Companies Used Law to Shield Against Y2K Suits : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Sep 24, 2000 - 04:25 PM

Report Finds Companies Used Law to Shield Against Y2K Suits By D. Ian Hopper Associated Press Writer

WASHINGTON (AP) - Worried that a flood of Y2K cases could cripple the economy, Congress last year passed legislation to limit lawsuits related to the computer problem and save American businesses billions of dollars in legal costs. Government investigators now report that companies invoked it in court just 18 times, which a congressional critic saw as a "fitting postscript" to Y2K alarms that never materialized.

Sen. Patrick Leahy, D-Vt., who voted against the legislation last year and commissioned the General Accounting Office report, said the study "confirms that in the courts, the Y2K bill was mostly used by big companies to delay or sidetrack relief to consumers."

He added, "This is a lesson for the next time special interests ask Congress for special legal protections."

A colleague who worked to pass the measure countered that it helped businesses concentrate on solving the Y2K problem.

"The Y2K Act encouraged businesses to be proactive in addressing and remedying their Y2K challenges, rather than defensive and fearful of a predicted flood of lawsuits," said Sen. Christopher Dodd, D-Conn.

"The success with which our nation's businesses met the Y2K issue was in significant part facilitated by this legislation."

The report by the investigative arm of Congress showed that defendants used the Y2K Act 12 times in federal court and 6 times in state court. The suits involved class actions by customers, disputes between businesses and disputes against insurers. Compilers said they had no way to tell how many times the law was invoked to keep cases out of court.

In many cases, defendants invoking the Y2K Act eventually settled the cases or had them dismissed. Ten cases were pending when the report was finished last month.

The law allowed defendants to move some state cases to federal court, challenge class action lawsuits and force plaintiffs to use mediation.

The Y2K problem occurred because of the fear that some computer programs, especially older ones, might fail when the date changed to 2000. Because the programs were written to recognize only the last two digits of a year to save space, such programs could have read the digits "00" as 1900 instead of 2000.

The United States spent about $100 billion to fix the problem. The problems after the rollover were sporadic and very few, but some computers left unrepaired did fail.

The bill passed overwhelmingly in both the House and Senate. President Clinton repeatedly threatened to veto early versions, which he said went too far in restricting Americans' rights to sue for full compensation for wrongs.

Senate Democrats negotiated with the White House to give the bill added protections for consumers.

"I hope that we find that the Y2K Act succeeds in helping to screen out frivolous claims without blocking or unduly burdening legitimate suits," Clinton said in a statement when he signed the bill in July 1999.

"We will be watching to see whether the bill's provisions are misused by parties who did little or nothing to remediate in order to defeat claims brought by those harmed by irresponsible conduct."

Sen. John McCain, R-Ariz., chief Senate sponsor, argued during negotiations with the White House that an avalanche of lawsuits could have a "crippling effect on our economy." Some experts estimated $1 trillion in civil actions.

Among examples cited in the as-yet-unreleased GAO report, which was obtained by The Associated Press:

-A suit against electronics retailers such as Circuit City and CompUSA accused the companies of selling computer hardware and software that they knew were not Y2K-compliant. The defendants used the Y2K law's higher standards for notice and jurisdiction to have the case dismissed.

-A plaintiff alleged that a manufacturer called its Y2K overhaul an "upgrade," refused to honor standard maintenance agreements and charged at least 400 clients $6,000 each. The defendants invoked the Y2K law's forced mediation clause, but the parties had not settled as of March.

-A California plaintiff sued computer maker Packard Bell NEC for selling personal computers susceptible to the Year 2000 bug. The suit said the company refused to repair the malfunctioning date, which required a user to enter the correct date when the computer was turned on. A judge dismissed the case under the Y2K law and the plaintiff appealed, but the case was settled out of court.

-- Martin Thompson (, September 24, 2000

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