are filed. And there will be claims because there are people who are not acting responsibly. If they're not acting responsibly, they ought to bear some responsibility, but those who are, I think, will be taken care of by the courts under existing principles of contract and tort law. And by the way, under most contract law principles, punitive damages aren't available anyway.

VAN SUSTEREN: What about that congressman?

DAVIS: Well, you still have a negligence side, and of course that is a tort and they try to move a lot of that in.

VAN SUSTEREN: Congressman, let me ask you a question about a company that has a huge payroll. Let's say that -- and there's a computer glitch so that 500 or 1,000 employees don't get paid their January 1st paycheck or their January 15th. Why should they -- I mean, if they've known about this and they're essentially not paying their employees, why should they get any sort of an advantage?

DAVIS: They don't get an advantage. I mean, if their employee isn't paid and the employee loses the house or they lose a car or something is foreclosed on because they don't have the cash, they can go after their employer.

VAN SUSTEREN: But you know, I want to punish an employer who don't know any better with punitive damage, because it's not just losing a house. Losing a house isn't just sort of losing a house; you're losing your home.

DAVIS: Well, if the employer doesn't make a good-faith effort to fix, doesn't take reasonable steps to fix the problem, the employer will be held fully liable as you note. But if that employer hires another company to come in and fix it -- this is very complicated as you know, this is something that may take a lot of time, a lot of testing -- your system could be fixed, but the systems you're talking to or somebody you've hired, their system may not be fixed. Under those circumstances, to tie up our high-tech business base into lawsuits ad nauseam, make this the second round of asbestos suits, is to me just something that's not in the interest of America.

VAN SUSTEREN: But the law only holds accountable those damage which are foreseeable, and if a company is sitting here today and should foresee some payroll problem down the road, why shouldn't they just pay the penalty of not only not paying the employee but of someone who loses a house? Why should they be punished when it's foreseeable, because that's what the law basically tries to do, is to try to make people hold, sort of let the company off the hook?

DAVIS: When I think of the case of when you start talking about the damages that revolve in that, the company could be held liable, not just for the lateness in the check. The same for mortgage companies who may not pay the taxes on time and there's a foreclosure. You can be held fully liable. What you don't get is punitive damages.

VAN SUSTEREN: Warren, do you want to weigh in on this issue?

WARREN REID, "THE YEAR 2000 COMPUTER CRISIS": Well, I think they're covering both sides, but what's really important is it really depends on the specific circumstances. If, for instance, an individual, a doctor -- and you read a lot about the health care industry and doctors not really being -- getting their arms around the problem -- ends up prescribing the wrong kinds of drugs to a patient and that patient were to get very ill, you've got a personal injury situation there, but in those kinds of situations I think the doctor or the hospital should be held to the highest level of liability. In...

VAN SUSTEREN: But they are -- but, Warren, they are in terms of compensatory, but a doctor who makes a mistake is not sued for punitive damage. I mean, it takes much more than simply a mistake. I mean, you've almost got to step over and intentionally want to hurt someone to getpunitive damages, when you've been grossly negligent. REID: Well, but in this particular situation, you know, if you don't have the records together because of the Y2K problem that would allow you to know what kind of drugs the person is taking and what kind of other effects the particular thing that you're diagnosing or the particular drug that you're giving them now will have on other drugs and contra-indications, then I think you are very negligent and you could be looked at being criminal. You need to have that information before you go ahead and deliver the medical service.

VAN SUSTEREN: All right, we need to take a break. Up next: which industry is most at risk for Y2K glitches, and what kind of liability will it expose? Stay with us.

(BEGIN LEGAL BRIEF)

Linda Tripp returns to work at the Pentagon Wednesday to a new position in the Defense Department's Manpower Data Center. Tripp previously was director of the Joint Civilian Orientation Conference. She has been telecommuting since early last year.

(END LEGAL BRIEF)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BENNETT: We're most concerned about health care. It's terribly fragmented. That means there are a lot of little tiny pieces to it. It's not a single consolidated industry. And our surveys indicate that there are a number of doctors' offices and a number of smaller hospitals that are probably not going to be ready if they don't put on a real push between now and the end of the year.

(END VIDEO CLIP)

VAN SUSTEREN: The medical field has been pinpointed as a vulnerable industry for Y2K disaster. Problems with consistent care, outdated equipment and inaccessible files could change the face of liability claims and malpractice parameters.

Warren, why should I -- why should I worry about Y2K? Where is it a problem for me?

REID: Well, I think, as an individual, problems could come from many different sectors. My biggest concern has to do with the utilities industry, and the one that gives electric power and telecommunications.

Right now, the North American Electric Reliability Council, which is self-funded by the electric companies themselves, has been unable to really give any definitive answer about when that industry will be ready. They were supposed to have some results at the end of last October, then in December, then in March coming up, and it looks like they may not even make the March deadline because they are saying they will have a more definitive report in July. If you don't have electric power, then you don't have telecommunications, you don't have anything, really, you can't even get gas out of the ground because it uses electric power to pump the gasoline up to your car. So the big ones are the utilities industries.

Another one, of course, is health care that we've spoken about. The food industry, it seems to be making some reasonable contingency plans they have enough food available, however, if there is hoarding, hoarding can stop allowing enough food to be available for a lot of people.

I just spoke to the sparklets (ph) guy. He said people are buying water like crazy. They have actually developed a new device that allows people to stack all the different water containers that they are buying, which they never had before.

I'm also concerned about the drug industry, make sure you are able to get your prescriptions, and all of those good things, on time.

There's another question I have about the welfare industry. There is, you know, millions of people who live hand to mouth on welfare. And while the government says welfare will be just fine, remember it took 10 years for Social Security to get its act together, and make those remediations. And welfare has been working on it way less than 10 years.

So there is a lot of problems there. Again, if you are planning to travel, people are asking me shall I travel over the new year's. And my answer is very simple: Absolutely not. Why don't you just make believe that the millennium is going to come in six months later or a year later, and celebrate it at that particular time.

VAN SUSTEREN: Congressman, it sounds rather frightening when I hear Warren tell me. Do I really need to worry about this? I mean, do you agree that this stuff...

DAVIS: Most of it will get solved, but a lot of this we won't know until the date approaches. There will be a lot of time for testing, and we are finding out in the testing things going wrong. A company in England recently lost its corned beef inventory because '00 was the expiration on the year the computer read it as 1900, thought the meat was 98 years old. You are going to be getting a lot of those kind of things because things are so automated that are destroyed and out before you have a chance to change it.

VAN SUSTEREN: Chris, what are the kind of problems your clients are facing?

WOLF: Well, one of the ways to think of this problem is like a major weather event, like a snowstorm or a hurricane that is approaching, and we have a weather forecast now, and we know it is coming. Now what my clients are doing are taking precautions, and they are doing it under my guidance as to some of the legal risks, and as they address some of the legal risks and try to spread the risks, or get protection... VAN SUSTEREN: How do they do that?

WOLF: Well, they can do it by getting warranties, and getting contractual provisions that provide for Y2K compliant software or computer systems, and they can get it by getting promises from suppliers that there will not be severe Y2K disruptions.

And just getting back to my earlier point about the legislation, with all due respect to both the congressman and to Senator Hatch, who is proposing it, I'm very concerned that without the threat really of potential liability, that my clients and others may not be taking the precautions, both legal and technical, that will help solve this problem, including principally, and I think we talked about it briefly earlier, contingency planning because now it almost too late to fix a lot of these problems.

And what people ought to be doing is dealing with the contingency of a problem and coming up with solutions. For example, in the health care industry, getting more staff available around new year's next year.

VAN SUSTEREN: And presumably that's what congressman and at least the Senate is trying to do with their bill, whether it passes or not. But we need to take a break.

Up next, how widespread are the Y2K landmines? And how can businesses protect themselves from liability? Stay with us.

(BEGIN VIDEO CLIP)

TIMOTHY HAMMONDS, PRESIDENT, FOOD MARKETING INSTITUTE: The vast majority of supermarkets expect to be Y2K compliant. For front-end systems, 96 percent of our people expect scanners to be compliant, up and functioning; 91 percent expect the same for their electronic scales.

MICHAEL HESCHEL, THE KROGER COMPANY: We will have safety stock available. We believe, as a result, that unless there is widespread hoarding or excessive stockpiling, January 1, 2000 will be a routine shopping day.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(INTERRUPTED BY COVERAGE OF A LIVE EVENT)

TO PURCHASE A VIDEOTAPE OF THIS PIECE, PLEASE CALL 800-CNN-NEWS

-- Diane J. Squire (sacredspaces@yahoo.com), March 03, 1999

Answers

Regardless of all the good faith and due diligence and hard work that may be going into the work the banking industry is doing, things can still go wrong.

These are situations I "could have foreseen," at least as probable events, but at no time have I had any means to correct the errors which caused them to happen.

If I suffer damages (fees, penalties, foreclosures, bad credit rating) when my checks bounce because my SS check is deposited late, or not at all, or is credited to the wrong account, or because my checking account and/or my checks were improperly processed, will existing law support my claim against the bank? or the SSA?

-- Tom Carey (tomcarey@mindspring.com), March 03, 1999.


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