Trying To Head Off The Other Y2K Problem - need for legislation to limit legal actions involving Y2K computer problem - Brief Article

Nation's Business, Feb, 1999

The deceptively simple shorthand designation Y2K refers to potentially massive problems when the computers that have become so critical to business operations must adjust to the year 2000. Well into the computer age, it was a common cost-saving practice for programmers to designate a year by its last two digits--69, 79, or 89, for example--and the computer would read those years as 1969, 1979, and 1989.

When this year ends, however, many computers will read those two-digit numbers as 00 and continue doing what they have long been told to do--assume that the first two numbers are 19 and that the year is 1900.

In the worst-case scenario, some contend, computer malfunctions could threaten manufacturing, transportation, medical care, communication, and electricity and water supply; could cause chaos in financial markets; and could affect order placement, deliveries, billing, and other commercial procedures to the point that many businesses could fail.

Nonetheless, the Y2K threat remains a matter of utmost urgency The private sector is working aggressively on technical solutions designed to make its computer systems compatible with the transition to 2000. Cost estimates for this effort range to $1 trillion.

Other experts disagree that damage could be so extensive.

"While no one knows for sure, the Y2K computer problem has the potential to disrupt the entire global economy and affect the financial health of businesses large and small," says Lawrence Kraus, president of the Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce.

There is no guarantee, however, that even such massive, good-faith efforts will head off major problems.

The institute, whose mission is to reduce the number of frivolous lawsuits and restore fairness to the legal system, is committed to preventing the looming computer problem from becoming yet another opportunity for trial lawyers to assault American businesses with excessive litigation.

"Under no circumstance should this problem be exploited to the detriment of America's high-tech companies, consumers, or businesses that rely on computer systems," Kraus says.

The legal-reform group will soon ask Congress to consider on a priority basis legislation to "provide a fair, fast, and predictable mechanism for resolution" of Y2K disputes by:

* Creating special temporary Y2K courts.

* Enabling a defendant company to avoid liability for punitive damages if the firm had exercised due diligence and reasonable care to prevent actual or potential computer failure because of the date problem.

* Denying damages to a claimant for losses that could have been avoided by use of information that had been provided by the defendant.

* Exempting directors and officers of a business from personal liability for damages resulting from failure to become year-2000-compliant if the business had exercised good faith and due diligence in compliance efforts.

* Limiting lawyers' contingency fees in Y2K actions.

American business is going all out to deal with the challenge of Y2K compliance and should not be forced to divert time and money to coping with a new onslaught from trial lawyers seeking to gain personal financial advantage from a serious national problem that others are trying to solve.

The legislative approach suggested by the Institute for Legal Reform is a fair and workable way of heading off what could become a serious problem.

It should receive high priority and speedy approval when it reaches Congress.