Text: H.R.775 — 106th Congress (1999-2000)All Information (Except Text)
Public Law No: 106-37 (07/20/1999)
[106th Congress Public Law 37]
[From the U.S. Government Printing Office]
[[Page 113 STAT. 185]]
Public Law 106-37
To <<NOTE: July 20, 1999 - [H.R. 775]>> 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 Representatives of the
United States of America in Congress <<NOTE: Y2K Act.>> assembled,
SECTION 1. SHORT TITLE; TABLE OF SECTIONS.
(a) Short <<NOTE: 15 USC 6601 note.>> Title.--This Act may be cited
as the ``Y2K Act''.
(b) Table of Sections.--The table of sections for this Act is as
Sec. 1. Short title; table of sections.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.
Sec. 4. Application of Act.
Sec. 5. Punitive damages limitations.
Sec. 6. Proportionate liability.
Sec. 7. Prelitigation notice.
Sec. 8. Pleading requirements.
Sec. 9. Duty to mitigate.
Sec. 10. Application of existing impossibility or commercial
Sec. 11. Damages limitation by contract.
Sec. 12. Damages in tort claims.
Sec. 13. State of mind; bystander liability; control.
Sec. 14. Appointment of special masters or magistrate judges for Y2K
Sec. 15. Y2K actions as class actions.
Sec. 16. Applicability of State law.
Sec. 17. Admissible evidence ultimate issue in State courts.
Sec. 18. Suspension of penalties for certain year 2000 failures by small
SEC. 2. <<NOTE: 15 USC 6601.>> FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds the following:
(1)(A) Many information technology systems, devices, and
programs are not capable of recognizing certain dates in 1999
and after December 31, 1999, and will read dates in the year
2000 and thereafter as if those dates represent the year 1900 or
thereafter or will fail to process dates after December 31,
(B) If not corrected, the problem described in subparagraph
(A) and resulting failures could incapacitate systems that are
essential to the functioning of markets, commerce, consumer
products, utilities, Government, and safety and defense systems,
in the United States and throughout the world.
(2) It is in the national interest that producers and users
of technology products concentrate their attention and resources
in the time remaining before January 1, 2000, on assessing,
fixing, testing, and developing contingency plans to address
[[Page 113 STAT. 186]]
any and all outstanding year 2000 computer date-change problems,
so as to minimize possible disruptions associated with computer
(3)(A) Because year 2000 computer date-change problems may
affect virtually all businesses and other users of technology
products to some degree, there is a substantial likelihood that
actual or potential year 2000 failures will prompt a significant
volume of litigation, much of it insubstantial.
(B) The litigation described in subparagraph (A) would have
a range of undesirable effects, including the following:
(i) It would threaten to waste technical and
financial resources that are better devoted to curing
year 2000 computer date-change problems and ensuring
that systems remain or become operational.
(ii) It could threaten the network of valued and
trusted business and customer relationships that are
important to the effective functioning of the national
(iii) It would strain the Nation's legal system,
causing particular problems for the small businesses and
individuals who already find that system inaccessible
because of its complexity and expense.
(iv) The delays, expense, uncertainties, loss of
control, adverse publicity, and animosities that
frequently accompany litigation of business disputes
could exacerbate the difficulties associated with the
date change and work against the successful resolution
of those difficulties.
(4) It is appropriate for the Congress to enact legislation
to assure that the year 2000 problems described in this section
do not unnecessarily disrupt interstate commerce or create
unnecessary caseloads in Federal courts and to provide
initiatives to help businesses prepare and be in a position to
withstand the potentially devastating economic impact of such
(5) Resorting to the legal system for resolution of year
2000 problems described in this section is not feasible for many
businesses and individuals who already find the legal system
inaccessible, particularly small businesses and individuals who
already find the legal system inaccessible, because of its
complexity and expense.
(6) Concern about the potential for liability--in
particular, concern about the substantial litigation expense
associated with defending against even the most insubstantial
lawsuits--is prompting many persons and businesses with
technical expertise to avoid projects aimed at curing year 2000
computer date-change problems.
(7) A proliferation of frivolous lawsuits relating to year
2000 computer date-change problems 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) Congress encourages businesses to approach their
disputes relating to year 2000 computer date-change problems
responsibly, and to avoid unnecessary, time-consuming, and
costly litigation about Y2K failures, particularly those that
are not material. Congress supports good faith negotiations
between parties when there is such a dispute, and, if necessary,
[[Page 113 STAT. 187]]
urges the parties to enter into voluntary, nonbinding mediation
rather than litigation.
(b) Purposes.--Based upon the power of the Congress under Article I,
Section 8, Clause 3 of the Constitution of the United States, the
purposes of this Act are--
(1) to establish uniform legal standards that give all
businesses and users of technology products reasonable
incentives to solve year 2000 computer date-change problems
before they develop;
(2) to encourage continued remediation and testing efforts
to solve such problems by providers, suppliers, customers, and
other contracting partners;
(3) to encourage private and public parties alike to resolve
disputes relating to year 2000 computer date-change problems by
alternative dispute mechanisms in order to avoid costly and
time-consuming litigation, to initiate those mechanisms as early
as possible, and to encourage the prompt identification and
correction of such problems; and
(4) to lessen the burdens on interstate commerce by
discouraging insubstantial lawsuits while preserving the ability
of individuals and businesses that have suffered real injury to
obtain complete relief.
SEC. 3. <<NOTE: 15 USC 6602.>> DEFINITIONS.
In this Act:
(1) Y2K action.--The term ``Y2K action''--
(A) means a civil action commenced in any Federal or
State court, or an agency board of contract appeal
proceeding, in which the plaintiff's alleged harm or
injury arises from or is related to an actual or
potential Y2K failure, or a claim or defense arises from
or is related to an actual or potential Y2K failure;
(B) includes a civil action commenced in any Federal
or State court by a government entity when acting in a
commercial or contracting capacity; but
(C) does not include an action brought by a
government entity acting in a regulatory, supervisory,
or enforcement capacity.
(2) Y2K failure.--The term ``Y2K failure'' means failure by
any device or system (including 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 instructions to process, to calculate, to compare,
to sequence, to display, to store, to transmit, or to receive
year-2000 date-related data, including failures--
(A) to deal with or account for transitions or
comparisons from, into, and between the years 1999 and
(B) to recognize or accurately to process any
specific date in 1999, 2000, or 2001; or
(C) accurately to account for the year 2000's status
as a leap year, including recognition and processing of
the correct date on February 29, 2000.
(3) Government entity.--The term ``government entity'' means
an agency, instrumentality, or other entity of Federal, State,
or local government (including multijurisdictional agencies,
instrumentalities, and entities).
[[Page 113 STAT. 188]]
(4) Material defect.--The term ``material defect'' means a
defect in any item, whether tangible or intangible, or in the
provision of a service, that substantially prevents the item or
service from operating or functioning as designed or according
to its specifications. The term ``material defect'' does not
include a defect that--
(A) has an insignificant or de minimis effect on the
operation or functioning of an item or computer program;
(B) affects only a component of an item or program
that, as a whole, substantially operates or functions as
(C) has an insignificant or de minimis effect on the
efficacy of the service provided.
(5) Personal injury.--The term ``personal injury'' means
physical injury to a natural person, including--
(A) death as a result of a physical injury; and
(B) mental suffering, emotional distress, or similar
injuries suffered by that person in connection with a
(6) State.--The term ``State'' means any State of the United
States, the District of Columbia, the Commonwealth of Puerto
Rico, the Northern Mariana Islands, the United States Virgin
Islands, Guam, American Samoa, and any other territory or
possession of the United States, and any political subdivision
(7) Contract.--The term ``contract'' means a contract,
tariff, license, or warranty.
(8) Alternative dispute resolution.--The term ``alternative
dispute resolution'' means any process or proceeding, other than
adjudication by a court or in an administrative proceeding, to
assist in the resolution of issues in controversy, through
processes such as early neutral evaluation, mediation,
minitrial, and arbitration.
SEC. 4. <<NOTE: 15 USC 6603.>> APPLICATION OF ACT.
(a) General Rule.--This Act applies to any Y2K action brought after
January 1, 1999, for a Y2K failure occurring before January 1, 2003, or
for a potential Y2K failure that could occur or has allegedly caused
harm or injury before January 1, 2003, including any appeal, remand,
stay, or other judicial, administrative, or alternative dispute
resolution proceeding in such an action.
(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) Claims for Personal Injury or Wrongful Death Excluded.--This Act
does not apply to a claim for personal injury or for wrongful death.
(d) Warranty and Contract Preservation.--
(1) In general.--Subject to paragraph (2), in any Y2K action
any written contractual term, including a limitation or an
exclusion of liability, or a disclaimer of warranty, shall be
strictly enforced unless the enforcement of that term would
manifestly and directly contravene applicable State law embodied
in any statute in effect on January 1, 1999, specifically
addressing that term.
[[Page 113 STAT. 189]]
(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
controlling 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 immunity.
(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:
(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
(iii) Local government.--The term ``local
(I) any county, city, town,
township, parish, village, or other
general purpose political subdivision of
a State; and
(II) any combination of political
subdivisions described in subclause (I)
recognized by the Secretary 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
[[Page 113 STAT. 190]]
for the integrity of the national
securities markets, including the
protection of depositors and investors;
(III) noncompliance with applicable
federally enforceable measurement,
monitoring, or reporting requirements to
the extent caused by operational error
(IV) lack of reasonable preventative
(V) lack of preparedness for a Y2K
(VI) noncompliance with the
underlying federally enforceable
requirements to which the applicable
federally enforceable measurement,
monitoring, or reporting requirement
(3) Conditions necessary for a demonstration of a y2k
upset.--A defendant who wishes to establish the affirmative
defense of Y2K upset shall demonstrate, through properly signed,
contemporaneous operating logs, or other relevant evidence
(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
(C) noncompliance with the applicable federally
enforceable measurement, monitoring, or reporting
requirement 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, monitoring, 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.
[[Page 113 STAT. 191]]
(8) Preservation of authority.--Nothing in this subsection
shall affect the authority of a government entity to seek
injunctive relief or require a defendant to correct a violation
of a federally enforceable measurement, monitoring, or reporting
(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 mortgage payment
(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.--Notwithstanding
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
(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 purposes of this subsection.
(4) Applicability.--This subsection does not apply to
transactions 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
financial 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 periodic 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
[[Page 113 STAT. 192]]
(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. <<NOTE: 15 USC 6604.>> 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 convincing
evidence that the applicable standard for awarding damages has been met.
(b) Caps on Punitive Damages.--
(1) In general.--Subject to the evidentiary standard
established 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
(2) Defendant described.--A defendant described in this
paragraph is a defendant--
(i) is sued in his or her capacity as an
(ii) whose net worth does not exceed $500,000;
(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. <<NOTE: 15 USC 6605.>> 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 corresponds 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 <<NOTE: Courts.>> 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
[[Page 113 STAT. 193]]
(B) if alleged by the plaintiff, whether the
defendant (other than a defendant who has entered into a
settlement agreement with the plaintiff)--
(i) acted with specific intent to injure the
(ii) knowingly committed fraud.
(2) Contents of special interrogatories or findings.--The
responses to interrogatories or findings under paragraph (1)
shall specify the total amount of damages that the plaintiff is
entitled to recover and the percentage of responsibility of each
defendant found to have caused or contributed to the loss
incurred by the plaintiff.
(3) Factors for consideration.--In determining the
percentage of responsibility under this subsection, the trier of
fact shall consider--
(A) the nature of the conduct of each person found
to have caused or contributed to the loss incurred by
the plaintiff; and
(B) the nature and extent of the causal relationship
between the conduct of each such person and the damages
incurred by the plaintiff.
(c) Joint Liability for Specific Intent or Fraud.--
(1) In general.--Notwithstanding subsection (a), the
liability of a defendant in a Y2K action that is not a contract
action is joint and several if the trier of fact specifically
determines that the defendant--
(A) acted with specific intent to injure the
(B) knowingly committed fraud.
(2) Fraud; recklessness.--
(A) Knowing commission of fraud described.--For
purposes of subsection (b)(1)(B)(ii) and paragraph
(1)(B) of this subsection, a defendant knowingly
committed fraud if the defendant--
(i) made an untrue statement of a material
fact, with actual knowledge that the statement was
(ii) omitted a fact necessary to make the
statement not be misleading, with actual knowledge
that, as a result of the omission, the statement
was false; and
(iii) knew that the plaintiff was reasonably
likely to rely on the false statement.
(B) Recklessness.--For purposes of subsection
(b)(1)(B) and paragraph (1) of this subsection, reckless
conduct by the defendant does not constitute either a
specific intent to injure, or the knowing commission of
fraud, by the defendant.
(3) Right to contribution not affected.--Nothing in this
section affects the right, under any other law, of a defendant
to contribution with respect to another defendant found under
subsection (b)(1)(B), or determined under paragraph (1)(B) of
this subsection, to have acted with specific intent to injure
the plaintiff or to have knowingly committed fraud.
(d) Special Rules.--
(1) Uncollectible share.--
(A) In general.--Notwithstanding subsection (a), if,
upon motion made not later than 6 months after a final
judgment is entered in any Y2K action that is not a
[[Page 113 STAT. 194]]
action, the court determines that all or part of the
share of the judgment against a defendant for
compensatory damages is not collectible against that
defendant, then each other defendant in the action is
liable for the uncollectible share as follows:
(i) Percentage of net worth.--The other
defendants are jointly and severally liable for
the uncollectible share if the plaintiff
(I) the plaintiff is an individual
whose recoverable damages under the
final judgment are equal to more than 10
percent of the net worth of the
(II) the net worth of the plaintiff
is less than $200,000.
(ii) Other plaintiffs.--For a plaintiff not
described in clause (i), each of the other
defendants is liable for the uncollectible share
in proportion to the percentage of responsibility
of that defendant.
(iii) For a plaintiff not described in clause
(i), in addition to the share identified in clause
(ii), the defendant is liable for an additional
portion of the uncollectible share in an amount
equal to 50 percent of the amount determined under
clause (ii) if the plaintiff demonstrates by a
preponderance of the evidence that the defendant
acted with reckless disregard for the likelihood
that its acts would cause injury of the sort
suffered by the plaintiff.
(B) Overall limit.--The total payments required
under subparagraph (A) from all defendants may not
exceed the amount of the uncollectible share.
(C) Subject to contribution.--A defendant against
whom judgment is not collectible is subject to
contribution and to any continuing liability to the
plaintiff on the judgment.
(D) Suits by consumers.--
(i) Notwithstanding subparagraph (A), the
other defendants are jointly and severally liable
for the uncollectible share if--
(I) the plaintiff is a consumer
whose suit alleges or arises out of a
defect in a consumer product; and
(II) the plaintiff is suing as an
individual and not as part of a class
(ii) In this subparagraph:
(I) The term ``class action''
(aa) a single lawsuit in
which: (1) damages are sought on
behalf of more than 10 persons
or prospective class members; or
(2) one or more named parties
seek to recover damages on a
representative basis on behalf
of themselves and other unnamed
parties similarly situated; or
(bb) any group of lawsuits
filed in or pending in the same
court in which: (1) damages are
sought on behalf of more than 10
persons; and (2) the lawsuits
[[Page 113 STAT. 195]]
consolidated, or otherwise
proceed as a single action for
(II) The term ``consumer'' means an
individual who acquires a consumer
product for purposes other than resale.
(III) The term ``consumer product''
means any personal property or service
which is normally used for personal,
family, or household purposes.
(2) Special right of contribution.--To the extent that a
defendant is required to make an additional payment under
paragraph (1), that defendant may recover contribution--
(A) from the defendant originally liable to make the
(B) from any other defendant that is jointly and
(C) from any other defendant held proportionately
liable who is liable to make the same payment and has
paid less than that other defendant's proportionate
share of that payment; or
(D) from any other person responsible for the
conduct giving rise to the payment that would have been
liable to make the same payment.
(3) Nondisclosure to jury.--The standard for allocation of
damages under subsection (a) and subsection (b)(1), and the
procedure for reallocation of uncollectible shares under
paragraph (1) of this subsection, shall not be disclosed to
members of the jury.
(e) Settlement Discharge.--
(1) In general.--A defendant who settles a Y2K action that
is not a contract action at any time before final verdict or
judgment shall be discharged from all claims for contribution
brought by other persons. <<NOTE: Courts.>> Upon entry of the
settlement by the court, the court shall enter an order
constituting the final discharge of all obligations to the
plaintiff of the settling defendant arising out of the action.
The order shall bar all future claims for contribution arising
out of the action--
(A) by any person against the settling defendant;
(B) by the settling defendant against any person
other than a person whose liability has been
extinguished by the settlement of the settling
(2) Reduction.--If a defendant enters into a settlement with
the plaintiff before the final verdict or judgment, the verdict
or judgment shall be reduced by the greater of--
(A) an amount that corresponds to the percentage of
responsibility of that defendant; or
(B) the amount paid to the plaintiff by that
(f ) General Right of Contribution.--
(1) In general.--A defendant who is jointly and severally
liable for damages in any Y2K action that is not a contract
action may recover contribution from any other person who, if
joined in the original action, would have been liable for the
same damages. A claim for contribution shall be determined based
on the percentage of responsibility of the claimant and of each
person against whom a claim for contribution is made.
(2) Statute of limitations for contribution.--An action for
contribution in connection with a Y2K action that is not a
contract action shall be brought not later than 6 months
[[Page 113 STAT. 196]]
after the entry of a final, nonappealable judgment in the Y2K
action, except that an action for contribution brought by a
defendant who was required to make an additional payment under
subsection (d)(1) may be brought not later than 6 months after
the date on which such payment was made.
(g) More Protective State Law Not Preempted.--Nothing in this
section preempts or supersedes any provision of State law that--
(1) limits the liability of a defendant in a Y2K action to a
lesser amount than the amount determined under this section; or
(2) otherwise affords a greater degree of protection from
joint or several liability than is afforded by this section.
SEC. 7. <<NOTE: 15 USC 6606.>> PRELITIGATION NOTICE.
(a) In General.--Before commencing a Y2K action, except an action
that seeks only injunctive relief, a prospective plaintiff in a Y2K
action shall send a written notice by certified mail (with either return
receipt requested or other means of verification that the notice was
sent) to each prospective defendant in that action. The notice shall
provide specific and detailed information about--
(1) the manifestations of any material defect alleged to
have caused harm or loss;
(2) the harm or loss allegedly suffered by the prospective
(3) how the prospective plaintiff would like the prospective
defendant to remedy the problem;
(4) the basis upon which the prospective plaintiff seeks
that remedy; and
(5) the name, title, address, and telephone number of any
individual who has authority to negotiate a resolution of the
dispute on behalf of the prospective plaintiff.
(b) Person to Whom Notice To Be Sent.--The notice required by
subsection (a) shall be sent--
(1) to the registered agent of the prospective defendant for
service of legal process;
(2) if the prospective defendant does not have a registered
agent, then to the chief executive officer if the prospective
defendant is a corporation, to the managing partner if the
prospective defendant is a partnership, to the proprietor if the
prospective defendant is a sole proprietorship, or to a
similarly-situated person if the prospective defendant is any
other enterprise; or
(3) if the prospective defendant has designated a person to
receive prelitigation notices on a Year 2000 Internet Website
(as defined in section 3(7) of the Year 2000 Information and
Readiness Disclosure Act), to the designated person, if the
prospective plaintiff has reasonable access to the Internet.
(c) Response to Notice.--
(1) In <<NOTE: Deadline.>> general.--Within 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
the actions it has taken or will take to address the problem
identified by the prospective plaintiff.
[[Page 113 STAT. 197]]
(2) Willingness to engage in adr.--The written statement
shall state whether the prospective defendant is willing to
engage in alternative dispute resolution.
(3) Inadmissibility.--A written statement required by this
subsection is not admissible in evidence, under Rule 408 of the
Federal Rules of Evidence or any analogous rule of evidence in
any State, in any proceeding to prove liability for, or the
invalidity of, a claim or its amount, or otherwise as evidence
of conduct or statements made in compromise negotiations.
(4) Presumptive time of receipt.--For purposes of paragraph
(1), a notice under subsection (a) is presumed to be received 7
days after it was sent.
(5) Priority.--A prospective defendant receiving more than
one notice under this section may give priority to notices with
respect to a product or service that involves a health or safety
related Y2K failure.
(d) Failure to Respond.--If a prospective defendant--
(1) fails to respond to a notice provided pursuant to
subsection (a) within the 30 days specified in subsection
(2) does not describe the action, if any, the prospective
defendant has taken, or will take, to address the problem
identified by the prospective plaintiff,
the prospective plaintiff may immediately commence a legal action
against that prospective defendant.
(e) Remediation Period.--
(1) In general.--If the prospective defendant responds and
proposes remedial action it will take, or offers to engage in
alternative dispute resolution, then the prospective plaintiff
shall allow the prospective defendant an additional 60 days from
the end of the 30-day notice period to complete the proposed
remedial action or alternative dispute resolution before
commencing a legal action against that prospective defendant.
(2) Extension by agreement.--The prospective plaintiff and
prospective defendant may change the length of the 60-day
remediation period by written agreement.
(3) Multiple extensions not allowed.--Except as provided in
paragraph (2), a defendant in a Y2K action is entitled to no
more than one 30-day period and one 60-day remediation period
under paragraph (1).
(4) Statutes of limitation, etc., tolled.--Any applicable
statute of limitations or doctrine of laches in a Y2K action to
which paragraph (1) applies shall be tolled during the notice
and remediation period under that paragraph.
(f ) Failure to Provide Notice.--If a defendant determines that a
plaintiff has filed a Y2K action without providing the notice specified
in subsection (a) or without awaiting the expiration of the appropriate
waiting period specified in subsection (c), the defendant may treat the
plaintiff's complaint as such a notice by so informing the court and the
plaintiff in its initial response to the plaintiff. If any defendant
elects to treat the complaint as such a notice--
(1) <<NOTE: Courts.>> the court shall stay all discovery and
all other proceedings in the action for the appropriate period
after filing of the complaint; and
(2) the time for filing answers and all other pleadings
shall be tolled during the appropriate period.
[[Page 113 STAT. 198]]
(g) Effect of Contractual or Statutory Waiting Periods.--In cases in
which a contract, or a statute enacted before January 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 provided by contract or the statute is controlling over the
waiting period specified in subsections (c) and (d).
(h) State Law Controls Alternative Methods.--Nothing in this section
supersedes or otherwise preempts any State law or rule of civil
procedure with respect to the use of alternative dispute resolution for
(i) Provisional Remedies Unaffected.--Nothing in this section
interferes with the right of a litigant to provisional remedies
otherwise available under Rule 65 of the Federal Rules of Civil
Procedure or any State rule of civil procedure providing extraordinary
or provisional remedies in any civil action in which the underlying
complaint seeks both injunctive and monetary relief.
( j) Special Rule for Class Actions.--For the purpose of applying
this section to a Y2K 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. 8. <<NOTE: 15 USC 6607.>> PLEADING REQUIREMENTS.
(a) Application with Rules of Civil Procedure.--This section applies
exclusively to Y2K actions 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.--In all Y2K actions in which
damages are requested, there shall be filed with the complaint a
statement of specific information as to the nature and amount of each
element of damages and the factual basis for the damages calculation.
(c) Material Defects.--In any Y2K action in which the plaintiff
alleges that there is a material defect in a product or service, there
shall be filed with the complaint a statement of specific information
regarding the manifestations of the material defects and the facts
supporting a conclusion that the defects are material.
(d) Required State of Mind.--In any Y2K action in which a claim is
asserted on which the plaintiff may prevail only on proof that the
defendant acted with a particular state of mind, there shall be filed
with the complaint, with respect to each element of that claim, a
statement of the facts giving rise to a strong inference that the
defendant acted with the required state of mind.
SEC. 9. <<NOTE: 15 USC 6608.>> DUTY TO MITIGATE.
(a) In General.--Damages awarded in any Y2K action shall exclude
compensation for damages the plaintiff could reasonably have avoided in
light of any disclosure or other information 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
product or services concerning means of remedying or avoiding the Y2K
failure involved in the action.
[[Page 113 STAT. 199]]
(b) Preservation of Existing Law.--The duty imposed by this section
is in addition to any duty to mitigate imposed by State law.
(c) Exception for Intentional Fraud.--Subsection (a) does not apply
to damages suffered by reason of the plaintiff's justifiable reliance
upon an affirmative material misrepresentation by the defendant, made by
the defendant with actual knowledge of its falsity, concerning the
potential for Y2K failure of the device or system used or sold by the
defendant that experienced the Y2K failure alleged to have caused the
SEC. 10. <<NOTE: 15 USC 6609.>> APPLICATION OF EXISTING IMPOSSIBILITY OR
COMMERCIAL IMPRACTICABILITY DOCTRINES.
In any Y2K action for breach or repudiation of contract, the
applicability of the doctrines of impossibility and commercial
impracticability 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.
SEC. 11. <<NOTE: 15 USC 6610.>> DAMAGES LIMITATION BY CONTRACT.
In any Y2K action for breach or repudiation of contract, no party
may claim, or be awarded, any category of damages unless such damages
(1) by the express terms of the contract; or
(2) if the contract is silent on such damages, by operation
of State law at the time the contract was effective or by
operation of Federal law.
SEC. 12. <<NOTE: 15 USC 6611.>> DAMAGES IN TORT CLAIMS.
(a) In General.--A party to a Y2K action making a tort claim, other
than a claim of intentional tort arising independent of a contract, may
not recover damages for economic loss unless--
(1) the recovery of such losses is provided for in a
contract to which the party seeking to recover such losses is a
(2) such losses result directly from damage to tangible
personal or real property caused by the Y2K failure involved in
the action (other than damage to property that is the subject of
the contract between the parties to the Y2K action or, in the
event there is no contract between the parties, other than
damage caused only to the property that experienced the Y2K
and such damages are permitted under applicable Federal or State law.
(b) Economic Loss.--For purposes of this section only, and except as
otherwise specifically provided in a valid and enforceable written
contract between the plaintiff and the defendant in a Y2K action, the
term ``economic loss'' means amounts awarded to compensate an injured
party for any loss, and includes amounts awarded for damages such as--
(1) lost profits or sales;
(2) business interruption;
(3) losses indirectly suffered as a result of the
defendant's wrongful act or omission;
(4) losses that arise because of the claims of third
(5) losses that must be pled as special damages; and
[[Page 113 STAT. 200]]
(6) consequential damages (as defined in the Uniform
Commercial Code or analogous State commercial law).
(c) Certain Other Actions.--A person liable for damages, whether by
settlement or judgment, in a civil action to which this Act does not
apply because of section 4(c) whose liability, in whole or in part, is
the result of a Y2K failure may, notwithstanding any other provision of
this Act, pursue any remedy otherwise available under Federal or State
law against the person responsible for that Y2K failure to the extent of
recovering the amount of those damages.
SEC. 13. <<NOTE: 15 USC 6612.>> STATE OF MIND; BYSTANDER LIABILITY;
(a) Defendant's State of Mind.--In a Y2K action other than a claim
for breach or repudiation of contract, and in which the defendant's
actual or constructive awareness of an actual or potential Y2K failure
is an element of the claim, the defendant is not liable unless the
plaintiff establishes that element of the claim by the standard of
evidence under applicable State law in effect on the day before January
(b) Limitation on Bystander Liability for Y2K Failures.--
(1) In general.--With respect to any Y2K action for money
damages in which--
(A) the defendant is not the manufacturer, seller,
or distributor of a product, or the provider of a
service, that suffers or causes the Y2K failure at
(B) the plaintiff is not in substantial privity with
the defendant; and
(C) the defendant's actual or constructive awareness
of an actual or potential Y2K failure is an element of
the claim under applicable law,
the defendant shall not be liable unless the plaintiff, in
addition to establishing all other requisite elements of the
claim, proves, by the standard of evidence under applicable
State law in effect on the day before January 1, 1999, that the
defendant actually knew, or recklessly disregarded a known and
substantial risk, that such failure would occur.
(2) Substantial privity.--For purposes of paragraph (1)(B),
a plaintiff and a defendant are in substantial privity when, in
a Y2K action arising out of the performance of professional
services, the plaintiff and the defendant either have
contractual relations with one another or the plaintiff is a
person who, prior to the defendant's performance of such
services, was specifically identified to and acknowledged by the
defendant as a person for whose special benefit the services
were being performed.
(3) Certain claims excluded.--For purposes of paragraph
(1)(C), claims in which the defendant's actual or constructive
awareness of an actual or potential Y2K 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, negligent misrepresentation,
and interference with contract or economic advantage.
(c) Control Not Determinative of Liability.--The fact that a Y2K
failure occurred in an entity, facility, system, product, or component
that was sold, leased, rented, or otherwise within the control of the
party against whom a claim is asserted in a Y2K action shall not
constitute the sole basis for recovery of damages
[[Page 113 STAT. 201]]
in that action. A claim in a Y2K action for breach or repudiation of
contract for such a failure is governed by the terms of the contract.
(d) Protections of the Year 2000 Information and Readiness
Disclosure Act Apply.--The protections for the exchanges of information
provided by section 4 of the Year 2000 Information and Readiness
Disclosure Act (Public Law 105-271) shall apply to any Y2K action.
SEC. 14. <<NOTE: 15 USC 6613.>> APPOINTMENT OF SPECIAL MASTERS OR
MAGISTRATE JUDGES FOR Y2K ACTIONS.
Any district court of the United States in which a Y2K action is
pending may appoint a special master or a magistrate judge to hear the
matter and to make findings of fact and conclusions of law in accordance
with Rule 53 of the Federal Rules of Civil Procedure.
SEC. 15. <<NOTE: 15 USC 6614.>> Y2K ACTIONS AS CLASS ACTIONS.
(a) Material Defect Requirement.--A Y2K action involving a claim
that a product or service is defective may be maintained as a class
action in Federal or State court as to that claim only if--
(1) it satisfies all other prerequisites established by
applicable Federal or State law, including applicable rules of
civil procedure; and
(2) the court finds that the defect in a product or service
as alleged would be a material defect for the majority of the
members of the class.
(b) Notification.--In any Y2K 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, which shall include--
(1) a concise and clear description of the nature of the
(2) the jurisdiction where the case is pending; and
(3) 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.
(c) Forum for Y2K Class Actions.--
(1) Jurisdiction.--Except as provided in paragraph (2), the
district courts of the United States shall have original
jurisdiction of any Y2K action that is brought as a class
(2) Exceptions.--The district courts of the United States
shall not have original jurisdiction over a Y2K action brought
as a class action if--
(A)(i) a substantial majority of the members of the
proposed plaintiff class are citizens of a single State;
(ii) the primary defendants are citizens of that
(iii) the claims asserted will be governed primarily
by the laws of that State;
(B) the primary defendants are States, State
officials, or other governmental entities against whom
the district courts of the United States may be
foreclosed from ordering relief;
[[Page 113 STAT. 202]]
(C) the plaintiff class does not seek an award of
punitive damages, and the amount in controversy is less
than the sum of $10,000,000 (exclusive of interest and
costs), computed on the basis of all claims to be
determined in the action; or
(D) there are less than 100 members of the proposed
A party urging that any exception described in subparagraph (A),
(B), (C), or (D) applies to an action shall bear the full burden
of demonstrating the applicability of the exception.
(3) Procedure if Requirements Not Met.--
(A) Dismissal or remand.--A United States district
court shall dismiss, or, if after removal, strike the
class allegations and remand, any Y2K action brought or
removed under this subsection as a class action if--
(i) the action is subject to the jurisdiction
of the court solely under this subsection; and
(ii) the court determines the action may not
proceed as a class action based on a failure to
satisfy the conditions of Rule 23 of the Federal
Rules of Civil Procedure.
(B) Amendment; removal.--Nothing in paragraph (A)
shall prohibit plaintiffs from filing an amended class
action in Federal or State court. A defendant shall have
the right to remove such an amended class action to a
United States district court under this subsection.
(C) Period of limitations tolled.--Upon dismissal or
remand, the period of limitations for any claim that was
asserted in an action on behalf of any named or unnamed
member of any proposed class shall be deemed tolled to
the full extent provided under Federal law.
(D) Dismissal without prejudice.--The dismissal of a
Y2K action under subparagraph (A) shall be without
(d) Effect on Rules of Civil Procedure.--Except as otherwise
provided in this section, nothing in this section supersedes any rule of
Federal or State civil procedure applicable to class actions.
SEC. 16. <<NOTE: 15 USC 6615.>> APPLICABILITY OF STATE LAW.
Nothing in this Act shall be construed to affect the applicability
of any State law that provides stricter limits on damages and
liabilities, affording greater protection to defendants in Y2K actions,
than are provided in this Act.
SEC. 17. <<NOTE: 15 USC 6616.>> ADMISSIBLE EVIDENCE ULTIMATE ISSUE IN
Any party to a Y2K action in a State court in a State that has not
adopted a rule of evidence substantially similar to Rule 704 of the
Federal Rules of Evidence may introduce in such action evidence that
would be admissible if Rule 704 applied in that jurisdiction.
SEC. 18. <<NOTE: 15 USC 6617.>> SUSPENSION OF PENALTIES FOR CERTAIN YEAR
2000 FAILURES BY SMALL BUSINESS CONCERNS.
(a) Definitions.--In this section--
(1) the term ``agency'' means any executive agency, as
defined in section 105 of title 5, United States Code, that
[[Page 113 STAT. 203]]
has the authority to impose civil penalties on small business
(2) the term ``first-time violation'' means a violation by a
small business concern of a federally enforceable rule or
regulation (other than a Federal rule or regulation that relates
to the safety and soundness of the banking or monetary system or
for the integrity of the National Securities markets, including
protection of depositors and investors) caused by a Y2K failure
if that Federal rule or regulation had not been violated by that
small business concern within the preceding 3 years; and
(3) the term ``small business concern'' has the same meaning
as a defendant described in section 5(b)(2)(B).
(b) Establishment <<NOTE: Deadline.>> of Liaisons.--Not later than
30 days after the date of the enactment of this Act, each agency shall--
(1) establish a point of contact within the agency to act as
a liaison between the agency and small business concerns with
respect to problems arising out of Y2K failures and compliance
with Federal rules or regulations; and
(2) <<NOTE: Federal Register, publication.>> publish the
name and phone number of the point of contact for the agency in
the Federal Register.
(c) General Rule.--Subject to subsections (d) and (e), no agency
shall impose any civil money penalty on a small business concern for a
(d) Standards for Waiver.--An agency shall provide a waiver of civil
money penalties for a first-time violation, provided that a small
business concern demonstrates, and the agency determines, that--
(1) the small business concern previously made a reasonable
good faith effort to anticipate, prevent, and effectively
remediate a potential Y2K failure;
(2) a first-time violation occurred as a result of the Y2K
failure of the small business concern or other entity, which
significantly affected the small business concern's ability to
comply with a Federal rule or regulation;
(3) the first-time violation was unavoidable in the face of
a Y2K failure or occurred as a result of efforts to prevent the
disruption of critical functions or services that could result
in harm to life or property;
(4) upon identification of a first-time violation, the small
business concern initiated reasonable and prompt measures to
correct the violation; and
(5) the small business concern submitted notice to the
appropriate agency of the first-time violation within a
reasonable time not to exceed 5 business days from the time that
the small business concern became aware that the first-time
violation had occurred.
(e) Exceptions.--An agency may impose civil money penalties
authorized under Federal law on a small business concern for a first-
time violation if--
(1) the small business concern's failure to comply with
Federal rules or regulations resulted in actual harm, or
constitutes or creates an imminent threat to public health,
safety, or the environment; or
[[Page 113 STAT. 204]]
(2) the small business concern fails to correct the
violation not later than 1 month after initial notification to
(f ) Expiration.--This section shall not apply to first-time
violations caused by a Y2K failure occurring after December 31, 2000.
Approved July 20, 1999.
LEGISLATIVE HISTORY--H.R. 775 (S. 96) (S. 461):
HOUSE REPORTS: Nos. 106-131, Pt. 1 (Comm. on the Judiciary) and 106-212
(Comm. of Conference).
SENATE REPORTS: No. 106-10 accompanying S. 96 (Comm. on Commerce,
Science, and Transportation).
CONGRESSIONAL RECORD, Vol. 145 (1999):
May 12, considered and passed House.
June 15, considered and passed Senate, amended, in lieu of
July 1, House and Senate agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 35 (1999):
July 20, Presidential statement.